Quintiles Transitional Holdings Inc. (Q)

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Quintiles Transnational Holdings Inc. (Q)

Q4 2013 Results Earnings Conference Call

February 13, 2014, 08:00 AM ET


Karl Deonanan - Investor Relations

Thomas Pike - Chief Executive Officer

Kevin Gordon - Chief Financial Officer


Eric Coldwell - Robert W. Baird & Co.

Ross Muken – ISI Group

Tejas Savant - JPMorgan

Douglas Tsao - Barclays

David H. Windley – Jefferies & Co.

George Hill - Deutsche Bank

Timothy C. Evans - Wells Fargo Securities

Jeff Bailin - Credit Suisse



On behalf of Quintiles, hello, and welcome to today's Fourth Quarter 2013 Earnings Call. My name is Henna, and I will be your web events specialist today. (Operator Instructions).

It is now my pleasure to turn the webcast over to Karl Deonanan, Vice President of Investor Relations. Mr. Deonanan, the floor is yours.

Karl Deonanan

Thank you, Henna. Good morning, and welcome to Quintiles' Fourth Quarter 2013 Earnings Call. With me this morning are Tom Pike, our Chief Executive Officer; and Kevin Gordon, our Chief Financial Officer.

In addition to our press release issued this morning, a conference call presentation corresponding to our prepared remarks is available on our website at www.quintiles.com/investors.

Before we begin I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission.

In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

I would now like to turn the call over to our CEO, Tom Pike.

Tom Pike

Thank you Karl good morning from snowy North Carolina. I would like to thank you all for joining our fourth quarter and full year 2013 earnings call. I am proud to say that we accomplished what we set out to do in 2013 that's win significant new business and deliver with quality and innovation.

Let's begin on slide three. 2013 was a great year of Quintiles as we reemerged as a public company in early May and achieved many milestones through the year; one of the most recent was our first billion dollar service revenue quarter in the company's history. We're pleased with both our quarterly results and our full year 2013 achievements and enter 2014 with a great deal of momentum. We continue to demonstrate our leadership and ability to execute operationally.

We achieved a 13.2% increase in our backlog across the business to a record $9.9 billion. We have a book-to-bill across the business of 1.29 for the year very balanced with 1.29 in product development and 1.27 in integrated healthcare services. We have strong service revenue growth of over 10% in product development during the fourth quarter contributing to that first $1 billion service revenue quarter.

We also continue to enhance our best in industry margins with 110 basis points improvement to our full year adjusted income from operations margin, and we delivered 28.7% growth in adjusted net income for the year, 18.6% growth in adjusted diluted earnings per share for the year and 15% growth in free-cash flow for the year.

Regarding the quarter it was solid. In product development we are the global leader in providing clinical services and we were selected by a couple of key customers to deepen our relationships resulting in some bookings but may be more importantly positioning us well for future quarters and years.

Our book-to-bill ratio for the fourth quarter in product development was 1.24 and 1.29 overall for the year. Both of those are above our historical norms. Our strong net new business for the year allowed us to capture market share in terms of new business during this year. Regarding services revenues we achieved double-digit growth in the quarter as projects began to transition out of the start-up phase.

Our adjusted income from operations in this segment was strong at 19.7% with improved margins over the same quarter last year. Perhaps more importantly though we have some of the best customer relationships in the industry, increasingly our customers have us work with them side-by-side on designing trials and improving efficiency.

During this quarter we saw many leading pharmaceutical firms reexamining their development practices and we are there helping them to see the probability of success.

Regarding Integrated Healthcare Services I am pleased to report that we are continuing our transformation. We had another strong quarter of net new business with a book-to-bill ratio of 1.47 for the quarter, leaving us at 1.27 for the year. These are both well above our historical norms. Within this segment our late phase business remains a leader with strong new business wins this year.

One exciting thing is the synergy between our commercial and clinical groups. For instance, last week I met with nurse educators who work with investigators during the clinical trial process for one compound and they are now rolling into the commercial organization for product launch. This is merely one example of our evolving Product Development and Integrated Healthcare Services interconnected evidence based delivery model.

We continue to deliver innovative solutions for our customers across both of our segments which underpins our ability to generate strong new business as demonstrated in 2013. We finished the year strong in both segments, have nice momentum as we enter 2014. We believe 2014 should be a stronger year in terms of revenue growth along with our best-in-class margins.

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