PRA Health Sciences, Inc. Reports Third Quarter 2020 Results and Updates Full Year 2020 Guidance

  • Net new business of $737.9 million; representing growth of 10.2%; Net book-to-bill of 1.28 excluding reimbursement revenue

  • Net new business of $986.0 million; Net book-to-bill of 1.35 including reimbursement revenue

  • $796.3 million of total revenue; representing growth of 2.0% at actual foreign exchange rates and 1.3% on a constant currency basis

  • GAAP net income per diluted share of $1.41; GAAP net income of $91.3 million

  • Adjusted net income per diluted share was $1.30; Adjusted net income of $84.1 million

  • Raising full year 2020 revenue guidance to between $3.120 billion and $3.150 billion, GAAP net income per diluted share to between $3.23 and $3.35 and adjusted net income per diluted share to between $4.61 and $4.71

RALEIGH, N.C., Nov. 04, 2020 (GLOBE NEWSWIRE) — PRA Health Sciences, Inc. (“PRA,” “we,” “us” or the “Company”) (NASDAQ: PRAH) today reported financial results for the quarter ended September 30, 2020.

“I am very appreciative of the effort and focus of all of our employees despite the difficult health circumstances in the world today. As a result of this commitment, I am very pleased to report revenue and earnings that were significantly better than the guidance we provided in August and an increase to our 2020 guidance. I am also happy to report another quarter of record level gross and net new business awards,” said Colin Shannon, PRA’s President and Chief Executive Officer. “Although we continue to experience challenges with the pandemic, we believe we will finish 2020 strong and are well-positioned for 2021.”

Net new business for our Clinical Research segment for the three months ended September 30, 2020 excluding reimbursement revenue was $737.9 million, representing a net book-to-bill ratio of 1.28 for the period. Net new business for our Clinical Research segment for the three months ended September 30, 2020 including reimbursement revenue was $986.0 million, representing a net book-to-bill of 1.35 for the period. Consistent with the prior quarters, we did not experience any material COVID-19 related cancellations during the third quarter. Net new business, excluding reimbursement revenue, contributed to an ending backlog at  September 30, 2020 of $5.1 billion, an increase of 11.0% year over year and 3.7% sequentially.

For the three months ended September 30, 2020, revenue was $796.3 million, which represents an increase of 2.0%, or $15.6 million, compared to the three months ended September 30, 2019 at actual foreign exchange rates. On a constant currency basis, revenue increased $10.3 million, an increase of 1.3% compared to the third quarter of 2019. By segment, the Clinical Research segment generated revenues of $732.1 million, while the Data Solutions segment generated revenues of $64.2 million. The increase in revenue for the quarter was attributable to increased billable hours offset by a decrease in the reimbursable portion of revenue, which was impacted by the continued disruption from the COVID-19 pandemic.

Direct costs, exclusive of depreciation and amortization, were $412.1 million during the three months ended September 30, 2020 compared to $389.3 million for the three months ended September 30, 2019 at actual foreign exchange rates. On a constant currency basis, direct costs increased $21.4 million compared to the third quarter of 2019. The increase in direct costs continues to be driven by increased labor costs in our Clinical Research segment and increased data costs in our Data Solutions segment. Direct costs were 51.7% of revenue during the third quarter of 2020 compared to 49.9% of revenue during the third quarter of 2019.

Selling, general and administrative expenses were $115.4 million during the three months ended September 30, 2020 compared to $95.5 million for the three months ended September 30, 2019. Selling, general and administrative costs were 14.5% of revenue during the third quarter of 2020 compared to 12.2% of revenue during the third quarter of 2019.

GAAP net income was $91.3 million for the three months ended September 30, 2020, or $1.41 per share on a diluted basis, compared to GAAP net income of $83.0 million for the three months ended September 30, 2019, or $1.25 per share on a diluted basis.

