Delaware | 001-36730 | 27-3403111 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
3201 Beechleaf Court, Suite 600 Raleigh, North Carolina | 27604-1547 | |
(Address of principal executive offices) | (Zip Code) |
⃞ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
⃞ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
⃞ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
⃞ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 | Press release dated July 27, 2017 |
INC RESEARCH HOLDINGS, INC. | ||||
Date: | July 26, 2017 | By: | /s/ Gregory S. Rush | |
Name: | Gregory S. Rush | |||
Title: | Executive Vice President and Chief Financial Officer |
• | Book-to-bill ratio of 1.6x, 1.5x, and 1.4x for the three-, six-, and twelve-month periods ended June 30, 2017, respectively. |
• | Net new business awards of $423.8 million and $783.8 million for the three and six months ended June 30, 2017, representing growth of 40.3% and 29.7%, respectively, representing another record quarter of net awards. |
• | Net service revenue of $258.1 million and $510.2 million for the three and six months ended June 30, 2017, respectively. |
• | GAAP diluted earnings per share of $0.06 and $0.45 for the three and six months ended June 30, 2017, respectively. |
• | Adjusted diluted earnings per share of $0.64 and $1.24 for the three and six months ended June 30, 2017, respectively, representing growth of 4.9% and 4.2%, respectively. |
Investor Relations Contact: Ronnie Speight Vice President, Investor Relations Phone: +1 (919) 745-2745 Email: Investor.Relations@incresearch.com | Press/Media Contact: Lori Dorer Senior Director, Global Corporate Communications Phone: +1 (919) 745-2890 Email: Corporate.Communications@incresearch.com |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net service revenue | $ | 258,087 | $ | 258,804 | $ | 510,165 | $ | 507,801 | |||||||
Reimbursable out-of-pocket expenses | 133,048 | 140,843 | 262,888 | 304,933 | |||||||||||
Total revenue | 391,135 | 399,647 | 773,053 | 812,734 | |||||||||||
Costs and operating expenses: | |||||||||||||||
Direct costs (exclusive of depreciation and amortization) | 162,010 | 159,497 | 316,845 | 311,555 | |||||||||||
Reimbursable out-of-pocket expenses | 133,048 | 140,843 | 262,888 | 304,933 | |||||||||||
Selling, general, and administrative | 42,531 | 42,596 | 87,465 | 86,075 | |||||||||||
Restructuring, CEO transition, and other costs | 4,029 | 1,364 | 5,956 | 7,402 | |||||||||||
Transaction expenses | 23,739 | 1,169 | 23,741 | 1,730 | |||||||||||
Depreciation | 6,066 | 5,060 | 12,230 | 9,952 | |||||||||||
Amortization | 9,462 | 9,463 | 18,926 | 18,924 | |||||||||||
Total operating expenses | 380,885 | 359,992 | 728,051 | 740,571 | |||||||||||
Income from operations | 10,250 | 39,655 | 45,002 | 72,163 | |||||||||||
Other (expense) income, net: | |||||||||||||||
Interest income | 152 | 43 | 264 | 77 | |||||||||||
Interest expense | (3,286 | ) | (3,087 | ) | (6,386 | ) | (6,091 | ) | |||||||
Other expense, net | (6,754 | ) | (3,260 | ) | (10,211 | ) | (8,377 | ) | |||||||
Total other (expense) income, net | (9,888 | ) | (6,304 | ) | (16,333 | ) | (14,391 | ) | |||||||
Income before provision for income taxes | 362 | 33,351 | 28,669 | 57,772 | |||||||||||
Income tax benefit (expense) | 3,027 | (2,948 | ) | (4,093 | ) | (9,964 | ) | ||||||||
Net income | $ | 3,389 | $ | 30,403 | $ | 24,576 | $ | 47,808 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.06 | $ | 0.56 | $ | 0.45 | $ | 0.88 | |||||||
Diluted | $ | 0.06 | $ | 0.54 | $ | 0.45 | $ | 0.85 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 54,123 | 54,298 | 54,069 | 54,127 | |||||||||||
Diluted | 55,307 | 56,078 | 55,215 | 55,970 |
June 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 169,654 | $ | 102,471 | |||
Restricted cash | 636 | 607 | |||||
Accounts receivable billed, net | 223,447 | 211,476 | |||||
