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ICON Reports Second Quarter 2022 Results

·17-min read

Highlights

  • Net business wins in the quarter of $2,323 million; a net book to bill of 1.20, and 1.25 on a trailing twelve month basis.

  • Closing backlog of $20.0 billion, an increase of 2.1% on Q1 2022 or an increase of 10.7% year over year on a Combined Company basis.

  • Quarter 2 revenue of $1,935.2 million representing a year on year increase of 122.1%. On a Combined Company basis, Quarter 2 revenue increased 0.9% year over year and 4.4% on a constant dollar basis. Excluding COVID-related studies, revenue increased circa 16% year over year on a constant dollar, Combined Company basis. YTD revenue of $3,837.0 million representing a year on year increase of 121.9% or 127.4% on a constant dollar basis.

  • Adjusted EBITDA of $354.3 million or 18.3% of revenue, a year on year increase of 120.2%. On a Combined Company basis, adjusted EBITDA increased 16.1% year over year. YTD Adjusted EBITDA of $694.9 million or 18.1% of revenue, a year on year increase of 122.3%.

  • Adjusted net income attributable to the Group was $235.8 million or $2.86 per diluted share, an increase of 24.4%. YTD adjusted net income attributable to the Group of $463.7 million or $5.62 per diluted share, an increase of 25.6% over the prior year period.

  • GAAP net income attributable to the Group for Quarter 2 of $115.7 million.

  • $100 million repayment made on Term Loan B debt. Net debt balance of $4.43 billion with Net Debt to Adjusted EBITDA of 3.1x.

  • Revised full year 2022 revenue guidance in the range of $7,690 - $7,810 million, representing a year over year increase of 40.3% to 42.5%. Full year 2022 adjusted earnings per share guidance in the range of $11.65 - $11.85, representing a year over year increase of 20.7% to 22.8%, maintaining the midpoint of our previous guidance. Adjusted earnings per share to exclude amortization, stock compensation, foreign exchange and transaction-related / integration-related adjustments.

DUBLIN, July 27, 2022--(BUSINESS WIRE)--ICON plc (NASDAQ: ICLR), a world-leading healthcare intelligence and clinical research organization, today reported its financial results for the second quarter ended June 30, 2022.

CEO Dr. Steve Cutler commented, "ICON delivered strong results in the second quarter, reflecting continued demand across our service offering. On a combined company basis, financial performance was driven by year over year constant dollar revenue growth of 4.4% and circa 16% excluding COVID-related studies. On a combined company basis, Adjusted EBITDA increased 16.1% year over year. We are delighted with the continued progress of new ICON, as our integration efforts are expected to deliver realized cost synergies of $100 million for the full year, $25 million ahead of our previous target for 2022."

Dr. Cutler added, "We are revising our full year 2022 financial guidance to reflect the impact of increasing macroeconomic headwinds, specifically from the strengthening US Dollar and the ongoing war in Ukraine. We now expect revenue for the full year to be in the range of $7,690 - $7,810 million, an increase of 40.3% to 42.5% over full year 2021. Additionally, we continue to expect to deliver significant year over year adjusted earnings per share growth of 20.7% to 22.8%, resulting in a range of $11.65 - $11.85 for the full year 2022, maintaining the midpoint of our previous guidance and reflecting strong operational execution and cost management."

Second Quarter 2022 Results

Gross business wins in the second quarter were $2,764 million and cancellations were $441 million. This resulted in net business wins of $2,323 million and a book to bill of 1.20.

Revenue for Quarter 2 was $1,935.2 million. This represents a year on year increase of 122.1% or 129.9% on a constant currency basis.

GAAP net income attributable to the Group was $115.7 million. Adjusted net income attributable to the Group for the quarter was $235.8 million resulting in an adjusted diluted earnings per share of $2.86 compared to $2.30 per share for Quarter 2 2021.

Adjusted EBITDA for Quarter 2 was $354.3 million or 18.3% of revenue, a year on year increase of 120.2%.

Cash generated from operating activities for the quarter was $182.1 million. During the quarter, $28.2 million was spent on capital expenditure. At June 30, 2022, the Group had cash and cash equivalents of $614.9 million, compared to cash and cash equivalents of $559.1 million at March 31, 2022 and $1,055.5 million at June 30, 2021. During the quarter, a $100 million Term Loan B payment was made resulting in a net indebtedness balance of $4.43 billion at year end.

Year to date 2022 Results

Gross business wins year to date were $5,547 million and cancellations were $798 million. This resulted in net business wins of $4,749 million and a book to bill of 1.24.

Year to date GAAP revenue was $3,837.0 million. This represents a year on year increase of 121.9% or 127.4% on a constant currency basis.