EBITDA was $148.3 million for the three months ended September 30, 2020, representing an increase of 15.3% compared to the three months ended September 30, 2019. Adjusted EBITDA was $132.3 million for the three months ended September 30, 2020, representing a decrease of 4.0% compared to the three months ended September 30, 2019.

Adjusted net income was $84.1 million for the three months ended September 30, 2020, representing a decrease of 3.6% compared to the three months ended September 30, 2019. Adjusted net income per diluted share was $1.30 for the three months ended September 30, 2020, representing a decrease of 1.5% compared to the three months ended September 30, 2019.

Nine Months Ended September 30, 2020 Financial Highlights

For the nine months ended September 30, 2020, revenue was $2,309.9 million, which represents an increase of 1.9%, or $43.9 million, compared to the nine months ended September 30, 2019 at actual foreign exchange rates. On a constant currency basis, revenue increased $48.5 million, representing an increase of 2.1% compared to the nine months ended September 30, 2019.

Reported GAAP income from operations was $231.0 million, reported GAAP net income was $145.8 million and reported GAAP net income per diluted share was $2.26 for the nine months ended September 30, 2020.

Adjusted Net Income was $206.7 million for the nine months ended September 30, 2020, a decrease of 14.7% compared to the same period in 2019. Adjusted Net Income per diluted share was $3.20 for the nine months ended September 30, 2020, down 12.1% compared to the same period in 2019.

Guidance

The full extent of the COVID-19 pandemic and its impact on our fourth quarter operations continues to remain uncertain. Specifically, the duration of the pandemic, the geographic location of specific outbreaks, and the length and scope of travel restrictions and business closures imposed by the governments of impacted countries could impact our financial results in the fourth quarter of 2020. These uncertainties could impact the assumptions used in the Company’s 2020 guidance if they result in business interruptions, such as the closure of our Phase I clinics, a slowdown in recruitment activities, or limited access to sites worldwide. However, the Company has used its best efforts to estimate the impact of COVID-19 on its business and the resulting impact on financial performance for the remainder of the year.

For full year 2020, the Company expects to achieve total revenues between $3.120 billion and $3.150 billion, GAAP net income per diluted share between $3.23 and $3.35 and adjusted net income per diluted share between $4.61 and $4.71, with an expected effective income tax rate of 23%.

Our actual effective tax rate may differ from our estimate due to, among other things, changes in 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.

Our guidance assumes a EURO rate of 1.15 and a GBP rate of 1.30. All other foreign currency exchange rates are as of September 30, 2020.

A reconciliation of our non-GAAP measures, EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share and our full year guidance to the corresponding GAAP measures is included in this press release.

Conference Call Details

PRA will host a conference call at 9:00 a.m. ET on November 5, 2020, 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 6797898. The conference call will also be accessible, live via audio broadcast, on the Investor Relations section of the PRA website at investor.prahs.com. A replay of the conference call will be available online at investor.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 6797898.

Additional Information

A financial supplement with third quarter 2020 results, which should be read in conjunction with this press release, may be found in the Investor Relations section of our website at investor.prahs.com in a document titled “Q3 2020 Earnings Presentation.”

About PRA Health Sciences

PRA (NASDAQ: PRAH) is a full-service global contract research organization, providing a broad range of product development and data solution services to pharmaceutical and biotechnology companies around the world. PRA’s integrated services include data management, statistical analysis, clinical trial management, and regulatory and drug development consulting. PRA’s global operations span more than 90 countries across North America, Europe, Asia, Latin America, Africa, Australia and the Middle East, and more than 17,500 employees. Since 2000, PRA has participated in more than 4,000 clinical trials. 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 95 products. 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’Donnell
Solebury Trout
Managing Director
203.428.3213
[email protected] or
[email protected]

