INC Research posted a robust 17.7 percent jump in service revenue in the first quarter but also recently laid off 175 people worldwide – not quite three percent of its employees – as part of a broader realignment of its workforce.
Despite the layoffs, which included about 30 workers at its headquarters in Raleigh, the company expects to continue to add jobs this year to handle its growing business, Chief Financial Officer Greg Rush said in an interview. Last year INC added 800 net new hires worldwide, including about 100 in the Triangle.
“We are continuing to hire, we’re continuing to grow,” said Rush, who added that the company also added 200 net new hires in the first quarter, giving it a total of 6,600 worldwide. The layoffs started in March but the vast majority of employees were notified in early April.
Rush said the layoffs arose in part from a realignment of its therapeutic business units, which were reduced from four to three – oncology, central nervous system and general medicine – to boost efficiency. That enabled the company to eliminate some upper level managers.
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“The worker bees that do all the work were not as impacted by that move,” he said.
In addition, as part of formulating its latest three-year plan, INC undertook a comprehensive look at aligning employees and their skill sets with the needs of customers. That led to further reductions.
At the same time, the company has increased its use of higher-cost contractors this year, partially in response to a customer that wanted it to accelerate its work. By using contractors, even though it costs the company more money, it will avoid “another one of these restructurings” when that work winds down towards the end of the year, Rush said.
INC also is relying on contractors to address an industry-wide shortage of qualified clinical research associates that do the heavy lifting on clinical trials. Contractors can make more money than employees, especially if they have a working spouse who can cover their health insurance costs, Rush said.
Rush noted that INC has added thousands of employees over the last several years.
INC is a contract research organization, or CRO, that helps pharmaceutical and biotechnology companies conduct clinical trials and analyze the results.
The company issued its first-quarter results, which exceeded Wall Street’s expectations, before the markets opened Monday. During a conference call with analysts, INC disclosed that it took a $5.6 million restructuring charge to cover employee severance.
INC posted service revenue of $249 million in the first quarter, up from $211.5 million a year ago. Rush credited the company’s strong backlog and an 18.3 percent increase in new business awards during the quarter for the increase.
Adjusted net income totaled $32.5 million, up 23.4 percent from a year ago. That amounted to 58 cents per share, up 38.1 percent on a per-share basis and four cents better than analysts expected, according to Bloomberg News.
“I’m pleased to report that we’re off to a strong start for 2016,” said CEO Jamie Macdonald.
INC also boosted its guidance for all of 2016. It now expects revenue to rise between 11.5 percent and 12.6 percent for the year, up from between 9.9 percent and 12.1 percent previously.
INC shares closed Monday at $48.95, up $1.45. The company’s stock has risen 8 percent this year.
INC executives also were asked to address speculation about mergers and acquisitions – an obvious reference to a recent Bloomberg News report, citing “people with knowledge of the matter,” that Laboratory Corporation of America and INC had talked about a possible deal.
Without addressing that report directly, Rush said: “We believe we are well-positioned to be an acquirer in the space. We believe we have a good balance sheet to do that.” But he added that the company is most focused on smaller “tuck-in acquisitions.”