EX-99.1 2 q2_2019earningsreleasexex9.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

syneoshealth.jpg

FOR IMMEDIATE RELEASE

Syneos Health Reports Second Quarter 2019 Results
Highlights
GAAP revenue of $1,166.8 million for the three months ended June 30, 2019, representing growth of 8.8% compared to the same period in 2018.
Adjusted revenue of $1,168.4 million for the three months ended June 30, 2019, representing growth of 8.6%, or 9.6% on a constant currency basis, compared to the same period in 2018.
Net new business awards of $5,265.2 million for the trailing twelve months (TTM) ended June 30, 2019, representing a TTM book-to-bill ratio of 1.16x.
Clinical Solutions segment net new business awards of $3,967.0 million for the TTM period ended June 30, 2019, representing a TTM book-to-bill ratio of 1.20x.
Commercial Solutions segment net new business awards of $1,298.2 million for the TTM period ended June 30, 2019, representing a TTM book-to-bill ratio of 1.04x.
GAAP diluted earnings per share of $0.11 for the three months ended June 30, 2019.
Adjusted diluted earnings per share of $0.74 for the three months ended June 30, 2019.
Repaid $40.0 million of term loan debt and repurchased $23.1 million of common stock during the three months ended June 30, 2019.
Updating full-year 2019 guidance: adjusted revenue of $4,640.0 million to $4,750.0 million, adjusted EBITDA of $630.0 million to $660.0 million, and adjusted diluted earnings per share of $3.08 to $3.26.
MORRISVILLE, N.C. -- August 6, 2019 -- Syneos Health (Nasdaq:SYNH), a leading biopharmaceutical solutions organization combining a Contract Research Organization and a Contract Commercial Organization, today reported financial results for the second quarter and six months ended June 30, 2019.
“Our solid second quarter results reflect strong year-over-year growth in both segments, and growing market interest in our ability to deliver comprehensive, integrated solutions to customers of all sizes,” said Alistair Macdonald, Chief Executive Officer, Syneos Health. “Our unmatched breadth of integrated capabilities, shared insights, and unique Syneos One product development offering are key differentiators for customers looking to accelerate development and commercialization timelines. We believe we are well positioned to drive growth throughout the remainder of 2019 with a robust backlog, pipeline and RFP flow, and look forward to continuing to solve our customers’ most complex challenges."

1


Second Quarter 2019 Results
Please refer to the "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to 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 measures.
For the three months ended June 30, 2019, GAAP revenue increased 8.8% to $1,166.8 million and adjusted revenue increased 8.6% to $1,168.4 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 9.6%. This increase was driven by revenue growth in both Commercial Solutions and Clinical Solutions, as discussed below.
For the three months ended June 30, 2019, Clinical Solutions GAAP revenue increased 8.4% to $849.9 million, and adjusted revenue increased 8.2% to $851.5 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 9.4%. This increase was primarily due to net new business growth, favorable revenue mix, and higher growth in reimbursable expenses, partially offset by the impact of fluctuations in foreign currency exchange rates.
For the three months ended June 30, 2019, Commercial Solutions GAAP revenue increased 9.8% to $316.9 million and adjusted revenue increased 9.6% to $316.9 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 10.3%. This increase was primarily due to net new business growth and the Company’s acquisition of Kinapse in the third quarter of 2018, partially offset by lower growth in reimbursable expenses and the impact of fluctuations in foreign currency exchange rates.
GAAP net income for the three months ended June 30, 2019 was $11.3 million, resulting in diluted earnings per share of $0.11, compared to GAAP net income of $13.6 million, or diluted earnings per share of $0.13, for the three months ended June 30, 2018.
Adjusted net income for the three months ended June 30, 2019 was $77.3 million, resulting in adjusted diluted earnings per share of $0.74, representing growth of 19.4% from the same period in prior year. The increases in adjusted net income and adjusted diluted earnings per share were primarily due to growth in adjusted EBITDA and the reduction of the Company's non-GAAP effective tax rate to 24.5%.
Adjusted EBITDA for the three months ended June 30, 2019 increased 12.2% to $153.8 million from the same period in the prior year, representing an increase in adjusted EBITDA margin from 12.7% to 13.2%. This increase in adjusted EBITDA was driven primarily by revenue growth, an increase in net realized synergies, and the impact of fluctuations in foreign currency exchange rates, partially offset by the startup of large new customer relationships.
TTM net new business awards were $5,265.2 million for the period ended June 30, 2019, representing a TTM book-to-bill ratio of 1.16x. Clinical Solutions TTM net new business awards for the period ended June 30, 2019 were $3,967.0 million, representing a TTM book-to-bill ratio of 1.20x. Commercial Solutions TTM net new business awards for the period ended June 30, 2019 were $1,298.2 million, representing a TTM book-to-bill ratio of 1.04x. These net new business awards contributed to an ending backlog of $8,455.3 million as of June 30, 2019, comprised of an ending backlog of $7,834.0 million for Clinical Solutions and an ending backlog of $621.3 million for the Deployment Solutions (formerly called Selling Solutions) offering within Commercial Solutions.
First Half 2019 Results
For the six months ended June 30, 2019, GAAP revenue increased 7.3% to $2,285.8 million and adjusted revenue increased 7.1% to $2,289.0 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 8.4%. This increase was driven by revenue growth in both Commercial Solutions and Clinical Solutions, as discussed below.

