Highlights
Syneos Health (Nasdaq:SYNH), a leading biopharmaceutical solutions
organization combining a CRO (Contract Research Organization) and a
CCO (Contract Commercial Organization), today reported financial
results for the second quarter and six months ended June 30,
2018. Following the merger with inVentiv Health in August 2017 (the
"Merger") and to aid investors and analysts with year-over-year
comparability of results for the merged business, this press
release includes certain "Combined Company" metrics that represent
combined financial information of INC Research and inVentiv Health
as if the Merger had taken place on January 1, 2017, with
conforming adjustments to the current year presentation. Please
refer to the "Use of Non-GAAP Financial Measures" and
"Reconciliation of GAAP to Combined Company Non-GAAP Measures"
included in this press release and accompanying tables for
important disclosures about non-GAAP measures and a reconciliation
of these measures to the nearest GAAP measure.
“We delivered solid second quarter results, which were in line
with our expectations and appropriately mark the one-year
anniversary of our transformative merger,” said Alistair Macdonald,
Chief Executive Officer of Syneos Health. “During the quarter, we
successfully leveraged our collaborative cross-selling capabilities
to achieve record net awards and revenue in our Clinical business,
and achieved the first quarter of sequential quarterly growth in
our Commercial business since the closing of the merger. We had
significant wins across both SMID and large customers, including a
large end-to-end deal, which further validates the relevance of our
integrated business model. We believe we are poised to capitalize
on our robust pipeline and generate strong results in the second
half of the year while continuing to build our unique
biopharmaceutical solutions organization.”
Impact of the Adoption of ASC 606
The Company adopted Accounting Standards Update (“ASU”) No.
2014-09, Revenue from Contracts with Customers (“ASC 606”) on
January 1, 2018 using the modified retrospective method for all
contracts not completed as of the date of adoption. The prior
periods were not revised under this guidance and remain as
previously reported. As a result of adopting the standard, the
Company is no longer permitted to present service revenue and
revenue associated with reimbursable out-of-pocket expenses
(reimbursable revenue) separately in the statements of operations.
The following schedule includes a comparison of the second quarter
and year-to-date 2018 financial results as reported compared to
results presented as if the previous accounting guidance (ASC 605)
had been in effect. The adoption of ASC 606 lowered the Company's
total revenue and income from operations, and had no impact on its
cash flows from operations.
|
|
|
Three Months Ended June 30,
2018 |
|
Three Months EndedJune 30,
2017 |
|
ASC 606 As Reported |
|
ASC 605 As Adjusted |
|
ASC 605 As Reported |
|
(unaudited, in thousands) |
Service
revenue |
$ |
1,072,530 |
|
|
$ |
796,461 |
|
|
$ |
258,087 |
|
Reimbursable out-of-pocket expenses |
— |
|
|
299,445 |
|
|
133,048 |
|
Total
revenue |
1,072,530 |
|
|
1,095,906 |
|
|
391,135 |
|
Direct
costs (exclusive of depreciation and amortization) |
547,993 |
|
|
548,122 |
|
|
162,010 |
|
Reimbursable out-of-pocket expenses |
299,472 |
|
|
299,445 |
|
|
133,048 |
|
Selling,
general, and administrative |
100,218 |
|
|
100,813 |
|
|
42,531 |
|
Restructuring and other costs |
8,591 |
|
|
8,591 |
|
|
4,029 |
|
Transaction
and integration-related expenses |
18,032 |
|
|
18,032 |
|
|
23,739 |
|
Depreciation |
17,557 |
|
|
17,557 |
|
|
6,066 |
|
Amortization |
49,945 |
|
|
49,945 |
|
|
9,462 |
|
Total
operating expenses |
1,041,808 |
|
|
1,042,505 |
|
|
380,885 |
|
Income from
operations |
$ |
30,722 |
|
|
$ |
53,401 |
|
|
$ |
10,250 |
|
|
|
Six Months Ended June 30,
2018 |
|
Six Months EndedJune 30,
2017 |
|
ASC 606 As Reported |
|
ASC 605 As Adjusted |
|
ASC 605 As Reported |
|
(unaudited, in thousands) |
Service
revenue |
$ |
2,129,726 |
|
|
$ |
1,556,519 |
|
|
$ |
510,165 |
|
Reimbursable out-of-pocket expenses |
— |
|
|
609,543 |
|
|
262,888 |
|
Total
revenue |
2,129,726 |
|
|
2,166,062 |
|
|
773,053 |
|
Direct
costs (exclusive of depreciation and amortization) |
1,080,050 |
|
|
1,085,010 |
|
|
316,845 |
|
Reimbursable out-of-pocket expenses |
608,238 |
|
|
609,543 |
|
|
262,888 |
|
Selling,
general, and administrative |
199,477 |
|
|
200,529 |
|
|
87,465 |
|
Restructuring and other costs |
22,298 |
|
|
22,298 |
|
|
5,956 |
|
Transaction
and integration-related expenses |
43,243 |
|
|
43,243 |
|
|
23,741 |
|
Depreciation |
35,585 |
|
|
35,585 |
|
|
12,230 |
|
Amortization |
99,938 |
|
|
99,938 |
|
|
18,926 |
|
Total
operating expenses |
2,088,829 |
|
|
2,096,146 |
|
|
728,051 |
|
Income from
operations |
$ |
40,897 |
|
|
$ |
69,916 |
|
|
$ |
45,002 |
|
|
Second Quarter and Year-to-Date 2018
Results
GAAP service revenue for the three months ended June 30,
2018 was $1.07 billion, an increase of $814.4 million, or 315.6%,
compared to $258.1 million in the same period of 2017. GAAP service
revenue for the six months ended June 30, 2018 was $2.13
billion, an increase of $1.62 billion, or 317.5%, compared to
$510.2 million in the same period of 2017. Excluding reimbursable
revenue of $299.5 million and $608.2 million for the three and six
months ended June 30, 2018, respectively, the service revenue
increase was primarily due to the Merger with inVentiv Health in
August 2017.
Combined Company adjusted service revenue under ASC 605
increased during the three months ended June 30, 2018 by $18.4
million, or 2.4%, to $797.5 million from $779.1 million during the
three months ended June 30, 2017. The increase was primarily
due to revenue growth in the Company's Clinical Solutions segment
and a foreign currency exchange rate benefit of $5.9 million,
partially offset by a decline in revenue from the Company's
Commercial Solutions segment. Combined Company adjusted service
revenue under ASC 605 decreased during the six months ended
June 30, 2018 by $5.9 million, or 0.4%, to $1,559.0 million
from $1,565.0 million during the six months ended June 30,
2017. The decrease was primarily due to project cancellations and
customer downsizing within the Company's Commercial Solutions
segment, partially offset by growth in the Company's Clinical
Solutions segment and a foreign currency exchange benefit of $17.0
million.
Under ASC 605, the Combined Company Clinical Solutions segment
generated $557.6 million of adjusted service revenue during the
three months ended June 30, 2018, representing an increase of
$31.4 million or 6.0%, compared to $526.2 million during the three
months ended June 30, 2017. Under ASC 605, the Combined
Company Clinical Solutions segment generated $1.09 billion of
adjusted service revenue during the six months ended June 30,
2018, representing an increase of $43.2 million, or 4.1%, compared
to $1.05 billion during the six months ended June 30, 2017.
