News Release

Printer Friendly Version View printer-friendly version
« Back
PRA Health Sciences, Inc. Reports Fourth Quarter and Full Year 2016 Results and Provides Q1 and Full Year 2017 Guidance
  • Net new business of $587.3 million in the fourth quarter; Net book-to-bill of 1.42
     
  • $413.6 million of service revenue in the fourth quarter; 14.2% growth at actual foreign exchange rates and 14.6% constant currency growth compared to the fourth quarter of 2015
     
  • Fourth quarter GAAP Net Income per diluted share was $0.22 and GAAP Net Income was $14.0 million
     
  • Fourth quarter Adjusted Net Income per diluted share was $0.71 per share and Adjusted Net Income was $45.9 million

RALEIGH, N.C., Feb. 22, 2017 (GLOBE NEWSWIRE) -- PRA Health Sciences, Inc. (“PRA” or the “Company”) (NASDAQ:PRAH) today reported financial results for the quarter ended December 31, 2016.

For the three months ended December 31, 2016, service revenue was $413.6 million, which represents growth of 14.2%, or $51.3 million, compared to the fourth quarter of 2015 at actual foreign exchange rates. On a constant currency basis, service revenue grew $52.9 million, an increase of 14.6% compared to the fourth quarter of 2015.

Net new business for the quarter ended December 31, 2016 was $587.3 million, representing a net book-to-bill ratio of 1.42 for the period. This net new business contributed to an ending backlog of $2.9 billion at December 31, 2016.

“We are pleased to have delivered another quarter with double-digit revenue, earnings and net new business growth year-over-year,” said Colin Shannon, PRA’s Chief Executive Officer. “We are well-positioned to deliver at least mid-teens growth during the coming year, as evidenced by our record level of new business awards and backlog. We continue to stay focused on our key strategic objectives, our client deliverables and developing our people, and we look forward to delivering strong results in 2017.”

Direct costs were $274.4 million during the three months ended December 31, 2016 compared to $234.9 million for the fourth quarter of 2015. Direct costs were 66.3% of service revenue during the fourth quarter of 2016 compared to 64.8% of service revenue during the fourth quarter of 2015. The increase in direct costs as a percentage of service revenue is due to the continued hiring of billable staff to support our current projects and the hiring of additional staff to ensure appropriate staffing levels to support our future growth.

Selling, general and administrative expenses were $70.2 million during the three months ended December 31, 2016 compared to $63.6 million for the fourth quarter of 2015. Selling, general and administrative costs were 17.0% of service revenue during the fourth quarter of 2016 compared to 17.6% of service revenue during the fourth quarter of 2015. The decrease in selling, general and administrative expenses as a percentage of revenue is attributable to our ability to continue to effectively manage our sales and administrative functions as the Company continues to grow.

For the three months ended December 31, 2016, we incurred transaction-related expenses of $13.0 million. The costs consist of $12.7 million of one-time stock-based compensation expense related to the release of transfer restrictions on vested options and the vesting of certain performance-based stock options in connection with the November secondary offering. In addition, we incurred $0.3 million of third-party fees associated with the secondary offering.

During the fourth quarter of 2016, we also incurred a loss on extinguishment of debt of $16.7 million. This loss is associated with our refinancing on our first lien term debt, which included the write-off of $15.8 million of unamortized debt issuance costs and $0.9 million of other costs associated with the transaction.

GAAP net income was $14.0 million for the three months ended December 31, 2016, or $0.22 per share on a diluted basis, compared to GAAP net income of $28.5 million for the three months ended December 31, 2015, or $0.45 per share on a diluted basis. Our GAAP net income for the three months ended December 31, 2016 included transaction-related expenses and the loss on extinguishment discussed above.

EBITDA was $54.3 million for the three months ended December 31, 2016, representing a decrease of 22.0% compared to the fourth quarter of 2015. Adjusted EBITDA was $73.9 million for the three months ended December 31, 2016, representing growth of 8.8% compared to the fourth quarter of 2015.