2


For the six months ended June 30, 2019, Clinical Solutions GAAP revenue increased 5.4% to $1,654.9 million and adjusted revenue increased 5.1% to $1,658.1 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 6.6%. This increase was primarily due to net new business growth and higher growth in reimbursable expenses, partially offset by the impact of fluctuations in foreign currency exchange rates.
For the six months ended June 30, 2019, Commercial Solutions GAAP revenue increased 12.9% to $631.0 million and adjusted revenue increased 12.7% to $631.0 million from the same period in the prior year. On a constant currency basis, adjusted revenue increased 13.4%. This increase was primarily due to net new business growth, favorable revenue mix, and the Company’s acquisition of Kinapse in the third quarter of 2018, partially offset by lower growth in reimbursable expenses and the impact of fluctuations in foreign currency exchange rates.
GAAP net loss for the six months ended June 30, 2019 was $18.7 million, resulting in a diluted loss per share of $0.18, compared to a net loss of $11.0 million, or a diluted loss per share of $0.11, for the six months ended June 30, 2018.
Adjusted net income for the six months ended June 30, 2019 was $139.4 million, resulting in adjusted diluted earnings per share of $1.33, representing growth of 14.7% from the same period in prior year. The increases in adjusted net income and adjusted diluted earnings per share were primarily due to growth in adjusted EBITDA and the reduction of the Company's non-GAAP effective tax rate to 24.5%.
Adjusted EBITDA for the six months ended June 30, 2019 increased 8.7% to $288.8 million from the same period in the prior year, representing an increase in adjusted EBITDA margin from 12.4% to 12.6%. This increase in adjusted EBITDA was driven primarily by revenue growth, an increase in net realized synergies, and the impact of fluctuations in foreign currency exchange rates, partially offset by higher than anticipated seasonal expenses and the startup of large new customer relationships.
Capital Management Update
During the three and six months ended June 30, 2019, the Company repaid $40.0 million and $77.5 million of principal of its term loans, respectively. During the three months ended June 30, 2019, the Company repurchased 509,100 shares of common stock for a total repurchase price of approximately $23.1 million. During the six months ended June 30, 2019, the Company repurchased 1,181,800 shares of common stock for a total repurchase price of approximately $49.7 million. As of June 30, 2019, the Company had remaining repurchase authorization of approximately $125.3 million, which is available through the end of 2019.