Accounts receivable unbilled | 151,086 | 173,873 | |||||
Prepaid expenses and other current assets | 37,904 | 34,202 | |||||
Total current assets | 582,727 | 522,629 | |||||
Property and equipment, net | 58,558 | 58,306 | |||||
Goodwill | 553,158 | 552,502 | |||||
Intangible assets, net | 95,610 | 114,486 | |||||
Deferred income taxes | 26,551 | 14,726 | |||||
Other long-term assets | 19,655 | 25,858 | |||||
Total assets | $ | 1,336,259 | $ | 1,288,507 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 26,731 | $ | 23,693 | |||
Accrued liabilities | 158,169 | 153,559 | |||||
Deferred revenue | 298,573 | 277,600 | |||||
Current portion of long-term debt | 23,750 | 11,875 | |||||
Total current liabilities | 507,223 | 466,727 | |||||
Long-term debt, less current portion | 449,258 | 485,849 | |||||
Deferred income taxes | 316 | 8,295 | |||||
Other long-term liabilities | 26,024 | 26,163 | |||||
Total liabilities | 982,821 | 987,034 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Preferred stock, $0.01 par value; 30,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2017 and December 31, 2016 | — | — | |||||
Common stock, $0.01 par value; 600,000,000 shares authorized, 54,179,374 and 53,762,786 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 542 | 538 | |||||
Additional paid-in capital | 590,371 | 573,176 | |||||
Accumulated other comprehensive loss, net of taxes | (30,051 | ) | (42,250 | ) | |||
Accumulated deficit | (207,424 | ) | (229,991 | ) | |||
Total shareholders' equity | 353,438 | 301,473 | |||||
Total liabilities and shareholders' equity | $ | 1,336,259 | $ | 1,288,507 |
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 24,576 | $ | 47,808 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 31,156 | 28,876 | |||||
Amortization of capitalized loan fees | 402 | 524 | |||||
Share-based compensation | 12,048 | 5,887 | |||||
Provision for doubtful accounts | 158 | 1,098 | |||||
Benefit from deferred income taxes | (9,081 | ) | (5,331 | ) | |||
Foreign currency adjustments | 5,882 | 13,593 | |||||
Other non-cash items | 700 | 137 | |||||
Changes in operating assets and liabilities: | |||||||
Billed and unbilled accounts receivable | 17,912 | (61,062 | ) | ||||
Accounts payable and accrued expenses | 8,694 | 4,070 | |||||
Deferred revenue | 13,956 | 5,921 | |||||
Other assets and liabilities | (7,979 | ) | 2,855 | ||||
Net cash provided by operating activities | 98,424 | 44,376 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (15,974 | ) | (11,490 | ) | |||
Net cash used in investing activities | (15,974 | ) | (11,490 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving line of credit | 15,000 | 15,000 | |||||
Repayments of revolving line of credit | (40,000 | ) | (45,000 | ) | |||
Proceeds from exercise of stock options | 6,251 | 9,125 | |||||
Payments related to tax withholding for share-based compensation | (1,179 | ) | (37 | ) | |||
Net cash used in financing activities | (19,928 | ) | (20,912 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 4,661 | (5,069 | ) | ||||
Net increase in cash and cash equivalents | 67,183 | 6,905 | |||||
Cash and cash equivalents, beginning of period | 102,471 | 85,011 | |||||
Cash and cash equivalents, end of period | $ | 169,654 | $ | 91,916 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Adjusted Income from Operations: | |||||||||||||||
GAAP income from operations | $ | 10,250 | $ | 39,655 | $ | 45,002 | $ | 72,163 | |||||||
Amortization (a) | 9,462 | 9,463 | 18,926 | 18,924 | |||||||||||
Restructuring, CEO transition, and other costs (b) | 4,029 | 1,364 | 5,956 | 7,402 | |||||||||||
Transaction expenses (c) | 23,739 | 1,169 | 23,741 | 1,730 | |||||||||||
Share-based compensation (d) | 6,229 | 3,071 | 12,048 | 5,887 | |||||||||||
Contingent consideration and other expense (e) | — | 286 | — | 1,085 | |||||||||||
