PPD, Inc. (Nasdaq: PPD), a leading global contract research
organization, today reported its financial results for the third
quarter ended September 30, 2021.
Highlights
- Net authorizations growth of 12.7% over third quarter 2020 to
$1,352.7 million, resulting in a net book-to-bill ratio of 1.19x on
a historical basis
- Ending backlog growth of 20.3% over third quarter 2020 to
$9,492.5 million on a historical basis
- Revenue of $1,560.8 million, representing growth of 26.5% over
third quarter 2020
- Net income attributable to common stockholders of $152.9
million, compared to $52.0 million in thirdquarter 2020
- Adjusted EBITDA of $280.3 million, compared to $232.6 million
in third quarter 2020
- Diluted earnings per share of $0.43, compared to $0.15 in third
quarter 2020
- Adjusted diluted earnings per share of $0.43, compared to $0.30
in third quarter 2020
“PPD’s strong results reflect solid performance against our
strategy to help customers bend the cost and time curve of drug
development,” said David Simmons, PPD’s chairman and CEO. “Our
capabilities and execution-focused culture continue to drive
growth, as we add another quarter of double-digit growth across key
metrics to our track record of success. In addition, to service our
record-ending backlog and prepare for new business, I’m excited to
share that our talented workforce has grown 19% year-over-year and
is now more than 30,000 strong, further bolstering our scale and
scientific leadership.”
Third Quarter 2021 Results
Revenue for the three months ended September 30, 2021 increased
26.5% to $1,560.8 million, compared to $1,233.8 million for the
three months ended September 30, 2020. At the segment level,
Clinical Development Services revenue of $1,270.6 million grew
26.0% and Laboratory Services revenue of $290.2 million grew 28.9%,
each compared to the three months ended September 30, 2020.
Net income attributable to common stockholders for the three
months ended September 30, 2021 was $152.9 million, or $0.43 per
diluted share, compared to $52.0 million, or $0.15 per diluted
share, for the three months ended September 30, 2020. Adjusted net
income for the three months ended September 30, 2021 was $155.5
million, or $0.43 per diluted share, compared to adjusted net
income of $108.2 million, or $0.30 per diluted share, for the three
months ended September 30, 2020.
Adjusted EBITDA for the three months ended September 30, 2021
was $280.3 million, compared to $232.6 million for the three months
ended September 30, 2020.
Important disclosures about, and reconciliations of, non-GAAP
measures to their most directly comparable GAAP measures, including
adjusted net income, adjusted diluted earnings per share and
adjusted EBITDA, are provided in the “Non-GAAP Financial Measures”
section of this press release.
Year-to-Date 2021 Results
Revenue for the nine months ended September 30, 2021 increased
36.1% to $4,514.6 million, compared to $3,317.2 million for the
nine months ended September 30, 2020. At the segment level,
Clinical Development Services revenue of $3,688.2 million grew
36.9% and Laboratory Services revenue of $826.4 million grew 32.8%,
each compared to the nine months ended September 30, 2020.
Net income attributable to common stockholders for the nine
months ended September 30, 2021 was $286.1 million, or $0.80 per
diluted share, compared to $47.1 million, or $0.14 per diluted
share, for the nine months ended September 30, 2020. Adjusted net
income for the nine months ended September 30, 2021 was $418.7
million, or $1.17 per diluted share, compared to adjusted net
income of $271.8 million, or $0.79 per diluted share, for the nine
months ended September 30, 2020.
Adjusted EBITDA for the nine months ended September 30, 2021 was
$778.6 million, compared to $623.8 million for the nine months
ended September 30, 2020.
Backlog and Net Authorizations
The following table provides select information related to PPD’s
backlog and net authorizations as of and for the three months ended
September 30, 2021, compared to the three months ended September
30, 2020:
Historical Basis
ASC 606 Direct Basis
ASC 606 Basis
(dollars in millions)
2021
% Change
2021
% Change
2021
% Change
Net authorizations
$1,352.7
12.7%
$1,352.7
12.7%
$2,253.3
27.7%
Ending backlog
9,492.5
20.3%
9,867.2
20.8%
14,592.0
24.5%
Backlog conversion
12.2%
11.6%
11.2%
Net book-to-bill
1.19x
1.21x
1.44x
Financial Position
As of September 30, 2021, cash and cash equivalents were
$1,172.7 million, gross debt was $4,292.0 million and net debt was
$3,119.3 million, resulting in a net leverage ratio of 3.0x
trailing 12 month adjusted EBITDA.
