Highlights

• Book-to-bill of 1.2x for each of the three, six and twelve months ended June 30, 2016.
• Net new business awards of $302.1 million and $604.4 million for the three and six months ended June 30, 2016, respectively.
• Net service revenue growth of 13.8% and 15.7% for the three and six months ended June 30, 2016, respectively.
• GAAP diluted earnings per share of $0.54 and $0.85 for the three and six months ended June 30, 2016, respectively.
• Adjusted diluted earnings per share of $0.61 and $1.19 for the three and six months ended June 30, 2016, respectively, representing growth of approximately 30% and 34%, respectively.
• Increased full year net service revenue guidance to $1,030 million to $1,040 million and adjusted diluted EPS guidance to $2.39 to $2.50.
• Board authorized $150.0 million stock repurchase program.

RALEIGH, N.C., July 28, 2016 (GLOBE NEWSWIRE) -- INC Research Holdings, Inc. (Nasdaq:INCR), a leading global Phase I to Phase IV contract research organization, today reported financial results for the second quarter and year-to-date periods ended June 30, 2016.

“INC Research employees once again delivered a robust quarter of solid financial results, excellent operational performance and strong customer focus resulting in strong backlog coverage for the remainder of 2016,” said CEO Jamie Macdonald. “As we look to the second half of the year, we remain focused on achieving our financial targets and becoming the CRO of Choice for all of our stakeholders. At the end of the day it’s about helping to develop new therapies for patients in need, and INC is particularly excited to be partnering with CISCRP on the ‘Inspiring Hope’ Ideathon event September 27-28 in Boston to shine a light on the importance of clinical trial participation in advancing public health.”

Second Quarter 2016 Results

Net service revenue for the three months ended June 30, 2016 increased by 13.8% to $258.8 million, compared to net service revenue of $227.4 million for the three months ended June 30, 2015. Net service revenue for the six months ended June 30, 2016 increased by 15.7% to $507.8 million, compared to net service revenue of $438.9 million for the six months ended June 30, 2015. Net service revenue growth during both the second quarter and first half of 2016 was primarily driven by continued strong awards over the last two years. In the first half of 2016, revenue has grown across all therapeutic areas and was particularly strong in the central nervous system ("CNS"), oncology and other complex therapeutic areas. During the three and six months ended June 30, 2016, fluctuations in foreign currency exchange rates resulted in an unfavorable impact of $0.1 million and $6.1 million on net service revenue compared to the same period in the prior year.    

Income from operations for the three months ended June 30, 2016 increased 10.3% to $39.7 million, compared to $35.9 million for the three months ended June 30, 2015. Income from operations for the six months ended June 30, 2016 increased 5.6% to $72.2 million, compared to $68.3 million for the six months ended June 30, 2015. Operating margin for the three and six months ended June 30, 2016 was 15.3% and 14.2%, respectively, compared to 15.8% and 15.6% for the same periods in the prior year.

The Company's income from operations includes certain expenses and transactions that it believes are not representative of its core operations, as described in more detail below under “Use of Non-GAAP Financial Measures.” Excluding these items, adjusted income from operations was $55.0 million for the three months ended June 30, 2016, compared to $48.8 million for the three months ended June 30, 2015, representing growth of 12.6%. Adjusted income from operations was $107.2 million for the six months ended June 30, 2016, compared to $95.3 million for the six months ended June 30, 2015, representing growth of 12.5%. Adjusted operating margin for the three and six months ended June 30, 2016, was 21.3% and 21.1%, respectively, compared to 21.5% and 21.7% for the same periods in 2015.

The Company reported net income for the three months ended June 30, 2016 of $30.4 million, resulting in diluted earnings per share of $0.54, compared to net income of $23.3 million, or $0.39 per diluted share, for the three months ended June 30, 2015. The Company reported net income for the six months ended June 30, 2016 of $47.8 million, resulting in diluted earnings per share of $0.85, compared to net income of $48.6 million, or $0.79 per diluted share, for the six months ended June 30, 2015. Adjusted net income for the three months ended June 30, 2016 was $34.3 million, or $0.61 per diluted share, compared to $28.6 million, or $0.47 per diluted share, for the same period in the prior year. Adjusted net income for the six months ended June 30, 2016 was $66.8 million, or $1.19 per diluted share, compared to $54.9 million, or $0.89 per diluted share, for the same period in the prior year.