3


Full Year 2019 Business Outlook
The Company's guidance takes into account a number of factors, including existing backlog, current sales pipeline, trends in cancellations and delays, and estimated synergies from the merger with inVentiv Health, net of reinvestments. Furthermore, the guidance presented below is based on current foreign currency exchange rates, current interest rates, and the Company's expected non-GAAP effective tax rate. The guidance is based upon the Company's estimated number of weighted average diluted shares outstanding, and does not take into account any share repurchases beyond the second quarter of 2019. The Company's updated full year 2019 guidance is outlined below:
 
Guidance Issued as of May 9, 2019
 
Guidance Issued as of August 6, 2019
 
Full Year 2019
 
Full Year 2019
 
Low
 
High
 
Low
 
High
 
(in millions, except per share data)
 
(in millions, except per share data)
Adjusted revenue
$
4,620

 
$
4,730

 
$
4,640

 
$
4,750

Clinical Solutions adjusted revenue (a)
3,345

 
3,410

 
3,365

 
3,430

Commercial Solutions revenue
1,275

 
1,320

 
1,275

 
1,320

Adjusted EBITDA
625

 
660

 
630

 
660

Adjusted diluted EPS
$
3.03

 
$
3.23

 
$
3.08

 
$
3.26

(a) Clinical Solutions adjusted revenue guidance includes an add-back of deferred revenue eliminated in purchase accounting of approximately $6.5 million for 2019.
The Company anticipates that its 2019 non-GAAP effective tax rate will be between 24.0% and 25.0%. Important disclosures in this earnings release about and reconciliations of historical and forward-looking non-GAAP measures, to the nearest corresponding GAAP measures are provided below under "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Measures.”
Webcast and Conference Call Details
Syneos Health will host a conference call at 8:00 a.m. ET on August 6, 2019, to discuss its second quarter 2019 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 2196064.
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 6, 2019. 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 2196064.
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 approximately 24,000 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 its 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.


4


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, including statements regarding creating a strong foundation for 2019 and beyond, anticipated financial results for the full year 2019, plans for capital deployment, and potential acquisitions. 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: reliance on key personnel; principal investigators and patients; general and international economic, political, and other risks, including currency and stock market fluctuations and the uncertain economic environment; the Company's ability to adequately price its contracts and not overrun cost estimates; any adverse effects from the Company's customer or therapeutic area concentration; 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; fluctuations in our operating results and effective income tax rate; risks related to the Company's information systems and cybersecurity; changes and costs of compliance with regulations related to data privacy; risks related to the United Kingdom’s planned withdrawal from the European Union; risks related to the Company's transfer pricing policies; failure to perform services in accordance with contractual requirements, regulatory requirements and ethical considerations; risks relating to litigation and government investigations; risks associated with the Company's early phase clinical facilities; insurance risk; risks of liability resulting from harm to patients; success of investments in the Company's customers’ business or drugs; foreign currency exchange rate fluctuations; 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 with inVentiv Health in 2017; risks related to the Company's income tax expense and tax reform; risks relating to the Company's intellectual property; risks associated with the Company's acquisition strategy; failure to realize the full value of goodwill and intangible assets; restructuring risk; potential violations of anti-corruption and anti-bribery laws; risks related to the Company's dependence on third parties; downgrades of the Company's credit ratings; competition in the biopharmaceutical services industry; changes in outsourcing trends; regulatory risks; trends in the Company's customers’ businesses; the Company's ability to keep pace with rapid technological change; risks related to the Company's indebtedness; fluctuations in the Company's financial results and stock price; and other risk factors set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and other SEC filings, copies of which are available free of charge on the Company's website at investor.syneoshealth.com. The Company 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 non-GAAP financial measures, including adjusted revenue, segment adjusted revenue, adjusted net income (including adjusted diluted earnings per share), EBITDA, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP effective tax rate. We also present adjusted revenue growth in constant currency. Constant currency revenue growth is defined as revenues for a given period restated at the comparative period's foreign currency exchange rates measured against the comparative period's reported revenues.
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.
The Company defines adjusted revenue and segment adjusted revenue as GAAP revenue and segment revenue, respectively, adjusted to include revenue eliminated as a result of purchase accounting.
The Company defines adjusted net income (including adjusted diluted earnings per share) as net income (including diluted earnings per share) excluding acquisition-related deferred revenue adjustments; acquisition-

