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PRA Health Sciences, Inc. (PRAH)

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PRA Health Sciences, Inc. (PRAH)

Q3 2018 Earnings Conference Call

November 1, 2018, 09:00 ET

Executives

Timothy McClain - VP, Legal Affairs

Colin Shannon - Chairman, CEO & President

Michael Bonello - EVP & CFO

Analysts

Donald Hooker - KeyBanc Capital Markets

Ross Muken - Evercore ISI

David Windley - Jefferies

Jack Meehan - Barclays Bank

Daniel Brennan - UBS Investment Bank

Juan Avendano - Bank of America Merrill Lynch

John Kreger - William Blair & Company

Erin Wright - Crédit Suisse

Alexander Draper - SunTrust Robinson Humphrey

Presentation

Operator

Good day, ladies and gentlemen, and welcome to PRA Health Sciences Third Quarter 2018 Earnings Call. [Operator Instructions]. As a reminder, this conference call may be recorded.

I would now like to turn the conference over to Senior Vice President of Legal Affairs, Tim McClain. Please go ahead.

Timothy McClain

Good morning, and thank you for joining us for the PRA Health Sciences third quarter of 2018 earnings teleconference. Today, Colin Shannon, our Chief Executive Officer; and Mike Bonello, our Chief Financial Officer, will discuss our third quarter financial results. Following our prepared remarks, we will be available for questions. In addition to our press release and investor supplement with additional financial information is available on 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 28, 2018 -- 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 third quarter financial results. I am delighted to report that the third quarter was another strong quarter for PRA, which produced solid revenue growth and double-digit adjusted net income and net new business growth. The industry backdrop remains quite robust in terms of RFP growth, and our service offerings continued to be well received by our clients.

Revenue for the quarter was approximately $718 million, which represents an increase of approximately 23% 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 8% year-over-year at actual foreign exchange rates. Adjusted net income for the third quarter was approximately $75 million, an increase of approximately 29% versus the third quarter of 2017. Adjusted net income per diluted share was $1.13, a 28% increase versus the third quarter of 2017. Net new business increased approximately 10% when compared to the third quarter of 2017. We had $657 million of net new business awards, representing a net book-to-bill of 1.28x.

Our new business awards and calculation of net book-to-bill ratio excludes the revenue impact of adopting ASC 606, 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 20% year-over-year, finishing at approximately $4.1 billion.

As we've previously disclosed, our backlog does not include our Data Solutions segment. In addition, we are not including pass-through 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 5 clients representing approximately 37% of revenue for the quarter, with our largest client representing approximately 9% of revenue. Both metrics exclude the impact of adopting ASC 606.

Regarding our Data Solutions segment, I am pleased with the integration and with the segment's third quarter results. As anticipated, we are seeing sales pick up in the last half of the year, and we are tracking well to meet our forecast.

In closing, I would like to thank our entire staff 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 the remainder of 2018.

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

Michael Bonello

Thank you, Colin, and good morning. For the third quarter of 2018, our consolidated revenues grew 23.3% at actual foreign exchange rates and 24% on a constant currency basis. We reported revenue of $717.6 million in the third quarter of 2018 compared to $582 million in the third quarter of 2017. Revenue, excluding the impact of the adoption of ASC 606, reimbursement revenue and the acquisition of Symphony Health, increased 7.7% at actual foreign exchange rates and 8.2% on a constant currency basis. Revenue by segment was $657 million for the Clinical Research segment and $60.6 million for the Data Solutions segment for the third quarter of 2018.

Read the rest of this transcript on seekingalpha.com