$332.0 million of service revenue in the first quarter; 10% constant currency service revenue growth compared to the first quarter of 2014
• $55.7 million of Adjusted EBITDA in the first quarter; 40% growth compared to the first quarter of 2014
• First quarter Adjusted Net Income per share increased 86% to $0.41 per share and Adjusted Net Income increased 190% to $25.8 million compared to the first quarter of 2014
• First quarter GAAP Net Income was $17.2 million or $0.27 per share
RALEIGH, NC — PRA Health Sciences, Inc. (NASDAQ: PRAH) today reported financial results for the quarter ended March 31, 2015.
For the three months ended March 31, 2015, the company's service revenues were $332.0 million, which represents growth of 7%, or $20.6 million, compared to the first quarter of 2014 at actual foreign exchange rates. On a constant currency basis, service revenue grew $30.6 million, an increase of 10% compared to the first quarter of 2014.
Net new business for the quarter ended March 31, 2015 was $398.0 million representing a book-to-bill ratio of 1.2 for the period. This net new business contributed to an ending backlog of $2.2 billion at March 31, 2015.
"We are off to a strong start in 2015 and I am pleased by our first quarter financial results that demonstrate a continuation of the solid momentum we achieved in 2014," said Colin Shannon, chief executive officer. "We continue to execute consistently across all of our businesses, which resulted in 10% revenue growth on a constant currency basis in the first quarter. We continue to win new business, as evidenced by our strong book-to-bill ratio and our $2.2 billion of backlog, the highest level in our company's history.
"In addition, we were recently honored as the "International Clinical Company of the Year" by PharmaTimes, which is recognition of our dedication to our clients and the exceptional talent and caliber of our employees."
Direct costs were $219.0 million during the three months ended March 31, 2015 compared to $215.2 million for the first quarter of 2014. Direct costs were 66.0% of service revenue during the first quarter of 2015 compared to 69.1% of service revenue during the first quarter of 2014. The decrease in direct costs as a percentage of service revenue is primarily related to the favorable impact from foreign currency exchange rate fluctuations.
Selling, general and administrative expenses were $60.8 million during the three months ended March 31, 2015 and 2014. Selling, general and administrative costs were 18.3% of service revenue during the first quarter of 2015 compared to 19.5% of service revenue during the first quarter of 2014. The decrease in selling, general and administrative expenses is primarily related to our continued leveraging of our selling and administrative functions.
Reported EBITDA on a GAAP basis was $59.8 million, representing an increase of 99.3% compared to the first quarter of 2014. Adjusted EBITDA was $55.7 million for the three months ended March 31, 2015, representing growth of 40.3% compared to the first quarter of 2014.
Reported GAAP net income was $17.2 million and reported GAAP diluted net income per share was $0.27 for the three months ended March 31, 2015, increases of 272% and 208%, respectively, when compared to the first quarter of 2014.
Adjusted Net Income was $25.8 million for the three months ended March 31, 2015, representing growth of 190% compared to the first quarter of 2014. Adjusted Net Income per share was $0.41 for the three months ended March 31, 2015, representing growth of 86% compared to the first quarter of 2014.
Reconciliations of our non-GAAP measures, including Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share to the corresponding GAAP measures are attached to this press release.
For 2015, the company is updating its guidance taking into account the movement in current foreign exchange rates. As a result the company expects to achieve service revenues between $1.34 billion and $1.39 billion, diluted GAAP net income per share between $0.70 and $0.80 per share, diluted Adjusted Net Income per share of $1.62 to $1.72 per share, and annual effective income tax rate estimates at approximately 30%. This guidance assumes foreign currency rates as of April 2015.
Webcast & Conference Call Details
PRA will host a conference call at 9:00 a.m. EDT tomorrow to discuss its first quarter 2015 financial results. To participate, please dial +1 (877) 930-8062 or +1 (253) 336-7647 outside the United States approximately 10 minutes before the scheduled start of the call. The conference call ID for the call is 30431024. The conference call will also be accessible, live via webcast, on the Investors section of the PRA website at www.prahs.com/investors. An archived 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 +1 (855) 859-2056 within the United States or +1 (404) 537-3406 outside the United States. The replay ID is 30431024.
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 more than 70 offices across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East and approximately 11,000 employees worldwide. Since 2000, PRA has performed approximately 2,300 clinical trials worldwide and has worked on more than 100 marketed drugs across several therapeutic areas. 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 50 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 'Investors' 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.
Contact: Linda Baddour, Executive Vice President and Chief Financial Officer or Mike Bonello, Senior Vice President and Corporate Controller at +1.919.786.8270
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; 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 March 2, 2015. 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 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 are more indicative of 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 (loss) 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 management fees, stock-based compensation expense, loss on disposal of fixed assets, loss on modification or extinguishment of debt, foreign currency losses and gains, other (expense) income, equity in losses of unconsolidated joint ventures, transaction and acquisition related costs, relocation costs, severance costs and restructuring charges, non-cash rent adjustments and other one-time charges. Adjusted Net Income is also adjusted to exclude amortization of intangible assets and amortization of deferred financing costs. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net (loss) 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 and Adjusted EBITDA 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.