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PRA Health Sciences (PRAH)

Q4 2018 Earnings Conference Call

February 28, 2019 9:00 AM ET

Company Participants

Tom Byrne - Vice President of Legal Affairs

Colin Shannon - Chief Executive Officer

Mike Bonello - Chief Financial Officer

Conference Call Participants

David Windley - Jefferies

John Kreger - William Blair

Eric Coldwell - Robert W. Baird

Donald Hooker - KeyBanc

Sandy Draper - SunTrust

Mitch Petersen - Barclays

Erin Wright - Credit Suisse

Juan Avendano - Bank of America Merrill Lynch

Dan Brennan - UBS



Good day, ladies and gentlemen and welcome to the PRA Health Sciences Fourth Quarter 2018 Earnings Release 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 conference is being recorded.

I would now like to introduce your host for today's call, Mr. Tom Byrne, Vice President of Legal Affairs. Mr. Byrne, you may begin.

Tom Byrne

Great. Thank you. Good morning and thank you for joining us for the PRA Health Sciences fourth quarter of 2018 earnings teleconference. Today, Colin Shannon, our Chief Executive Officer; and Mike Bonello 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 the 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 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, is available in the earnings press release and investor supplement included in the Investor Relations portion of our website.

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

Colin Shannon

Thank you, Tom. Good morning and thank you for joining the conference call covering our fourth quarter and full year 2018 financial results. I am delighted to report that the fourth quarter was another strong quarter for PRA which produced solid revenue growth and double-digit adjusted net income growth. We also continued to see strong growth in our new business awards and our backlog.

Net new business increased approximately 3% when compared to the fourth quarter of 2017. We had $667 million of net new business awards representing a net book-to-bill of 1.3 times revenue, continuing our consecutive quarter run of net book-to-bill equal to or greater than 1.2 times revenue.

For full year 2018, with a record level of $2.6 billion of net new business awards, representing growth of 10% and a net book-to-bill of 1.29 times. As we have previously discussed, 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 $4.2 billion. As we've previously disclosed, our backlog does not include our Data Solutions segment. And in addition, we exclude pass-throughs and investigator revenue from backlog.

The diversity of our new business awards continues to be consistent with previous quarters with approximately 58% of our new awards coming from the pharmaceutical sector and approximately 42% coming from the biotech sector.

Revenue for the fourth quarter was approximately $730 million which represents an increase of approximately 11% year-over-year at actual foreign exchange rates and 12% on a constant currency basis. Revenue gross excluding the impact of the adoption of ASC 606 and reimbursement revenues was approximately 4% year-over-year at actual foreign exchange rates.

Adjusted net income for the fourth quarter was approximately $87 million, an increase of approximately 26% over the same period last year. Adjusted net income per diluted share was $1.31 a 26% increase versus the fourth quarter of 2017.

Our client base continues to be well diversified with our top five clients representing approximately 36% of total revenue for the quarter and our largest client representing approximately 9% of total revenue. Both metrics exclude the impact of adopting ASC 606.

Our full year 2018 financial results continue to trend at consistent and strong growth. We reported solid revenue growth and improved our overall operating margins. We drove our full year revenue of approximately $2.9 billion representing growth of approximately 27% of actual foreign currency exchange rates and 26% on a constant currency basis.

Organic revenue growth which excludes the impact of the adoption of ASC 606 reimbursement revenue and our 2017 acquisitions was approximately 10% year-over-year at both actual foreign exchange rates and on a constant currency basis.

During 2018, we made significant investments in our business and enhanced our service offerings. We believe that we have established a foundation that will allow us to prevail long-term and sustainable growth and believe we are well positioned to offer a wide variety of services to our clients.

Read the rest of this transcript on seekingalpha.com