GAAP net income attributable to the Group year to date was $227.7 million. Adjusted net income attributable to the Group was $463.7 million resulting in an adjusted diluted earnings per share of $5.62 compared to $4.48 per share for the equivalent prior year period.

Adjusted EBITDA year to date was $694.9 million or 18.1% of revenue, a year on year increase of 122.3%.

Other Information

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release contains certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income attributable to the Group and adjusted diluted earnings per share attributable to the Group. Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share exclude amortization, stock compensation, foreign exchange gains and losses and transaction-related / integration-related adjustments. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, ICON believes certain non-GAAP information is useful to investors for historical comparison purposes.

To assist investors and analysts with year-over-year comparability for the merged business, we have included Combined Company information. These measures include financial information that combines the stand-alone ICON plc and PRA Health Sciences, Inc. information for revenue and Adjusted EBITDA, and other metrics as if the merger had taken place on January 1, 2020, with conforming adjustments to the current year presentation. Specifically, these financials represent the simple addition of the historical adjusted financials of each company. These combined financials are not intended to represent pro forma financial statements prepared in accordance with GAAP or Regulation S-X.

ICON will hold a conference call on July 28th, 2022 at 08:00 EDT [13:00 Ireland & UK]. This call and linked slide presentation can be accessed live from our website at http://investor.iconplc.com. A recording will also be available on the website for 90 days following the call. In addition, a calendar of company events, including upcoming conference presentations, is available on our website, under "Investors". This calendar will be updated regularly.

This press release contains forward-looking statements. These statements are based on management's current expectations and information currently available, including current economic and industry conditions. These statements are not guarantees of future performance or actual results, and actual results, developments and business decisions may differ from those stated in this press release. The forward-looking statements are subject to future events, risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the statements, including, but not limited to, the ability to enter into new contracts, maintain client relationships, manage the opening of new offices and offering of new services, the integration of new business mergers and acquisitions, the impact of COVID-19 on our business, as well as other economic and global market conditions and other risks and uncertainties detailed from time to time in SEC reports filed by ICON, all of which are difficult to predict and some of which are beyond our control. For these reasons, you should not place undue reliance on these forward-looking statements when making investment decisions. The word "expected" and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are only as of the date they are made and we do not undertake any obligation to update publicly any forward-looking statement, either as a result of new information, future events or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by ICON, including its Form 20-F, F-1, F-4, S-8, F-3 and certain other reports, which are available on the SEC's website at http://www.sec.gov.

Our full-year 2022 guidance measures (other than revenue) are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measure because the company is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include, but are not limited to, transaction-related / integration-related expenses, restructuring and related expenses, and other items not reflective of the company's ongoing operations.

ICON plc is a world-leading healthcare intelligence and clinical research organization. From molecule to medicine, we advance clinical research providing outsourced services to pharmaceutical, biotechnology, medical device and government and public health organizations. We develop new innovations, drive emerging therapies forward and improve patient lives. With headquarters in Dublin, Ireland, ICON employed approximately 40,500 employees in 119 locations in 53 countries as at June 30, 2022. For further information about ICON, visit: www.iconplc.com.

ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(UNAUDITED)

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

(in thousands except share and per share data)

Revenue

$ 1,935,193

$ 871,155

$ 3,836,957

$ 1,729,353

Costs and expenses:

Direct costs (excluding depreciation and amortization)

1,392,062

631,123

2,770,529

1,257,367

Selling, general and administrative expense

189,953

89,867

385,214

175,901

Depreciation and amortization

144,019

17,276

285,424

34,681

Transaction and integration-related expenses

8,884

20,017

20,969

32,518

Restructuring

22,486

26,693

Total costs and expenses

1,757,404

758,283

3,488,829

1,500,467

Income from operations

177,789

112,872

348,128

228,886

Interest income

166

186

293

443

Interest expense

(47,111)

(24,551)

(91,536)

(27,278)

Income before provision for income taxes

130,844

88,507

256,885

202,051

Provision for income taxes

(14,254)

(14,133)

(27,540)

(30,281)

Income before share of earnings from equity method investments

116,590

74,374

229,345

171,770

Share of equity method investments

(856)

(509)

(1,641)

(783)

Net income attributable to the Group

$ 115,734

$ 73,865

$ 227,704

$ 170,987

Net income per Ordinary Share attributable to the Group:

Basic

$ 1.42

$ 1.40

$ 2.80

$ 3.23

Diluted

$ 1.41

$ 1.38

$ 2.76

$ 3.21

Weighted average number of Ordinary Shares outstanding:

Basic

81,398,071

52,909,368

81,430,507

52,860,414

Diluted

82,312,946

53,381,501

82,462,842

53,294,435

ICON plc
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2022 AND DECEMBER 31, 2021

