Provides First Quarter and Full Year 2021
Guidance
PPD, Inc. (Nasdaq: PPD), a leading global contract research
organization, today reported its financial results for the fourth
quarter and full year ended December 31, 2020.
Highlights
- Fourth quarter net authorizations of $1,297.6 million,
representing 28.1% growth and resulting in a net book-to-bill ratio
of 1.30x on a historical basis
- Full year net authorizations of $4,613.7 million, representing
20.5% growth and resulting in a net book-to-bill ratio of 1.32x on
a historical basis
- Ending backlog of $8,187.9 million, an increase of 15.9% over
the prior year-end on a historical basis
- Fourth quarter and full year revenue of $1,364.3 million and
$4,681.5 million, representing growth of 30.3% and 16.1% over the
same periods in 2019, respectively
- Fourth quarter and full year net income attributable to common
stockholders of $73.1 million and $120.2 million, representing
growth of 980.2% and 119.8% over the same periods in 2019,
respectively
- Fourth quarter and full year adjusted EBITDA of $251.9 million
and $875.7 million, representing 17.9% and 12.7% growth over the
same periods in 2019, respectively
- Fourth quarter and full year diluted EPS of $0.20 and $0.35 and
adjusted diluted EPS of $0.39 and $1.19, respectively
- Full year 2021 guidance: revenue of $5,145 million to $5,304
million; adjusted EBITDA of $970 million to $1,000 million;
adjusted diluted EPS of $1.37 to $1.45
- First quarter 2021 guidance: revenue of $1,277 million to
$1,302 million; adjusted EBITDA of $225 million to $229 million;
adjusted diluted EPS of $0.30 to $0.32
“PPD’s talent and culture have been instrumental to our
success,” said David Simmons, PPD’s chairman and CEO. “The
challenges of the pandemic put a spotlight on our people,
differentiated capabilities and therapeutic expertise – and PPD
excelled in that spotlight. Not only have we played a key role in
developing vaccines and therapeutics to prevent and treat COVID-19,
but our unwavering commitment to study continuity and deployment of
innovative solutions in this dynamic environment produced
outstanding financial results. As we add another year of
double-digit growth to our long track record of strong performance,
we are very well positioned for 2021.”
Fourth Quarter 2020 Results
Revenue for the three months ended December 31, 2020 increased
30.3% to $1,364.3 million, compared to $1,046.9 million for the
three months ended December 31, 2019. At the segment level,
Clinical Development Services revenue of $1,110.1 million grew
28.3% and Laboratory Services revenue of $254.2 million grew 40.1%,
each compared to the three months ended December 31, 2019.
Net income attributable to common stockholders for the three
months ended December 31, 2020 was $73.1 million, or $0.20 per
diluted share, compared to $6.8 million, or $0.02 per diluted
share, for the three months ended December 31, 2019. Adjusted net
income for the three months ended December 31, 2020 was $141.0
million, or $0.39 per diluted share, compared to adjusted net
income of $92.2 million, or $0.33 per diluted share, for the three
months ended December 31, 2019.
Adjusted EBITDA for the three months ended December 31, 2020 was
$251.9 million, compared to $213.6 million for the three months
ended December 31, 2019.
Full Year 2020 Results
Revenue for the year ended December 31, 2020 increased 16.1% to
$4,681.5 million, compared to $4,031.0 million for the prior year.
At the segment level, Clinical Development Services revenue of
$3,804.9 million grew 13.4% and Laboratory Services revenue of
$876.6 million grew 29.5%, each compared to the prior year.
Net income attributable to common stockholders for the year
ended December 31, 2020 was $120.2 million, or $0.35 per diluted
share, compared to $54.7 million, or $0.19 per diluted share, for
the prior year. Adjusted net income for the year ended December 31,
2020 was $412.8 million, or $1.19 per diluted share, compared to
adjusted net income of $286.8 million, or $1.02 per diluted share,
for the prior year.
Adjusted EBITDA for the year ended December 31, 2020 was $875.7
million, compared to $776.9 million for the year ended December 31,
2019.
Important disclosures about, and reconciliations of, non-GAAP
measures to their most directly comparable GAAP measures, including
adjusted net income, adjusted diluted earnings per share and
adjusted EBITDA, are provided in the “Non-GAAP Financial Measures”
section of this press release.
Net Authorizations and Backlog
The following table provides select information related to PPD’s
net authorizations and backlog as of and for the three months ended
December 31, 2020 compared to the three months ended December 31,
2019:
Historical Basis
ASC 606 Direct Basis
ASC 606 Basis
(dollars in millions)
2020
% Change
2020
% Change
2020
% Change
Net
authorizations..............................................