These increases were primarily due to revenue from strong net
awards in the last 12 months and a favorable revenue mix.
The Combined Company Commercial Solutions segment generated
$239.9 million of adjusted service revenue under ASC 605 during the
three months ended June 30, 2018, a decrease of $13.0 million,
or 5.1%, compared to $252.9 million during the three months ended
June 30, 2017. The Combined Company Commercial Solutions
segment generated $470.5 million of adjusted service revenue under
ASC 605 during the six months ended June 30, 2018, a decrease
of $49.1 million, or 9.5%, compared to $519.6 million during the
six months ended June 30, 2017. These decreases were primarily
due to project cancellations and customer downsizing impacting
revenue from the Company's selling solutions and communications
service offerings, along with lower new business awards in 2017
that reduced 2018 revenue. Despite these factors, adjusted service
revenue from the Company's Commercial Solutions segment grew by
4.0% compared to the first quarter of 2018.
GAAP income from operations for the three months ended
June 30, 2018 increased by $20.5 million, or 199.7%, to $30.7
million from $10.3 million during the three months ended
June 30, 2017. GAAP income from operations for the six months
ended June 30, 2018 was $40.9 million, a decrease of $4.1
million, or 9.1%, compared to $45.0 million during the six months
ended June 30, 2017. These changes were primarily attributed
to the Merger with inVentiv Health in August 2017. Combined Company
adjusted income from operations under ASC 605 was $139.4 million
and $254.1 million, or 17.5% and 16.3% of adjusted service revenue,
respectively, during the three and six months ended June 30,
2018, compared to $120.1 million and $246.0 million, or 15.4% and
15.7% of adjusted service revenue, respectively, during the three
and six months ended June 30, 2017.
Combined Company adjusted EBITDA for the three and six months
ended June 30, 2018 under ASC 605 increased to $157.0 million
and $289.7 million, or 19.7% and 18.6% of adjusted service revenue,
respectively, compared to $138.8 million and $285.6 million, or
17.8% and 18.2% of adjusted service revenue, respectively, during
the three and six months ended June 30, 2017. These increases
were a result of revenue growth and a more favorable revenue mix in
the second quarter of 2018 in the Company's Clinical Solutions
segment, realized synergies, and other cost management initiatives
during 2018. However, these increases were partially offset by a
decline in revenue from the Company’s Commercial Solutions segment,
an unfavorable revenue mix in its selling solutions business, and
negative impacts of foreign currency exchange fluctuations of $1.3
million and $7.9 million during the three and six months ended
June 30, 2018, respectively.
GAAP net income for the three months ended June 30, 2018
was $13.6 million resulting in diluted earnings per share of $0.13,
compared to net income of $3.4 million resulting in diluted
earnings per share of $0.06 for the three months ended
June 30, 2017. GAAP net loss for the six months ended
June 30, 2018 was $11.0 million, or an $0.11 diluted loss per
share, compared to net income of $24.6 million, or a $0.45 diluted
earnings per share, for the six months ended June 30, 2017.
Combined Company adjusted net income under ASC 605 during the three
and six months ended June 30, 2018 was $78.4 million and
$139.2 million, or $0.75 and $1.33 per diluted share, respectively,
compared to $52.3 million and $107.7 million, or $0.50 and $1.02
per diluted share, during the three and six months ended
June 30, 2017, respectively. These increases in the Combined
Company adjusted net income were primarily due to lower interest
expense stemming from the partial redemption of the inVentiv Health
Senior Unsecured Notes as part of the 2017 Merger financing and a
reduction in the Company's non-GAAP tax rate from 31% during 2017
to 27.5% in 2018.
Under ASC 605, net new business awards were $1.06 billion and
$1.93 billion for the three and six months ended June 30,
2018, representing book-to-bill ratios of 1.32x and 1.24x,
respectively. Clinical Solutions and Commercial Solutions net new
business awards for the three months ended June 30, 2018
were $849.9 million and $205.8 million, representing
book-to-bill ratios of 1.52x and 0.86x, respectively. Clinical
Solutions and Commercial Solutions net new business awards for the
six months ended June 30, 2018 were $1.40
billion and $528.1 million, representing book-to-bill ratios
of 1.29x and 1.12x, respectively. Clinical Solutions Combined
Company net new business awards grew by 18.6% and 13.4%,
respectively, compared to the three and six months ended
June 30, 2017, and maintained a trailing twelve-month
book-to-bill ratio of 1.26x. As of June 30, 2018, ending
backlog under ASC 605 for Clinical Solutions and the selling
solutions offering within Commercial Solutions was $4.09 billion
and $424.7 million, respectively.
Capital Management Update
As part of the Company's balanced approach to capital
deployment, during the three and six months ended June 30,
2018, the Company repaid $66.3 million and $97.5 million,
respectively, of its term loan debt, bringing its total debt
reduction since the closing of the Merger to $149.5 million. The
expected annual interest expense savings as a result of these
activities is $6.1 million. Additionally, in June 2018, the Company
entered into two new interest rate swaps in an effort to
limit its exposure to variable interest rates on its Term Loans. As
a result, the percentage of the Company's total principal debt that
is subject to fixed rates was approximately 60% at June 30,
2018.
The Company also paid $37.5 million and $75.0 million to
repurchase outstanding shares of its common stock during the three
and six months ended June 30, 2018, respectively, under the
share repurchase program announced on February 28, 2018. As
of June 30, 2018, $175.0 million remains authorized under this
plan for discretionary repurchases through the end of 2019.
On June 29, 2018, the Company entered into an accounts
receivable financing agreement which will allow it to borrow up
to $250.0 million from a third party lender, subject to
the periodic calculations of the available borrowing base. The
borrowings under this agreement will bear interest at LIBOR plus
100 basis points, a rate lower than on the Company's Term
Loans.
Full Year 2018 Business Outlook
Guidance takes into account a number of factors, including
existing backlog, current sales pipeline, trends in cancellations
and delays, and estimated Merger synergies, net of reinvestments.
Furthermore, the guidance is based on current foreign currency
exchange rates, current interest rates following the Company's
repricing, accounts receivable securitization and interest rate
swap transactions, and expected tax rate. The guidance is based
upon the Company's estimated diluted share count, excluding any
share repurchases subsequent to the second quarter of 2018.
Guidance for the full year of 2018 is outlined below and has been
prepared under both the new revenue recognition requirements of ASC
606 and the previous revenue recognition requirements of ASC
605:
|
|
|
|
|
ASC 605Guidance
Issued: |
|
ASC 606Guidance
Issued: |
|
May 9, 2018 |
|
August 2, 2018 |
|
May 9, 2018 |
|
August 2, 2018 |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
(in millions, except per share data) |
Adjusted
service revenue |
$ |
3,235 |
|
|
$ |
3,340 |
|
|
$ |
3,235 |
|
|
$ |
3,340 |
|
|
$ |
4,400 |
|
|
$ |
4,550 |
|
|
$ |
4,400 |
|
|
$ |
4,550 |
|
Clinical Solutions adjusted service revenue |
2,245 |
|
|
2,300 |
|
|
2,245 |
|
|
2,300 |
|
|
3,250 |
|
|
3,350 |
|
|
3,250 |
|
|
3,350 |
|
Commercial Solutions adjusted service revenue |
990 |
|
|
1,040 |
|
|
990 |
|
|
1,040 |
|
|
1,150 |
|
|
1,200 |
|
|
1,150 |
|
|
1,200 |
|
Adjusted
EBITDA |
620 |
|
|
660 |
|
|
620 |
|
|
660 |
|
|
580 |
|
|
620 |
|
|
580 |
|
|
620 |
|
Adjusted
net income |
295 |
|
|
324 |
|
|
298 |
|
|
326 |
|
|
266 |
|
|
295 |
|
|
268 |
|
|
297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
diluted EPS |
$ |
2.80 |
|
|
$ |
3.07 |
|
|
$ |
2.84 |
|
|
$ |
3.10 |
|
|
$ |
2.52 |
|
|
$ |
2.80 |
|
|
$ |
2.55 |
|
|
$ |
2.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company anticipates that its 2018 effective tax rate will be
between 27.0% and 28.0%, which takes into account the effect of the
enactment of the Tax Cuts and Jobs Act (the "Tax Act"). The Company
continues to expect to pay minimal cash taxes in the U.S. for 2018
due to the utilization of its net operating loss carryforwards.
