PRA Health Sciences, Inc. (“PRA” or the “Company”) (NASDAQ:PRAH)
today reported financial results for the quarter and year ended
December 31, 2017.
For the three months ended December 31, 2017, service
revenue was $568.8 million, which represents growth of 37.5%, or
$155.2 million, compared to the fourth quarter of 2016 at actual
foreign exchange rates. On a constant currency basis, service
revenue grew $148.5 million, an increase of 35.9% compared to the
fourth quarter of 2016. Organic revenue growth was 20.2% at actual
foreign exchange rates and 18.6% on a constant currency basis.
Net new business for our Clinical Research segment for the
quarter ended December 31, 2017 was $647.3 million,
representing a net book-to-bill ratio of 1.30 for the period. This
net new business contributed to an ending backlog of $3.5 billion
at December 31, 2017.
“We are pleased with our financial results for the quarter and
are delighted to have delivered double digit constant currency
revenue, adjusted earnings and new business growth,” said Colin
Shannon, PRA’s Chief Executive Officer. “We believe we are well
positioned for the coming year, as evidenced by our record level of
new business awards and backlog, we continue to stay focused on our
key strategic initiatives, and we look forward to delivering strong
results in 2018.”
Direct costs were $368.9 million during the three months ended
December 31, 2017 compared to $274.4 million for the fourth
quarter of 2016. The increase in direct costs was primarily due to
an increase in labor-related costs of $51.7 million in our Clinical
Research segment as we continue to hire billable staff to ensure
appropriate staffing levels for our current studies and our future
growth. In addition, our Data Solutions segment resulted in $40.2
million of incremental direct costs when compared to 2016. Direct
costs were 64.9% of service revenue during the fourth quarter
of 2017 compared to 66.3% of service revenue during the fourth
quarter of 2016. The decrease in direct costs as a percentage of
service revenue is primarily due to higher gross margins within our
Data Solutions segment service offerings compared to our Clinical
Research service offerings.
Selling, general and administrative expenses were $92.2 million
during the three months ended December 31, 2017 compared to
$70.2 million for the fourth quarter of 2016. Selling, general and
administrative costs were 16.2% of service revenue during the
fourth quarter of 2017 compared to 17.0% of service revenue during
the fourth quarter of 2016. The decrease in selling, general
and administrative expenses as a percentage of revenue is primarily
attributable to our ability to effectively leverage our
selling and administrative functions.
During the three months ended December 31, 2017, the
Company recognized transaction-related costs of $75.9 million
primarily related to changes in the fair value of earn-out
liabilities associated with our recent acquisitions. During the
three months ended December 31, 2016, we incurred $13.0 million in
transaction-related costs. These costs consisted of $12.7 million
of stock-based compensation expense related to the release of
transfer restrictions on vested options, and the vesting of certain
performance-based stock options in connection with the November
2016 secondary offering. In addition, we incurred $0.3 million of
third-party fees associated with the secondary offering.
During the fourth quarter of 2017, we incurred an $11.9 million
loss on modification or extinguishment of debt. This loss is
associated with the amendment of our 2016 credit facilities and the
redemption of our senior notes. During the fourth quarter of 2016,
we incurred a $16.7 million loss on extinguishment of debt. This
loss is associated with the refinancing of our 2013 credit
facilities, which included the write-off of $15.8 million of
unamortized debt issuance costs and $0.9 million of other costs
associated with the transaction.
GAAP net loss was $16.0 million for the three months ended
December 31, 2017, or $0.25 per share on a diluted basis,
compared to GAAP net income of $14.0 million for the three months
ended December 31, 2016, or $0.22 per share on a diluted
basis. Our reported net loss for the three months ended
December 31, 2017 included the loss on modification of debt
and the revaluation of acquisition-related earn-out liabilities
discussed above.
EBITDA was $15.2 million for the three months ended
December 31, 2017, representing a decrease of 72.0% compared
to the fourth quarter of 2016. The decrease in EBITDA was driven by
the loss on modification of debt and the revaluation of
acquisition-related earn-out liabilities discussed above. Adjusted
EBITDA was $114.6 million for the three months ended
December 31, 2017, representing growth of 55.1% compared to
the fourth quarter of 2016.
Adjusted net income was $68.8 million for the three months ended
December 31, 2017, representing 49.9% growth compared to the
fourth quarter of 2016. Adjusted net income per diluted share was
$1.04 for the three months ended December 31, 2017,
representing 46.5% growth compared to the fourth quarter of
2016.
A reconciliation of our non-GAAP measures, including EBITDA,
adjusted EBITDA, adjusted net income, adjusted net income per share
and our 2018 guidance, to the corresponding GAAP measures is
included in this press release.
Full Year 2017 Financial Highlights
For the twelve months ended December 31, 2017, service
revenue was $1,948.4 million, which represents growth of 23.3%, or
$368.4 million, compared to the twelve months ended
December 31, 2016 at actual foreign exchange rates. On a
constant currency basis, service revenue grew $361.2 million,
representing growth of 22.9% compared to the twelve months ended
December 31, 2016. Organic revenue growth for the twelve
months ended December 31, 2017, was 17.6% at actual foreign
exchange rates and 17.1% on a constant currency basis.
Reported GAAP income from operations was $176.2 million,
reported GAAP net income attributable to PRA Health Sciences was
$86.9 million and reported GAAP net income attributable to PRA
Health Sciences per diluted share was $1.32 for the twelve months
ended December 31, 2017.