5


related amortization; restructuring and other costs; transaction and integration-related expenses; share-based compensation expense; loss on extinguishment of debt; and other income (expense), net.
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; other income (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 net income (including adjusted diluted earnings per share) and adjusted EBITDA are used by management and the Board to assess the performance of 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 Speight
Senior Vice President, Investor Relations
Phone: +1 919 745 2745
Email: Investor.Relations@syneoshealth.com
Press/Media Contact:

Danielle DeForge
Executive Director, External Communications
Phone: +1 781 425 2624
Email: danielle.deforge@syneoshealth.com

6



Syneos Health, Inc. and Subsidiaries
GAAP Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
Revenue
$
1,166,827

 
$
1,072,530

 
$
2,285,833

 
$
2,129,726

 
 
 
 
 
 
 
 
Costs and operating expenses:
 
 
 
 
 
 
 
Direct costs (exclusive of depreciation and amortization)
917,529

 
847,465

 
1,804,331

 
1,688,288

Selling, general, and administrative expenses
110,879

 
100,218

 
223,996

 
199,477

Restructuring and other costs
11,882

 
8,591

 
26,295

 
22,298

Transaction and integration-related expenses
7,654

 
18,032

 
24,312

 
43,243

Depreciation
19,248

 
17,557

 
38,819

 
35,585

Amortization
41,501

 
49,945

 
83,130

 
99,938

Total operating expenses
1,108,693

 
1,041,808

 
2,200,883

 
2,088,829

Income from operations
58,134

 
30,722

 
84,950

 
40,897

 
 
 
 
 
 
 
 
Other expense, net:
 
 
 
 
 
 
 
Interest income
2,133

 
1,655

 
3,635

 
2,494

Interest expense
(34,263
)
 
(32,894
)
 
(68,893
)
 
(64,630
)
Loss on extinguishment of debt

 
(1,877
)
 
(4,355
)
 
(2,125
)
Other income (expense), net
7,573

 
32,001

 
(1,348
)
 
19,447

Total other expense, net
(24,557
)
 
(1,115
)
 
(70,961
)
 
(44,814
)
Income (loss) before provision for income taxes
33,577

 
29,607

 
13,989

 
(3,917
)
Income tax expense
(22,285
)
 
(16,047
)
 
(32,701
)
 
(7,075
)
Net income (loss)
$
11,292

 
$
13,560

 
$
(18,712
)
 
$
(10,992
)
 
 
 
 
 
 
 
 
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.11

 
$
0.13

 
$
(0.18
)
 
$
(0.11
)
Diluted
$
0.11

 
$
0.13

 
$
(0.18
)
 
$
(0.11
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
103,699

 
102,899

 
103,532

 
103,674

Diluted
104,818

 
104,005

 
103,532

 
103,674



7


Syneos Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets:
 

 
 

Cash, cash equivalents, and restricted cash
$
107,256

 
$
155,932

Accounts receivable and unbilled services, net
1,287,509

 
1,256,731

Prepaid expenses and other current assets
71,985

 
79,299

Total current assets
1,466,750

 
1,491,962

Property and equipment, net
187,747

 
183,486

Operating lease right-of-use assets
227,715

 

Goodwill
4,336,355

 
4,333,159

Intangible assets, net
1,051,065

 
1,133,612

Deferred income tax assets
9,111

 
9,317

Other long-term assets
118,238

 
103,373

Total assets
$
7,396,981

 
$
7,254,909

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 

Current liabilities:
 
 
 

Accounts payable
$
128,812

 
$
98,624

Accrued expenses
569,446

 
563,527

Deferred revenue
710,905

 
777,141

Current portion of operating lease obligations
29,760

 

Current portion of finance lease obligations
16,004

 
13,806

Current portion of long-term debt
199,575

 
50,100

Total current liabilities
1,654,502

 
1,503,198

Long-term debt
2,534,842

 
2,737,019

Operating lease long-term obligations
228,704

 

Finance lease long-term obligations
28,390

 
26,759

Deferred income tax liabilities
33,223

 
25,120

Other long-term liabilities
93,421

 
106,669

Total liabilities
4,573,082

 
4,398,765

 
 
 
 
Commitments and contingencies
 

 
 

 
 
 
 
Shareholders' equity:
 

 
 

Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at June 30, 2019 and December 31, 2018

 