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 the current COVID-19 pandemic has adversely affected and may continue to affect adversely our business and results of operations; 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 Company may underprice contracts, overrun its cost estimates, or fail to receive approval for, or experience delays in, documenting change orders; the historical indications of the relationship of backlog to revenues may not be indicative of their future relationship; the Company may be unable to attract suitable investigators and patients for its clinical trials; the Company could be subject to employment liability with its embedded and functional outsourcing solutions as it places employees at the physical workplaces of its clients; the Company may lose key personnel or be unable to recruit and retain experienced personnel; the Company may be unable to maintain information systems or effectively update them; a failure or breach of the Company’s IT systems could result in customer information being compromised or otherwise significantly disrupt the Company’s business operations; client or therapeutic concentration or competition among clients could harm the Company’s business; if the Company does not keep pace with rapid technological changes, its services may become less competitive or obsolete; the Company may be unable to successfully identify, acquire and integrate businesses, services and technologies or to manage joint ventures; the Company’s business is subject to economic, political and other risks associated with international operations, including foreign currency exchange rate fluctuations; the Company may be exposed to liabilities under anti-corruption laws due to the global nature of its business; the Company’s failure to perform services in accordance with contractual requirements, certain laws and 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’s relationships with existing or potential clients who are in competition with each other may adversely impact the degree to which other clients or potential clients use its services; the Company may be unable to compete effectively with other players in the biopharmaceutical services industry; changes in accounting standards may adversely affect the Company’s financial statements; the Company’s effective income tax rate may fluctuate which may adversely affect its operations, earnings, and earnings per share; the Company may not realize the full value of its goodwill and intangible assets, and may be unable to use net operating loss carry-forwards; the Company’s suppliers may increase its costs to obtain, restrict its use of or refuse to license its data, or the Company may otherwise be unable to continue to obtain products, services and licenses from third parties; the Company may be unable to protect its intellectual property; patent and other intellectual property litigation could be time-consuming and costly; biopharmaceutical industry outsourcing trends could change and adversely affect the Company’s operations and growth rate; government regulators or customers may limit the scope of prescriptions or withdraw products from the market; the U.S. and international healthcare industry is subject to political, economic and/or regulatory influences and changes, such as healthcare reform; current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost or could limit the Company’s service offerings; the Company has substantial indebtedness, some of which have interest rates pricing using a spread over LIBOR, and may incur additional indebtedness in the future, which could adversely affect the Company’s financial condition; circumstances beyond the Company’s control could cause industry-wide reduction in demand for its services; 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 21, 2020. The forward-looking statements in this release speak only as of the date hereof, and the Company undertakes no obligation to update any such 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 diluted 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. In addition, management believes that EBITDA, adjusted EBITDA and adjusted net income (including adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 CONDENSED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
(unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenue

$

796,307

 

 

$

780,691

 

 

$

2,309,907

 

 

$

2,266,022

 

Operating expenses:

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization expense)

412,076

 

 

389,304

 

 

1,211,278

 

 

1,153,441

 

Reimbursable expenses

156,389

 

 

169,965

 

 

481,497

 

 

471,682

 

Selling, general and administrative expenses

115,409

 

 

95,542

 

 

332,346

 

 

291,439

 

Transaction-related costs

(45,074

)

 

572

 

 

(44,465

)

 

572

 

Depreciation and amortization expense

33,315

 

 

29,264

 

 

98,078

 

 

85,462

 

Loss on disposal of fixed assets, net

32

 

 

256

 

 

207

 

 

900

 

Income from operations

124,160

 

 

95,788

 

 

230,966

 

 

262,526

 

Interest expense, net

(10,721

)

 

(12,974

)

 

(36,102

)

 

(37,834

)

Loss on modification or extinguishment of debt

 

 

(1,855

)

 

 

 

(1,855

)

Foreign currency (losses) gains, net

(9,128

)

 

5,408

 

 

(12,036

)

 

1,864

 

Other (expense) income, net

(1

)

 

15

 

 

(1

)

 

(66

)

Income before income taxes

104,310

 

 

86,382

 

 

182,827

 

 

224,635

 

Provision for income taxes

13,058

 

 

3,375

 

 

37,041

 

 

56,317

 

Net income

91,252

 

 

83,007

 

 

145,786

 

 

168,318

 

Net income attributable to noncontrolling interest

 

 

 

 

 

 

(99

)

Net income attributable to PRA Health Sciences, Inc.

