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8-K - 8-K - PRA Health Sciences, Inc.q120208-kcover.htm
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FOR IMMEDIATE RELEASE

PRA Health Sciences, Inc. Reports First Quarter 2020 Results, Withdraws Full Year 2020 Guidance Due to Uncertain COVID-19 Impact and Provides Second Quarter 2020 Guidance

Net new business of $604.7 million; Net book-to-bill of 1.10 excluding reimbursement revenue
Net new business of $955.9 million; Net book-to-bill of 1.32 including reimbursement revenue
$783.7 million of total revenue; representing 8.5% growth at actual foreign exchange rates and 9.3% growth on a constant currency basis
GAAP net income per diluted share of $0.63 and GAAP net income of $40.7 million
Adjusted net income per diluted share was $1.05 and adjusted net income was $67.3 million
Withdrawing full year 2020 guidance due to the uncertainty around the impact of the COVID-19 pandemic on our full year results of operations
Providing second quarter 2020 revenue guidance of between $705 million and $740 million, GAAP net income per diluted share of between $0.32 and $0.46 and Adjusted net income per diluted share of between $0.75 and $0.90
RALEIGH, N.C., April 30, 2020 -- PRA Health Sciences, Inc. (“PRA,” "we," "us" or the “Company”) (NASDAQ: PRAH) today reported financial results for the three months ended March 31, 2020.
 
"During these unprecedented times, we have focused on the health and safety of employees putting into practice what we have always said about our people being our most important asset. Due to the ongoing impact of COVID-19, we have prioritized employees' well-being and have worked diligently with our customers to ensure that we mitigate the impact that this pandemic is having on their studies," said Colin Shannon, PRA's President and Chief Executive Officer.

"Our first quarter financial results were impacted by the pandemic, particularly during the latter part of the quarter, when decisions on new business were delayed and stay-at-home orders created challenges in conducting our business. However, we still produced revenue and earnings that were in line with the guidance we provided back in February. As the world started moving into lockdown we worked creatively with clients to help them find solutions for their on-going studies. Through the use of our mobile health platform and our remote monitoring technology, we were able to mitigate some of the impact the lockdown had on our financial results.

"With all the uncertainty of how this pandemic will unfold, it is extremely difficult to estimate the impact to our financial results, but we will continue to manage our business in a very fiscally responsible manner and continue to be innovative in finding solutions for our clients. We have significantly reduced our debt levels over the past few years, and we are well-positioned to weather the challenging economic conditions that we may continue to face. I would also like to add that we are extremely thankful to all those who are helping the world get through this global pandemic."


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Net new business for our Clinical Research segment for the three months ended March 31, 2020 excluding reimbursement revenue was $604.7 million, representing a net book-to-bill ratio of 1.10 for the period. Net new business for our Clinical Research segment for the three months ended March 31, 2020 including reimbursement revenue was $955.9 million, representing a net book-to-bill of 1.32 for the period. During the quarter, our net new business awards were impacted by the COVID-19 pandemic as business development activities began to slow at the end of the quarter with bid-defense meetings and study award decisions being postponed due to restrictions put in place as a result of the pandemic. This net new business, excluding reimbursement revenue, contributed to an ending backlog of $4.7 billion at March 31, 2020.

For the three months ended March 31, 2020, revenue was $783.7 million, which represents growth of 8.5%, or $61.7 million, compared to the three months ended March 31, 2019 at actual foreign exchange rates. On a constant currency basis, revenue grew $67.0 million, an increase of 9.3% compared to the first quarter of 2019. By segment, the Clinical Research segment generated revenues of $726.1 million, while the Data Solutions segment generated revenues of $57.6 million.
 
Direct costs, exclusive of depreciation and amortization, were $403.9 million during the three months ended March 31, 2020 compared to $377.9 million for the three months ended March 31, 2019 at actual foreign exchange rates. On a constant currency basis, direct costs increased $32.5 million compared to the first quarter of 2019. The increase in direct costs continues to be driven by increased labor costs in our Clinical Research segment and increased data costs in our Data Solutions segment. Direct costs were 51.5% of revenue during the first quarter of 2020 compared to 52.3% of revenue during the first quarter of 2019.