Adjusted Net Income was $45.9 million for the three months ended December 31, 2016, representing 22.3% growth compared to the fourth quarter of 2015. Adjusted Net Income per diluted share was $0.71 for the three months ended December 31, 2016, representing 20.3% growth compared to the fourth quarter of 2015.

A reconciliation of our non-GAAP measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and our 2017 guidance, to the corresponding GAAP measures is included in this press release.

Full Year 2016

For the twelve months ended December 31, 2016, service revenue was $1,580.0 million, which represents growth of 14.8%, or $204.2 million, compared to the twelve months ended December 31, 2015 at actual foreign exchange rates.  On a constant currency basis, service revenue grew $209.5 million, representing growth of 15.2% compared to the twelve months ended December 31, 2015.

GAAP income from operations was $162.3 million, GAAP net income was $68.2 million and GAAP net income per diluted share was $1.06 for the twelve months ended December 31, 2016.

Adjusted Net Income was $162.3 million for the twelve months ended December 31, 2016, an improvement of 28.6% compared to the same period in 2015.  Adjusted Net Income per diluted share was $2.52 for the twelve months ended December 31, 2016, up 26.0% compared to the same period in 2015.

Q1 2017 and Full Year 2017 Guidance

For Full Year 2017, the Company expects to achieve service revenues between $1.795 billion and $1.835 billion, representing constant currency growth of 14% to 16%, GAAP net income per diluted share between $2.46 and $2.56 per share, representing growth of 132% to 142%, Adjusted Net Income per diluted share between $3.08 and $3.18 per share, representing growth of 22% to 26%, and annual effective income tax rate estimates at approximately 27%.

For Q1 2017, the Company expects to achieve service revenues between $415 million and $425 million, representing constant currency growth of 11% to 14%, GAAP net income per diluted share between $0.41 and $0.46 per share, Adjusted Net Income per diluted share between $0.57 and $0.62 per share, and annual effective income tax rate estimates at approximately 27%.

All financial guidance assumes a EURO rate of 1.11 and a GBP rate of 1.35. All other foreign currency exchange rates are as of January 31, 2017.

Conference Call Details

PRA will host a conference call at 9:00 a.m. ET on February 23, 2017, 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 66572766. The conference call will also be accessible, live via audio broadcast, on the Investor Relations section of the PRA website at www.prahs.com/investors. A replay of the conference call will be available online at www.prahs.com/investors. 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 66572766.

About PRA Health Sciences

PRA (NASDAQ:PRAH) is one of the world’s leading global contract research organizations, or CROs, by revenue, providing outsourced clinical development services to the biotechnology and pharmaceutical industries. PRA’s global clinical development platform includes approximately 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and over 13,000 employees worldwide. Since 2000, PRA has performed approximately 3,500 clinical trials worldwide. 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 70 drugs.

PRA has therapeutic expertise in areas that are among the largest in pharmaceutical development, including oncology, central nervous system, inflammation and infectious diseases. PRA believes that it provides its clients with one of the most flexible clinical development service offerings, which includes both traditional, project-based Phase I through Phase IV services, as well as embedded and functional outsourcing services. The Company has invested in medical informatics and clinical technologies designed to enhance efficiencies, improve study predictability and provide better transparency to clients throughout their clinical development processes. 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.