$

91,252

 

 

$

83,007

 

 

$

145,786

 

 

$

168,219

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

Basic

$

1.44

 

 

$

1.28

 

 

$

2.31

 

 

$

2.58

 

Diluted

$

1.41

 

 

$

1.25

 

 

$

2.26

 

 

$

2.53

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

63,447

 

 

64,771

 

 

63,184

 

 

65,096

 

Diluted

64,874

 

 

66,213

 

 

64,558

 

 

66,607

 

 

 

 

 

 

 

 

 

 

 

 

 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)

 

September 30,

 

December 31,

 

2020

 

2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

336,228

 

 

$

236,232

 

Restricted cash

 

 

38

 

Accounts receivable and unbilled services, net of allowance for credit losses of $3,236 at September 30, 2020

708,810

 

 

658,517

 

Other current assets

89,261

 

 

90,780

 

Total current assets

1,134,299

 

 

985,567

 

Fixed assets, net

191,798

 

 

180,716

 

Operating lease right-of-use assets

178,514

 

 

186,343

 

Goodwill

1,672,409

 

 

1,502,756

 

Intangible assets, net

613,023

 

 

638,577

 

Other assets

49,171

 

 

50,471

 

Total assets

$

3,839,214

 

 

$

3,544,430

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of borrowings under credit facilities

$

 

 

$

88,800

 

Current portion of long-term debt

25,000

 

 

25,000

 

Accounts payable

31,873

 

 

55,293

 

Accrued expenses and other current liabilities

324,082

 

 

304,799

 

Current portion of operating lease liabilities

38,627

 

 

37,603

 

Advanced billings

580,158

 

 

505,714

 

Total current liabilities

999,740

 

 

1,017,209

 

Long-term debt, net

1,255,969

 

 

1,140,178

 

Long-term portion of operating lease liabilities

161,309

 

 

172,370

 

Deferred tax liabilities

47,794

 

 

78,511

 

Other long-term liabilities

49,136

 

 

46,171

 

Total liabilities

2,513,948

 

 

2,454,439

 

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 — 64,100,349 and 63,491,550 at September 30, 2020 and December 31, 2019, respectively

641

 

 

635

 

Additional paid-in capital

1,089,115

 

 

1,006,182

 

Accumulated other comprehensive loss

(153,558

)

 

(160,108

)

Retained earnings

389,068

 

 

243,282

 

Total stockholders’ equity

1,325,266

 

 

1,089,991

 

Total liabilities and stockholders’ equity

$

3,839,214

 

 

$

3,544,430

 

 

 

 

 

 

 

 

 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 

Nine Months Ended September 30,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income

$

145,786

 

 

$

168,318

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization expense

98,078

 

 

85,462

 

Amortization of debt issuance costs

1,266

 

 

1,364

 

Amortization of terminated interest rate swaps

4,559

 

 

4,960

 

Stock-based compensation expense

50,613

 

 

30,407

 

Change in fair value of acquisition-related contingent consideration

(44,500

)

 

 

Unrealized foreign currency losses (gains), net

17,413

 

 

(7,773

)

Deferred income tax benefit

(32,067

)

 

(25,408

)

Other reconciling items

8,221

 

 

792

 

Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:

 

 

 

Accounts receivable, unbilled services and advanced billings

20,890

 

 

(104,589

)

Other operating assets and liabilities

(3,156

)

 

(4,289

)

Payment of acquisition-related contingent consideration

 

 

(83,249

)

Net cash provided by operating activities

267,103

 

 

65,995

 

Cash flows from investing activities:

 

 

 

Purchase of fixed assets

(54,024

)

 

(61,210

)

(Cash paid) proceeds received for interest on interest rate swap, net

(6,414

)

 

1,076

 

Distributions from unconsolidated joint ventures

 

 

418

 