Important disclosures in this earnings release about and
reconciliations of non-GAAP measures, including Combined Company
non-GAAP measures related to adjusted service revenue, adjusted
income from operations, adjusted operating margin, adjusted net
income, adjusted diluted earnings per share, EBITDA, and adjusted
EBITDA, to the nearest corresponding GAAP measures are provided
below under "Use of Non-GAAP Financial Measures" and
"Reconciliation of GAAP to Combined Company Non-GAAP Measures.”
Webcast and Conference Call Details
Syneos Health will host a conference call at 8:00 a.m. ET on
August 2, 2018, to discuss its second quarter 2018 financial
results. The live webcast will be available in listen-only mode in
the Events section of the Company's Investor Relations website at
investor.syneoshealth.com. To participate via phone, please dial +1
877 930 8058 within the United States or +1 253 336 7551 outside
the United States approximately 15 minutes before the scheduled
start of the call. The conference ID for the call is 2556819.
An archived replay of the conference call is expected to be
available online at investor.syneoshealth.com after 1:00 p.m.
ET on August 2, 2018. In addition, an audio replay will be
available for one week following the call and will be accessible by
dialing +1 855 859 2056 within the United States or +1 404 537 3406
outside the United States. The audio replay ID is 2556819.
About Syneos Health
Syneos Health (Nasdaq:SYNH) is the only fully integrated
biopharmaceutical solutions organization. The Company, including a
Contract Research Organization (CRO) and Contract Commercial
Organization (CCO), is purpose-built to accelerate customer
performance to address modern market realities. Created through the
merger of two industry leading companies – INC Research and
inVentiv Health – Syneos Health brings together more than 21,000
clinical and commercial minds with the ability to support customers
in more than 110 countries. The Company shares insights, uses the
latest technologies and applies advanced business practices to
speed customers’ delivery of important therapies to patients. To
learn more about how Syneos Health is shortening the
distance from lab to life® visit syneoshealth.com.
Forward-Looking Statements
Except for historical information, all of the statements,
expectations, and assumptions contained in this press release are
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Actual results might
differ materially from those explicit or implicit in the
forward-looking statements. Important factors that could cause
actual results to differ materially include, but are not limited
to: risks associated with the integration of the Company's business
with the business of inVentiv Health and its operation of the
combined business following the closing of the Merger; the
Company's ability to maintain or generate new business awards; the
Company's ability to increase its market share, grow its business,
and execute its growth strategies; the Company's backlog not being
indicative of future revenues and its ability to realize the
anticipated future revenue reflected in its backlog; the impact of
adoption of the new accounting standard of recognizing revenue from
customers; the impact of the Tax Act; the Company's ability to
adequately price its contracts and not overrun cost estimates;
general and international economic, political, and other risks,
including currency and stock market fluctuations and the uncertain
economic environment; fluctuations in the Company's financial
results; reliance on key personnel; customer or therapeutic area
concentration; and the other risk factors set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2017 and other SEC filings, copies of which are
available free of charge on the Company's website at
investor.syneoshealth.com. Syneos Health assumes no obligation and
does not intend to update these forward-looking statements, except
as required by law.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance
with U.S. Generally Accepted Accounting Principles ("GAAP"), this
press release contains certain Combined Company and Combined
Segment non-GAAP financial measures, including adjusted service
revenue, adjusted income from operations, adjusted operating
margin, adjusted net income (including adjusted diluted earnings
per share), EBITDA, and adjusted EBITDA, as well as current year
metrics as if ASC 605 was still in effect. A “non-GAAP financial
measure” is generally defined as a numerical measure of a company’s
financial performance that excludes or includes amounts from the
most directly comparable measure calculated and presented in
accordance with GAAP in the statements of operations, balance
sheets, or statements of cash flows of the Company. To aid
investors and analysts with year-over-year comparability for the
merged business, the Company has included "Combined Company"
financial information that combines certain stand-alone INC
Research and inVentiv Health financial information as if the Merger
had taken place on January 1, 2017, with conforming adjustments to
the 2017 presentation.
The Company defines Combined Company adjusted service revenue as
the stand-alone INC Research and inVentiv Health service revenue as
if the Merger had taken place on January 1, 2017, with conforming
adjustments to the 2017 presentation and adjusted to include
revenue eliminated as a result of purchase accounting.
The Company defines Combined Company adjusted income from
operations as income from operations excluding expenses and
transactions that the Company believes are not representative of
its core operations, namely: acquisition-related deferred revenue
adjustments; acquisition-related amortization; restructuring and
other costs; transaction and integration-related expenses;
share-based compensation expense; discretionary bonus accrual
reversals; R&D tax credit adjustments; monitoring and advisory
fees; and acquisition-related revaluation adjustments. The Company
defines Combined Company adjusted operating margin as adjusted
income from operations as a percentage of adjusted service
revenue.
The Company defines Combined Company adjusted net income
(including adjusted diluted earnings per share) as net income
(including diluted earnings per share) excluding the items excluded
from adjusted income from operations mentioned previously, loss on
extinguishment of debt, and other expense (income), net. After
giving effect to these items, the Company has also included an
adjustment to its income tax rate to reflect the expected long-term
income tax rate and estimated impact of the enactment of the Tax
Act.
EBITDA represents earnings before interest, taxes, depreciation
and amortization. The Company defines adjusted EBITDA as EBITDA,
further adjusted to exclude expenses and transactions that the
Company believes are not representative of its core operations,
namely: acquisition-related deferred revenue adjustments;
restructuring and other costs; transaction and integration-related
expenses; share-based compensation expense; discretionary bonus
accrual reversals; R&D tax credit adjustments; monitoring and
advisory fees; acquisition-related revaluation adjustments; other
expense, net; and loss on extinguishment of debt. The Company
presents EBITDA and adjusted EBITDA because it believes they are
useful metrics for investors as they are commonly used by
investors, analysts and debt holders to measure the Company's
ability to fund capital expenditures and meet working capital
requirements.
Each of the non-GAAP measures noted above are used by management
and the Board to evaluate the Company's core operating results
because they exclude certain items whose fluctuations from
period-to-period do not necessarily correspond to changes in the
core operations of the business. Adjusted income from operations,
adjusted operating margin, and adjusted net income (including
adjusted diluted earnings per share) are used by management and the
Board to assess the Company's business.