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 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 historical indications of the relationship of backlog to revenues may not be indicative of their future relationship; the market for the Company’s services may not grow as the Company expects; the Company may under price contracts or overrun its cost estimates, and if the Company is unable to achieve operating efficiencies or grow revenues faster than expenses, operating margins will be adversely affected; the Company may be unable to maintain information systems or effectively update them; customer or therapeutic concentration could harm the Company’s business; the Company’s business is subject to risks associated with international operations, including economic, political and other risks; the Company is also subject to a number of additional risks associated with its business outside the United States, including foreign currency exchange fluctuations and restrictive regulations, as well as the risks and uncertainties associated with the United Kingdom’s expected withdrawal from the European Union; government regulators or customers may limit the scope of prescription or withdraw products from the market, and government regulators may impose new regulations affecting the Company’s business; the Company may be unable to successfully develop and market new services or enter new markets; the Company’s failure to perform services in accordance with contractual requirements, 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 has substantial indebtedness and may incur additional indebtedness in the future, which could adversely affect the Company’s financial condition; and other factors that are set forth in the Company’s filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed with the SEC on February 25, 2016. The Company undertakes no obligation to update any forward-looking 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 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 and the indenture governing the senior notes. In addition, management believes that EBITDA, Adjusted EBITDA and Adjusted Net Income (including diluted adjusted net income per share) 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 diluted adjusted net income per share) 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 diluted adjusted net income per share) 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 diluted adjusted net income per share) 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 diluted adjusted net income per share) 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 and gains, other (expense) income, equity in (gains) losses of unconsolidated joint ventures, transaction-related cost, acquisition-related costs, severance costs and restructuring charges, prior year foreign research and development credits, lease termination costs,  non-cash rent adjustments 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 STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
                         
    Three Months Ended December 31,    Year Ended December 31, 
    2016     2015     2016     2015  
Revenue:   (Unaudited)
           
Service revenue   $  413,613     $  362,265     $  1,580,023     $  1,375,847  
Reimbursement revenue      58,773        66,682        231,688        238,036  
Total revenue      472,386        428,947        1,811,711        1,613,883  
Operating expenses:                  —        —  
Direct costs      274,355        234,882        1,032,688        886,528  
Reimbursable out-of-pocket costs      58,773        66,682        231,688        238,036  
Selling, general and administrative      70,245        63,586        269,893        246,417  
Transaction-related costs      13,049        —        44,834        —  
Depreciation and amortization      17,260        19,735        69,506        77,952  
Loss on disposal of fixed assets      463        201        753        652  
Income from operations      38,241        43,861        162,349        164,298  
Interest expense, net      (12,388 )      (15,683 )      (54,913 )      (61,747 )
Loss on extinguishment of debt      (16,693 )      —        (38,178 )      —  
Foreign currency gains, net      14,765        5,251        24,029        14,048  
Other income (expense), net      692        73        607        (1,434 )
Income before income taxes and equity in gains (losses) of unconsolidated joint ventures        24,617        33,502        93,894        115,165  
Provision for income taxes      10,625        5,663        28,494        30,004  
Income before equity in gains (losses) of unconsolidated joint ventures      13,992        27,839        65,400        85,161  
Equity in gains (losses) of unconsolidated joint ventures, net of tax      33        665        2,775        (3,396 )
Net income   $  14,025     $  28,504     $  68,175     $  81,765  
Net income per share attributable to common stockholders:                        
Basic   $  0.23     $  0.47     $  1.12     $  1.36  
Diluted   $  0.22     $  0.45     $  1.06     $  1.29  
Weighted average common shares outstanding:                        
Basic      61,294        60,108        60,759        59,965  
Diluted      65,001        63,581        64,452        63,207  
                                 


   
PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share amounts)  
   