Adjusted net income was $218.8 million for the twelve months
ended December 31, 2017, an improvement of 34.8% compared to
the same period in 2016. Adjusted net income per diluted share
was $3.33 for the twelve months ended December 31, 2017, up
32.1% compared to the same period in 2016.
Full Year 2018 and Q1 2018 Guidance
Effective January 1, 2018, the Company adopted the provisions of
ASU No. 2014-09 “Revenue from Contracts with Customers” (ASC 606),
which requires that the Company apply percentage of completion
accounting to service revenue, reimbursement revenue and
investigator grants as one performance obligation. The inclusion of
reimbursable out-of-pocket costs and investigator fees in the
calculation of revenue under ASC 606 may create a timing difference
between the amount the Company is entitled to receive for these
reimbursable costs, and the amount of revenue recognized. The
variability and magnitude of this timing difference compared to
current accounting is dependent on the progress of the service
portion of the arrangement compared to the progress of the
investigator fees and the reimbursable out-of-pocket costs relative
to their respective forecasted costs over the life of the project.
The Company currently does not expect the impact of adopting ASC
606 to have a material impact on its 2018 GAAP net income or
adjusted net income and related earnings per share. Should actual
results differ from current expectations future guidance will be
updated accordingly.
For full year 2018, the Company expects to achieve total company
revenues between $2.84 billion and $2.95 billion, representing as
reported growth of 46% to 51%, constant currency growth of 18% to
20% excluding the impact of adopting ASC 606, and constant currency
organic growth of 10% to 12% excluding the impact of adopting ASC
606. We expect GAAP net income per diluted share of between $2.80
and $2.95 per share and adjusted net income per diluted share of
between $4.00 and $4.15 per share, representing growth of 20% to
25%. We anticipate an annual effective income tax rate estimate of
approximately 24%, which includes the expected impact of the Tax
Cuts and Jobs Act enacted in the fourth quarter of 2017. Our
effective tax rate may differ from this estimate, due to, among
other things, changes to estimates of the geographic allocation of
our pre-tax income as well as changes in interpretations, analysis,
and additional guidance that may be issued by regulatory agencies
as it relates to the Tax Cuts and Jobs Act.
For Q1 2018, the Company expects to achieve service revenues
between $688 million and $708 million, representing as reported
growth of 61% to 65%, constant currency growth of 28% to 30%
excluding the impact of adopting ASC 606, and constant currency
organic growth of 12% to 14% excluding the impact of adopting ASC
606, GAAP net income per diluted share of between $0.49 and $0.55
per share, adjusted net income per diluted share between $0.81 and
$0.86 per share, and an annual effective income tax rate of
approximately 24%.
Our 2018 guidance assumes a EURO rate of 1.25 and a GBP rate of
1.37 with all other foreign currencies using a rate as of January
31, 2018.
Conference Call Details
PRA will host a conference call at 9:00 a.m. ET on
February 22, 2018, to discuss the contents of this release and
other relevant topics. To participate, please dial (877) 930-8062
within the United States or (253) 336-7647 outside the United
States approximately 10 minutes before the scheduled start of the
call. The conference ID for the call is 3259778. The conference
call will also be accessible, live via audio broadcast, on the
Investor Relations section of the PRA website at
investors.prahs.com. A replay of the conference call will be
available online at investors.prahs.com. In addition, an audio
replay of the call will be available for one week following the
call and can be accessed by dialing (855) 859-2056 within the
United States or (404) 537-3406 outside the United States. The
replay ID is 3259778.
Additional Information
A financial supplement with fourth quarter 2017 results,
which should be read in conjunction with this press release, may be
found in the Investor Relations section of our website at
investors.prahs.com in a document titled “Q4 2017 Earnings
Presentation.”
About PRA Health Sciences
PRA (NASDAQ:PRAH) is one of the world’s leading global contract
research organizations, or CROs, by revenue, providing outsourced
clinical development and data solution services to the
biotechnology and pharmaceutical industries. PRA’s global clinical
development platform includes more than 70 offices across North
America, Europe, Asia, Latin America, South Africa, Australia and
the Middle East and over 15,800 employees worldwide. Since 2000,
PRA has participated in approximately 3,700 clinical trials
worldwide. In addition, PRA has participated in the pivotal or
supportive trials that led to U.S. Food and Drug Administration or
international regulatory approval of more than 75 drugs.
PRA has therapeutic expertise in areas that are among the
largest in pharmaceutical development, including oncology, central
nervous system, inflammation and infectious diseases. PRA believes
that it provides its clients with one of the most flexible clinical
development service offerings, which includes both traditional,
project-based Phase I through Phase IV services, as well as
embedded, functional outsourcing and data solution services. The
Company has invested in medical informatics and clinical
technologies designed to enhance efficiencies, improve study
predictability and provide better transparency to clients
throughout their clinical development processes. To learn more
about PRA, please visit www.prahs.com.
Internet Posting of Information: The Company routinely posts
information that may be important to investors in the ‘Investor
Relations’ section of the Company’s website at www.prahs.com. The
Company encourages investors and potential investors to consult the
Company’s website regularly for important information about the
Company.