Non-GAAP measures have limitations in that they do not reflect
all of the amounts associated with the Company's results of
operations as determined in accordance with GAAP. Also, other
companies might calculate these measures differently. Investors are
encouraged to review the reconciliations of the non-GAAP financial
measures to their most directly comparable GAAP measures included
in this press release and the accompanying tables.
Investor
Relations Contact: Ronnie SpeightVice President, Investor
RelationsPhone: +1 919 745 2745Email:
Investor.Relations@syneoshealth.com |
Press/Media
Contact: Danielle DeForgeExecutive Director, External
CommunicationsPhone: +1 781 425 2624Email:
danielle.deforge@syneoshealth.com |
Syneos Health, Inc. and
SubsidiariesGAAP Condensed Consolidated Statements
of Operations(in thousands, except per share
data)(unaudited)
|
|
|
|
|
Three Months EndedJune
30, |
|
Six Months EndedJune
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Service
revenue |
$ |
1,072,530 |
|
|
$ |
258,087 |
|
|
$ |
2,129,726 |
|
|
$ |
510,165 |
|
Reimbursable out-of-pocket expenses |
— |
|
|
133,048 |
|
|
— |
|
|
262,888 |
|
Total revenue |
1,072,530 |
|
|
391,135 |
|
|
2,129,726 |
|
|
773,053 |
|
|
|
|
|
|
|
|
|
Costs and
operating expenses: |
|
|
|
|
|
|
|
Direct costs (exclusive of depreciation and
amortization) |
547,993 |
|
|
162,010 |
|
|
1,080,050 |
|
|
316,845 |
|
Reimbursable out-of-pocket expenses |
299,472 |
|
|
133,048 |
|
|
608,238 |
|
|
262,888 |
|
Selling, general, and administrative |
100,218 |
|
|
42,531 |
|
|
199,477 |
|
|
87,465 |
|
Restructuring and other costs |
8,591 |
|
|
4,029 |
|
|
22,298 |
|
|
5,956 |
|
Transaction and integration-related expenses |
18,032 |
|
|
23,739 |
|
|
43,243 |
|
|
23,741 |
|
Depreciation |
17,557 |
|
|
6,066 |
|
|
35,585 |
|
|
12,230 |
|
Amortization |
49,945 |
|
|
9,462 |
|
|
99,938 |
|
|
18,926 |
|
Total operating expenses |
1,041,808 |
|
|
380,885 |
|
|
2,088,829 |
|
|
728,051 |
|
Income from
operations |
30,722 |
|
|
10,250 |
|
|
40,897 |
|
|
45,002 |
|
|
|
|
|
|
|
|
|
Other
(expense) income, net: |
|
|
|
|
|
|
|
Interest income |
1,655 |
|
|
152 |
|
|
2,494 |
|
|
264 |
|
Interest expense |
(32,894 |
) |
|
(3,286 |
) |
|
(64,630 |
) |
|
(6,386 |
) |
Loss on extinguishment of debt |
(1,877 |
) |
|
— |
|
|
(2,125 |
) |
|
— |
|
Other income (expense), net |
32,001 |
|
|
(6,754 |
) |
|
19,447 |
|
|
(10,211 |
) |
Total other expense, net |
(1,115 |
) |
|
(9,888 |
) |
|
(44,814 |
) |
|
(16,333 |
) |
Income
(loss) before provision for income taxes |
29,607 |
|
|
362 |
|
|
(3,917 |
) |
|
28,669 |
|
Income tax
(expense) benefit |
(16,047 |
) |
|
3,027 |
|
|
(7,075 |
) |
|
(4,093 |
) |
Net income (loss) |
$ |
13,560 |
|
|
$ |
3,389 |
|
|
$ |
(10,992 |
) |
|
$ |
24,576 |
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.13 |
|
|
$ |
0.06 |
|
|
$ |
(0.11 |
) |
|
$ |
0.45 |
|
Diluted |
$ |
0.13 |
|
|
$ |
0.06 |
|
|
$ |
(0.11 |
) |
|
$ |
0.45 |
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
102,899 |
|
|
54,123 |
|
|
103,674 |
|
|
54,069 |
|
Diluted |
104,005 |
|
|
55,307 |
|
|
103,674 |
|
|
55,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Syneos Health, Inc. and
Subsidiaries Condensed Consolidated Balance
Sheets(in thousands, except share data)(unaudited)
|
|
June 30, 2018 |
|
December 31, 2017 |
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
171,528 |
|
|
$ |
321,262 |
|
Restricted cash |
2,191 |
|
|
714 |
|
Accounts receivable billed, net |
682,415 |
|
|
642,985 |
|
Accounts receivable unbilled |
346,608 |
|
|
373,003 |
|
Contract assets |
131,367 |
|
|
— |
|
Prepaid expenses and other current assets |
82,964 |
|
|
84,215 |
|
Total current assets |
1,417,073 |
|
|
1,422,179 |
|
Property
and equipment, net |
163,500 |
|
|
180,412 |
|
Goodwill |
4,275,485 |
|
|
4,292,571 |
|
Intangible
assets, net |
1,182,571 |
|
|
1,286,050 |
|
Deferred
income tax assets |
32,813 |
|
|
20,159 |
|
Other
long-term assets |
101,758 |
|
|
84,496 |
|
Total assets |
$ |
7,173,200 |
|
|
$ |
7,285,867 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
85,810 |
|
|
$ |
58,575 |
|
Accrued liabilities |
502,646 |
|
|
500,303 |
|
Contract liabilities |
719,932 |
|
|
559,270 |
|
Current portion of capital lease obligations |
15,201 |
|
|
16,414 |
|
Current portion of long-term debt |
37,500 |
|
|
25,000 |
|
Total current liabilities |
1,361,089 |
|
|
1,159,562 |
|
Capital
lease obligations, non-current |
13,241 |
|
|
20,376 |
|
Long-term
debt, non-current |
2,835,321 |
|
|
2,945,934 |
|
Deferred
income tax liabilities |
32,557 |
|
|
37,807 |
|
Other
long-term liabilities |
108,320 |
|
|
99,609 |
|
Total liabilities |
4,350,528 |
|
|
4,263,288 |
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock, $0.01 par value; 30,000,000 shares
authorized, 0shares issued and outstanding at June 30, 2018 and
December 31,2017, respectively |
— |
|
|
— |
|
Common stock, $0.01 par value; 600,000,000 shares
authorized,102,871,399 and 104,435,501 shares issued and
outstanding atJune 30, 2018 and December 31, 2017,
respectively |
1,029 |
|
|
1,044 |
|
Additional paid-in capital |
3,371,316 |
|
|
3,414,389 |
|
Accumulated other comprehensive loss, net of tax |
(55,064 |
) |
|
(22,385 |
) |
Accumulated deficit |
(494,609 |
) |
|
(370,469 |
) |
Total shareholders' equity |
2,822,672 |
|
|
3,022,579 |
|
Total liabilities and shareholders' equity |
$ |
7,173,200 |
|
|
$ |
7,285,867 |
|
|
Syneos Health, Inc. and
SubsidiariesCondensed Consolidated Statements of
Cash Flows(in thousands)(unaudited)
|
|
|
Six Months EndedJune
30, |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
Net (loss)
income |
$ |
(10,992 |
) |
|
$ |
24,576 |
|
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
135,523 |
|
|
31,156 |
|
Amortization of capitalized loan fees and original issue
discount, net of Senior Notes premium |
(32 |
) |
|
402 |
|