Proceeds from the sale of fixed assets

29

 

 

26

 

Acquisition of Care Innovations, Inc., net of cash acquired

(158,824

)

 

 

Net cash used in investing activities

(219,233

)

 

(59,690

)

Cash flows from financing activities:

 

 

 

Repurchase and retirement of common stock

 

 

(300,000

)

Borrowings on accounts receivable financing agreement

 

 

30,000

 

Borrowings on line of credit

100,000

 

 

40,000

 

Proceeds from issuance of long-term debt

 

 

300,000

 

Repayments of line of credit

(55,000

)

 

(40,000

)

Repayments of long-term debt

(18,750

)

 

(25,000

)

Acquisition of noncontrolling interest

 

 

(4,138

)

Proceeds from stock issued under employee stock purchase plan and stock option exercises

29,741

 

 

30,180

 

Payments for debt issuance costs

(470

)

 

 

Net cash provided by financing activities

55,521

 

 

31,042

 

Effects of foreign exchange changes on cash, cash equivalents, and restricted cash

(3,433

)

 

(266

)

Change in cash, cash equivalents, and restricted cash

99,958

 

 

37,081

 

Cash, cash equivalents, and restricted cash, beginning of period

236,270

 

 

144,709

 

Cash, cash equivalents, and restricted cash, end of period

$

336,228

 

 

$

181,790

 

 

 

 

 

 

 

 

 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net income attributable to PRA Health Sciences, Inc.

$

91,252

 

 

$

83,007

 

 

$

145,786

 

 

$

168,219

 

Depreciation and amortization expense

33,315

 

 

29,264

 

 

98,078

 

 

85,462

 

Interest expense, net

10,721

 

 

12,974

 

 

36,102

 

 

37,834

 

Provision for income taxes

13,058

 

 

3,375

 

 

37,041

 

 

56,317

 

EBITDA

148,346

 

 

128,620

 

 

317,007

 

 

347,832

 

Stock-based compensation expense (a)

19,343

 

 

11,244

 

 

50,613

 

 

30,407

 

Loss on disposal of fixed assets, net (b)

32

 

 

256

 

 

207

 

 

900

 

Foreign currency losses (gains), net (c)

9,128

 

 

(5,408

)

 

12,036

 

 

(1,864

)

Other non-operating expense (income), net (d)

1

 

 

(15

)

 

1

 

 

66

 

Transaction-related costs (e)

(45,074

)

 

572

 

 

(44,465

)

 

572

 

Acquisition-related costs (f)

332

 

 

654

 

 

1,577

 

 

4,334

 

Lease termination expense (g)

 

 

 

 

 

 

(266

)

Non-cash rent adjustment (h)

(650

)

 

16

 

 

(70

)

 

322

 

Loss on modification or extinguishment of debt (j)

 

 

1,855

 

 

 

 

1,855

 

Other charges (i)

891

 

 

 

 

2,641

 

 

 

Non-operating income attributable to noncontrolling interest

 

 

 

 

 

 

190

 

Adjusted EBITDA

$

132,349

 

 

$

137,794

 

 

$

339,547

 

 

$

384,348

 

 

 

 

 

 

 

 

 

Net income attributable to PRA Health Sciences, Inc.

$

91,252

 

 

$

83,007

 

 

$

145,786

 

 

$

168,219

 

Provision for income taxes

13,058

 

 

3,375

 

 

37,041

 

 

56,317

 

Amortization of intangible assets

19,032

 

 

17,090

 

 

57,190

 

 

51,433

 

Amortization of deferred financing costs

424

 

 

462

 

 

1,266

 

 

1,364

 

Amortization of terminated interest rate swaps

1,432

 

 

1,671

 

 

4,559

 

 

4,960

 

Stock-based compensation expense (a)

19,343

 

 

11,244

 

 

50,613

 

 

30,407

 

Loss on disposal of fixed assets, net (b)

32

 

 

256

 

 

207

 

 

900

 

Foreign currency losses (gains), net (c)

