ICLR Misses on Q3 Earnings, Lowers 2024 Guidance, Stock Falls

Earnings Performance - Adjusted EPS for Q3 2024 was $3.35, up 1.5% YoY but missed the Zacks Consensus Estimate by 12.99% [1] - GAAP EPS for Q3 2024 was $2.36, up 19.8% YoY [1] - Following the earnings announcement, ICLR stock fell 21% [1] Revenue Performance - Total revenues for Q3 2024 decreased 1.2% YoY to $2.03 billion, missing the Zacks Consensus Estimate by 1.2% [2] - Gross business wins in Q3 amounted to $2.83 billion, with cancellations of $504 million, resulting in net business wins of $2.33 billion and a book-to-bill ratio of 1.15 [2] Margin Performance - Gross profit decreased 2.4% YoY to $594.1 million, with gross margin contracting 35 bps to 29.1% [3] - Selling, general, and administrative expenses rose 10.8% to $205.1 million [3] - Adjusted operating income decreased 8.2% YoY to $386.3 million, with adjusted operating margin contracting 144 bps to 19% [3] Cash Position - Cash and cash equivalents at the end of Q3 2024 were $695.5 million, up from $506.6 million at the end of Q2 2024 [4] - Net debt balance at the end of Q3 2024 was $2.7 billion [4] - Cumulative cash flow from operating activities was $948.3 million, compared to $720.9 million in the prior-year period [4] Guidance - Full-year 2024 revenue guidance lowered to $8.26 - $8.30 billion, representing 1.7-2.2% YoY growth, down from the previous guidance of $8.45-$8.55 billion [5] - Adjusted EPS guidance for 2024 lowered to $13.90 - $14.10, implying 8.7-10.2% YoY growth, down from the previous guidance of $15.00-$15.20 [6] Challenges and Opportunities - The company experienced slower-than-expected activity in its Biotech segment and lower revenue contributions from two of its largest customers undergoing development model transitions [7] - Project delays and cancellations in the fast-burn vaccine area affected revenues [7] - The company remains encouraged by strategic partnerships and increased flow from biotech [8] Industry Comparison - Phibro Animal Health (PAHC) reported Q4 fiscal 2024 adjusted earnings of 41 cents per share, beating the Zacks Consensus Estimate by 20.6%, with revenues of $273.2 million, beating the estimate by 4.1% [10] - Veracyte (VCYT) posted Q2 2024 earnings of 30 cents per share, beating the Zacks Consensus Estimate of a loss of 3 cents, with revenues of $114.4 million, surpassing the estimate by 14% [11] - HealthEquity (HQY) reported Q2 fiscal 2025 adjusted earnings of 86 cents per share, surpassing the Zacks Consensus Estimate by 22.9%, with revenues of $299.9 million, topping the estimate by 5.4% [12]