PRA off to a ‘strong start’ in 2015
Net new business for the quarter was $398m, representing a book-to-bill ratio of 1.2 for the period, which puts PRA in the lower end of the pack among its peers. Parexel reported a book-to-bill of 1.3 for the quarter, while LabCorp reported one of 1.37.
“Net book-to-bill of 1.20x is robust, but impressively low cancelations (2.2% vs 3.4% estimate, lowest in 8 qtrs) helped offset gross new bookings that may have been impacted by Fx [foreign exchange],” Citi Research analyst Garen Sarafian said in a positive note to investors.
As far as the mix of clients, PRA CEO Colin Shannon told investors on the call Thursday that the company is seeing “slightly higher” amounts of work from big pharma companies because of their acquisitions of some of the smaller companies that PRA works with.
"We are off to a strong start in 2015 and I am pleased by our first quarter financial results that demonstrate a continuation of the solid momentum we achieved in 2014," said Shannon. "We continue to win new business, as evidenced by our strong book-to-bill ratio and our $2.2 billion of backlog, the highest level in our company's history.”
The company also saw a decrease in direct costs as a percentage of service revenue, which it said is primarily related to the favorable impact from foreign currency exchange rate fluctuations. In addition, PRA saw a decrease in selling, general and administrative expenses, which it said is primarily related to its continued leveraging of selling and administrative functions.
Adjusted net income per share rose significantly to $0.41 for the quarter, representing growth of 86% compared to Q1 of 2014.
2015 Guidance
For 2015, the company is slightly lowering its guidance taking into account the movement in current foreign exchange rates. As a result it expects to achieve service revenues between $1.34bn and $1.39bn, diluted GAAP net income per share between $0.70 and $0.80 per share, diluted Adjusted Net Income per share of $1.62 to $1.72 per share, and annual effective income tax rate estimates at approximately 30%.
“We are raising estimates and our target price based on better than expected 1Q earnings and updated guidance,” analyst Sarafian said regarding PRA’s stock.
