PRA Health Sciences, Inc. (PRAH)

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PRA Health Sciences, Inc. (PRAH)

Q2 2018 Results Earnings Conference Call

August 2, 2018, 09:00 AM ET


Timothy McClain - SVP, Legal Affairs

Colin Shannon - President and CEO

Mike Bonello - EVP and CFO


John Kreger - William Blair

Donald Hooker - KeyBanc

David Windley - Jefferies

Eric Coldwell - Baird

Jack Meehan - Barclays

Erin Wright - Credit Suisse

Sandy Draper - SunTrust Robinson Humphrey



Good day, ladies and gentlemen, and welcome to the PRA Health Sciences, Inc. Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference, Tim McClain, Senior Vice President of Legal Affairs for PRA Health Sciences. Please go ahead sir.

Timothy McClain

Thank you Danielle. Good morning and thank you for joining us for the PRA Health Sciences' second quarter 2018 earnings teleconference. Today, Colin Shannon, our Chief Executive Officer; and Mike Bonello, our Chief Financial Officer will discuss our second quarter financial results.

Following our prepared remarks, we will 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 section of our Form 10-K filed with the SEC on February 22, 2018. Our risk factors may be updated from time-to-time in our filings with the SEC. Please note that we assume no obligation to update any forward-looking statements.

Certain financial measures we will discuss 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 views 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 relations portion of our website.

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

Colin Shannon

Thank you, Tim. Good morning and thank you for joining the conference call covering our second quarter financial results. I'm delighted to report that second quarter was another strong quarter for PRA, which produced double-digit revenue, adjusted net income and new business growth.

Revenue for the quarter was approximately $723 million, which represents an increase of approximately 35% year-over-year at actual foreign exchange rates. Organic revenue growth, which excludes the impact of adoption of ASC 606, reimbursement revenue, and our 2017 acquisitions was approximately 13% year-over-year at actual foreign exchange rates.

Adjusted net income for the second quarter was approximately $66 million, an increase of approximately 28% versus the second quarter of 2017. Adjusted net income per diluted share was $1, a 27% increase versus the second quarter of 2017.

Our net new business increased approximately 11% when compared to the second quarter of 2017 with a record level of $670 million of net new business awards, representing a net book-to-bill of 1.3 times.

Our new business awards and calculation of net book-to-bill ratio excludes the revenue impact of adopting ASC 606, it excludes reimbursement revenue and excludes revenue from our Data Solutions segment.

The addition of our new awards has resulted in our backlog increasing approximately 4% on a sequential basis and 21% year-over-year, finishing at approximately $3.9 billion. As we've previously disclosed, our backlog does not include our Data Solutions segment. In addition, we are not including pass-throughs or investigator revenue in backlog.

The mix 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 biotech sector.

In addition, our client base also continues to be well-diversified, with our top five clients representing approximately 38% of revenue for the quarter, with our largest client representing approximately 9% of revenue. Both metrics exclude the impact of adopting ASC 606.

Quickly mentioning Symphony Health. I'm happy with how our integration plans are progressing. I'm pleased with the segment second quarter results. Although Symphony's financial performance was at the lower end of our range in the first quarter of 2018, we remain optimistic about the full year 2018 forecast.

In closing, I would like to thank our team and our clients for their continued commitment to PRA Health sciences. We are delighted with our strong financial results and believe we are well-positioned for continued growth in 2018.

I would like to hand the call to Mike Bonello, our Chief Financial Officer, who will go through our quarterly financial results in more detail.

Mike Bonello

Thank you, Colin and good morning. For the second quarter of 2018, our consolidated revenues grew 35.4% at actual foreign exchange rates and 34.2% on a constant currency basis. We reported revenue of $722.8 million in the second quarter of 2018 compared to $533.7 million in the second quarter of 2017.

Revenue, excluding the impact of the adoption of ASC 606, reimbursement revenue, and the acquisition of Symphony Health increased 12.9% at actual foreign exchange rates and 11.7% on a constant currency basis. Revenue by segment was $664.7 million for the Clinical Research segment and $58.1 million for the Data Solutions segment for the second quarter of 2018.

Read the rest of this transcript on seekingalpha.com