Contacts:
Helen O’DonnellSolebury Communications GroupManaging
Director203.428.3213InvestorRelations@prahs.com
orhodonnell@soleburyir.com
Christine RogersPRA Health Sciences, Inc.Director, Public
Relations919.786.8463rogerschristine@prahs.com
Forward-Looking Statements
This press release contains forward-looking statements that
reflect, among other things, the Company’s current expectations and
anticipated results of operations, all of which are subject to
known and unknown risks, uncertainties and other factors that may
cause actual results, performance or achievements, market trends or
industry results to differ materially from those expressed or
implied by such forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical
fact may constitute forward-looking statements. Without limiting
the foregoing, words such as “anticipates,” “believes,”
“estimates,” “expects,” “guidance,” “intends,” “may,” “plans,”
“projects,” “should,” “targets,” “will” and the negative thereof
and similar words and expressions are intended to identify
forward-looking statements. Actual results may differ materially
from the Company’s expectations due to a number of factors,
including that most of the Company’s contracts may be terminated on
short notice and that the Company may be unable to maintain large
customer contracts or to enter into new contracts; the historical
indications of the relationship of backlog to revenues may not be
indicative of their future relationship; the market for the
Company’s services may not grow as the Company expects; the Company
may under price contracts or overrun its cost estimates, fail to
receive approval for or experience delays in documenting change
orders, and if the Company is unable to achieve operating
efficiencies or grow revenues faster than expenses, operating
margins will be adversely affected; the Company may be unable to
maintain information systems or effectively update them; customer
or therapeutic concentration could harm the Company’s business; the
Company’s business is subject to risks associated with
international operations, including economic, political and other
risks such as compliance with a myriad of laws and regulations,
complications from conducting clinical trials in multiple countries
simultaneously and changes in exchange rates; the Company is also
subject to a number of additional risks associated with its
business outside the United States, including foreign currency
exchange fluctuations and restrictive regulations, as well as the
risks and uncertainties associated with the United Kingdom’s
expected withdrawal from the European Union; government regulators
or customers may limit the scope of prescription or withdraw
products from the market, and government regulators may impose new
regulations affecting the Company’s business; the Company may be
unable to successfully develop and market new services or enter new
markets; the Company’s failure to perform services in accordance
with contractual requirements, regulatory standards and ethical
considerations may subject it to significant costs or liability,
damage its reputation and cause it to lose existing business or not
receive new business; the Company’s services are related to
treatment of human patients, and it could face liability if a
patient is harmed; the Company may be unable to successfully
identify, acquire and integrate businesses, services and
technologies; the Company's reliance on third parties for data,
products, services and intellectual property licenses; the Company
has substantial indebtedness and may incur additional indebtedness
in the future, which could adversely affect the Company’s financial
condition; and other factors that are set forth in the Company’s
filings with the Securities and Exchange Commission, including its
most recent Annual Report on Form 10-K filed with the SEC on
February 23, 2017. The Company undertakes no obligation to update
any forward-looking statement after the date of this release,
whether as a result of new information, future developments or
otherwise, except as may be required by applicable law.
Use of Non-GAAP Financial Measures
This press release includes EBITDA, adjusted EBITDA, adjusted
net income and adjusted net income per share, each of which are
financial measures not prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”).
Management believes that these measures provide useful supplemental
information to management and investors regarding our operating
results as they exclude certain items whose fluctuation from
period- to- period do not necessarily correspond to changes in the
operating results of our business. As a result, management and our
board of directors regularly use EBITDA and adjusted EBITDA as a
tool in evaluating our operating and financial performance and in
establishing discretionary annual bonuses. Adjusted EBITDA is also
the basis for covenant compliance EBITDA, which is used in certain
covenants in the credit agreement governing our senior secured
credit facilities and the indenture governing the senior notes. In
addition, management believes that EBITDA, adjusted EBITDA and
adjusted net income (including diluted adjusted net income per
share) facilitate comparisons of our operating results with those
of other companies by backing out of GAAP net income items relating
to variations in capital structures (affecting interest expense),
taxation, and the age and book depreciation of facilities and
equipment (affecting relative depreciation expense), which may vary
for different companies for reasons unrelated to operating
performance. We believe that EBITDA, adjusted EBITDA and adjusted
net income (including diluted adjusted net income per share) are
frequently used by securities analysts, investors, and other
interested parties in the evaluation of issuers, many of which also
present EBITDA, adjusted EBITDA and adjusted net income (including
diluted adjusted net income per share) when reporting their results
in an effort to facilitate an understanding of their operating
results.
These non-GAAP financial measures have limitations as analytical
tools, and you should not consider these measures in isolation, or
as a substitute for analysis of our results as reported under GAAP.
Additionally, because not all companies use identical calculations,
these presentations of EBITDA, adjusted EBITDA and adjusted net
income (including diluted adjusted net income per share) may not be
comparable to similarly titled measures of other companies.
EBITDA represents net income before interest, taxes,
depreciation and amortization. Adjusted EBITDA and adjusted net
income (including diluted adjusted net income per share) represent
EBITDA and net income (including diluted net income per share),
respectively, adjusted to exclude stock-based compensation
expense, loss (gain) on disposal of fixed assets, loss on
modification or extinguishment of debt, foreign currency
losses (gains), other non-operating expense (income), equity
in (gains) losses of unconsolidated joint ventures,
transaction-related costs, acquisition-related costs, severance
costs and restructuring charges, prior year foreign research
and development credits, lease termination expense, non-cash
rent adjustment, adjustment to reflect amounts attributable to
noncontrolling interest and other charges. Adjusted net income is
also adjusted to exclude amortization of intangible assets,
amortization of terminated interest rate swaps, and amortization of
deferred financing costs. EBITDA, adjusted EBITDA and adjusted net
income are not measurements of our financial performance under GAAP
and should not be considered as alternatives to net income or other
performance measures derived in accordance with GAAP or as
alternatives to cash flow from operating activities as measures of
our liquidity. EBITDA, adjusted EBITDA and adjusted net income have
limitations as analytical tools, and you should not consider such
measures either in isolation or as substitutes for analyzing our
results as reported under GAAP.