$1,297.6
28.1
%
$1,297.6
28.1
%
$1,881.9
38.5
%
Ending
backlog...............................................
$8,187.9
15.9
%
$8,512.8
16.2
%
$12,237.7
19.1
%
Backlog
conversion...............................................
12.7
%
11.7
%
11.6
%
Net
book-to-bill...............................................
1.30x
1.36x
1.38x
The following table provides select information related to PPD’s
net authorizations and backlog as of and for the year ended
December 31, 2020 compared to the year ended December 31, 2019:
Historical Basis
ASC 606 Direct Basis
ASC 606 Basis
(dollars in millions)
2020
% Change
2020
% Change
2020
% Change
Net
authorizations...............................................
$4,613.7
20.5
%
$4,613.7
20.5
%
$6,643.8
31.5
%
Ending
backlog...............................................
$8,187.9
15.9
%
$8,512.8
16.2
%
$12,237.7
19.1
%
Backlog
conversion...............................................
11.7
%
11.1
%
10.7
%
Net
book-to-bill...............................................
1.32x
1.35x
1.42x
Financial Position
As of December 31, 2020, cash and cash equivalents were $768.0
million, gross debt was $4,289.7 million and net debt was $3,521.7
million, resulting in a net leverage ratio of 4.0x trailing
12-month adjusted EBITDA.
As of December 31, 2020, PPD had $298.4 million of borrowing
capacity under its revolving credit facility. Total liquidity,
which is comprised of PPD’s borrowing capacity under its revolving
credit facility and cash and cash equivalents of $768.0 million,
was $1,066.4 million as of December 31, 2020, representing a 65.7%
increase over total liquidity of $643.6 million as of December 31,
2019.
On January 13, 2021, PPD entered into and closed a new (i)
$3,050.0 million aggregate principal amount senior secured
first-lien term loan facility (the “New Term Loan”) maturing in
January 2028 and (ii) $600.0 million committed principal amount
senior secured first-lien revolving credit facility maturing in
January 2026 (the “New Revolving Credit Facility” and together with
the New Term Loan, the “New Credit Agreement”). The proceeds from
borrowings under the New Term Loan, together with cash on hand,
were used to (i) refinance in full the principal amount outstanding
and accrued and unpaid interest, fees and other amounts then due
and owing under the then-existing credit agreement (the
“Refinancing”) and (ii) pay fees and expenses relating to the New
Credit Agreement.
PPD’s adjusted total liquidity as of December 31, 2020 was
$1,312.9 million after giving effect to the New Credit Agreement
and the Refinancing, as if each had occurred on such date.
Financial Guidance
PPD’s first quarter and full year 2021 guidance is as
follows:
First Quarter 2021
Low – High ($)
Low – High (Y/Y%)
Revenue
$1,277 million – $1,302
million
19% – 21%
Adjusted EBITDA
$225 million – $229 million
14% – 17%
Adjusted diluted EPS
$0.30 – $0.32
25% – 33%
Full Year 2021
Low – High ($)
Low – High (Y/Y%)
Revenue
$5,145 million – $5,304
million
10% – 13%
Adjusted EBITDA
$970 million – $1,000 million
11% – 14%
Adjusted diluted EPS
$1.37 – $1.45
15% – 22%
First quarter and full year 2021 guidance assumes foreign
exchange rates will remain in effect through the first quarter and
full year. PPD’s guidance for adjusted diluted EPS also assumes (i)
an estimated full year adjusted tax rate of between 23% and 24% and
(ii) diluted weighted-average shares outstanding of 358 million as
of March 31, 2021 and 360 million as of December 31, 2021,
respectively.
Webcast and Conference Call Details
PPD will host a conference call on Wednesday, February 24, at
9:00 a.m. (Eastern Time) to discuss its fourth quarter and full
year 2020 financial results. The conference call can be accessed
live over the phone by dialing +1 877 407 0784, or for
international callers, +1 201 689 8560.
Investors and other interested parties may also listen to a live
webcast of the conference call by logging onto the investors
section of PPD’s website at https://investors.ppd.com. An online
replay will be available after the call and can be accessed by
dialing +1 844 512 2921, or for international callers, +1 412 317
6671. The passcode for the live conference call and the replay is
13715818. The replay will be available until Wednesday, March 10,
2021.