    December 31,   
    2016     2015    
ASSETS              
Current assets:              
Cash and cash equivalents   $  144,623     $  121,065    
Restricted cash      4,715        5,060    
Accounts receivable and unbilled services, net      439,053        415,077    
Prepaid expenses and other current assets      35,367        30,175    
Income taxes receivable      979        2,399    
Total current assets      624,737        573,776    
Fixed assets, net      87,577        80,691    
Goodwill      971,980        1,014,798    
Intangible assets, net      473,976        533,938    
Deferred tax assets      6,568        3,069    
Investment in unconsolidated joint ventures      284        1,288    
Deferred financing fees      1,762        2,490    
Other assets      23,507        18,693    
Total assets   $  2,190,391     $  2,228,743    
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
Current portion of long-term debt   $  31,250     $  —    
Accounts payable      51,335        57,096    
Accrued expenses and other current liabilities      123,589        119,893    
Income taxes payable      25,524        19,262    
Advanced billings      332,501        333,729    
Total current liabilities      564,199        529,980    
Deferred tax liabilities      73,703        81,691    
Long-term debt, net      797,052        889,514    
Other long-term liabilities      26,185        24,836    
Total liabilities      1,461,139        1,526,021    
Commitments and contingencies              
Stockholders' equity:              
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2016 and 2015, respectively      —        —    
Common stock, $0.01 par value, 1,000,000,000 authorized shares at December 31, 2016 and December 31, 2015; 61,597,705 and 60,245,009 issued and outstanding at December 31, 2016 and December 31, 2015, respectively      616        602    
Additional paid-in capital      879,067        828,347    
Accumulated other comprehensive loss      (224,686 )      (132,307 )  
Retained earnings      74,255        6,080    
Total stockholders' equity      729,252        702,722    
Total liabilities and stockholders' equity   $  2,190,391     $  2,228,743    
                   


   
PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
    Years Ended December 31,  
    2016     2015    
Cash flows from operating activities:              
Net income   $  68,175     $  81,765    
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization      69,506        77,952    
Amortization of debt issuance costs and discount      4,433        5,983    
Amortization of terminated interest rate swaps      4,961        731    
Stock-based compensation expense      7,067        5,276    
Non-cash transaction related costs      42,166        —    
Unrealized foreign currency gains      (24,499 )      (16,464 )  
Loss on modification or extinguishment of debt      38,178        —    
Loss on disposal of fixed assets      753        652    
Change in acquisition-related contingent consideration      (527 )      89    
Equity in (gains) losses of unconsolidated joint ventures      (2,775 )      3,396    
Unrealized loss on derivatives      47        1,787    
Other reconciling items      (652 )      443    
Excess tax benefit from stock-based compensation      (846 )      —    
Deferred income taxes      (10,469 )      (3,219 )  
Changes in operating assets and liabilities:              
Accounts receivable and unbilled services      (31,313 )      (83,211 )  
Prepaid expenses and other assets      (10,071 )      (11,675 )  
Accounts payable and other liabilities      (1,474 )      36,135    
Income taxes      7,308        9,958    
Advanced billings      79        42,830    
Net cash provided by operating activities      160,047        152,428    
Cash flows from investing activities:              
Purchase of fixed assets      (33,143 )      (32,814 )  
Cash paid for interest on interest rate swap      (913 )      (302 )  
Cash paid to terminate interest rate swaps      —        (32,907 )  
Acquisition of Nextrials, Inc., net of cash acquired      (4,268 )      —    
Acquisition of Value Health Solutions, Inc., net of cash acquired      —        (543 )  
Payment of ClinStar, LLC working capital settlement      —        (1,693 )  
Distributions from unconsolidated joint ventures      3,700        19,529    
Contributions to unconsolidated joint ventures      —        (23,000 )  
Proceeds from the sale of fixed assets      10        44    
Net cash used in investing activities      (34,614 )      (71,686 )  
Cash flows from financing activities:              
Proceeds from issuance of long-term debt      625,000        —    
Proceeds from accounts receivable financing agreement      120,000        —    
Repayment of long-term debt      (822,559 )      (40,000 )  
Borrowings on line of credit      110,000        90,000    
Repayments of line of credit      (110,000 )      (90,000 )  
Payment of debt prepayment and debt extinguishment costs      (17,824 )      —    
Payment for debt issuance costs      (7,713 )      —    
Payment of common stock issuance costs      —        (525 )  
Excess tax benefit from stock-based compensation      846        —    
Proceeds from stock option exercises      655        81    
Payment of acquisition-related contingent consideration      —        (2,000 )  
Net cash used in financing activities      (101,595 )      (42,444 )  
Effects of foreign exchange changes on cash, cash equivalents, and restricted cash        (625 )      (3,702 )  
Change in cash, cash equivalents, and restricted cash      23,213        34,596    
Cash, cash equivalents, and restricted cash, beginning of period      126,125        91,529    
Cash, cash equivalents, and restricted cash, end of period   $  149,338     $  126,125    
                   


