RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)--Quintiles Transnational Holdings Inc. (NYSE: Q) today reported its financial results for the quarter ended June 30, 2016.

For the three months ended June 30, 2016, the Company’s service revenues were $1.17 billion which represents growth of 8.6%, or $92.7 million, including a favorable foreign currency impact of $7.0 million compared to the same period last year. The Company’s growth in service revenues, excluding the impact of foreign currency fluctuations (“constant currency”), was 7.9% with 13.1% growth in the Product Development segment and a decline of 5.9% in the Integrated Healthcare Services segment.

Reported GAAP income from operations was $150.7 million in the second quarter of 2016, representing a decline of 4.8% compared to the same period last year, and adjusted income from operations was $184.8 million, representing growth of 12.3% compared to the same period last year. The income from operations margin was 12.9%, representing a decrease of 180 basis points compared to the same period last year, and the adjusted income from operations margin was 15.8%, representing 50 basis points of expansion compared to the same period last year. The adjusted income from operations margin included the benefit of 130 basis points of favorable currency fluctuations, offset by lower Product Development margins compared to the same period last year.

Reported GAAP net income attributable to Quintiles was $86.8 million in the second quarter of 2016, representing growth of 2.1% compared to the same period last year, and adjusted net income was $112.5 million, representing growth of 14.0% compared to the same period last year. Reported GAAP diluted earnings per share was $0.71 for the three months ended June 30, 2016, representing growth of 6.0% compared to the same period last year, and diluted adjusted earnings per share was $0.93, representing growth of 19.2% compared to the same period last year. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, including adjusted income from operations, adjusted net income, and diluted adjusted earnings per share, are attached to this press release.

Net new business grew 24.4% compared to the same period last year to $1.64 billion, representing a book-to-bill ratio of 1.41 in the quarter ended June 30, 2016. Second quarter net new business contributed to an ending backlog of $12.5 billion at June 30, 2016.

“Our team executed well in the second quarter, and we are very pleased with our diluted adjusted EPS growth of 19.2%, service revenue growth of 8.6%, and our 1.41 book-to-bill ratio,” said Quintiles Chief Executive Officer Tom Pike. “Our Product Development segment delivered a strong net new business performance with a 1.56 book-to-bill ratio, bringing Product Development’s book-to-bill ratio to 1.26 for the first half of 2016, and we believe our $12.5 billion backlog provides a strong foundation moving forward.”

The Product Development segment net new business totaled $1.39 billion in the quarter ended June 30, 2016, which represents growth of 43.2% and translates to a book-to-bill ratio of 1.56. Product Development’s service revenues at constant currency grew 13.1%, or $102.7 million, during the second quarter of 2016 compared to the same period last year. At actual foreign exchange rates, Product Development service revenues were $890.1 million, positively impacted by $1.0 million of favorable foreign currency fluctuations, resulting in service revenue growth of 13.2% compared to the same period last year. The constant currency revenue growth resulted from Q2 Solutions and volume-related increases in core clinical services and clinical trial support services, offset by a decline in advisory services. Product Development’s income from operations margin was 21.0% for the first quarter, representing a decline of 140 basis points compared to the same period last year, net of a benefit of 150 basis points from favorable currency fluctuations. The Product Development income from operations margin in the second quarter of 2016 includes an increase in compensation and related expenses relative to the prior year, our planned investment to expand our Global Delivery Network, as well as $4.2 million of bad debt expense and a $10.1 million reserve for certain potentially non-reimbursable expenses.

The Integrated Healthcare Services segment net new business totaled $259.8 million in the quarter ended June 30, 2016, which translates to a book-to-bill ratio of 0.94. On a constant currency basis, Integrated Healthcare Services’ service revenues declined 5.9%, or $17.0 million, during the second quarter of 2016 compared to the same period last year. At actual foreign exchange rates, Integrated Healthcare Services’ service revenues declined 3.8% to $277.0 million, positively impacted by $6.0 million from favorable foreign currency fluctuations. The constant currency revenue decline resulted from decreases in North America commercial services due to cancellations from 2015, and earlier this year, and a decrease in Encore Health revenues, partially offset by growth in real-world and late phase research services and an increase in Europe Commercial services. Commercial services in Europe benefitted by $8.9 million from the acceleration of revenue related to the modification of a royalty-based sales force arrangement. Integrated Healthcare Services’ income from operations margin was 9.3% for the second quarter, representing an increase of 280 basis points compared to the same period last year, due to higher margins in commercial services as a result of the royalty-based contract modification mentioned above, higher margins in real world and late phase research, and the benefit of 60 basis points from favorable currency fluctuations, offset by an increase of $2.6 million in bad debt expense.