About PPD
PPD is a leading global contract research organization providing
comprehensive, integrated drug development, laboratory and
lifecycle management services. Our customers include
pharmaceutical, biotechnology, medical device, academic and
government organizations. With locations in 46 countries and more
than 26,000 professionals worldwide, PPD applies innovative
technologies, therapeutic expertise and a firm commitment to
quality to help customers bend the cost and time curve of drug
development and optimize value in delivering life-changing
therapies to improve health. For more information, visit
www.ppd.com.
Forward-Looking Statements
This press release contains forward-looking statements. These
statements often include words such as “anticipate,” “expect,”
“suggest,” “plan,” “guidance,” “believe,” “intend,” “project,”
“forecast,” “estimates,” “targets,” “projections,” “should,”
“could,” “would,” “may,” “might,” “will,” and other similar
expressions, including forward-looking statements about the impact
from the novel coronavirus disease (the “COVID-19 pandemic”). We
base these forward-looking statements on our current expectations,
plans and assumptions that we have made in light of our experience
in the industry, as well as our perceptions of historical trends,
current conditions, expected future developments and other factors
we believe are appropriate under the circumstances at this time,
including the impact from the COVID-19 pandemic. As you consider
this press release, you should understand that these statements are
not guarantees of performance or results. The forward-looking
statements contained herein are subject to and involve risks,
uncertainties and assumptions and you should not place undue
reliance on these forward-looking statements. Although we believe
that these forward-looking statements are based on reasonable
assumptions at the time they are made, you should be aware that
many factors could affect our actual financial results, including
the impact from the COVID-19 pandemic, and our ability to achieve
our projected financial guidance, and therefore actual results
might differ materially from those expressed in these
forward-looking statements. Factors that might materially affect
such forward-looking statements and projections include: any
failure of our backlog to accurately predict or convert into future
revenue; the fact that our customers can terminate, delay or reduce
the scope of our contracts with them upon short notice or with no
notice; the impact of industry, customer and therapeutic area
concentration; consolidation amongst our customers, and the
potential for rationalization of the combined drug development
pipeline, resulting in fewer products in clinical development; our
ability to accurately price our contracts and manage our costs
associated with performance of such contracts; any failures in our
information and communication systems, including cybersecurity
breaches, impacting us or our customers, clinical trial
participants or employees; our dependence on our technology
network, and the impact from upgrades to the network; any failure
to perform services in accordance with contractual requirements,
regulatory standards and ethical standards; our ability to access
clinical research sites, attract suitable investigators or enroll a
sufficient number of patients (including as a result of the
COVID-19 pandemic) for our customers’ clinical trials; any failure
by us to comply with numerous privacy laws; our ability to keep
pace with rapid technological changes that could make our services
less competitive or obsolete; our ability to recruit, retain and
motivate key personnel, including the loss of any key executive who
becomes seriously ill with COVID-19; our dependence on third
parties for critical goods and support services, including a
significant impact from the COVID-19 pandemic on our suppliers; any
violation of laws, including laws governing the conduct of clinical
trials or other biopharmaceutical research, and anti-corruption
laws, such as the U.S. Foreign Corrupt Practices Act and the United
Kingdom Bribery Act of 2010; competition between our existing and
potential customers and the potential negative impact on our
business; our management of business restructuring transactions and
the integration of acquisitions; risks related to the drug and
medical device development services industry that could result in
potential liability that could affect our business, reputation and
financial condition; any failure of our insurance to cover the
potential liabilities, including indemnification obligations,
associated with the operation of our business and provision of
services and changes to our insurance coverage; our use of
biological and hazardous materials, which could violate law or
cause injury or death, resulting in liability; international or
U.S. economic, currency, political and other risks, such as those
from the COVID-19 pandemic; disruptions to our operations by the
occurrence of a natural disaster, pandemic (such as the COVID-19
pandemic), or other catastrophic events; the current and uncertain
future impact from the COVID-19 pandemic on our business, growth,
reputation, prospects, financial condition, results of operations
(including components of our financial results), cash flows and
liquidity; changes in tax laws, such as U.S. tax reform, or
interpretations of existing tax laws; economic conditions,
import/export implications and regulatory changes relating to the
United Kingdom’s exit from the European Union; any inability to
adequately protect our intellectual property or the security of our
systems and the data stored therein; our investments in third
parties, which are illiquid and subject to loss; the substantial
value of our goodwill and intangible assets, which we might not
fully realize, resulting in impairment losses; difficult and
volatile conditions in the capital and credit markets and in the
overall economy, including those caused by the COVID-19 pandemic;
the fragmented and highly competitive nature of the drug
development services industry; changes in trends in the
biopharmaceutical industry, including decreases in research and
development spending and outsourcing; the potential adverse effect
that the political, economic and/or regulatory influences and
changes impacting the United States and international healthcare
industry could have on both our customers’ and our businesses,
including as a result of healthcare reform; any patent or other
intellectual property litigation we might be involved in; risks
related to our indebtedness; risks related to ownership of our
common stock; the significant influence certain stockholders have
over us; other factors beyond our control; and other risk factors
set forth in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 as updated by the Company’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2020, and other SEC filings, copies of which are available free of
charge on the SEC website at www.sec.gov. These cautionary
statements should not be construed by you to be exhaustive and are
made only as of the date hereof. We undertake no obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Backlog and Net Authorizations
Revenue is comprised of direct, third-party pass-through and
out-of-pocket revenue from providing services to customers. Direct
revenue represents revenue associated with the direct services.