Common stock, $0.01 par value; 600,000 shares authorized, 103,460 and 103,372 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
1,035

 
1,034

Additional paid-in capital
3,404,389

 
3,402,638

Accumulated other comprehensive loss, net of tax
(92,688
)
 
(88,195
)
Accumulated deficit
(488,837
)
 
(459,333
)
Total shareholders' equity
2,823,899

 
2,856,144

Total liabilities and shareholders' equity
$
7,396,981

 
$
7,254,909


8


Syneos Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Six Months Ended 
 June 30,
 
2019
 
2018
Cash flows from operating activities:
 

 
 

Net loss
$
(18,712
)
 
$
(10,992
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 

Depreciation and amortization
121,949

 
135,523

Amortization of Senior Notes premium, net of capitalized loan fees and original issue discount


 


Share-based compensation
28,061

 
16,254

Provision for doubtful accounts
783

 
(1,734
)
Provision for (benefit from) deferred income taxes
8,793

 
(7,682
)
Foreign currency transaction adjustments
(957
)
 
(19,633
)
Fair value adjustment of contingent obligations
(940
)
 
2,388

Loss on extinguishment of debt
4,355

 
2,125

Other non-cash items
1,147

 
4,024

Changes in operating assets and liabilities, net of effect of business combinations:
 
 
 
Accounts receivable, unbilled services, and deferred revenue
(89,535
)
 
(68,629
)
Accounts payable and accrued expenses
32,005

 
(3,269
)
Other assets and liabilities
(3,435
)
 
16,799

Net cash provided by operating activities
83,514

 
65,174

Cash flows from investing activities:
 

 
 

Purchases of property and equipment
(28,066
)
 
(32,586
)
Investments in unconsolidated affiliates
(3,000
)
 

Net cash used in investing activities
(31,066
)
 
(32,586
)
Cash flows from financing activities:
 

 
 

Proceeds from issuance of long-term debt, net of discount
183,195

 

Payments of debt financing costs
(1,032
)
 
(3,421
)
Repayments of long-term debt
(256,136
)
 
(97,500
)
Proceeds from accounts receivable financing agreement
38,200

 

Repayments of accounts receivable financing agreement
(22,400
)
 

Payments of contingent consideration related to business combinations
(8
)
 

Payments of finance leases
(4,677
)
 
(8,863
)
Payments for repurchase of common stock
(49,671
)
 
(74,985
)
Proceeds from exercise of stock options
24,377

 
7,458

Payments related to tax withholding for share-based compensation
(11,763
)
 
(2,383
)
Net cash used in financing activities
(99,915
)
 
(179,694
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(1,209
)
 
(1,151
)
Net change in cash, cash equivalents, and restricted cash
(48,676
)
 
(148,257
)
Cash, cash equivalents, and restricted cash - beginning of period
155,932

 
321,976

Cash, cash equivalents, and restricted cash - end of period
$
107,256

 
$
173,719


9


Syneos Health, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(in thousands)
(unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted revenue:
 
 
 
 
 
 
 
Revenue, as reported
$
1,166,827

 
$
1,072,530

 
$
2,285,833

 
$
2,129,726

Acquisition-related deferred revenue adjustment (a)
1,593

 
3,800

 
3,187

 
7,606

Adjusted revenue
$
1,168,420

 
$
1,076,330

 
$
2,289,020

 
$
2,137,332

 
 
 
 
 
 
 
 
Segment adjusted revenue:
 
 
 
 
 
 
 
Clinical Solutions revenue, as reported
$
849,922

 
$
783,913

 
$
1,654,880

 
$
1,570,752

Acquisition-related deferred revenue adjustment (a)
1,593

 
3,393

 
3,187

 
6,792

Clinical Solutions adjusted revenue
$
851,515

 
$
787,306

 
$
1,658,067

 
$
1,577,544

 
 
 
 
 
 
 
 
Commercial Solutions revenue, as reported
$
316,905

 
$
288,617

 
$
630,953

 
$
558,974

Acquisition-related deferred revenue adjustment (a)

 
407

 