Share-based compensation |
16,254 |
|
|
12,048 |
|
(Recovery of) provision for doubtful accounts |
(1,734 |
) |
|
158 |
|
Benefit from deferred income taxes |
(7,682 |
) |
|
(9,081 |
) |
Foreign currency transaction adjustments |
(19,633 |
) |
|
5,882 |
|
Fair value adjustment of contingent tax-sharing
obligation |
2,388 |
|
|
— |
|
Loss on extinguishment of debt |
2,125 |
|
|
— |
|
Other non-cash items |
4,056 |
|
|
700 |
|
Changes in
operating assets and liabilities, net of effect of business
combinations: |
|
|
|
Accounts receivable, unbilled services, and advanced
billings |
(68,629 |
) |
|
31,868 |
|
Accounts payable and accrued expenses |
(3,269 |
) |
|
8,694 |
|
Other assets and liabilities |
16,799 |
|
|
(7,977 |
) |
Net cash provided by operating activities |
65,174 |
|
|
98,426 |
|
Cash flows from investing activities: |
|
|
|
Purchases
of property and equipment |
(32,586 |
) |
|
(15,974 |
) |
Net cash used in investing activities |
(32,586 |
) |
|
(15,974 |
) |
Cash flows from financing activities: |
|
|
|
Payments of
debt financing costs |
(3,421 |
) |
|
— |
|
Repayments
of long-term debt |
(97,500 |
) |
|
— |
|
Proceeds
from revolving line of credit |
— |
|
|
15,000 |
|
Repayments
of revolving line of credit |
— |
|
|
(40,000 |
) |
Payments of
capital leases |
(8,863 |
) |
|
— |
|
Payments
for repurchase of common stock |
(74,985 |
) |
|
— |
|
Proceeds
from exercise of stock options |
7,458 |
|
|
6,251 |
|
Payments
related to tax withholding for share-based compensation |
(2,383 |
) |
|
(1,179 |
) |
Net cash used in financing activities |
(179,694 |
) |
|
(19,928 |
) |
Effect of exchange rate changes on cash, cash equivalents,
and restricted cash |
(1,151 |
) |
|
4,688 |
|
Net change in cash, cash equivalents, and restricted
cash |
(148,257 |
) |
|
67,212 |
|
Cash, cash equivalents, and restricted cash - beginning of
period |
321,976 |
|
|
103,078 |
|
Cash, cash equivalents, and restricted cash - end of
period |
$ |
173,719 |
|
|
$ |
170,290 |
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures(in thousands)(unaudited)
|
|
|
Three Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted service revenue: |
|
|
|
|
|
|
|
Service
revenue, as reported |
$ |
1,072,530 |
|
|
$ |
(276,069 |
) |
|
$ |
796,461 |
|
|
$ |
258,087 |
|
Pre-merger inVentiv service revenue |
— |
|
|
— |
|
|
— |
|
|
514,947 |
|
Combined
Company service revenue, before adjustments |
1,072,530 |
|
|
(276,069 |
) |
|
796,461 |
|
|
773,034 |
|
Acquisition-related deferred revenue adjustment (a) |
3,800 |
|
|
(2,739 |
) |
|
1,061 |
|
|
6,056 |
|
Combined
Company adjusted service revenue |
1,076,330 |
|
|
(278,808 |
) |
|
797,522 |
|
|
779,090 |
|
Reimbursable out-of-pocket expenses, as reported |
— |
|
|
299,445 |
|
|
299,445 |
|
|
133,048 |
|
Pre-merger inVentiv reimbursable out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
148,266 |
|
Combined
Company adjusted total revenue |
$ |
1,076,330 |
|
|
$ |
20,637 |
|
|
$ |
1,096,967 |
|
|
$ |
1,060,404 |
|
|
|
|
|
|
|
|
|
Combined Company segment adjusted service
revenue: |
|
|
|
|
|
|
|
Clinical
Solutions service revenue, as reported |
$ |
783,913 |
|
|
$ |
(226,937 |
) |
|
$ |
556,976 |
|
|
$ |
255,504 |
|
Pre-merger inVentiv Clinical Solutions service revenue |
— |
|
|
— |
|
|
— |
|
|
265,188 |
|
Combined
Company Clinical Solutions service revenue, before adjustments |
783,913 |
|
|
(226,937 |
) |
|
556,976 |
|
|
520,692 |
|
Acquisition-related deferred revenue adjustment (a) |
3,393 |
|
|
(2,739 |
) |
|
654 |
|
|
5,537 |
|
Combined
Company Clinical Solutions adjusted service revenue |
787,306 |
|
|
(229,676 |
) |
|
557,630 |
|
|
526,229 |
|
Clinical Solutions reimbursable out-of-pocket expenses, as
reported |
— |
|
|
251,917 |
|
|
251,917 |
|
|
133,048 |
|
Pre-merger inVentiv Clinical Solutions reimbursable
out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
96,933 |
|
Combined
Company Clinical Solutions total revenue |
$ |
787,306 |
|
|
$ |
22,241 |
|
|
$ |
809,547 |
|
|
$ |
756,210 |
|
|
|
|
|
|
|
|
|
Commercial
Solutions service revenue, as reported |
$ |
288,617 |
|
|
$ |
(49,132 |
) |
|
$ |
239,485 |
|
|
$ |
2,583 |
|
Pre-merger inVentiv Commercial Solutions service revenue |
— |
|
|
— |
|
|
— |
|
|
249,759 |
|
Combined
Company Commercial Solutions service revenue, before
adjustments |
288,617 |
|
|
(49,132 |
) |
|
239,485 |
|
|
252,342 |
|
Acquisition-related deferred revenue adjustment (a) |
407 |
|
|
— |
|
|
407 |
|
|
519 |
|
Combined
Company Commercial Solutions adjusted service revenue |
289,024 |
|
|
$ |
(49,132 |
) |
|
$ |
239,892 |
|
|
$ |
252,861 |
|
Commercial Solutions reimbursable out-of-pocket expenses, as
reported |
— |
|
|
47,528 |
|
|
47,528 |
|
|
— |
|
Pre-merger inVentiv Commercial Solutions reimbursable
out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
51,333 |
|
Combined
Company Commercial Solutions total revenue |
$ |
289,024 |
|
|
$ |
(1,604 |
) |
|
$ |
287,420 |
|
|
$ |
304,194 |
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures (Continued)(in thousands, except
per share data)(unaudited)
|
|
|
Six Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted service revenue: |
|
|
|
|
|
|
|
Service
revenue, as reported |
$ |
2,129,726 |
|
|
$ |
(573,207 |
) |
|
$ |
1,556,519 |
|
|
$ |
510,165 |
|
Pre-merger inVentiv service revenue |
— |
|
|
— |
|
|
— |
|
|
1,041,002 |
|
Combined
Company service revenue, before adjustments |
2,129,726 |
|
|
(573,207 |
) |
|
1,556,519 |
|
|
1,551,167 |
|
Acquisition-related deferred revenue adjustment (a) |
7,606 |
|
|
(5,086 |
) |
|
2,520 |
|
|
13,816 |
|
Combined
Company adjusted service revenue |
2,137,332 |
|
|
(578,293 |
) |
|
1,559,039 |
|
|
1,564,983 |
|
Reimbursable out-of-pocket expenses, as reported |
— |
|
|
609,543 |
|
|
609,543 |
|
|
262,888 |
|
Pre-merger inVentiv reimbursable out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