Third-party pass-through and out-of-pocket revenue (collectively,
“indirect revenue”) represents the reimbursement by customers of
third-party pass-through and out-of-pocket costs incurred by PPD
under its contracts with customers.
Historically, PPD reported backlog and net authorizations on a
basis which excluded indirect revenues and the impact of Accounting
Standards Codification (“ASC”) 606 (“ASC 606”) on direct revenue
(“Historical Basis”). During the first quarter of 2020, PPD began
to assess backlog and net authorizations on an ASC 606 direct
revenue basis (“ASC 606 Direct Basis”) and on an ASC 606 total
direct and indirect revenue basis (“ASC 606 Basis”).
Net authorizations represent new business awards, net of award
or contract modifications, contract cancellations, foreign currency
fluctuations and other adjustments. Backlog for all periods
represents anticipated revenues for work not yet completed or
performed (i) under signed contracts, letters of intent and, in
some cases, awards that are supported by other forms of written
communication and (ii) where there is sufficient or reasonable
certainty about the customer’s ability and intent to fund and
commence the services within six months. Backlog conversion
represents quarterly revenues for the period divided by opening
backlog for that period. The net book-to-bill ratio represents the
amount of net authorizations for the period divided by revenues
recognized in that period.
Backlog might not be a reliable indicator of future revenue and
PPD might not realize all or any part of the revenue from the
authorizations in backlog as of any point in time.
Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance
with generally accepted accounting principles in the United States
(“GAAP”), this press release contains certain non-GAAP financial
measures, including adjusted EBITDA, adjusted tax rate, adjusted
net income, adjusted diluted earnings per share, net debt, net
leverage ratio, total liquidity and adjusted total liquidity. A
non-GAAP financial measure is generally defined as a numerical
measure of a company’s financial performance or financial position
that excludes or includes amounts so as to be different than the
most directly comparable measure calculated and presented in
accordance with GAAP.
Adjusted EBITDA consists of net income or loss attributable to
common stockholders of PPD, adjusted for changes in
recapitalization investment portfolio consideration and net income
or loss attributable to noncontrolling interest and before interest
expense, net, provision for or benefit from income taxes and
depreciation and amortization and eliminates (i) non-operating
income or expense and (ii) impacts of certain non-cash, unusual or
other items that are included in net income or loss that we do not
consider indicative of our ongoing operating performance. Adjusted
tax rate is calculated by dividing adjusted tax expense by adjusted
income before the provision for income taxes, whereby adjusted tax
expense equals the sum of the following line items: (i) (benefit
from) provision for income taxes and (ii) tax adjustments, and
adjusted income before the provision for income taxes equals the
sum of the following line items: (i) income before (benefit from)
provision for income taxes and (ii) total adjustments to net
income. Adjusted net income (and adjusted diluted earnings per
share) consists of net income or loss (and diluted earnings or loss
per share) attributable to common stockholders of PPD before
amortization and the elimination of (i) non-operating income or
expense and (ii) impacts of certain non-cash, unusual or other
items that are included in net income or loss that we do not
consider indicative of our ongoing operating performance. In the
case of adjusted EBITDA, adjusted net income and adjusted diluted
earnings per share, we believe that making such adjustments
provides management and investors meaningful information to
understand our operating performance and the ability to analyze
financial and business trends on a period-to-period basis. Although
we exclude amortization of acquired intangible assets from our
non-GAAP expenses, we note that revenue generated from such
intangibles is included within revenue in determining net income or
loss attributable to common stockholders of PPD. Net debt consists
of the outstanding principal balance of the term loan, senior
unsecured notes, finance lease obligations and revolving credit
borrowings, less cash and cash equivalents, and the net leverage
ratio is equal to net debt divided by trailing 12-month adjusted
EBITDA.