 
814

Commercial Solutions adjusted revenue
$
316,905

 
$
289,024

 
$
630,953

 
$
559,788


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
EBITDA and adjusted EBITDA:
 
 
 
 
 
 
 
Net income (loss), as reported
$
11,292

 
$
13,560

 
$
(18,712
)
 
$
(10,992
)
Interest expense, net
32,130

 
31,239

 
65,258

 
62,136

Income tax expense
22,285

 
16,047

 
32,701

 
7,075

Depreciation
19,248

 
17,557

 
38,819

 
35,585

Amortization (g)
41,501

 
49,945

 
83,130

 
99,938

EBITDA
126,456

 
128,348

 
201,196

 
193,742

Acquisition-related deferred revenue adjustment (a)
1,593

 
3,800

 
3,187

 
7,606

Restructuring and other costs (b)
11,882

 
8,591

 
26,295

 
22,298

Transaction and integration-related expenses (c)
7,654

 
18,032

 
24,312

 
43,243

Share-based compensation (d)
13,794

 
8,375

 
28,061

 
16,163

Other income (expense), net (e)
(7,573
)
 
(32,001
)
 
1,348

 
(19,447
)
Loss on extinguishment of debt (f)

 
1,877

 
4,355

 
2,125

Adjusted EBITDA
$
153,806

 
$
137,022

 
$
288,754

 
$
265,730

Adjusted EBITDA margin
13.2
%
 
12.7
%
 
12.6
%
 
12.4
%



10


Syneos Health, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share data)
(unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted net income:
 
 
 
 
 
 
 
Net income (loss) as reported
$
11,292

 
$
13,560

 
$
(18,712
)
 
$
(10,992
)
Acquisition-related deferred revenue adjustment (a)
1,593

 
3,800

 
3,187

 
7,606

Amortization (g)
41,501

 
49,945

 
83,130

 
99,938

Restructuring and other costs (b)
11,882

 
8,591

 
26,295

 
22,298

Transaction and integration-related expenses (c)
7,654

 
18,032

 
24,312

 
43,243

Share-based compensation (d)
13,794

 
8,375

 
28,061

 
16,163

Other income (expense), net (e)
(7,573
)
 
(32,001
)
 
1,348

 
(19,447
)
Loss on extinguishment of debt (f)

 
1,877

 
4,355

 
2,125

Income tax adjustment to normalized rate (h)
(4,821
)
 
(8,215
)
 
(22,083
)
 
(39,127
)
Impact of base erosion and anti-abuse tax (i)
2,011

 

 
9,538

 

Adjusted net income
$
77,333

 
$
63,964

 
$
139,431

 
$
121,807

 
 
 
 
 
 
 
 
Diluted weighted average common shares outstanding:
 
 
 
 
 
 
 
Diluted weighted average common shares outstanding, as reported
104,818
 
104,005

 
103,532

 
103,674

Effect of certain securities considered anti-dilutive under GAAP (j)

 

 
1,279

 
1,002

Diluted weighted average common shares outstanding
104,818
 
104,005

 
104,811

 
104,676

 
 
 
 
 
 
 
 
Adjusted diluted earnings per share
$
0.74

 
$
0.62

 
$
1.33

 
$
1.16

a.
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.
b.
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.
c.
Represents fees associated with corporate transactions and integration-related activities that primarily relate to the merger with inVentiv Health in 2017.
d.
Represents non-cash share-based compensation expense related to awards granted under equity incentive plans.
e.
Represents other (income) expense comprised primarily of foreign exchange gains and losses.
f.
Represents loss on extinguishment of debt associated with debt prepayments and refinancing activities.
g.
Represents the amortization of intangible assets associated with acquired customer relationships, backlog, and trademarks.
h.
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 24.5% for the three and six months ended June 30, 2019, and 27.5% for the three and six months ended June 30, 2018. These rates have been adjusted to exclude tax impacts related to valuation allowances recorded against deferred tax assets.
i.
Represents the net income tax effect recorded in the three and six months ended June 30, 2019 as a result of the base erosion and anti-abuse tax.
j.
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 the number of shares used in computing GAAP diluted net loss per share due to reporting a net loss under GAAP for the period.

