The contract research organization (CRO) recently released its second quarter 2018 earnings. According to the company, revenue for the quarter was approximately $723m, which represents an increase of approximately 35% year-over-year at actual foreign exchange rates.
Adjusted net income for the second quarter was approximately $66m, an increase of approximately 28% versus the second quarter of 2017. Net new business increased by approximately 11% compared to the same period last year, with a record level of $670m in net new business awards.
Approximately 60% of the new awards came from the pharmaceutical sector and approximately 40% from biotech, explained CEO Colin Shannon on the company’s earnings call.
Shannon added that the company’s client base continues to be well-diversified. The top five clients represented approximately 38% of revenue for the quarter and the largest client represented approximately 9% of revenue.
He also noted that the company is seeing a high volume of requests for proposals (RFPs), many of them from clients with which PRA has not previously worked.
“Sometimes that can take a number of iterations before they actually give us an award,” Shannon explained. “So, it might be a year or so. But our goal is obviously to impress the client.”
Shannon commented that the market dynamics are “pretty strong,” adding, “It’s lovely to see such a strong bookings across the sector.”
“We are building up and you'll see it reflecting through into our revenue recognition,” he added.
Capital expenditures were $12.7m in the second quarter of 2018 compared to $14m during the same period last year. CFO Mike Bonello explained, “Our capital expenditures continue to reflect our investment in information technology and the expansion of our infrastructure to support our growth.”
PRA also updated its 2018 guidance, estimating revenues between $2.87bn and $2.92bn, representing a reported growth of 47% to 50%.
Symphony integration
Shannon said he is happy with how integration plans are progressing with Symphony Health, which PRA acquired last year for $530m.
While Symphony's financial performance was at the lower end of the projected range in the first quarter of 2018, Shannon remains optimistic about the full year 2018 forecast.
“I've always felt this that the latter half of this year will always be a bigger and faster acceleration towards more integration,” he said.
Symphony, which provides data, analytics, and technology solutions, is a different business sector, Shannon commented. “This year was always really just a case of, let's understand it,” he explained.
Shannon said the “major goal is to make sure we maximize the opportunity of this business as well.”
Hiring practices
Hiring has seen a “nice pause” compared to last year, Shannon explained, which is enabling PRA to get ready “for the next surge.” When the bookings start to come through, “it's going to start full steam ahead,” he said.
Shannon said the company is taking this opportunity to work on internal systems. “We took on an awful lot of staff over the last couple of years,” he explained, “It's nice to do a little bit of consolidation” – which has helped improve margins.
“I think we are feeling very good about the end of the year and next year,” he said, adding that there might be a ramp-up in staff.