Some of these limitations are:
- EBITDA and adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs;
- EBITDA and adjusted EBITDA do not reflect our interest expense,
or the cash requirements necessary to service interest or principal
payments, on our debt;
- EBITDA and adjusted EBITDA do not reflect our tax expense or
the cash requirements to pay our taxes;
- EBITDA and adjusted EBITDA do not reflect historical capital
expenditures or future requirements for capital expenditures or
contractual commitments;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA and adjusted EBITDA do not
reflect any cash requirements for such replacements; and
- other companies in our industry may calculate EBITDA and
adjusted EBITDA differently, limiting their usefulness as
comparative measures.
Because of these limitations, EBITDA and adjusted EBITDA should
not be considered as discretionary cash available to us to reinvest
in the growth of our business or as a measure of cash that will be
available to us to meet our obligations.
Constant Currency
Constant currency comparisons are based on translating local
currency amounts in the current year period at actual foreign
exchange rates for the prior year. The Company routinely evaluates
its financial performance on a constant currency basis in order to
facilitate period- to- period comparisons without regard to the
impact of changing foreign currency exchange rates.
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except per share
amounts) |
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue: |
|
(Unaudited) |
|
|
|
|
Service
revenue |
|
$ |
568,802 |
|
|
$ |
413,613 |
|
|
$ |
1,948,374 |
|
|
$ |
1,580,023 |
|
Reimbursement revenue |
|
87,094 |
|
|
58,773 |
|
|
311,015 |
|
|
231,688 |
|
Total
revenue |
|
655,896 |
|
|
472,386 |
|
|
2,259,389 |
|
|
1,811,711 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Direct
costs |
|
368,880 |
|
|
274,355 |
|
|
1,283,868 |
|
|
1,032,688 |
|
Reimbursable out-of-pocket costs |
|
87,094 |
|
|
58,773 |
|
|
311,015 |
|
|
231,688 |
|
Selling,
general and administrative |
|
92,217 |
|
|
70,245 |
|
|
321,987 |
|
|
269,893 |
|
Transaction-related costs |
|
75,893 |
|
|
13,049 |
|
|
87,709 |
|
|
44,834 |
|
Depreciation and amortization |
|
28,081 |
|
|
17,260 |
|
|
78,227 |
|
|
69,506 |
|
Loss on
disposal of fixed assets, net |
|
118 |
|
|
463 |
|
|
358 |
|
|
753 |
|
Income
from operations |
|
3,613 |
|
|
38,241 |
|
|
176,225 |
|
|
162,349 |
|
Interest expense,
net |
|
(15,641 |
) |
|
(12,388 |
) |
|
(46,729 |
) |
|
(54,913 |
) |
Loss on modification or
extinguishment of debt |
|
(11,934 |
) |
|
(16,693 |
) |
|
(15,023 |
) |
|
(38,178 |
) |
Foreign currency
(losses) gains, net |
|
(4,618 |
) |
|
14,765 |
|
|
(39,622 |
) |
|
24,029 |
|
Other (expense) income,
net |
|
(104 |
) |
|
692 |
|
|
(304 |
) |
|
607 |
|
(Loss) income before
income taxes and equity in income of unconsolidated joint
ventures |
|
(28,684 |
) |
|
24,617 |
|
|
74,547 |
|
|
93,894 |
|
(Benefit from)
provision for income taxes |
|
(12,458 |
) |
|
10,625 |
|
|
(12,623 |
) |
|
28,494 |
|
(Loss) income before
equity in income of unconsolidated joint ventures |
|
(16,226 |
) |
|
13,992 |
|
|
87,170 |
|
|
65,400 |
|
Equity in income of
unconsolidated joint ventures, net of tax |
|
31 |
|
|
33 |
|
|
123 |
|
|
2,775 |
|
Net (loss) income |
|
(16,195 |
) |
|
14,025 |
|
|
87,293 |
|
|
68,175 |
|
Net loss (income)
attributable to noncontrolling interest |
|
147 |
|
|
— |
|
|
(366 |
) |
|
— |
|
Net (loss) income
attributable to PRA Health Sciences, Inc. |
|
$ |
(16,048 |
) |
|
$ |
14,025 |
|
|
$ |
86,927 |
|
|
$ |
68,175 |
|
Net (loss) income per
share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.25 |
) |
|
$ |
0.23 |
|
|
$ |
1.39 |
|
|
$ |
1.12 |
|
Diluted |
|
$ |
(0.25 |
) |
|
$ |
0.22 |
|
|
$ |
1.32 |
|
|
$ |
1.06 |
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
63,187 |
|
|
61,294 |
|
|
62,437 |
|
|
60,759 |
|
Diluted |
|
63,187 |
|
|
65,001 |
|
|
65,773 |
|
|
64,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except share
amounts) |
|
|
|
December 31, |
|
|
2017 |
|
2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
192,229 |
|
|
$ |
144,623 |
|
Restricted cash |
|
661 |
|
|
4,715 |
|
Accounts
receivable and unbilled services, net |
|
627,003 |
|
|
439,053 |
|
Prepaid
expenses and other current assets |
|
55,580 |
|
|
35,367 |
|
Income
taxes receivable |
|
1,551 |
|
|
979 |
|
Total