   
PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES  
RECONCILIATION OF NON-GAAP MEASURES  
(in thousands, except per share amounts)  
(unaudited)  
   
    Three Months Ended December 31,    Year Ended December 31,   
    2016     2015     2016     2015    
Net income   $  14,025     $  28,504     $  68,175     $  81,765    
Depreciation and amortization      17,260        19,735        69,506        77,952    
Interest expense, net      12,388        15,683        54,913        61,747    
Provision for income taxes      10,625        5,663        28,494        30,004    
EBITDA      54,298        69,585        221,088        251,468    
Stock-based compensation expense (a)      2,127        1,642        7,067        5,276    
Loss on disposal of fixed assets, net (b)      463        201        753        652    
Loss on extinguishment of debt (c)      16,693        —        38,178        —    
Foreign currency gains, net (d)      (14,765 )      (5,251 )      (24,029 )      (14,048 )  
Other non-operating (income) expense, net (e)      (692 )      (73 )      (607 )      1,434    
Equity in (gains) losses of unconsolidated joint ventures, net of tax        (33 )      (665 )      (2,775 )      3,396    
Foreign research and development credits (f)      (197 )      150        (197 )      (8,346 )  
Transaction-related costs (g)      13,049        —        44,834        —    
Acquisition-related costs (h)      2,192        49        2,434        233    
Lease termination expense (i)      33        354        (415 )      3,270    
Severance and restructuring charges (j)      —        (220 )      33        1,569    
Non-cash rent adjustment (k)      746        1,419        2,923        4,273    
Other charges (l)      —        743        —        2,416    
Adjusted EBITDA   $  73,914     $  67,934     $  289,287     $  251,593    
                           
Net income      14,025        28,504        68,175        81,765    
Amortization of intangible assets      11,113        14,179        45,368        56,751    
Amortization of deferred financing costs      919        1,161        4,433        5,983    
Amortization of terminated interest rate swaps      1,627        731        4,961        731    
Stock-based compensation expense (a)      2,127        1,642        7,067        5,276    
Loss on disposal of fixed assets, net (b)      463        201        753        652    
Loss on extinguishment of debt (c)      16,693        —        38,178        —    
Foreign currency gains, net (d)      (14,765 )      (5,251 )      (24,029 )      (14,048 )  
Other non-operating (income) expense, net (e)      (692 )      (73 )      (607 )      1,434    
Equity in (gains) losses of unconsolidated joint ventures, net of tax      (33 )      (665 )      (2,775 )      3,396    
Foreign research and development credits (f)      (197 )      150        (197 )      (8,346 )  
Transaction-related costs (g)      13,049        —        44,834        —    
Acquisition-related costs (h)      2,192        49        2,434        233    
Lease termination expense (i)      33        354        (415 )      3,270    
Severance and restructuring charges (j)      —        (220 )      33        1,569    
Non-cash rent adjustment (k)      746        1,419        2,923        4,273    
Other charges (l)      —        743        —        2,416    
Total adjustments      33,275        14,420        122,961        63,590    
Tax effect of total adjustments (m)      (1,420 )      (5,406 )      (28,829 )      (19,097 )  
Adjusted net income   $  45,880     $  37,518     $  162,307     $  126,258    
                           
Diluted weighted average common shares outstanding      65,001        63,581        64,452        63,207    
                           
Adjusted net income per diluted share   $  0.71     $  0.59     $  2.52     $  2.00    
                                   


   
PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES  
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE  
(in millions, except per share amounts)  
(unaudited)  
   
    FY 2017  
      Adjusted net income     Adjusted Diluted Earnings Per Share  
    Low   High   Low   High  
                           