Adjusted Income from Operations | $ | 53,709 | $ | 55,008 | $ | 105,673 | $ | 107,191 | |||||||
GAAP Operating Margin | 4.0 | % | 15.3 | % | 8.8 | % | 14.2 | % | |||||||
Adjusted Operating Margin | 20.8 | % | 21.3 | % | 20.7 | % | 21.1 | % | |||||||
EBITDA and Adjusted EBITDA: | |||||||||||||||
Net income, as reported | $ | 3,389 | $ | 30,403 | $ | 24,576 | $ | 47,808 | |||||||
Interest expense, net | 3,134 | 3,044 | 6,122 | 6,014 | |||||||||||
Income tax (benefit) expense | (3,027 | ) | 2,948 | 4,093 | 9,964 | ||||||||||
Depreciation | 6,066 | 5,060 | 12,230 | 9,952 | |||||||||||
Amortization (a) | 9,462 | 9,463 | 18,926 | 18,924 | |||||||||||
EBITDA | 19,024 | 50,918 | 65,947 | 92,662 | |||||||||||
Restructuring, CEO transition, and other costs (b) | 4,029 | 1,364 | 5,956 | 7,402 | |||||||||||
Transaction expenses (c) | 23,739 | 1,169 | 23,741 | 1,730 | |||||||||||
Share-based compensation (d) | 6,229 | 3,071 | 12,048 | 5,887 | |||||||||||
Contingent consideration and other expense (e) | — | 286 | — | 1,085 | |||||||||||
Other expense, net (f) | 6,754 | 3,260 | 10,211 | 8,377 | |||||||||||
Adjusted EBITDA | $ | 59,775 | $ | 60,068 | $ | 117,903 | $ | 117,143 | |||||||
Adjusted EBITDA Margin | 23.2 | % | 23.2 | % | 23.1 | % | 23.1 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Adjusted Net Income: | |||||||||||||||
Net income, as reported | $ | 3,389 | $ | 30,403 | $ | 24,576 | $ | 47,808 | |||||||
Amortization (a) | 9,462 | 9,463 | 18,926 | 18,924 | |||||||||||
Restructuring, CEO transition, and other costs (b) | 4,029 | 1,364 | 5,956 | 7,402 | |||||||||||
Transaction expenses (c) | 23,739 | 1,169 | 23,741 | 1,730 | |||||||||||
Share-based compensation (d) | 6,229 | 3,071 | 12,048 | 5,887 | |||||||||||
Contingent consideration and other expense (e) | — | 286 | — | 1,085 | |||||||||||
Other expense, net (f) | 6,754 | 3,260 | 10,211 | 8,377 | |||||||||||
Income tax adjustment to normalized rate (g) | (18,469 | ) | (14,720 | ) | (27,266 | ) | (24,437 | ) | |||||||
Adjusted Net Income | $ | 35,133 | $ | 34,296 | $ | 68,192 | $ | 66,776 | |||||||
Adjusted diluted earnings per share | $ | 0.64 | $ | 0.61 | $ | 1.24 | $ | 1.19 | |||||||
Diluted weighted average common shares outstanding | 55,307 | 56,078 | 55,215 | 55,970 |
(a) | Represents the amortization of intangible assets associated with previously acquired customer relationships. |
(b) | Restructuring, CEO transition, 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) transition costs associated with the change in the Company's Chief Executive Officer during the fourth quarter of 2016, (iii) consulting costs incurred for the continued consolidation of legal entities and restructuring of the Company's contract management process to meet the requirements of upcoming accounting regulation changes, and (iv) termination costs in connection with abandonment and closure of redundant facilities and other lease related charges. |
(c) | Represents fees associated with corporate transactions and integration activities that were primarily related to our pending merger with inVentiv Health in 2017. |
(d) | Represents non-cash share-based compensation expense related to awards granted under equity incentive plans. |
(e) | Represents contingent consideration expense incurred as a result of acquisitions and other expenses accounted for as compensation expense under GAAP. |
(f) | Represents other (income) expense comprised primarily of foreign exchange gains and losses. |
(g) | Represents the income tax effect of the non-GAAP adjustments made to arrive at adjusted net income using an estimated effective tax rate of approximately 31.5% for 2017 and 34.0% in 2016. This rate has been adjusted to exclude tax impacts related to valuation allowances recorded against deferred tax assets. |
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