11


Syneos Health, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP
Full Year 2019 Guidance
(in millions, except per share data)
(unaudited)
 
Guidance issued as of May 9, 2019
 
Guidance issued as of August 6, 2019
 
Full Year 2019
 
Full Year 2019
 
Low
 
High
 
Low
 
High
EBITDA and Adjusted EBITDA:
 
 
 
 
 
 
 
GAAP net income
$
82.4

 
$
102.0

 
$
70.5

 
$
86.6

Adjustments (a):
 
 
 
 
 
 
 
Interest expense, net
122.0

 
127.0

 
122.0

 
127.0

Income tax expense
35.3

 
43.7

 
30.2

 
37.1

Depreciation
79.0

 
81.0

 
79.0

 
81.0

Amortization
166.0

 
166.0

 
166.0

 
166.0

EBITDA
484.7

 
519.7

 
467.7

 
497.7

Acquisition-related deferred revenue adjustment
6.5

 
6.5

 
6.5

 
6.5

Restructuring and other costs
17.0

 
17.0

 
39.0

 
39.0

Transaction and integration-related expenses
41.0

 
41.0

 
41.0

 
41.0

Share-based compensation
62.5

 
62.5

 
62.5

 
62.5

Other expense, net
8.9

 
8.9

 
4.4

 
4.4

Loss on extinguishment of debt
4.4

 
4.4

 
8.9

 
8.9

Adjusted EBITDA
$
625.0

 
$
660.0

 
$
630.0

 
$
660.0

(a)
Amounts are estimates with an estimated range of +/- 5% and are presented gross without the benefit of associated income tax deduction.
 
Guidance issued as of
May 9, 2019
 
Guidance issued as of
August 6, 2019
 
Full Year 2019
 
Full Year 2019
 
Adjusted Net Income
 
Adjusted Diluted Earnings Per Share
 
Adjusted Net Income
 
Adjusted Diluted Earnings Per Share
 
Low
 
High
 
Low
 
High
 
Low
 
High
 
Low
 
High
Adjusted net income and adjusted diluted earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net income and diluted earnings per share
$
82.4

 
$
102.0

 
$
0.78

 
$
0.96

 
$
70.5

 
$
86.6

 
$
0.67

 
$
0.82

Adjustments:
 
 
 
 

 

 
 
 
 
 

 

Acquisition-related deferred revenue adjustment (a)
166.0

 
166.0

 
1.57

 
1.57

 
166.0

 
166.0

 
1.58

 
1.58

Amortization (a)
62.5

 
62.5

 
0.59

 
0.59

 
62.5

 
62.5

 
0.60

 
0.60

Restructuring and other costs (a)
17.0

 
17.0

 
0.16

 
0.16

 
39.0

 
39.0

 
0.37

 
0.37

Transaction and integration-related expenses (a)
41.0

 
41.0

 
0.39

 
0.39

 
41.0

 
41.0

 
0.39

 
0.39

Share-based compensation (a)
6.5

 
6.5

 
0.06

 
0.06

 
6.5

 
6.5

 
0.06

 
0.06

Other expense, net (a)
4.4

 
4.4

 
0.04

 
0.04

 
4.4

 
4.4

 
0.04

 
0.04

Loss on extinguishment of debt (a)
8.9

 
8.9

 
0.08

 
0.08

 
8.9

 
8.9

 
0.08

 
0.08

Income tax effect of above adjustments (b)
(67.7
)
 
(66.3
)
 
(0.64
)
 
(0.63
)
 
(74.8
)
 
(71.9
)
 
(0.71
)
 
(0.68
)
Adjusted net income and adjusted diluted earnings per share
$
321.0

 
$
342.0

 
$
3.03

 
$
3.23

 
$
324.0

 
$
343.0

 
$
3.08

 
$
3.26

(a)
Amounts are estimates with an estimated range of +/- 5% and are presented gross without the benefit of associated income tax deduction.
(b)
Income tax expense is calculated and the adjustments are tax-affected at an approximate effective rate of 24.0% to 25.0%, which represents the estimated range of the Company's full year non-GAAP effective tax rate.

12