Selling, general and administrative expenses were $107.0 million during the three months ended March 31, 2020 compared to $97.1 million for the three months ended March 31, 2019. Selling, general and administrative costs were 13.6% of revenue during the first quarter of 2020 compared to 13.4% of revenue during the first quarter of 2019.

GAAP net income was $40.7 million for the three months ended March 31, 2020, or $0.63 per share on a diluted basis, compared to GAAP net income of $44.1 million for the three months ended March 31, 2019, or $0.66 per share on a diluted basis.

EBITDA was $103.3 million for the three months ended March 31, 2020, representing a decrease of 7.9% compared to the three months ended March 31, 2019. Adjusted EBITDA was $112.1 million for the three months ended March 31, 2020, representing a decrease of 4.3% compared to the three months ended March 31, 2019.

Adjusted net income was $67.3 million for the three months ended March 31, 2020, representing a decrease of 8.1% compared to the three months ended March 31, 2019. Adjusted net income per diluted share was $1.05 for the three months ended March 31, 2020, representing a decrease of 4.5% compared to the three months ended March 31, 2019.
 
Guidance
 
The Company is withdrawing its full year 2020 guidance. Due to the uncertain scope and duration of the COVID-19 pandemic and uncertain timing of global recovery and economic normalization, the Company is unable to estimate with confidence the full-year overall impact on its global operations.


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For Q2 2020, the Company expects to achieve total revenues between $705.0 million and $740.0 million, GAAP net income per diluted share of between $0.32 and $0.46, adjusted net income per diluted share of between $0.75 and $0.90, and an effective income tax rate of 23%.

Our Q2 2020 guidance assumes a EURO rate of 1.15 and a GBP rate of 1.30. All other foreign currency exchange rates are as of March 31, 2020.

A reconciliation of our non-GAAP measures, EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share and our Q2 2020 guidance to the corresponding GAAP measures is included in this press release.
 
Conference Call Details
 
PRA will host a conference call at 9:00 a.m. ET on May 1, 2020, 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 7450977. The conference call will also be accessible, live via audio broadcast, on the Investor Relations section of the PRA website at investor.prahs.com. A replay of the conference call will be available online at investor.prahs.com. 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 7450977.
 
Additional Information
 
A financial supplement with first quarter 2020 results, which should be read in conjunction with this press release, may be found in the Investor Relations section of our website at investor.prahs.com in a document titled “Q1 2020 Earnings Presentation.”
 
About PRA Health Sciences
 
PRA (NASDAQ: PRAH) is a full-service global contract research organization, providing a broad range of product development and data solution services to pharmaceutical and biotechnology companies around the world. PRA’s integrated services include data management, statistical analysis, clinical trial management, and regulatory and drug development consulting. PRA’s global operations span more than 90 countries across North America, Europe, Asia, Latin America, South Africa, Australia and the Middle East, and more than 17,500 employees. Since 2000, PRA has participated in more than 4,000 clinical trials. 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 95 products. 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.
 

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Contacts: 
 
Helen O’Donnell
Solebury Trout
Managing Director
203.428.3213
InvestorRelations@prahs.com or
hodonnell@soleburytrout.com 