Adjusted EBITDA for the three months ended June 30, 2016 increased 12.8% to $60.1 million, up from $53.3 million for the three months ended June 30, 2015. Adjusted EBITDA for the six months ended June 30, 2016 increased 12.1% to $117.1 million, up from $104.5 million for the six months ended June 30, 2015. Adjusted EBITDA margins decreased to 23.2% and 23.1%, for the three and six months ended June 30, 2016, respectively, from 23.4% and 23.8%, for the three and six months ended June 30, 2015, respectively.

Important disclosures about and reconciliations of non-GAAP measures, including adjusted income from operations, adjusted operating margin, adjusted net income and adjusted diluted earnings per share,  EBITDA and adjusted EBITDA, to the corresponding GAAP measures, are provided below and attached to this press release.

New Business Awards and Backlog

Backlog grew by 13.9% to $1.9 billion as of June 30, 2016, as compared to $1.7 billion for the period ended June 30, 2015.  For the three, six and twelve months ended June 30, 2016, fluctuations in foreign currency exchange rates resulted in an unfavorable impact on our June 30, 2016 backlog in the amount of $8.2 million, $1.2 million and $13.3 million, respectively. Net new business awards were $302.1 million, representing a book-to-bill ratio of 1.2x, for the three months ended June 30, 2016, as compared to $295.9 million for the three months ended June 30, 2015. Net new business awards were $604.4 million, representing a book-to-bill ratio of 1.2x, for the six months ended June 30, 2016, as compared to $551.4 million for the six months ended June 30, 2015.

Net new business awards were higher in the first six months of 2016 compared to the first six months of 2015 primarily due to the continued growth of the Company's business across its CNS, oncology and other complex therapeutic areas, partially offset by a large program cancellation during the second quarter of 2016. Specifically, the Company's net new business awards for the three months ended June 30, 2016, were negatively impacted by a $57 million cancellation by one of its customers due to insufficient clinical efficacy of the underlying compound.

Stock Repurchase Plan

On July 26, 2016, the Company’s board of directors approved a $150.0 million stock repurchase program for shares of the Company’s common stock commencing on August 1, 2016 and ending no later than December 31, 2017. The Company intends to use cash on hand and borrowings under its 2015 Credit Facility to fund the stock repurchase program.  The stock repurchase program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. The timing and amount of repurchases will be determined by the Company’s management based on a variety of factors such as the market price of the Company’s common stock, the Company’s corporate requirements, and the overall market condition.

Business Outlook

The Company is updating its 2016 full-year guidance as outlined in the following table.  The guidance takes into account a number of factors, including our current sales pipeline, existing backlog and our expectations for net awards for the remainder of 2016. Further, our guidance is based on current foreign currency exchange rates, current interest rates, our expected tax rates, and does not take into account the effects of future stock repurchases. 

Important disclosures about and reconciliations of non-GAAP measures, including adjusted net income and diluted adjusted earnings per share, to the corresponding GAAP measures are provided below and attached to this press release.

Webcast and Conference Call Details

INC Research will host a conference call at 8:00 a.m. EDT on July 28, 2016, to discuss its second quarter 2016 financial results.  The live webcast will be available in listen-only mode on the Events section of the Company's Investor Relations website at investor.incresearch.com.  To participate via phone, please dial +1 (877) 930-8058 within the United States or +1 (253) 336-7551 outside the United States, approximately 15 minutes before the scheduled start of the call.  The conference ID for the call is 48863149.

An archived replay of the conference call will be available online at investor.incresearch.com after 1:00 p.m. EDT on July 28, 2016.  In addition, an audio replay will be available for one week following the call and will be accessible by dialing +1 (855) 859-2056 within the United States or +1 (404) 537-3406 outside the United States.  The audio replay ID is 48863149.