305,256 |
|
Combined
Company adjusted total revenue |
$ |
2,137,332 |
|
|
$ |
31,250 |
|
|
$ |
2,168,582 |
|
|
$ |
2,133,127 |
|
|
|
|
|
|
|
|
|
Combined Company segment adjusted service
revenue: |
|
|
|
|
|
|
|
Clinical
Solutions service revenue, as reported |
$ |
1,570,752 |
|
|
$ |
(483,945 |
) |
|
$ |
1,086,807 |
|
|
$ |
505,001 |
|
Pre-merger inVentiv Clinical Solutions service revenue |
— |
|
|
— |
|
|
— |
|
|
528,073 |
|
Combined
Company Clinical Solutions service revenue, before adjustments |
1,570,752 |
|
|
(483,945 |
) |
|
1,086,807 |
|
|
1,033,074 |
|
Acquisition-related deferred revenue adjustment (a) |
6,792 |
|
|
(5,086 |
) |
|
1,706 |
|
|
12,276 |
|
Combined
Company Clinical Solutions adjusted service revenue |
1,577,544 |
|
|
(489,031 |
) |
|
1,088,513 |
|
|
1,045,350 |
|
Clinical Solutions reimbursable out-of-pocket expenses, as
reported |
— |
|
|
513,395 |
|
|
513,395 |
|
|
262,888 |
|
Pre-merger inVentiv Clinical Solutions reimbursable
out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
192,668 |
|
Combined
Company Clinical Solutions total revenue |
$ |
1,577,544 |
|
|
$ |
24,364 |
|
|
$ |
1,601,908 |
|
|
$ |
1,500,906 |
|
|
|
|
|
|
|
|
|
Commercial
Solutions service revenue, as reported |
$ |
558,974 |
|
|
$ |
(89,262 |
) |
|
$ |
469,712 |
|
|
$ |
5,164 |
|
Pre-merger inVentiv Commercial Solutions service revenue |
— |
|
|
— |
|
|
— |
|
|
512,929 |
|
Combined
Company Commercial Solutions service revenue, before
adjustments |
558,974 |
|
|
(89,262 |
) |
|
469,712 |
|
|
518,093 |
|
Acquisition-related deferred revenue adjustment (a) |
814 |
|
|
— |
|
|
814 |
|
|
1,540 |
|
Combined
Company Commercial Solutions adjusted service revenue |
559,788 |
|
|
$ |
(89,262 |
) |
|
$ |
470,526 |
|
|
$ |
519,633 |
|
Commercial Solutions reimbursable out-of-pocket expenses, as
reported |
— |
|
|
96,148 |
|
|
96,148 |
|
|
— |
|
Pre-merger inVentiv Commercial Solutions reimbursable
out-of-pocket expenses |
— |
|
|
— |
|
|
— |
|
|
112,588 |
|
Combined
Company Commercial Solutions total revenue |
$ |
559,788 |
|
|
$ |
6,886 |
|
|
$ |
566,674 |
|
|
$ |
632,221 |
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures (Continued)(in thousands, except
per share data)unaudited)
|
|
|
Three Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted income from
operations: |
|
|
|
|
|
|
|
Income from
operations, as reported |
$ |
30,722 |
|
|
$ |
22,679 |
|
|
$ |
53,401 |
|
|
$ |
10,250 |
|
Pre-merger inVentiv loss from operations |
— |
|
|
— |
|
|
— |
|
|
(13,770 |
) |
Combined
Company income (loss) from operations, before adjustments |
30,722 |
|
|
22,679 |
|
|
53,401 |
|
|
(3,520 |
) |
Acquisition-related deferred revenue adjustment (a) |
3,800 |
|
|
(2,739 |
) |
|
1,061 |
|
|
6,056 |
|
Amortization (b) |
49,945 |
|
|
— |
|
|
49,945 |
|
|
68,316 |
|
Restructuring and other costs (c) |
8,591 |
|
|
— |
|
|
8,591 |
|
|
9,430 |
|
Transaction and integration-related expenses (d) |
18,032 |
|
|
— |
|
|
18,032 |
|
|
32,283 |
|
Share-based compensation (e) |
8,375 |
|
|
— |
|
|
8,375 |
|
|
11,534 |
|
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(5,827 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
1,078 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
796 |
|
Combined
Company adjusted income from operations |
$ |
119,465 |
|
|
$ |
19,940 |
|
|
$ |
139,405 |
|
|
$ |
120,146 |
|
GAAP
operating margin |
2.9 |
% |
|
|
|
6.7 |
% |
|
4.0 |
% |
Combined
Company adjusted operating margin |
11.1 |
% |
|
|
|
17.5 |
% |
|
15.4 |
% |
|
|
|
|
|
|
|
|
Combined Company EBITDA and adjusted EBITDA: |
|
|
|
|
|
|
|
Net income,
as reported |
$ |
13,560 |
|
|
$ |
17,173 |
|
|
$ |
30,733 |
|
|
$ |
3,389 |
|
Pre-merger inVentiv net loss |
— |
|
|
— |
|
|
— |
|
|
(38,789 |
) |
Combined
Company net income (loss), before adjustments |
13,560 |
|
|
17,173 |
|
|
30,733 |
|
|
(35,400 |
) |
Interest expense, net |
31,239 |
|
|
— |
|
|
31,239 |
|
|
39,672 |
|
Income tax expense (benefit) |
16,047 |
|
|
5,506 |
|
|
21,553 |
|
|
(16,944 |
) |
Depreciation |
17,557 |
|
|
— |
|
|
17,557 |
|
|
18,608 |
|
Amortization (b) |
49,945 |
|
|
— |
|
|
49,945 |
|
|
68,316 |
|
EBITDA |
128,348 |
|
|
22,679 |
|
|
151,027 |
|
|
74,252 |
|
Acquisition-related deferred revenue adjustment (a) |
3,800 |
|
|
(2,739 |
) |
|
1,061 |
|
|
6,056 |
|
Restructuring and other costs (c) |
8,591 |
|
|
— |
|
|
8,591 |
|
|
9,430 |
|
Transaction and integration-related expenses (d) |
18,032 |
|
|
— |
|
|
18,032 |
|
|
32,283 |
|
Share-based compensation (e) |
8,375 |
|
|
— |
|
|
8,375 |
|
|
11,534 |
|
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(5,827 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
1,078 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
796 |
|
Other (income) expense, net (j) |
(32,001 |
) |
|
— |
|
|
(32,001 |
) |
|
9,152 |
|
Loss on extinguishment of debt (k) |
1,877 |
|
|
— |
|
|
1,877 |
|
|
— |
|
Combined
Company adjusted EBITDA |
$ |
137,022 |
|
|
$ |
19,940 |
|
|
$ |
156,962 |
|
|
$ |
138,754 |
|
Adjusted
EBITDA Margin |
12.7 |
% |
|
|
|
19.7 |
% |
|
17.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures (Continued)(in thousands, except
per share data)(unaudited)
|
|
|
Six Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted income from
operations: |
|
|
|
|
|
|
|
Income from
operations, as reported |
$ |
40,897 |
|
|
$ |
29,019 |
|
|
$ |
69,916 |
|
|
$ |
45,002 |
|
Pre-merger inVentiv loss from operations |
— |
|
|
— |
|
|
— |
|
|
(28,185 |
) |
Combined
Company income from operations, before adjustments |
40,897 |
|
|
29,019 |
|
|
69,916 |
|
|
16,817 |
|
Acquisition-related deferred revenue adjustment (a) |
7,606 |
|
|
(5,086 |
) |
|
2,520 |
|
|
13,816 |
|
Amortization (b) |
99,938 |
|
|
— |
|
|
99,938 |
|
|
147,449 |
|
Restructuring and other costs (c) |
22,298 |
|
|
— |
|
|
22,298 |
|
|
15,847 |
|
Transaction and integration-related expenses (d) |