Net income and net income per diluted share   $  162.0     $  168.0     $  2.46     $  2.56    
Adjustments:                          
Amortization of intangible assets      36.0        36.0        0.55        0.55    
Amortization of deferred financing costs      2.0        2.0        0.03        0.03    
Amortization of terminated interest rate swaps      6.0        6.0        0.09        0.09    
Stock-based compensation expense (a)      8.0        8.0        0.12        0.12    
Non-cash rent adjustment (k)      4.0        4.0        0.06        0.06    
Total adjustments      56.0        56.0        0.85        0.85    
Tax effect of total adjustments (m)      (15.0 )      (15.0 )      (0.23 )      (0.23 )  
Adjusted net income and adjusted net income per diluted share     $  203.0     $  209.0     $  3.08     $  3.18    
                                   


                         
    Q1 2017
      Adjusted net income     Adjusted Diluted Earnings Per Share
    Low   High   Low   High
                         
Net income and net income per diluted share   $  27.0     $  30.0     $  0.41     $  0.46  
Adjustments:                        
Amortization of intangible assets      9.0        9.0        0.14        0.14  
Amortization of deferred financing costs      0.5        0.5        0.01        0.01  
Amortization of terminated interest rate swaps      1.5        1.5        0.02        0.02  
Stock-based compensation expense (a)      2.0        2.0        0.03        0.03  
Non-cash rent adjustment (k)      1.0        1.0        0.02        0.02  
Total adjustments      14.0        14.0        0.22        0.22  
Tax effect of total adjustments (m)      (4.0 )      (4.0 )      (0.06 )      (0.06 )
Adjusted net income and adjusted net income per diluted share     $  37.0     $  40.0     $  0.57     $  0.62  
                                 

(a) Stock-based compensation expense represents the amount of recurring non-cash expense related to the Company’s equity compensation programs, excluding transaction-related stock-based compensation discussed in footnote (g).
(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) Loss on extinguishment of debt relates to costs incurred in connection with changes to our long-term debt. We exclude these losses from Adjusted EBITDA and Adjusted Net Income because they result from financing decisions rather than from decisions made related to our ongoing operations.
(d) 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.
(e) Other non-operating (income) 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.
(f) The foreign research and development credits are the result of a comprehensive analysis we have been performing across the organization to determine whether expenditures incurred qualify as research and development as defined by the respective jurisdiction.  The amounts recorded in this line item represent amounts recorded in the current period that related to a prior period.
(g) Transaction-related costs primarily relate to costs incurred in connection with the March, May and November 2016 secondary offerings and receivables financing agreement. These costs include $32.0 million of non-cash stock-based compensation expense related to the vesting and release of the transfer restrictions of certain performance-based stock options and $10.1 million of stock-based compensation expense associated with the release of the transfer restrictions on a portion of service-based vested options in connection with the announcement of our March, May and November 2016 secondary offerings. In addition, we incurred $2.7 million of third-party fees associated with the secondary offerings and the closing of our accounts receivable financing agreement.
(h) Acquisition-related costs primarily relate to costs incurred in connection with purchase of the assets of Value Health Solutions, Inc., the acquisition of Nextrials, Inc., and the integration cost for the Takeda joint venture, as well as costs related to other potential acquisitions to enhance our strategic objectives.
(i) Lease termination expenses represent charges incurred in connection with the termination of leases at locations that are no longer being used by the Company.
(j) Severance and restructuring charges represent amounts incurred in connection with the elimination of redundant positions within the organization, including positions eliminated in connection with the KKR Transaction and the acquisitions of ClinStar, RPS and CRI Lifetree.
(k) 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.
(l) Represents charges incurred that are not considered part of our core operating results.
(m) Represents the tax effect of the total adjustments at our estimated effective tax rate.

Contacts:

Helen O’Donnell
Solebury Communications Group
Managing Director
203.726.1372
InvestorRelations@PRAHS.com or
hodonnell@soleburyir.com

Christine Rogers
PRA Health Sciences, Inc.
Director, Public Relations
919.786.8463
rogerschristine@prahs.com

Primary Logo

PRA Health Sciences, Inc.