Other companies in our industry may calculate adjusted EBITDA,
adjusted tax rate, adjusted net income, adjusted diluted earnings
per share, net debt, net leverage ratio, total liquidity and
adjusted total liquidity differently than we do. As a result, these
non-GAAP financial measures have limitations as analytical and
comparative tools and should not be considered in isolation, or as
a substitute for analysis of our results as reported under GAAP.
Adjusted EBITDA, adjusted tax rate, adjusted net income, adjusted
diluted earnings per share, net debt, net leverage ratio, total
liquidity and adjusted total liquidity should not be considered as
measures of discretionary cash available to us to invest in the
growth of our business. In calculating these performance and
liquidity financial measures, we make certain adjustments that are
based on assumptions and estimates that may prove to have been
inaccurate. Our presentation of adjusted EBITDA, adjusted tax rate,
adjusted net income, adjusted diluted earnings per share, net debt,
net leverage ratio, total liquidity and adjusted total liquidity
should not be construed as an inference that our future results and
financial position will be unaffected by unusual items.
PPD has not reconciled the forward-looking adjusted EBITDA and
adjusted diluted earnings per share guidance included above to the
most directly comparable GAAP measure because this cannot be done
without unreasonable effort due to the variability and low
visibility with respect to certain costs, the most significant of
which are incentive compensation (including stock-based
compensation), certain fair value measurements, recapitalization
portfolio interest consideration and costs related to the
uncertainties caused by the global COVID-19 pandemic, which are
potential adjustments to future earnings. PPD expects the
variability of these items to have a potentially unpredictable, and
a potentially significant, impact on our future GAAP financial
results.
PPD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
(in thousands, except per
share data)
Three Months Ended
December 31,
Years Ended December
31,
2020
2019
2020
2019
Revenue........................................................................................................................
$
1,364,292
$
1,046,884
$
4,681,474
$
4,031,017
Operating costs and expenses:
Direct costs, exclusive of depreciation
and
amortization.....................................................................................................................
459,346
372,077
1,682,046
1,484,258
Reimbursed
costs.....................................................................................................................
390,231
235,938
1,200,754
924,634
Selling, general and administrative
expenses.....................................................................................................................
275,415
257,375
1,010,127
938,806
Depreciation and
amortization.....................................................................................................................
72,721
66,934
279,116
264,830
Long-lived and goodwill asset
impairments.....................................................................................................................
—
1,284
1,414
1,284
Total operating costs and
expenses....................................................................................................................
1,197,713
933,608
4,173,457
3,613,812
Income from
operations.................................................................................................................
166,579
113,276
508,017
417,205
Interest expense,
net........................................................................................................................
(50,937)
(82,597)
(216,932)
(311,744)
Loss on extinguishment of
debt........................................................................................................................
—
—
(93,534)
—
Gain (loss) on
investments........................................................................................................................
36,088
3,673
52,737
(19,043)
Other expense,
net........................................................................................................................
(48,643)
(23,985)
(62,740)
(27,143)
Income before (benefit from) provision for
income
taxes.................................................................................................................
103,087
10,367
187,548
59,275
(Benefit from) provision for income
taxes........................................................................................................................
(1,877)
(9,430)
18,805
2,957
Income before equity in losses of
unconsolidated
affiliates.................................................................................................................
104,964
19,797
168,743
56,318
Equity in losses of unconsolidated
affiliates, net of income
taxes........................................................................................................................
(2,501)
(1,503)
(8,187)
(3,563)
Net
income.................................................................................................................
102,463
18,294
160,556
52,755
Net income attributable to noncontrolling
interest
........................................................................................................................
(2,366)
(1,544)
(6,865)
(4,934)
Net income attributable to PPD,
Inc..................................................................................................................
100,097
16,750
153,691
47,821
Recapitalization investment portfolio
consideration........................................................................................................................
(27,009)
(9,984)
(33,538)
6,846
Net income attributable to common
stockholders of PPD,
Inc..................................................................................................................
$
73,088
$
6,766
$
120,153
$
54,667
Earnings per share attributable to common
stockholders of PPD, Inc.:
Basic.................................................................................................................
$
0.21
$
0.02
$
0.35
$
0.20
Diluted.................................................................................................................
$
0.20
$
0.02
$
0.35
$
0.19
Weighted-average common shares
outstanding:........................................................................................................................
Basic.................................................................................................................
349,851
279,433
341,178
279,285
Diluted.................................................................................................................