(Unaudited)

June, 30 2022

(Audited)

December, 31 2021

ASSETS

(in thousands)

Current Assets:

Cash and cash equivalents

$ 614,918

$ 752,213

Available for sale investments

1,712

1,712

Accounts receivable, net of allowance for credit losses

1,357,268

1,342,770

Unbilled revenue

709,477

623,121

Other receivables

63,838

56,760

Prepayments and other current assets

130,977

114,323

Income taxes receivable

52,132

50,299

Total current assets

2,930,322

2,941,198

Non-current Assets:

Property, plant and equipment, net

313,110

336,444

Goodwill

8,970,283

9,037,931

Intangible assets

4,508,453

4,710,843

Operating right-of-use assets

160,417

198,123

Other receivables

53,236

70,557

Income taxes receivable

18,838

18,637

Deferred tax asset

54,051

48,392

Equity method investments

731

2,373

Investments in equity- long term

26,891

22,592

Total Assets

$ 17,036,332

$ 17,387,090

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$ 77,648

$ 90,764

Unearned revenue

1,191,778

1,323,961

Other liabilities

1,118,975

949,629

Income taxes payable

38,223

59,433

Current bank credit lines and loan facilities

55,150

55,150

Total current liabilities

2,481,774

2,478,937

Non-current Liabilities:

Non-current bank credit lines and loan facilities

4,990,500

5,381,162

Lease liabilities

147,300

159,483

Non-current other liabilities

38,223

42,596

Non-current income taxes payable

216,942

172,109

Deferred tax liability

1,015,580

1,085,976

Total Liabilities

8,890,319

9,320,263

Shareholders' Equity:

Ordinary shares, par value 6 euro cents per share; 100,000,000 shares authorized,

81,526,607 shares issued and outstanding at June 30, 2022 and

81,554,683 shares issued and outstanding at December 31, 2021

6,637

6,640

Additional paid‑in capital

6,787,365

$ 6,733,910

Other undenominated capital

1,162

1,134

Accumulated other comprehensive income

(192,935)

(90,937)

Retained earnings

1,543,784

1,416,080

Total Shareholders' Equity

8,146,013

8,066,827

Total Liabilities and Equity

$ 17,036,332

$ 17,387,090

ICON plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(UNAUDITED)

Six Months Ended

June 30, 2022

June 30, 2021

(in thousands)

Cash flows from operating activities:

Net income

$ 227,704

$ 170,987

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

285,424

34,681

Impairment of long lived assets

20,749

Reduction in carrying value of operating right-of-use assets

23,570

14,037

Loss on equity method investments

1,641

783

Charge on interest rate hedge

891

Amortization of financing costs and debt discount

9,188

1,592

Stock compensation expense

38,186

14,874

Loss on extinguishment of debt

14,434

Deferred tax benefit

(75,265)

3,313

Unrealized foreign exchange gain

(37,421)

2,586

Other non-cash items

9,159

(3,909)

Changes in operating assets and liabilities:

Accounts receivable

(41,032)

36,650

Unbilled revenue

(33,187)

12,690

Unearned revenue

(176,904)

14,534

Other net assets

157,154

(77,789)

Net cash provided by operating activities

408,966

240,354

Cash flows from investing activities:

Purchase of property, plant and equipment

(47,840)

(21,653)

Purchase of equity method investment

(2,450)

Purchase of investments in equity - long term

(799)

(1,771)

Net cash used in investing activities

(48,639)

(25,874)

Cash flows from financing activities:

Proceeds from exercise of equity compensation

15,140

182

Share issue costs

(3)

(10)

Repurchase of ordinary shares

(99,983)

Share repurchase costs

(17)

Drawdown of bank credit lines and loan facilities

25,000

Repayment of bank credit lines and loan facilities

(425,000)

Net cash used in financing activities

(484,863)

172

Effect of exchange rate movements on cash

(12,759)

539

Net (decrease)/ increase in cash and cash equivalents

(137,295)

215,191

Cash and cash equivalents at beginning of period

752,213

840,305

Cash and cash equivalents at end of period

$ 614,918

$ 1,055,496

ICON plc
RECONCILIATION OF NON-GAAP MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(UNAUDITED)

Three Months Ended

Six Months Ended

June 30,
2022

June 30,
2021

June 30,
2022

June 30,
2021

(in thousands except share and per share data)

Adjusted EBITDA

Net income attributable to the Group

$ 115,734

$ 73,865

$ 227,704

$ 170,987

Share of equity method investments

856

509

1,641

783

Provision for income taxes

14,254

14,133

27,540

30,281

Net interest expense (a)