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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 the current COVID-19 pandemic has adversely affected and may continue to affect adversely our business and results of operations; 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 Company may underprice contracts, overrun its cost estimates, or fail to receive approval for, or experience delays in, documenting change orders; the historical indications of the relationship of backlog to revenues may not be indicative of their future relationship; the Company may be unable to attract suitable investigators and patients for its clinical trials; the Company could be subject to employment liability with its embedded and functional outsourcing solutions as it places employees at the physical workplaces of its clients; the Company may lose key personnel or be unable to recruit and retain experienced personnel; the Company may be unable to maintain information systems or effectively update them; a failure or breach of the Company’s IT systems could result in customer information being compromised or otherwise significantly disrupt the Company’s business operations; client or therapeutic concentration or competition among clients could harm the Company’s business; if the Company does not keep pace with rapid technological changes, its services may become less competitive or obsolete; the Company may be unable to successfully identify, acquire and integrate businesses, services and technologies or to manage joint ventures; the Company’s business is subject to economic, political and other risks associated with international operations, including foreign currency exchange rate fluctuations; the Company may be exposed to liabilities under anti-corruption laws due to the global nature of its business; the Company’s failure to perform services in accordance with contractual requirements, certain laws and 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’s relationships with existing or potential clients who are in competition with each other may adversely impact the degree to which other clients or potential clients use its services; the Company may be unable to compete effectively with other players in the biopharmaceutical services industry; changes in accounting standards may adversely affect the Company’s financial statements; the Company’s effective income tax rate may fluctuate which may adversely affect its operations, earnings, and earnings per share; the Company may not realize the full value of its goodwill and intangible assets, and may be unable to use net operating loss carry-forwards; the Company’s suppliers may increase its costs to obtain, restrict its use of or refuse to license its data, or the Company may otherwise be unable to continue to obtain products, services and licenses from third parties; the Company may be unable to protect its intellectual property; patent and other intellectual property litigation could be time-consuming and costly; biopharmaceutical industry outsourcing trends could change and adversely affect the Company’s operations and growth rate; government regulators or customers may limit the scope of prescriptions or withdraw products from the market; the U.S. and international healthcare industry is subject to political, economic and/or regulatory influences and changes, such as healthcare reform; current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost or could limit the Company’s service offerings; the Company has substantial indebtedness, some of which have interest

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rates pricing using a spread over LIBOR, and may incur additional indebtedness in the future, which could adversely affect the Company’s financial condition; circumstances beyond the Company’s control could cause industry-wide reduction in demand for its services; and other factors that are set forth in the Company’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K filed with the SEC on February 21, 2020. The forward-looking statements in this release speak only as of the date hereof, and the Company undertakes no obligation to update any such 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 diluted 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. In addition, management believes that EBITDA, adjusted EBITDA and adjusted net income (including adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 adjusted net income per share on a diluted basis) 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 (gains), other non-operating expense (income), equity in (gains) losses of unconsolidated joint ventures, transaction-related costs, acquisition-related costs, severance costs and restructuring charges, prior year foreign research and development credits, lease termination expense,  non-cash rent adjustment, adjustment to reflect amounts attributable to noncontrolling interest 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

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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.
 

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PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Revenue
 
$
783,708

 
$
722,022

Operating expenses:
 
 
 
 
Direct costs (exclusive of depreciation and amortization expense)
 
403,862

 
377,888

Reimbursable expenses
 
176,841

 
140,620

Selling, general and administrative expenses
 
106,957

 
97,095

Transaction-related costs
 
609

 

Depreciation and amortization expense
 
32,278

 
27,608

(Gain) loss on disposal of fixed assets, net
 
(19
)
 
88

Income from operations
 
63,180

 
78,723

Interest expense, net
 
(13,487
)
 
(12,369
)
Foreign currency gains, net
 
7,842

 
6,128

Other expense, net
 
(4
)
 
(88
)
Income before income taxes
 
57,531

 
72,394

Provision for income taxes
 
16,871

 
28,138

Net income
 
40,660

 
44,256

Net income attributable to noncontrolling interest
 

 
(172
)
Net income attributable to PRA Health Sciences, Inc.
 
$
40,660

 
$
44,084

Net income per share attributable to common stockholders:
 
 
 
 
Basic
 
$
0.65

 
$
0.68

Diluted
 
$
0.63

 
$
0.66

Weighted average common shares outstanding:
 
 
 
 
Basic
 
62,933

 
65,192

Diluted
 
64,339

 
66,847


 

 

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PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
 
 
 
March 31,
 
December 31,
 
 
2020
 
2019
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
150,804

 
$
236,232

Restricted cash
 
36

 
38

Accounts receivable and unbilled services, net of allowance for credit losses of $2,603 at March 31, 2020
 
692,251

 
658,517

Other current assets
 
111,832

 
90,780

Total current assets
 
954,923

 
985,567

Fixed assets, net
 
184,899

 
180,716

Operating lease right-of-use assets
 
185,483

 
186,343

Goodwill
 
1,659,891

 
1,502,756

Intangible assets, net
 
646,290

 
638,577

Other assets
 
49,670

 
50,471

Total assets
 
$
3,681,156

 
$
3,544,430

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of borrowings under credit facilities
 