9,128

 

 

(5,408

)

 

12,036

 

 

(1,864

)

Other non-operating expense (income), net (d)

1

 

 

(15

)

 

1

 

 

66

 

Transaction-related costs (e)

(45,074

)

 

572

 

 

(44,465

)

 

572

 

Acquisition-related costs (f)

332

 

 

654

 

 

1,577

 

 

4,334

 

Lease termination expense (g)

 

 

 

 

 

 

(266

)

Non-cash rent adjustment (h)

(650

)

 

16

 

 

(70

)

 

322

 

Loss on modification or extinguishment of debt (j)

 

 

1,855

 

 

 

 

1,855

 

Other charges (i)

891

 

 

 

 

2,641

 

 

 

Non-operating income attributable to noncontrolling interest

 

 

 

 

 

 

190

 

Adjusted pre-tax income

109,201

 

 

114,779

 

 

268,382

 

 

318,809

 

Adjusted tax expense (j)

(25,116

)

 

(27,546

)

 

(61,729

)

 

(76,515

)

Adjusted net income

$

84,085

 

 

$

87,233

 

 

$

206,653

 

 

$

242,294

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

64,874

 

 

66,213

 

 

64,558

 

 

66,607

 

 

 

 

 

 

 

 

 

Adjusted net income per diluted share

$

1.30

 

 

$

1.32

 

 

$

3.20

 

 

$

3.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
(in millions, except per share amounts)
(unaudited)

 

FY 2020

 

 

 

Low

 

High

 

 

 

 

Total Revenue

$

3,120.0

 

 

$

3,150.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2020

 

Adjusted Net Income

 

Adjusted Diluted Earnings Per Share

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

Net income and net income per diluted share

$

209.0

 

 

$

217.0

 

 

$

3.23

 

 

$

3.35

 

Adjustments:

 

 

 

 

 

 

 

Provision for income taxes

56.0

 

 

58.0

 

 

0.86

 

 

0.90

 

Amortization of intangible assets

76.0

 

 

76.0

 

 

1.17

 

 

1.17

 

Amortization of deferred financing costs

2.0

 

 

2.0

 

 

0.03

 

 

0.03

 

Amortization of terminated interest rate swaps

4.0

 

 

4.0

 

 

0.06

 

 

0.06

 

Stock-based compensation expense (a)

69.0

 

 

69.0

 

 

1.07

 

 

1.07

 

Foreign currency losses, net (c)

12.0

 

 

12.0

 

 

0.19

 

 

0.19

 

Transaction-related costs (e)

(45.0

)

 

(45.0

)

 

(0.70

)

 

(0.70

)

Acquisition-related costs (f)

2.0

 

 

2.0

 

 

0.03

 

 

0.03

 

Other charges (i)

3.0

 

 

3.0

 

 

0.05

 

 

0.05

 

Adjusted pre-tax income

388.0

 

 

398.0

 

 

5.99

 

 

6.15

 

Adjusted tax expense (j)

(89.0

)

 

(93.0

)

 

(1.38

)

 

(1.44

)

Adjusted net income and adjusted net income per diluted share

$

299.0

 

 

$

305.0

 

 

$

4.61

 

 

$

4.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Stock-based compensation expense represents the amount of recurring non-cash expense related to the Company’s equity compensation programs.
(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) Foreign currency gains (losses), 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.
(d) Other non-operating expense, 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.
(e) Transaction-related costs include fees associated with costs associated with acquisition related earn-out liabilities, our secondary offerings, stock-based compensation expense related to the transfer restrictions on vested options, the amendment to our accounts receivable financing agreement, and expenses associated with our acquisitions.
(f) Acquisition-related 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.
(g) Lease termination expense represents charges incurred in connection with the termination of leases at locations that are no longer being used by the Company.
(h) 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.
(i) Represents charges incurred that are not considered part of our core operating results.
(j) Represents the tax effect of adjusted pre-tax income at our estimated effective tax rate.