357,226
282,603
346,684
280,693
PPD, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands, except par
value)
Assets
December 31,
2020
2019
Current assets:
Cash and cash
equivalents..................................................................................................
$
767,999
$
345,187
Accounts receivable and unbilled services,
net..................................................................
1,609,718
1,326,614
Income taxes
receivable......................................................................................................
22,386
27,437
Prepaid expenses and other current
assets..........................................................................
146,100
119,776
Total current
assets.................................................................................................
2,546,203
1,819,014
Property and equipment,
net....................................................................................................
496,474
458,845
Investments in unconsolidated
affiliates.................................................................................
43,178
34,028
Investments.............................................................................................................................
265,894
250,348
Goodwill,
net...........................................................................................................................
1,820,208
1,764,104
Intangible assets,
net................................................................................................................
748,404
892,091
Other
assets.............................................................................................................................
201,643
156,220
Operating lease right-of-use
assets..........................................................................................
171,839
181,596
Total
assets.............................................................................................................
$
6,293,843
$
5,556,246
Liabilities, Redeemable
Noncontrolling Interest and Stockholders’ Deficit
Current liabilities:
Accounts
payable................................................................................................................
$
176,341
$
130,060
Accrued expenses:
Payables to
investigators...............................................................................................
404,654
322,231
Accrued employee
compensation.................................................................................
331,156
263,834
Accrued
interest............................................................................................................
2,825
44,527
Other accrued
expenses.................................................................................................
192,954
138,632
Income taxes
payable..........................................................................................................
21,206
15,161
Unearned
revenue...............................................................................................................
1,060,544
1,110,872
Current portion of operating lease
liabilities......................................................................
51,643
45,962
Current portion of long-term debt and
finance lease
obligations.......................................
36,238
35,794
Total current
liabilities...........................................................................................
2,277,561
2,107,073
Accrued income
taxes.............................................................................................................
18,658
38,465
Deferred tax
liabilities.............................................................................................................
54,535
92,225
Recapitalization investment portfolio
liability.......................................................................
191,923
191,678
Long-term operating lease liabilities,
less current
portion......................................................
137,657
153,766
Long-term debt and finance lease
obligations, less current
portion........................................
4,226,192
5,608,134
Other
liabilities........................................................................................................................
98,908
33,017
Total
liabilities.......................................................................................................
7,005,434
8,224,358
Redeemable noncontrolling
interest........................................................................................
34,929
30,036
Stockholders’ deficit:
Common stock $0.01 par value,
2,000,000 shares authorized; 350,858
shares issued and
350,132 shares outstanding as of December
31, 2020 and
2,080,000 shares authorized; 280,127
shares issued and
279,426 shares outstanding as of December
31, 2019................................................
3,509
2,801
Treasury stock, at cost, 726 and 701
shares as of
December 31, 2020 and 2019,
respectively................................................................
(13,268)
(12,707)
Additional
paid-in-capital..................................................................................................
1,819,892
1,983
Accumulated
deficit............................................................................................................
(2,271,808)
(2,391,321)
Accumulated other comprehensive
loss.............................................................................
(284,845)
(298,904)
Total stockholders’
deficit......................................................................................
(746,520)
(2,698,148)
Total liabilities, redeemable
noncontrolling interest and stockholders’ deficit.....
$
6,293,843
$
5,556,246
PPD, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
(in thousands)
Years Ended December
31,
2020
2019
Cash flows from operating activities:
Net
income...............................................................................................................................
$
160,556
$
52,755
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization................................................................................................
279,116
264,830
Long-lived and goodwill asset
impairments.............................................................................
1,414
1,284
Stock-based compensation
expense........................................................................................
21,274
15,632
Non-cash operating lease
expense...........................................................................................
43,797
40,633
Amortization of debt issuance costs,
modification costs and debt
discounts................................
10,535
17,768
Non-cash losses (gains) on interest rate
swaps
2,572
(9,523)
(Gain) loss on investments
(52,737)
19,043
Loss on unconsolidated affiliates
8,187
3,563
Deferred income tax benefit
(38,564)
(84,795)
Loss on extinguishment of
debt..............................................................................................
93,534
—
Amortization of costs to obtain a
contract................................................................................
11,224
11,432
Other...................................................................................................................................
(1,722)
9,366
Change in operating assets and
liabilities, net of effect of businesses acquired or sold:
Accounts receivable and unbilled services,
net.....................................................................
(278,471)
(28,075)
Prepaid expenses and other current
assets............................................................................