$

 
$
88,800

Current portion of long-term debt
 
25,000

 
25,000

Accounts payable
 
57,728

 
55,293

Accrued expenses and other current liabilities
 
372,327

 
304,799

Current portion of operating lease liabilities
 
37,347

 
37,603

Advanced billings
 
534,233

 
505,714

Total current liabilities
 
1,026,635

 
1,017,209

Long-term debt, net
 
1,267,973

 
1,140,178

Long-term portion of operating lease liabilities
 
171,277

 
172,370

Deferred tax liabilities
 
60,994

 
78,511

Other long-term liabilities
 
46,860

 
46,171

Total liabilities
 
2,573,739

 
2,454,439

Commitments and contingencies
 
 
 
 
Stockholders' equity:
 
 
 
 
Preferred stock (100,000,000 authorized shares; $0.01 par value)
 
 
 
 
     Issued and outstanding -- none
 

 

Common stock (1,000,000,000 authorized shares; $0.01 par value)
 
 
 
 
Issued and outstanding -- 63,625,742 and 63,491,550 at March 31, 2020 and December 31, 2019, respectively
 
636

 
635

Additional paid-in capital
 
1,027,099

 
1,006,182

Accumulated other comprehensive loss
 
(204,260
)
 
(160,108
)
Retained earnings
 
283,942

 
243,282

Total stockholders' equity
 
1,107,417

 
1,089,991

Total liabilities and stockholders' equity
 
$
3,681,156

 
$
3,544,430


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PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net income
 
$
40,660

 
$
44,256

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization expense
 
32,278

 
27,608

Amortization of debt issuance costs
 
421

 
448

Amortization of terminated interest rate swaps
 
1,565

 
1,631

Stock-based compensation expense
 
15,425

 
9,247

Change in fair value of acquisition-related contingent consideration
 
574

 

Unrealized foreign currency gains, net
 
(4,788
)
 
(7,967
)
Deferred income tax benefit
 
(18,524
)
 
(10,521
)
Other reconciling items
 
135

 
(78
)
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
 
 
 
 
Accounts receivable, unbilled services and advanced billings
 
(7,600
)
 
(36,848
)
Other operating assets and liabilities
 
436

 
13,250

Net cash provided by operating activities
 
60,582

 
41,026

Cash flows from investing activities:
 
 
 
 
Purchase of fixed assets
 
(21,460
)
 
(19,895
)
Proceeds from the sale of fixed assets
 
26

 

(Cash paid) proceeds received for interest on interest rate swap, net
 
(780
)
 
416

Distributions from unconsolidated joint ventures
 

 
418

Acquisition of Care Innovations, Inc., net of cash acquired
 
(159,078
)
 

Net cash used in investing activities
 
(181,292
)
 
(19,061
)
Cash flows from financing activities:
 
 
 
 
Borrowings on line of credit
 
100,000

 

Repayments of line of credit
 
(55,000
)
 

Repayments of long-term debt
 
(6,250
)
 

Proceeds from stock issued under employee stock purchase plan and stock option exercises
 
2,908

 
10,419

Payments for debt issuance costs
 
(470
)
 

Net cash provided by financing activities
 
41,188

 
10,419

Effects of foreign exchange changes on cash, cash equivalents, and restricted cash
 
(5,908
)
 
506

Change in cash, cash equivalents, and restricted cash
 
(85,430
)
 
32,890

Cash, cash equivalents, and restricted cash, beginning of period
 
236,270

 
144,709

Cash, cash equivalents, and restricted cash, end of period
 
$
150,840

 
$
177,599



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PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Net income attributable to PRA Health Sciences, Inc.
 