current assets |
|
877,024 |
|
|
624,737 |
|
Fixed assets, net |
|
143,070 |
|
|
87,577 |
|
Goodwill |
|
1,512,424 |
|
|
971,980 |
|
Intangible assets,
net |
|
783,836 |
|
|
473,976 |
|
Deferred tax
assets |
|
8,939 |
|
|
6,568 |
|
Investment in
unconsolidated joint ventures |
|
407 |
|
|
284 |
|
Deferred financing
fees |
|
1,844 |
|
|
1,762 |
|
Other assets |
|
30,502 |
|
|
23,507 |
|
Total
assets |
|
$ |
3,358,046 |
|
|
$ |
2,190,391 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Current
portion of borrowings under credit facilities |
|
$ |
91,500 |
|
|
$ |
— |
|
Current
portion of long-term debt |
|
28,789 |
|
|
31,250 |
|
Accounts
payable |
|
64,635 |
|
|
51,335 |
|
Accrued
expenses and other current liabilities |
|
303,875 |
|
|
123,589 |
|
Income
taxes payable |
|
13,606 |
|
|
25,524 |
|
Advanced
billings |
|
469,211 |
|
|
332,501 |
|
Total
current liabilities |
|
971,616 |
|
|
564,199 |
|
Deferred tax
liabilities |
|
112,181 |
|
|
73,703 |
|
Long-term debt,
net |
|
1,225,397 |
|
|
797,052 |
|
Other long-term
liabilities |
|
112,371 |
|
|
26,185 |
|
Total
liabilities |
|
2,421,565 |
|
|
1,461,139 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders'
equity: |
|
|
|
|
Preferred stock
(100,000,000 authorized shares; $0.01 par value) |
|
|
|
|
Issued
and outstanding -- none |
|
— |
|
|
— |
|
Common stock
(1,000,000,000 authorized shares; $0.01 par value) |
|
|
|
|
Issued
and outstanding -- 63,623,950 and 61,597,705 at December 31, 2017
and 2016, respectively |
|
636 |
|
|
616 |
|
Additional paid-in
capital |
|
905,423 |
|
|
879,067 |
|
Accumulated other
comprehensive loss |
|
(136,470 |
) |
|
(224,686 |
) |
Retained earnings |
|
161,182 |
|
|
74,255 |
|
Equity
attributable to PRA Health Sciences, Inc. stockholders |
|
930,771 |
|
|
729,252 |
|
Noncontrolling
interest |
|
5,710 |
|
|
— |
|
Total
stockholders' equity |
|
936,481 |
|
|
729,252 |
|
Total
liabilities and stockholders' equity |
|
$ |
3,358,046 |
|
|
$ |
2,190,391 |
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in thousands) |
|
|
|
Years Ended December 31, |
|
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
Net
income |
|
$ |
87,293 |
|
|
$ |
68,175 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
78,227 |
|
|
69,506 |
|
Amortization of debt issuance costs and discount |
|
2,108 |
|
|
4,433 |
|
Amortization of terminated interest rate swaps |
|
6,684 |
|
|
4,961 |
|
Stock-based compensation expense |
|
12,616 |
|
|
7,067 |
|
Non-cash
transaction related stock-based compensation expense |
|
5,294 |
|
|
42,166 |
|
Unrealized foreign currency losses (gains) |
|
39,700 |
|
|
(24,499 |
) |
Loss on
modification or extinguishment of debt |
|
15,023 |
|
|
38,178 |
|
Loss on
disposal of fixed assets |
|
358 |
|
|
753 |
|
Change in
acquisition-related contingent consideration |
|
74,969 |
|
|
(527 |
) |
Equity in
(income) losses of unconsolidated joint ventures |
|
(123 |
) |
|
(2,775 |
) |
Unrealized loss on derivatives |
|
171 |
|
|
47 |
|
Excess
tax benefit from stock-based compensation |
|
— |
|
|
(846 |
) |
Deferred
income taxes |
|
(75,915 |
) |
|
(10,469 |
) |
Other
reconciling items |
|
592 |
|
|
(652 |
) |
Changes
in operating assets and liabilities, net of acquired assets
and assumed liabilities: |
|
|
|
|
Accounts
receivable and unbilled services |
|
(136,330 |
) |
|
(31,313 |
) |
Prepaid
expenses and other assets |
|
1,762 |
|
|
(10,071 |
) |
Accounts
payable and other liabilities |
|
35,792 |
|
|
(1,474 |
) |
Income
taxes |
|
10,640 |
|
|
7,308 |
|
Advanced
billings |
|
61,547 |
|
|
79 |
|
Net cash
provided by operating activities |
|
220,408 |
|
|
160,047 |
|
Cash flows from
investing activities: |
|
|
|
|
Purchase
of fixed assets |
|
(61,318 |
) |
|
(33,143 |
) |
Proceeds
from the sale of fixed assets |
|
56 |
|
|
10 |
|
Cash paid
for interest on interest rate swap |
|
(874 |
) |
|
(913 |
) |
Acquisition of Symphony Health Solutions Corporation, net of cash
acquired |
|
(521,182 |
) |
|
— |
|
Payment
of Symphony Health Solutions Corporation contingent
consideration |
|
(67,781 |
) |
|
— |
|
Acquisition of Parallel 6, Inc., net of cash acquired |
|
(38,859 |
) |
|
— |
|
Acquisition of Takeda PRA Development Center KK, net of cash
acquired |
|
2,680 |
|
|
— |
|
Acquisition of Takeda Pharmaceutical Data Services, Ltd., net of
cash acquired |
|
(142 |
) |
|
— |
|
Acquisition of Nextrials, Inc., net of cash acquired |
|
— |
|
|
(4,268 |
) |
