On April 30, 2020 PRA Health Sciences, Inc. ("PRA," "we," "us" or the "Company") (NASDAQ: PRAH) reported financial results for the three months ended March 31, 2020 (Press release, PRA Health Sciences, APR 30, 2020, View Source [SID1234556836]).
"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.
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"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."
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.
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."