General corporate and unallocated expenses were $37.0 million during the quarter ended June 30, 2016 compared to $30.3 million for the same period last year, and included $8.9 million of expenses related to the proposed merger with IMS Health. Interest expense was $22.5 million during the quarter ended June 30, 2016 compared to $25.5 million for the same period last year.

Other income, net was $2.8 million during the quarter ended June 30, 2016 compared to other expense, net of $11.7 million for the same period last year. Other income, net for the second quarter of 2016 primarily consisted of $1.6 million of foreign currency net gains, and other expense, net for the second quarter of 2015 included $6.8 million of foreign currency net losses and $4.6 million of expense related to the change in fair value of contingent consideration related to an acquisition.

The GAAP effective income tax rate was 27.9% for the second quarter of 2016 compared to 27.6% for the same period in 2015.

Equity in losses of unconsolidated affiliates was $3.8 million during the second quarter of 2016 compared to equity in earnings of unconsolidated affiliates of $1.7 million for the same period last year.

Net income attributable to noncontrolling interests was $4.5 million during the quarter ended June 30, 2016, primarily due to the minority interest partner’s share in Q2 Solutions. There was no material net income attributable to noncontrolling interests in the same period last year.

The Company repurchased approximately 1.5 million shares of its common stock in the second quarter of 2016 at an average market price per share of $65.67 for an aggregate purchase price of $97.6 million, and has approximately $46.8 million remaining under its repurchase authorization. The share repurchase program does not obligate the Company to acquire any particular amount of common stock, has no end date, and may be modified, suspended, or discontinued at any time.

For the six months ended June 30, 2016, the Company’s constant currency service revenue growth was 8.2%, or $171.9 million, as compared to the same period in 2015. At actual foreign exchange rates, the Company’s service revenues of $2.3 billion for the six months ended June 30, 2016, grew 8.1% compared to the same period in 2015 which included a negative foreign currency impact of $1.1 million. For the six months ended June 30, 2016, reported GAAP income from operations was $329.5 million, representing growth of 9.3% compared to the same period in 2015, and adjusted income from operations was $366.7 million, representing growth of 17.1% compared to the same period in 2015. The income from operations margin was 14.5%, representing 20 basis points of expansion, and the adjusted income from operations margin was 16.1%, representing 120 basis points of expansion compared to the same period last year, including the benefit of 140 basis points from favorable currency fluctuations. Reported GAAP net income was $193.4 million for the six months ended June 30, 2016, representing growth of 12.9% compared to the same period in 2015, and adjusted net income was $220.8 million, representing growth of 16.3% compared to the same period in 2015. Reported GAAP diluted earnings per share was $1.59 for the six months ended June 30, 2016, representing growth of 17.8% compared to the same period last year, and diluted adjusted earnings per share was $1.82, representing growth of 21.3% compared to the same period last year.

Financial Guidance

The Company is adjusting its full year 2016 constant currency service revenue growth guidance to a range of between 6.0% and 7.0% compared to full year 2015, reaffirming its full year 2016 Product Development constant currency service revenue growth guidance of approximately 10%, and updating its full year 2016 Integrated Healthcare Services constant currency service revenue guidance to a 3.0% to 6.0% decline compared to full year 2015.

The Company is increasing its diluted adjusted EPS guidance to $3.78 to $3.88 per share, representing growth of 13.5% to 16.5% compared to full year 2015, with diluted GAAP EPS guidance of $3.26 to $3.41 per share, representing growth of 5.7% to 10.6% compared to full year 2015. The Company expects an annual effective income tax rate of approximately 29.0%.

This financial guidance assumes foreign currency exchange rates in effect at the end of June remain in effect for the remainder of the year and does not reflect the potential impact of any future equity repurchases or the announced merger agreement with IMS Health. Diluted GAAP EPS guidance includes certain merger related costs, including actual costs already incurred and estimates of certain future costs. Actual results may differ from these estimates.

About Quintiles

Quintiles (NYSE: Q) helps biopharma and other healthcare companies improve their probability of success by connecting insights from our deep scientific, therapeutic and analytics expertise with superior delivery for better outcomes. From advisory through operations, Quintiles is the world’s largest provider of product development and integrated healthcare services, including commercial and observational solutions. Conducting operations in approximately 100 countries, Quintiles is a member of the FORTUNE 500 and has been named to FORTUNE’s list of the “World’s Most Admired Companies.” To learn more, visit www.quintiles.com.