Distributions from unconsolidated joint ventures |
|
— |
|
|
3,700 |
|
Net cash
used in investing activities |
|
(687,420 |
) |
|
(34,614 |
) |
Cash flows from
financing activities: |
|
|
|
|
Proceeds
from issuance of long-term debt |
|
550,000 |
|
|
625,000 |
|
Repayment
of long-term debt |
|
(125,513 |
) |
|
(822,559 |
) |
Proceeds
from accounts receivable financing agreement |
|
20,000 |
|
|
120,000 |
|
Repayment
on accounts receivable financing agreement |
|
(20,000 |
) |
|
— |
|
Borrowings on line of credit |
|
121,500 |
|
|
110,000 |
|
Repayments of line of credit |
|
(30,000 |
) |
|
(110,000 |
) |
Payment
of debt prepayment and debt extinguishment costs |
|
(9,226 |
) |
|
(17,824 |
) |
Payment
for debt issuance costs |
|
(6,588 |
) |
|
(7,713 |
) |
Excess
tax benefit from stock-based compensation |
|
— |
|
|
846 |
|
Proceeds
from stock option exercises |
|
7,236 |
|
|
655 |
|
Payment
of acquisition-related contingent consideration |
|
(400 |
) |
|
— |
|
Net cash
provided by (used in) financing activities |
|
507,009 |
|
|
(101,595 |
) |
Effects of foreign
exchange changes on cash, cash equivalents, and restricted
cash |
|
3,555 |
|
|
(625 |
) |
Change in cash, cash
equivalents, and restricted cash |
|
43,552 |
|
|
23,213 |
|
Cash, cash equivalents,
and restricted cash, beginning of year |
|
149,338 |
|
|
126,125 |
|
Cash, cash equivalents,
and restricted cash, end of year |
|
$ |
192,890 |
|
|
$ |
149,338 |
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF NON-GAAP
MEASURES |
(in thousands, except per share
amounts) |
(unaudited) |
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net (loss)
income attributable to PRA Health Sciences, Inc. |
|
$ |
(16,048 |
) |
|
$ |
14,025 |
|
|
$ |
86,927 |
|
|
$ |
68,175 |
|
Depreciation and
amortization |
|
28,081 |
|
|
17,260 |
|
|
78,227 |
|
|
69,506 |
|
Interest expense,
net |
|
15,641 |
|
|
12,388 |
|
|
46,729 |
|
|
54,913 |
|
(Benefit from)
provision for income taxes |
|
(12,458 |
) |
|
10,625 |
|
|
(12,623 |
) |
|
28,494 |
|
EBITDA |
|
15,216 |
|
|
54,298 |
|
|
199,260 |
|
|
221,088 |
|
Stock-based
compensation expense (a) |
|
4,930 |
|
|
2,127 |
|
|
12,616 |
|
|
7,067 |
|
Loss on disposal of
fixed assets, net (b) |
|
118 |
|
|
463 |
|
|
358 |
|
|
753 |
|
Loss on modification or
extinguishment of debt (c) |
|
11,934 |
|
|
16,693 |
|
|
15,023 |
|
|
38,178 |
|
Foreign currency losses
(gains), net (d) |
|
4,618 |
|
|
(14,765 |
) |
|
39,622 |
|
|
(24,029 |
) |
Other non-operating
expense (income), net (e) |
|
104 |
|
|
(692 |
) |
|
304 |
|
|
(607 |
) |
Equity in income of
unconsolidated joint ventures, net of tax |
|
(31 |
) |
|
(33 |
) |
|
(123 |
) |
|
(2,775 |
) |
Foreign research and
development credits (f) |
|
(66 |
) |
|
(197 |
) |
|
(66 |
) |
|
(197 |
) |
Transaction-related
costs (g) |
|
75,893 |
|
|
13,049 |
|
|
87,709 |
|
|
44,834 |
|
Acquisition-related
costs (h) |
|
386 |
|
|
2,192 |
|
|
3,565 |
|
|
2,434 |
|
Lease termination
expense (i) |
|
35 |
|
|
33 |
|
|
187 |
|
|
(415 |
) |
Severance and
restructuring charges (j) |
|
— |
|
|
— |
|
|
— |
|
|
33 |
|
Non-cash rent
adjustment (k) |
|
1,164 |
|
|
746 |
|
|
3,614 |
|
|
2,923 |
|
Non-operating income
attributable to noncontrolling interest |
|
339 |
|
|
— |
|
|
592 |
|
|
— |
|
Adjusted
EBITDA |
|
$ |
114,640 |
|
|
$ |
73,914 |
|
|
$ |
362,661 |
|
|
$ |
289,287 |
|
|
|
|
|
|
|
|
|
|
Net (loss)
income attributable to PRA Health Sciences, Inc. |
|
$ |
(16,048 |
) |
|
$ |
14,025 |
|
|
$ |
86,927 |
|
|
$ |
68,175 |
|
(Benefit from)
provision for income taxes |
|
(12,458 |
) |
|
10,625 |
|
|
(12,623 |
) |
|
28,494 |
|
Amortization of
intangible assets |
|
19,669 |
|
|
11,113 |
|
|
49,184 |
|
|
45,368 |
|
Amortization of
deferred financing costs |
|
629 |
|
|
919 |
|
|
2,108 |
|
|
4,433 |
|
Amortization of
terminated interest rate swaps |
|
1,753 |
|
|
1,627 |
|
|
6,684 |
|
|
4,961 |
|
Stock-based
compensation expense (a) |
|
4,930 |
|
|
2,127 |
|
|
12,616 |
|
|
7,067 |
|
Loss on disposal of
fixed assets, net (b) |
|
118 |
|
|
463 |
|
|
358 |
|
|
753 |
|
Loss on modification or
extinguishment of debt (c) |
|
11,934 |
|
|
16,693 |
|
|
15,023 |
|
|
38,178 |
|
Foreign currency losses
(gains), net (d) |
|
4,618 |
|
|
(14,765 |
) |
|
39,622 |
|
|
(24,029 |
) |
Other non-operating
expense (income), net (e) |
|
104 |
|
|
(692 |
) |
|
304 |
|
|
(607 |
) |
Equity in income of
unconsolidated joint ventures, net of tax |
|
(31 |
) |
|
(33 |
) |
|
(123 |
) |
|