43,243 |
|
|
— |
|
|
43,243 |
|
|
32,856 |
|
Share-based compensation (e) |
16,163 |
|
|
— |
|
|
16,163 |
|
|
22,697 |
|
Discretionary bonus accrual reversal (f) |
— |
|
|
— |
|
|
— |
|
|
(5,953 |
) |
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(6,030 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
6,510 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
2,019 |
|
Combined
Company adjusted income from operations |
$ |
230,145 |
|
|
$ |
23,933 |
|
|
$ |
254,078 |
|
|
$ |
246,028 |
|
GAAP
operating margin |
1.9 |
% |
|
|
|
4.5 |
% |
|
8.8 |
% |
Combined
Company adjusted operating margin |
10.8 |
% |
|
|
|
16.3 |
% |
|
15.7 |
% |
|
|
|
|
|
|
|
|
Combined Company EBITDA and adjusted EBITDA: |
|
|
|
|
|
|
|
Net (loss)
income, as reported |
$ |
(10,992 |
) |
|
$ |
22,718 |
|
|
$ |
11,726 |
|
|
$ |
24,576 |
|
Pre-merger inVentiv net loss |
— |
|
|
— |
|
|
— |
|
|
(79,505 |
) |
Combined
Company net (loss) income, before adjustments |
(10,992 |
) |
|
22,718 |
|
|
11,726 |
|
|
(54,929 |
) |
Interest expense, net |
62,136 |
|
|
— |
|
|
62,136 |
|
|
80,406 |
|
Income tax expense (benefit) |
7,075 |
|
|
6,301 |
|
|
13,376 |
|
|
(24,476 |
) |
Depreciation |
35,585 |
|
|
— |
|
|
35,585 |
|
|
39,575 |
|
Amortization (b) |
99,938 |
|
|
— |
|
|
99,938 |
|
|
147,449 |
|
EBITDA |
193,742 |
|
|
29,019 |
|
|
222,761 |
|
|
188,025 |
|
Acquisition-related deferred revenue adjustment (a) |
7,606 |
|
|
(5,086 |
) |
|
2,520 |
|
|
13,816 |
|
Restructuring and other costs (c) |
22,298 |
|
|
— |
|
|
22,298 |
|
|
15,847 |
|
Transaction and integration-related expenses (d) |
43,243 |
|
|
— |
|
|
43,243 |
|
|
32,856 |
|
Share-based compensation (e) |
16,163 |
|
|
— |
|
|
16,163 |
|
|
22,697 |
|
Discretionary bonus accrual reversal (f) |
— |
|
|
— |
|
|
— |
|
|
(5,953 |
) |
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(6,030 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
6,510 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
2,019 |
|
Other (income) expense, net (j) |
(19,447 |
) |
|
— |
|
|
(19,447 |
) |
|
15,816 |
|
Loss on extinguishment of debt (k) |
2,125 |
|
|
— |
|
|
2,125 |
|
|
— |
|
Combined
Company adjusted EBITDA |
$ |
265,730 |
|
|
$ |
23,933 |
|
|
$ |
289,663 |
|
|
$ |
285,603 |
|
Adjusted
EBITDA Margin |
12.4 |
% |
|
|
|
18.6 |
% |
|
18.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures (Continued)(in thousands, except
per share data)(unaudited)
|
|
|
Three Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted net income: |
|
|
|
|
|
|
|
Net income,
as reported |
$ |
13,560 |
|
|
$ |
17,173 |
|
|
$ |
30,733 |
|
|
$ |
3,389 |
|
Pre-merger inVentiv net loss |
— |
|
|
— |
|
|
— |
|
|
(38,789 |
) |
Combined
Company net income (loss), before adjustments |
13,560 |
|
|
17,173 |
|
|
30,733 |
|
|
(35,400 |
) |
Acquisition-related deferred revenue adjustment (a) |
3,800 |
|
|
(2,739 |
) |
|
1,061 |
|
|
6,056 |
|
Amortization (b) |
49,945 |
|
|
— |
|
|
49,945 |
|
|
68,316 |
|
Restructuring and other costs (c) |
8,591 |
|
|
— |
|
|
8,591 |
|
|
9,430 |
|
Transaction and integration-related expenses (d) |
18,032 |
|
|
— |
|
|
18,032 |
|
|
32,283 |
|
Share-based compensation (e) |
8,375 |
|
|
— |
|
|
8,375 |
|
|
11,534 |
|
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(5,827 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
1,078 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
796 |
|
Other (income) expense, net (j) |
(32,001 |
) |
|
— |
|
|
(32,001 |
) |
|
9,152 |
|
Loss on extinguishment of debt (k) |
1,877 |
|
|
— |
|
|
1,877 |
|
|
— |
|
Income tax adjustment to normalized rate (l) |
(8,215 |
) |
|
22 |
|
|
(8,193 |
) |
|
(45,110 |
) |
Combined
Company adjusted net income |
$ |
63,964 |
|
|
$ |
14,456 |
|
|
$ |
78,420 |
|
|
$ |
52,308 |
|
|
|
|
|
|
|
|
|
Combined Company diluted weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding, as reported |
104,005 |
|
— |
|
|
104,005 |
|
55,307 |
Effect of certain securities considered anti-dilutive under
GAAP (m) |
— |
|
|
— |
|
|
— |
|
|
— |
|
Estimated additional dilutive shares outstanding as a result
of the Merger (n) |
— |
|
|
— |
|
|
— |
|
|
49,927 |
|
Combined
Company diluted weighted average common shares outstanding |
104,005 |
|
— |
|
|
104,005 |
|
105,234 |
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share |
$ |
0.62 |
|
|
|
|
$ |
0.75 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Combined
Company Non-GAAP Measures (Continued)(in thousands, except
per share data)(unaudited)
|
|
|
Six Months Ended June
30, |
|
2018 |
|
2018 |
|
2018 |
|
2017 |
|
ASC 606 |
|
ASC 605 |
|
As Reported |
|
Adjustment |
|
As Adjusted |
|
As Reported |
Combined Company adjusted net income: |
|
|
|
|
|
|
|
Net (loss)
income, as reported |
$ |
(10,992 |
) |
|
$ |
22,718 |
|
|
$ |
11,726 |
|
|
$ |
24,576 |
|
Pre-merger inVentiv net loss |
— |
|
|
— |
|
|
— |
|
|
(79,505 |
) |
Combined
Company net (loss) income, before adjustments |
(10,992 |
) |
|
22,718 |
|
|
11,726 |
|
|
(54,929 |
) |
Acquisition-related deferred revenue adjustment (a) |
7,606 |
|
|
(5,086 |
) |
|
2,520 |
|
|
13,816 |
|
Amortization (b) |
99,938 |
|
|
— |
|
|
99,938 |
|
|
147,449 |
|
Restructuring and other costs (c) |
22,298 |
|
|
— |
|
|
22,298 |
|
|
15,847 |
|
Transaction and integration-related expenses (d) |
43,243 |
|
|
— |
|
|
43,243 |
|
|
32,856 |
|
Share-based compensation (e) |
16,163 |
|
|
— |
|
|
16,163 |
|
|
22,697 |
|
Discretionary bonus accrual reversal (f) |
— |
|
|
— |
|
|
— |
|
|
(5,953 |
) |
R&D tax credit adjustment (g) |
— |
|
|
— |
|
|
— |
|
|
(6,030 |
) |
Monitoring and advisory fees (h) |
— |
|
|
— |
|
|
— |
|
|
6,510 |
|
Acquisition-related revaluation adjustments (i) |
— |
|
|
— |
|
|
— |
|
|
2,019 |
|
Other (income) expense, net (j) |
(19,447 |
) |
|
— |
|
|
(19,447 |
) |
|
15,816 |
|
Loss on extinguishment of debt (k) |
2,125 |
|
|
— |
|
|
2,125 |
|
|
— |
|
