Tom Pike, CEO of rival Quintiles, knows full well the talent challenge facing INC Research and other contract research organizations. He described last fall a scarcity of employees known as clinical research associates, or CRAs, and he pointed out that there was a “war on talent.”

INC echoed Pike’s concerns in great deal Monday.

INC Research’s latest earnings report reflects growth in earnings, revenue and hiring. But a separate SEC filing disclosed 175 layoffs as part of a reorganization. Some additional cuts are planned, the company added.

Execs also said n discussing earnings that they are using more contractors, which often are more expensive than full-time employees. What’s going on? That talent war.

INC (Nasdaq: INCR) reported financials that produced earnings of 58 cents per share – 5 cents above Wall Street expectations – at some $17.4 million/

And revenues rose to $249 million, nearly $10 million higher than forecast.

INC also projects revenues topping $1 billion this year, which is right at what analysts had forecast.

However, in a separate SEC filing, INC reported cutting some 175 jobs and restructuring and costs of $6 million, including $5.6 million in severance.

Detailing the layoffs

The SEC filing on the layoffs reads:

“In order to ensure that our organizational focus and resources are properly aligned with our strategic goals, and to continue strengthening the delivery of our growing backlog to customers, we completed a review of our business. As a result, we are making certain changes to our therapeutic unit structure to realign with management focus and optimize the efficiency of our resourcing to achieve our strategic plan. Accordingly, on March 31, 2016 management approved a global plan to eliminate approximately 175 positions globally and, as a result, recorded a charge of $5.6 million related to employee severance costs. As a follow-up to this plan, further efforts were made to refine our resourcing plan to align with our strategic goals and strengthen service delivery. The remaining positions to be eliminated will result in an estimated $1.0 million to $2.0 million of additional restructuring expenses to be incurred in the second quarter of 2016.”

However, the company also grew its overall headcount and in a conference call two of its top executives said INC is facing increased costs because it is having to hire more contractors to meet client demand. These independent workers can be more expensive to hire, they noted.

“With respect to our longer term margins, we continue to see an increasingly tight labor markets for CRA, which may put some pressure on wages and may result in the need for us to use a greater mix of higher cost contractors to service our customers,” Chief Financial Officer Greg Rush said.

In demand are CRAs, or clinical research associates, with demand especially tight for those trained in oncology.

“It’s certainly something we’re starting to see and we’re taking proactive actions to offset it but it’s certainly something that’s been developing,” Rush said of the CRA shortage.

“So, it’s probably about mid last year and it’s become more and more acute. I think you’ve heard all of our competitors talk about it in some form or fashion about whether new talent acquisition is difficult, particularly in oncology right now. So, whenever you have imbalance of demand versus supply, that’s going to put pressure on wages. And in addition new CRAs in marketplace can make a good living as independent contractors.

“So, you’re screening a lot of them choose to take that route. And as a result, the supply of those drops and then your demand continues to grow in sort of a circle. Our competitors are talking about moving things to lower cost markets to help offset that and develop talent there. We believe with our therapeutic focus that’s probably not the best answer for our business model.”

CEO Jamie Macdonald also weighed in on the issue.

“We would normally expect to have some percentage of our workforce that do CRAs as contractors and we try to manage within certain boundaries,” he explained.

“The other thing is, at an industry level, we’ve had these discussions to see is there anything that we can do to really sort of highlight the career path in clinical development, not just at the CRA level because generally it’s not something that people that are coming out of school think about.”

Macdonald also said INC has made adjustments in benefits for and demands placed on its own CRAs.

“Obviously we’re working on work life balance, improving the tools, improving travel for CRAs, all of those are designed to create the right work environment to be able to tract the best people and keep them within INC,” he said.

Read the full earnings conference call transcript at:

http://seekingalpha.com/article/3970271-inc-researchs-incr-ceo-jamie-macdonald-q1-2016-results-earnings-call-transcript?part=single