(2,775 |
) |
Foreign research and
development credits (f) |
|
(66 |
) |
|
(197 |
) |
|
(66 |
) |
|
(197 |
) |
Transaction-related
costs (g) |
|
75,893 |
|
|
13,049 |
|
|
87,709 |
|
|
44,834 |
|
Acquisition-related
costs (h) |
|
386 |
|
|
2,192 |
|
|
3,565 |
|
|
2,434 |
|
Lease termination
expense (i) |
|
35 |
|
|
33 |
|
|
187 |
|
|
(415 |
) |
Severance and
restructuring charges (j) |
|
— |
|
|
— |
|
|
— |
|
|
33 |
|
Non-cash rent
adjustment (k) |
|
1,164 |
|
|
746 |
|
|
3,614 |
|
|
2,923 |
|
Non-operating income
attributable to noncontrolling interest |
|
339 |
|
|
— |
|
|
592 |
|
|
— |
|
Adjusted pre-tax
income |
|
92,969 |
|
|
57,925 |
|
|
295,681 |
|
|
219,630 |
|
Adjusted tax expense
(l) |
|
(24,172 |
) |
|
(12,045 |
) |
|
(76,877 |
) |
|
(57,323 |
) |
Adjusted net
income |
|
$ |
68,797 |
|
|
$ |
45,880 |
|
|
$ |
218,804 |
|
|
$ |
162,307 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
66,037 |
|
|
65,001 |
|
|
65,773 |
|
|
64,452 |
|
|
|
|
|
|
|
|
|
|
Adjusted net income per
diluted share |
|
$ |
1.04 |
|
|
$ |
0.71 |
|
|
$ |
3.33 |
|
|
$ |
2.52 |
|
PRA HEALTH SCIENCES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP
GUIDANCE |
(in millions, except per share
amounts) |
(unaudited) |
|
|
|
|
FY 2018 |
|
|
|
Adjusted Net Income |
|
Adjusted Diluted Earnings Per
Share |
|
|
|
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
|
|
Net
income and net income per diluted share attributable to PRA Health
Sciences, Inc. |
|
$ |
187.0 |
|
|
$ |
197.0 |
|
|
$ |
2.80 |
|
|
$ |
2.95 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
60.0 |
|
|
62.0 |
|
|
0.89 |
|
|
0.93 |
|
Amortization of intangible assets |
|
71.0 |
|
|
71.0 |
|
|
1.06 |
|
|
1.06 |
|
Amortization of deferred financing costs |
|
2.0 |
|
|
2.0 |
|
|
0.03 |
|
|
0.03 |
|
Amortization of terminated interest rate swaps |
|
6.0 |
|
|
6.0 |
|
|
0.09 |
|
|
0.09 |
|
Stock-based compensation expense (a) |
|
27.0 |
|
|
27.0 |
|
|
0.40 |
|
|
0.40 |
|
Non-cash rent adjustment (k) |
|
1.0 |
|
|
1.0 |
|
|
0.01 |
|
|
0.01 |
|
Adjusted pre-tax income |
|
354.0 |
|
|
366.0 |
|
|
5.28 |
|
|
5.47 |
|
Adjusted tax expense (l) |
|
(85.0 |
) |
|
(88.0 |
) |
|
(1.28 |
) |
|
(1.32 |
) |
Adjusted net income and adjusted net income per diluted
share attributable to PRA Health Sciences, Inc. |
|
$ |
269.0 |
|
|
$ |
278.0 |
|
|
$ |
4.00 |
|
|
$ |
4.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2018 |
|
|
|
Adjusted Net Income |
|
Adjusted Diluted Earnings Per
Share |
|
|
|
Low |
|
High |
|
Low |
|
High |
|
|
|
|
|
|
|
|
|
|
Net
income and net income per diluted share attributable to PRA Health
Sciences, Inc. |
|
$ |
32.0 |
|
|
$ |
36.0 |
|
|
$ |
0.49 |
|
|
$ |
0.55 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
11.0 |
|
|
11.0 |
|
|
0.17 |
|
|
0.17 |
|
Amortization of intangible assets |
|
18.0 |
|
|
18.0 |
|
|
0.27 |
|
|
0.27 |
|
Amortization of deferred financing costs |
|
1.0 |
|
|
1.0 |
|
|
0.02 |
|
|
0.02 |
|
Amortization of terminated interest rate swaps |
|
2.0 |
|
|
2.0 |
|
|
0.03 |
|
|
0.03 |
|
Stock-based compensation expense (a) |
|
6.0 |
|
|
6.0 |
|
|
0.09 |
|
|
0.09 |
|
Adjusted pre-tax income |
|
70.0 |
|
|
74.0 |
|
|
1.07 |
|
|
1.13 |
|
Adjusted tax expense (l) |
|
(17.0 |
) |
|
(18.0 |
) |
|
(0.26 |
) |
|
(0.27 |
) |
Adjusted net income and adjusted net income per diluted
share attributable to PRA Health Sciences, Inc. |
|
$ |
53.0 |
|
|
$ |
56.0 |
|
|
$ |
0.81 |
|
|
$ |
0.86 |
|
(a) Stock-based compensation expense represents the amount
of recurring non-cash expense related to the Company’s equity
compensation programs, excluding transaction-related stock-based
compensation discussed in footnote (g).(b) Loss on disposal
of fixed assets represents the costs incurred in connection with
the sale or disposition of fixed assets, primarily IT equipment and
furniture and fixtures. We exclude these losses from adjusted
EBITDA and adjusted net income because they result from investing
decisions rather than from decisions made related to our ongoing
operations.(c) Loss on modification or extinguishment of debt
relates to costs incurred in connection with changes to our
long-term debt. We exclude these losses from adjusted EBITDA and
adjusted net income because they result from financing decisions
rather than from decisions made related to our ongoing
operations.(d) Foreign currency losses (gains), net primarily
relates to gains or losses that arise in connection with the