About INC Research

INC Research (Nasdaq:INCR) is a leading global contract research organization providing the full range of Phase I to Phase IV clinical development services for the biopharmaceutical and medical device industries. Leveraging the breadth of our service offerings and the depth of our therapeutic expertise across multiple patient populations, INC Research connects customers, clinical research sites and patients to accelerate the delivery of new medicines to market. The Company was named “Best Contract Research Organization” in December 2015 by a distinguished panel for Scrip Intelligence and ranked “Top CRO to Work With” among large global CROs in the 2015 CenterWatch Global Investigative Site Relationship Survey.  INC Research is headquartered in Raleigh, NC, with operations across six continents and experience spanning more than 110 countries. For more information, please visit www.incresearch.com.

Forward-Looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this press release, including our updated 2016 guidance, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Actual results might differ materially from those explicit or implicit in the forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to: our ability to adequately price our contracts and not overrun cost estimates; general and international economic, political and other risks, including currency and stock market fluctuations and the uncertain economic environment in Europe as a result of the recent vote by the United Kingdom to exit from the European Union; fluctuations in our financial results; our ability to maintain or generate new business awards; our backlog not being indicative of future revenues and our ability to realize the anticipated future revenue reflected in our backlog; our customer or therapeutic area concentration; our ability to increase our market share, grow our business and execute our growth strategies; and the other risk factors set forth in our Form 10-K for the year ended December 31, 2015, Form 10-Q for the quarter ended June 30, 2016 and other SEC filings, copies of which are available free of charge on our website at investor.incresearch.com. INC Research assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with GAAP, this press release contains the following non-GAAP financial measures: Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Net Income (including Adjusted Diluted Earnings per Share), EBITDA and Adjusted EBITDA.  A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets or statements of cash flows of the Company.

The Company defines Adjusted Income from Operations as income from operations excluding expenses and transactions that the Company believes are not representative of its core operations, namely, acquisition-related amortization, restructuring and other costs, transaction expenses, asset impairment charges, share-based compensation expense, and contingent consideration related to acquisitions and other.  The Company defines Adjusted Operating Margin as adjusted income from operations as a percentage of net service revenue.

The Company defines Adjusted Net Income (including Adjusted Diluted Earnings per Share) as net income (including diluted earnings per share) excluding the items excluded from adjusted income from operations mentioned previously, other expense (income), and loss on extinguishment of debt. After giving effect to these items and other unusual tax impacts during the period, the Company has also included an adjustment to its income tax rate to reflect the expected long-term income tax rate.

EBITDA represents earnings before interest, taxes, depreciation and amortization.  The Company defines Adjusted EBITDA as EBITDA excluding certain expenses and transactions that the Company believes are not representative of its core operations, namely, restructuring and other costs, transaction expenses, asset impairment charges, share-based compensation expense, contingent consideration related to acquisitions and other, other expense (income), and loss on extinguishment of debt.  The Company presents EBITDA and Adjusted EBITDA because it believes they are useful metrics for investors as they are commonly used by investors, analysts and debt holders to measure the Company's ability to service its debt obligations, fund capital expenditures and meet working capital requirements.

Each of the non-GAAP measures noted above are used by management and the Board to evaluate the Company's core operating results as they exclude items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business. Adjusted Income from Operations, Adjusted Operating Margin, and Adjusted Net Income (including Adjusted Diluted Earnings per Share) are used by management and the Board to assess the Company's business. The Company believes these measures are used by investors and analysts to measure the Company's performance.  Adjusted EBITDA is also a useful metric for management, investors and debt holders to measure the Company's ability to service its debt obligations.

Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.  Also, other companies might calculate these measures differently. Investors are encouraged to review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures included in this press release and the accompanying tables.

Investor Relations Contact:
Ronnie Speight
Vice President, Investor Relations
Phone: +1 (919) 745-2745
Email: Investor.Relations@incresearch.com

Press/Media Contact:
Lori Dorer
Senior Director, Corporate Communications
Phone: +1 (513) 763-1380
Email: Corporate.Communications@incresearch.com

INC Research, LLC