46,945

24,365

91,243

26,835

Depreciation and amortization

144,019

17,276

285,424

34,681

Stock-based compensation expense (b)

18,893

8,797

38,113

15,632

Foreign currency losses (gains), net (c)

(17,817)

1,899

(24,417)

839

Restructuring (d)

22,486

26,693

Transaction-related / integration-related costs (e)

8,884

20,017

20,969

32,518

Adjusted EBITDA

$ 354,254

$ 160,861

$ 694,910

$ 312,556

Adjusted net income attributable to the Group and adjusted diluted net income
per Ordinary Share attributable to the Group

Net income attributable to the Group

115,734

73,865

227,704

170,987

Provision for income taxes

14,254

14,133

27,540

30,281

Amortisation

118,325

4,058

233,127

8,741

Stock-based compensation expense (b)

18,893

8,797

38,113

15,632

Foreign currency losses (gains), net (c)

(17,817)

1,899

(24,417)

839

Restructuring (d)

22,486

26,693

Transaction-related / integration-related costs (e)

8,884

20,017

20,969

32,518

Transaction-related financing costs (f)

3,504

22,125

9,255

22,479

Adjusted tax expense (g)

(48,465)

(22,000)

(95,238)

(42,872)

Adjusted net income attributable to the Group

$ 235,798

$ 122,894

$ 463,746

$ 238,605

Diluted weighted average number of Ordinary Shares outstanding

82,312,946

53,381,501

82,462,842

53,294,435

Adjusted diluted net income per Ordinary Share attributable to the Group

$ 2.86

$ 2.30

$ 5.62

$ 4.48

ICON plc
RECONCILIATION OF NON-GAAP MEASURES (COMBINED COMPANY)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND JUNE 30, 2021
(UNAUDITED)

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

(in thousands except share and per share data)

Combined Company adjusted revenue

Revenue, as reported

$ 1,935,193

$ 871,155

$ 3,836,957

$ 1,729,353

Pre-merger PRA Health Sciences Revenue

1,047,398

1,981,173

Combined Company revenue

$ 1,935,193

$ 1,918,553

$ 3,836,957

$ 3,710,526

Combined Company adjusted EBITDA

Net income attributable to the Group

$ 115,734

$ 73,865

$ 227,704

$ 170,987

Pre-merger PRA Health Sciences Net income attributable to the Group

-

71,068

-

128,008

Combined Company Net income attributable to the Group

$ 115,734

$ 144,933

$ 227,704

$ 298,995

Share of equity method investments

856

509

1,641

783

Provision for income taxes

14,254

1,138

27,540

36,981

Net interest expense (a)

46,945

29,043

91,243

36,726

Depreciation and amortization

144,019

50,451

285,424

100,424

Stock-based compensation expense (b)

18,893

27,529

38,113

53,136

Foreign currency losses (gains), net (c)

(17,817)

8,015

(24,417)

(5,433)

Restructuring (d)

22,486

26,693

Transaction-related / integration-related costs (e)

8,884

43,432

20,969

69,369

Combined Company adjusted EBITDA

$ 354,254

$ 305,050

$ 694,910

$ 590,981

  1. Net interest expense includes losses on modification or extinguishment of debt.

  2. Stock-based compensation expense represents the amount of recurring non-cash expense related to the Company’s equity compensation programs (inclusive of employer related taxes).

  3. Foreign currency losses (gains), net relates to gains or losses that arise in connection with the revaluation of non-US dollar denominated assets and liabilities. We exclude these gains and losses from adjusted EBITDA and adjusted net income because fluctuations from period- to- period do not necessarily correspond to changes in our operating results.

  4. Restructuring charges incurred relate to charges incurred in connection with the termination of leases at locations that are no longer being used and amounts incurred in connection with the elimination of redundant positions within the organization.

  5. Transaction-related / integration-related costs include expenses/credits associated with our acquisitions, share-based compensation expense related to the acceleration of share-based compensation awards and replacement share-based awards, contingent consideration valuation adjustments, and any other costs incurred directly related to the integration of these acquisitions.

  6. Transaction-related financing costs includes costs incurred in connection with changes to our long-term debt and amortization of financing fees. We exclude these costs from Adjusted EBITDA and Adjusted Net Income because they result from financing decisions rather than from decisions made related to our ongoing operations.

  7. Represents the tax effect of adjusted pre-tax income at our estimated effective tax rate.

http://www.iconplc.com

ICON/ICLR-F

View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005923/en/

Contacts

Investor Relations +1 888 381 7923 or
Brendan Brennan Chief Financial Officer +353 1 291 2000
Kate Haven Vice President Investor Relations +1888 381 7923
http://www.iconplc.com