PRA Health Sciences, Inc. (PRAH)

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PRA Health Sciences, Inc. (PRAH)

Q4 2017 Earnings Conference Call

February 22, 2018, 9:00 AM ET


Mike Bonello - Senior Vice President and Corporate Controller

Colin Shannon - Chief Executive Officer

Linda Baddour - Chief Financial Officer


David Windley - Jefferies

Tim Evans - Wells Fargo

Eric Coldwell - Baird

Michael Baker - Raymond James

Courtney Owens - William Blair

Jack Meehan - Barclays

Hong Tran - Credit Suisse

Donald Hooker - KeyBanc



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 PRA Health Sciences Incorporated Earnings Conference Call. [Operator Instructions]

As a reminder, this call is being recorded. I would now like to turn the conference over to our host for today, Mike Bonello, Senior Vice President and Corporate Controller. You may begin.

Mike Bonello

Good morning and thank you for joining us for the PRA Health Sciences fourth quarter of 2017 earnings teleconference. Today Colin Shannon, our Chief Executive Officer; and Linda Baddour, our Chief Financial Officer, will discuss our fourth quarter and full-year financial results. Following our opening comments, we’ll be available for questions. In addition to our press release, an investor supplement with additional financial information is available in the Investor Relations portion of our website.

Before we begin, I’d like to remind you that our remarks and responses during this teleconference may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the risk factors included in our Annual Report on Form 10-K filed with the SEC on February 23, 2017. Our risk factors may be updated from time to time in our filings with SEC. Please note that we assume no obligation to update any forward-looking statements.

Certain financial measures will be discussed on this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a more helpful and complete understanding of our results and is consistent with how management viewed our financial results.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure calculated and presented in accordance with GAAP are available in the earnings press release and investor supplement included in the Investor Relation portion of our website.

I would now like to turn the call over to our CEO, Colin Shannon.

Colin Shannon

Thank you, Mike. Good morning. I’d like to thank you, all, for joining the PRA Health Sciences conference call to discuss our fourth quarter and full year 2017 financial results.

I am pleased to report that the fourth quarter of 2017 was another strong quarter with double-digit revenue, adjusted net income, and net new business growth. Service revenues for the fourth quarter were approximately $569 million which represents an increase of approximately 38% year-over-year at actual foreign exchange rates, and 36% on a constant currency basis.

Service revenue excluding Symphony increased approximately 20% year-over-year at actual foreign exchange rate and 19% on a constant currency basis.

Adjusted net income for the fourth quarter was approximately $69 million, an increase of approximately 50% of the same period last year. Adjusted net income per diluted share was $1.04, a 47% increase versus the fourth quarter of 2016.

Net new business increased approximately 10% when compared to the fourth quarter of 2016. We had a record of $647 million of net new business awards, representing a net book-to-bill of 1.3 times our service revenue and this is despite unusually high cancellations of $132.6 million during the quarter.

The addition of our new awards has resulted in our backlog increasing approximately 4% on a sequential basis and 20% year-over-year, finishing at approximately $3.5 billion. We will not be including our data solutions segment and reported new business awards and backlogs due to the short-term nature of these contracts.

The diversity of our new business awards continues to be consistent with previous quarters with approximately 60% of our new awards coming from the pharmaceutical sector, and approximately 40% coming from the biotechnology sector.

Our client base also continues to be well diversified with our top five clients representing approximately 37% of our total revenue for the quarter with our largest client representing approximately 9% of total revenue.

Our full-year 2017 financial results continued the trend of consistent and strong growth. We reported solid revenue growth and improved our overall operating margins. We have got our full-year service revenues of approximately $1.9 billion, representing growth of approximately 23% on an actual and constant currency basis. Revenue growth excluding Symphony Health was approximately 18% at actual rates and approximately 17% on constant currency basis.

During 2017, we made significant investments on our business and expanded our service offerings. We believe that we have established a foundation that will allow us to provide long-term sustainable growth and believe we are well positioned to offer a wide variety of services to our clients. On acquisition of Symphony Health has gone very well and I am delighted with their performance. We look forward to the continued opportunities that this strategic acquisition will provide in the future.

During Q1 2018, we’ll be formally finalizing our integration plan and we’ll be working on completing the integration by the end of 2018. Using our solid performance in 2017, we are anticipating our 2018 diluted adjusted earnings per share to be between $4 per share and $4.15 per share.

As discussed in our press release, this guidance includes the impact of adopting the new revenue standard, the impact of the enactment of the Tax Cuts and Jobs Act, and updated foreign exchange rates become estimates. Linda will provide additional details about our 2018 guidance later in the call.

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