$
40,660

 
$
44,084

Depreciation and amortization expense
 
32,278

 
27,608

Interest expense, net
 
13,487

 
12,369

Provision for income taxes
 
16,871

 
28,138

EBITDA
 
103,296

 
112,199

Stock-based compensation expense (a)
 
15,425

 
9,247

(Gain) loss on disposal of fixed assets, net (b)
 
(19
)
 
88

Foreign currency gains, net (c)
 
(7,842
)
 
(6,128
)
Other non-operating expense, net (d)
 
4

 
88

Transaction-related costs (e)
 
609

 

Acquisition-related costs (f)
 
838

 
2,119

Lease termination expense (g)
 

 
(218
)
Non-cash rent adjustment (h)
 
(508
)
 
(339
)
Other charges (i)
 
282

 

Non-operating income attributable to noncontrolling interest
 

 
85

Adjusted EBITDA
 
$
112,085

 
$
117,141

 
 
 
 
 
Net income attributable to PRA Health Sciences, Inc.
 
$
40,660

 
$
44,084

Provision for income taxes
 
16,871

 
28,138

Amortization of intangible assets
 
19,126

 
17,186

Amortization of deferred financing costs
 
421

 
448

Amortization of terminated interest rate swaps
 
1,565

 
1,631

Stock-based compensation expense (a)
 
15,425

 
9,247

(Gain) loss on disposal of fixed assets, net (b)
 
(19
)
 
88

Foreign currency gains, net (c)
 
(7,842
)
 
(6,128
)
Other non-operating expense, net (d)
 
4

 
88

Transaction-related costs (e)
 
609

 

Acquisition-related costs (f)
 
838

 
2,119

Lease termination expense (g)
 

 
(218
)
Non-cash rent adjustment (h)
 
(508
)
 
(339
)
Other charges (i)
 
282

 

Non-operating income attributable to noncontrolling interest
 

 
85

Adjusted pre-tax income
 
87,432

 
96,429

Adjusted tax expense (j)
 
(20,108
)
 
(23,143
)
Adjusted net income
 
$
67,324

 
$
73,286

 
 
 
 
 
Diluted weighted average common shares outstanding
 
64,339

 
66,847

 
 
 
 
 
Adjusted net income per diluted share
 
$
1.05

 
$
1.10


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PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE
(in millions, except per share amounts)
(unaudited)

 
 
 
Q2 2020
 
 
 
 
 
 
Low
 
High
 
 
 
 
Total Revenue
 
$
705.0

 
$
740.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2020
 
 
 
Adjusted Net Income
 
Adjusted Diluted Earnings Per Share
 
 
 
Low
 
High
 
Low
 
High
 
 
 
 
 
 
 
 
 
 
Net income and net income per diluted share
 
$
21.0

 
$
30.0

 
$
0.32

 
$
0.46

Adjustments:
 
 
 
 
 
 
 
 
Provision for income taxes
 
6.0

 
9.0

 
0.09

 
0.14

Amortization of intangible assets
 
19.0

 
19.0

 
0.29

 
0.29

Amortization of deferred financing costs
 
1.0

 
1.0

 
0.02

 
0.02

Amortization of terminated interest rate swaps
 
1.0

 
1.0

 
0.02

 
0.02

Stock-based compensation expense (a)
 
15.0

 
15.0

 
0.23

 
0.23

Adjusted pre-tax income
 
63.0

 
75.0

 
0.97

 
1.16

Adjusted tax expense (j)
 
(14.0)

 
(17.0)

 
(0.22)

 
(0.26)

Adjusted net income and adjusted net income per diluted share
 
$
49.0

 
$
58.0

 
$
0.75

 
$
0.90

(a)
Stock-based compensation expense represents the amount of recurring non-cash expense related to the Company’s equity compensation programs.
(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)
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.
(d)
Other non-operating 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.
(e)
Transaction-related costs include fees associated with our secondary offerings, stock-based compensation expense related to the transfer restrictions on vested options, the amendment to our accounts receivable financing agreement, costs associated with acquisition related earn-out liabilities, and expenses associated with our acquisitions.
(f)
Acquisition-related costs primarily consist of professional fees, rebranding costs, the elimination of redundant facilities and any other costs incurred directly related to the integration of these acquisitions.
(g)
Lease termination expense represents charges incurred in connection with the termination of leases at locations that are no longer being used by the Company.
(h)
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.
(i)
Represents charges incurred that are not considered part of our core operating results.
(j)
Represents the tax effect of adjusted pre-tax income at our estimated effective tax rate.

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