revaluation of short-term inter-company balances between our
domestic and international subsidiaries. In addition, this amount
includes gains or losses from foreign currency transactions, such
as those resulting from the settlement of third-party accounts
receivable and payables denominated in a currency other than the
local currency of the entity making the payment. We exclude these
gains and losses from adjusted EBITDA and adjusted net income
because they result from financing decisions rather than from
decisions made related to our ongoing operations and because
fluctuations from period- to- period do not necessarily correspond
to changes in our operating results.(e) Other non-operating
expense (income), net represents income and expense that are
non-operating and whose fluctuations from period- to -period do not
necessarily correspond to changes in our operating
results.(f) The foreign research and development credits are
the result of a comprehensive analysis we have been performing
across the organization to determine whether expenditures incurred
qualify as research and development as defined by the respective
jurisdiction. The amounts recorded in this line item represent
amounts recorded in the current period that related to a prior
period.(g) Transaction-related costs relate primarily to the
acquisition of Symphony Health, secondary offerings, fair-value
revaluation of acquisition-related earn-out liabilities and the
receivables financing agreement. Such costs for the year ended
December 31, 2017 consist of $6.4 million of fees incurred in
connection with the acquisition of Symphony Health, $5.3 million of
stock-based compensation expense related to the release of the
transfer restrictions on vested options, $1.0 million of
third-party fees incurred in connection with our August 2017
secondary offering and $75.0 million related to changes in the fair
value of earn-out liabilities associated with our recent
acquisitions. Transaction-related costs for the year ended December
31, 2016 primarily relate to costs incurred in connection with the
March, May and November 2016 secondary offerings and receivables
financing agreement. For the year ended December 31, 2016, these
costs include $32.0 million of non-cash stock-based compensation
expense related to the vesting and release of the transfer
restrictions of certain performance-based stock options and $10.1
million of stock-based compensation expense associated with the
release of the transfer restrictions on a portion of service-based
vested options in connection with the announcement of our March,
May and November 2016 secondary offerings. In addition, we incurred
$2.7 million of third-party fees associated with the secondary
offerings and the closing of our accounts receivable financing
agreement.(h) Acquisition-related costs primarily relate to
costs incurred in connection with due diligence performed in
connection with contemplated acquisitions, excluding those
associated with the acquisition of Symphony Health that are
discussed in footnote (g); the acquisition of Nextrials, Inc., the
acquisition of Parallel 6, Inc., and the integration cost for the
Takeda joint venture, as well as costs related to other potential
acquisitions to enhance our strategic objectives. Integration costs
primarily consist of professional fees, rebranding costs, the
elimination of redundant facilities and any other costs incurred
directly related to the integration of these acquisitions.(i)
Lease termination expense represents charges incurred in connection
with the termination of leases at locations that are no longer
being used by the Company.(j) Severance and restructuring
charges represent amounts incurred in connection with the
elimination of redundant positions within the organization,
including positions eliminated in connection with acquisitions made
by the Company.(k) We have escalating leases that require the
amortization of rent expense on a straight-line basis over the life
of the lease. The non-cash rent adjustment represents the
difference between rent expense recorded in the consolidated
statement of operations and the amount of cash actually
paid.(l) Represents the tax effect of adjusted pre-tax income
at our estimated effective tax rate.
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PRA Health Sciences (NASDAQ:PRAH)
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From Apr 2023 to Apr 2024