15,577
(11,465)
Other
assets......................................................................................................................
(40,899)
(31,288)
Income taxes,
net...............................................................................................................
(7,001)
7,712
Accounts payable, accrued expenses and
other
liabilities.......................................................
141,238
26,283
Operating lease
liabilities...................................................................................................
(45,330)
(39,065)
Unearned
revenue..............................................................................................................
(72,966)
166,856
Net cash provided by operating
activities.....................................................................................
251,334
432,946
Cash flows from investing activities:
Purchases of property and
equipment................................................................................
(163,331)
(125,424)
Acquisitions of businesses, net of cash
and cash equivalents acquired..................................
321
(74,187)
Capital contributions paid for
investments.........................................................................
(6,852)
(4,069)
Distributions received from
investments
43,974
452
Investments in unconsolidated
affiliates.............................................................................
(20,000)
(30,000)
Net cash used in investing
activities............................................................................................
(145,888)
(233,228)
Cash flows from financing activities:
Repurchase of common
stock............................................................................................
(626)
(4,012)
Proceeds from exercise of stock
options.............................................................................
24,264
4,524
Borrowing on revolving credit
facility................................................................................
150,000
—
Repayment of revolving credit
facility...............................................................................
(150,000)
—
Proceeds from issuance of senior
notes...............................................................................
1,200,000
891,000
Redemption of HoldCo
Notes............................................................................................
(1,464,500)
—
Redemption of OpCo
Notes..............................................................................................
(1,160,865)
—
Payments on long-term debt and finance
leases...................................................................
(41,137)
(37,409)
Distribution to noncontrolling interest
holder......................................................................
(3,829)
—
Payment of debt issuance and debt
modification
costs.........................................................
(20,738)
(30,142)
Payment of contingent consideration for
acquisition of
business...........................................
(4,338)
—
Net proceeds from initial public
offering............................................................................
1,772,960
—
Recapitalization investment portfolio
distribution................................................................
(20,474)
—
Return of capital and special dividend to
stockholders.........................................................
—
(1,246,000)
Net cash provided by (used in) financing
activities.......................................................................
280,717
(422,039)
Effect of exchange rate changes on cash
and cash
equivalents........................................................
36,649
14,442
Net increase (decrease) in cash and cash
equivalents.....................................................................
422,812
(207,879)
Cash and cash equivalents, beginning of
the
period.......................................................................
345,187
553,066
Cash and cash equivalents, end of the
period................................................................................
$
767,999
$
345,187
PPD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
(unaudited)
(in thousands, except per
share data)
Three Months Ended
December 31,
Years Ended December
31,
2020
2019
2020
2019
Net income attributable to common
stockholders of PPD, Inc......................................
$
73,088
$
6,766
$
120,153
$
54,667
Recapitalization investment portfolio
consideration....................................................
27,009
9,984
33,538
(6,846)
Net income attributable to noncontrolling
interest.......................................................
2,366
1,544
6,865
4,934
Net
income...........................................................................................................
102,463
18,294
160,556
52,755
Reconciliation to Adjusted
EBITDA:
Interest expense,
net.................................................................................................
50,937
82,597
216,932
311,744
(Benefit from) provision for income
taxes..................................................................
(1,877)
(9,430)
18,805
2,957
Depreciation and
amortization..................................................................................
72,721
66,934
279,116
264,830
Stock-based compensation
expense...........................................................................
5,175
3,931
21,274
15,632
Option holder special bonuses
(a)..............................................................................
659
4,017
6,288
18,874
Other expense, net
(b)..............................................................................................
48,643
23,985
62,740
27,143
Long-lived and goodwill asset
impairments................................................................
—
1,284
1,414
1,284
Loss on extinguishment of
debt.................................................................................
—
—
93,534
—
Sponsor fees and related costs
(c)..............................................................................
—
934
448
3,805
Severance and charges for other cost
reduction activities
(d)........................................
245
2,641
2,305
10,398
Transaction-related and public company
transition costs (e).........................................
1,233
9,959
10,177
22,950
(Gain) loss on investments
(f)...................................................................................
(36,088)
(3,673)
(52,737)
19,043
Other adjustments
(g)...............................................................................................
7,749
12,148
54,825
25,530
Adjusted
EBITDA................................................................................................
$
251,860
$
213,621
$
875,677
$
776,945
Reconciliation to Adjusted Net
Income:
Net
income..............................................................................................................
$
102,463
$
18,294
$
160,556
$
52,755
Amortization of intangible
assets...............................................................................
39,015
40,949
157,613
162,121
Amortization of debt issuance and
modification costs and debt discount.......................