Income tax adjustment to normalized rate (l) |
(39,127 |
) |
|
(281 |
) |
|
(39,408 |
) |
|
(82,441 |
) |
Combined
Company adjusted net income |
$ |
121,807 |
|
|
$ |
17,351 |
|
|
$ |
139,158 |
|
|
$ |
107,657 |
|
|
|
|
|
|
|
|
|
Combined Company diluted weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding, as reported |
103,674 |
|
1,002 |
|
|
104,676 |
|
55,215 |
Effect of certain securities considered anti-dilutive under
GAAP (m) |
1,002 |
|
— |
|
|
— |
|
|
— |
|
Estimated additional dilutive shares outstanding as a result
of the Merger (n) |
— |
|
|
— |
|
|
— |
|
|
49,927 |
|
Combined
Company diluted weighted average common shares outstanding |
104,676 |
|
1,002 |
|
|
104,676 |
|
105,142 |
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share |
$ |
1.16 |
|
|
|
|
$ |
1.33 |
|
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Represents non-cash adjustments resulting from the revaluation
of deferred revenue and the subsequent elimination of revenue in
purchase accounting in connection with business combinations.
- Represents the amortization of intangible assets associated
with acquired customer relationships, backlog, and trademarks.
- Restructuring and other costs consist primarily of: (i)
severance costs associated with a reduction/optimization of the
Company's workforce in line with the Company's expectations of
future business operations, (ii) consulting costs incurred for the
continued consolidation of legal entities and restructuring of the
Company's contract management process to meet the requirements of
accounting regulation changes, and (iii) termination costs in
connection with abandonment and closure of redundant facilities and
other lease-related charges.
- Represents fees associated with corporate transactions and
integration-related activities which primarily relate to the Merger
in 2017.
- Represents non-cash share-based compensation expense related to
awards granted under equity incentive plans.
- Represents inVentiv Health discretionary bonus accruals from
the prior year that were reversed in periods prior to the
Merger.
- Represents additional research and development tax credits in
certain international locations for expenses incurred and recorded
as a reduction of direct costs.
- Represents the annual sponsor management fee previously paid
pursuant to the THL and Advent Management Agreement with inVentiv
Health.
- Represents non-cash adjustments resulting from the revaluation
of certain items such as facilities and vehicle leases in
connection with inVentiv Health's Merger with Advent in 2016.
- Represents other (income) expense comprised primarily of
foreign exchange gains and losses.
- Represents loss on extinguishment of debt associated with the
debt prepayment.
- Represents the income tax effect of the Combined Company
non-GAAP adjustments made to arrive at adjusted net income using an
estimated effective tax rate of approximately 27.5% in 2018 and
35.0% in 2017. These rates have been adjusted to exclude tax
impacts related to valuation allowances recorded against deferred
tax assets.
- Represents the weighted average number of equity-based awards
issued under the Company's equity incentive plans calculated using
the treasury stock method that were excluded from shares used in
computing GAAP diluted net loss per share due to reporting a net
loss under GAAP for the period.
- Represents the estimated impact on the dilutive weighted
average shares outstanding of shares and equity-based awards issued
by the Company as a result of the Merger had the Merger occurred on
January 1, 2017. The amount consists of the shares issued to
inVentiv Health's shareholders on August 1, 2017 and the fully
vested stock option awards and restricted stock units issued under
the equity incentive plans formerly related to inVentiv Health that
were assumed by the Company in the Merger.
Syneos Health, Inc. and
SubsidiariesReconciliation of GAAP to Non-GAAP
Full Year 2018 Guidance(in millions, except per
share data)(unaudited)
|
Full Year 2018 - ASC
605 |
|
Full Year 2018 - ASC
606 |
|
Adjusted NetIncome |
|
Adjusted DilutedEarnings Per
Share |
|
Adjusted NetIncome |
|
Adjusted DilutedEarnings Per
Share |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
GAAP net
income and diluted earnings per share |
$ |
49.3 |
|
|
$ |
75.7 |
|
|
$ |
0.47 |
|
|
$ |
0.72 |
|
|
$ |
17.8 |
|
|
$ |
46.8 |
|
|
$ |
0.17 |
|
|
$ |
0.45 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization (a) |
200.0 |
|
|
200.0 |
|
|
|
|
|
|
200.0 |
|
|
200.0 |
|
|
|
|
|
Share-based compensation (a) |
39.0 |
|
|
39.0 |
|
|
|
|
|
|
39.0 |
|
|
39.0 |
|
|
|
|
|
Restructuring and other costs (a) |
41.0 |
|
|
41.0 |
|
|
|
|
|
|
41.0 |
|
|
41.0 |
|
|
|
|
|
Transaction and integration-related expenses (a) |
48.0 |
|
|
48.0 |
|
|
|
|
|
|
48.0 |
|
|
48.0 |
|
|
|
|
|
Merger-related deferred revenue adjustment (a) |
3.0 |
|
|
3.0 |
|
|
|
|
|
|
13.5 |
|
|
13.5 |
|
|
|
|
|
Other (a) |
6.5 |
|
|
6.5 |
|
|
|
|
|
|
6.5 |
|
|
6.5 |
|
|
|
|
|
Income tax effect of above adjustments (b) |
(88.8 |
) |
|
(87.2 |
) |
|
|
|
|
|
(97.8 |
) |
|
(97.8 |
) |
|
|
|
|
Adjusted
net income and adjusted diluted earnings per share |
$ |
298.0 |
|
|
$ |
326.0 |
|
|
$ |
2.84 |
|
|
$ |
3.10 |
|
|
$ |
268.0 |
|
|
$ |
297.0 |
|
|
$ |
2.55 |
|
|
$ |
2.83 |
|
- Amounts are estimates with an estimated range of +/- 5% and are
presented gross without the benefit of associated income tax
deduction.
- Income tax expense is calculated and the adjustments are
tax-affected at an approximate rate of 27% - 28%, which represents
the estimated range of the Company's full year non-GAAP effective
tax rate and takes into account the estimated effect of the
enactment of the Tax Act.
Syneos Health (NASDAQ:SYNH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Syneos Health (NASDAQ:SYNH)
Historical Stock Chart
From Jul 2023 to Jul 2024