2,272
5,606
10,535
17,768
Amortization of accumulated other
comprehensive income on derivatives....................
(2,060)
(2,366)
(11,313)
(9,523)
Stock-based compensation
expense...........................................................................
5,175
3,931
21,274
15,632
Option holder special bonuses
(a)..............................................................................
659
4,017
6,288
18,874
Other expense, net
(b)..............................................................................................
48,643
23,985
62,740
27,143
Long-lived and goodwill asset
impairments................................................................
—
1,284
1,414
1,284
Loss on extinguishment of
debt.................................................................................
—
—
93,534
—
Sponsor fees and related costs
(c)..............................................................................
—
934
448
3,805
Severance and charges for other cost
reduction activities
(d)........................................
245
2,641
2,305
10,398
Transaction-related and public company
transition costs (e).........................................
1,233
9,959
10,177
22,950
(Gain) loss on investments
(f)...................................................................................
(36,088)
(3,673)
(52,737)
19,043
Other adjustments
(g)...............................................................................................
7,749
12,148
54,825
25,530
Total
adjustments....................................................................................................
66,843
99,415
357,103
315,025
Tax adjustments1
(h)................................................................................................
(28,302)
(25,550)
(104,816)
(80,961)
Adjusted net
income..............................................................................................
$
141,004
$
92,159
$
412,843
$
286,819
Diluted weighted average common shares
outstanding................................................
357,226
282,603
346,684
280,693
Adjusted diluted earnings per
share.........................................................................
$
0.39
$
0.33
$
1.19
$
1.02
1 The GAAP effective tax rate was (2%) and
(91%) for the three months ended December 31, 2020 and 2019,
respectively, and 10% and 5% for the years ended December 31, 2020
and 2019, respectively. The adjusted tax rate, as defined in the
“Non-GAAP Financial Measures” section of this press release, was
16% and 15% for the three months ended December 31, 2020 and 2019,
respectively, and 23% and 22% for the years ended December 31, 2020
and 2019, respectively.
PPD, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
(in thousands, except net
leverage ratio)
Calculation of Net Leverage Ratio as of
December 31, 2020
Gross
debt.............................................................................................................................................................
$
4,289,740
Less: Cash and cash
equivalents..............................................................................................................................
767,999
Net
debt.................................................................................................................................................................
$
3,521,741
Adjusted
EBITDA..................................................................................................................................................
$
875,677
Net leverage ratio (net debt/trailing
12-month adjusted
EBITDA)...............................................................................
4.0x
____________________
(a) Represents PPD’s costs associated with special cash bonuses
paid to PPD’s option holders. (b) Primarily represents losses from
fluctuations in foreign currency exchange rates. (c) Represents
management fees incurred under consulting services agreements with
certain investment funds of Hellman & Friedman LLC and its
affiliates and The Carlyle Group, Inc. and its affiliates. These
consulting services agreements terminated upon consummation of
PPD’s initial public offering (“IPO”). (d) Represents employee
separation costs, exit and disposal costs associated with the full
or partial exit of certain leased facilities, costs associated with
planned employee reorganizations and other contract termination
costs from various cost-reduction activities. (e) Represents
integration and transaction costs incurred with completed or
contemplated acquisitions, costs incurred in connection with PPD’s
IPO, secondary offering, other transaction costs and costs
associated with PPD’s public company transition. (f) Represents the
fair value accounting gains or losses primarily from PPD’s
investments in Auven Therapeutics Holdings, L.P. and venBio Global
Strategic Fund, L.P. (g) Other adjustments include amounts that
management believes are not representative of our operating
performance. These adjustments include implementation costs
associated with a new enterprise resource planning system, one-time
costs incurred in 2020 associated with the termination of a
long-term incentive program which has been replaced by a
traditional stock-based program in 2020, advisory costs associated
with the adoption of new accounting standards, one-time costs and
income associated with the COVID-19 pandemic and other unusual
charges or income. (h) Includes the tax effect of non-GAAP
adjustments at an estimated blended statutory tax rate of 26%,
excluding the change in recapitalization investment portfolio
consideration, and $(11,483) and $(13,559) in other tax adjustments
for the three months and year ended December 31, 2020,
respectively, as they are not representative of PPD’s operating
performance. There were no other tax adjustments for either the
three months or year ended December 31, 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210223006094/en/
PPD Contacts Media: Ned Glascock +1 910 558 8760
media@ppd.com
Investors: Tracy Krumme +1 910 558 4186 investors@ppd.com
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