As of September 30, 2021, PPD had $598.4 million of borrowing
capacity under its revolving credit facility. Total liquidity,
which is comprised of PPD’s borrowing capacity under its revolving
credit facility and its cash and cash equivalents, was $1,771.1
million as of September 30, 2021, representing 60.8% growth
compared to September 30, 2020.
Financial Guidance
Due to the proposed merger with Thermo Fisher Scientific
previously announced on April 15, 2021, which is subject to
regulatory approvals in addition to the satisfaction of customary
closing conditions, PPD is not providing financial guidance.
Webcast and Conference Call Details
PPD will host a conference call on Thursday, October 28, 2021 at
8 a.m. (U.S. Eastern Time) to discuss its third quarter 2021
financial results. The conference call can be accessed live over
the phone by dialing +1 877 407 0784, or for international callers,
+1 201 689 8560. Due to the proposed merger, there will be no
opportunity to ask questions on the conference call.
Investors and other interested parties also may listen to a live
webcast of the conference call by logging on to the investors
section of PPD’s website at https://investors.ppd.com. A replay
will be available after the call and can be accessed by dialing +1
844 512 2921, or for international callers, +1 412 317 6671. The
passcode for the live conference call and the replay is 13724407.
The audio replay will be available until Thursday, November 11,
2021.
About PPD
PPD is a leading global contract research organization providing
comprehensive, integrated drug development, laboratory and
lifecycle management services. Our customers and partners include
pharmaceutical, biotechnology, medical device, academic and
government organizations. With more than 30,000 professionals
worldwide, PPD has conducted clinical trials in more than 100
countries to help customers deliver life-changing therapies to
improve health. We apply innovative technologies, therapeutic
expertise and a firm commitment to quality to bend the cost and
time curve of drug development and optimize value. For more
information, visit www.ppd.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements reflect our current views
with respect to, among other things, the following: our proposed
merger with Thermo Fisher Scientific Inc. (“Thermo Fisher”), our
current expectations and anticipated results of operations, our
financial performance, the impact from the novel coronavirus
disease (“COVID-19”) pandemic, the continued reliance of the
biopharmaceutical industry on outsourcing to contract research
organizations, the continued growth in research and development
spending in the biopharmaceutical industry, estimated growth rates
in addressable markets and our ability to effectively recruit,
train, develop and retain talented individuals. These
forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements, market trends or industry results to
differ materially from those expressed or implied by such
forward-looking statements. Therefore, any statements contained
herein that are not statements of historical fact may be
forward-looking statements and should be evaluated as such. These
statements often include words such as “anticipate,” “expect,”
“suggest,” “plan,” “believe,” “intend,” “project,” “forecast,”
“estimates,” “targets,” “projections,” “should,” “could,” “would,”
“may,” “might,” “will,” and other similar expressions. We base
these forward-looking statements on our current expectations, plans
and assumptions that we have made in light of our experience in the
industry, as well as our perceptions of historical trends, current
conditions, expected future developments and other factors we
believe are appropriate under the circumstances at this time,
including the impact from the COVID-19 pandemic and the proposed
merger with Thermo Fisher. As you consider this press release, you
should understand that these statements are not guarantees of
performance or results. The forward-looking statements contained
herein are subject to and involve risks, uncertainties and
assumptions and you should not place undue reliance on these
forward-looking statements. Although we believe that these
forward-looking statements are based on reasonable assumptions at
the time they are made, actual results might differ materially from
those expressed in the forward-looking statements. Some of the
factors, risks and uncertainties that might materially affect the
forward-looking statements contained herein and may make an
investment in our securities speculative or risky include, but are
not limited to, the following: uncertainties associated with the
proposed merger with Thermo Fisher; the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement; the inability to complete the
proposed merger due to the failure to satisfy conditions to
completion of the proposed merger, including that a governmental
entity may prohibit, delay or refuse to grant approval for the
consummation of the proposed merger; risks related to disruption of
management’s attention from our ongoing business operations due to
the proposed merger; the effect of the announcement of the proposed
merger on our relationships with our customers, operating results
and business generally; the risk that the proposed merger will not
be consummated in a timely manner; the costs of the proposed merger
if the proposed merger is not consummated; restrictions imposed on
our business during the pendency of the proposed merger; potential
litigation instituted against us or our directors challenging the
proposed merger; any failure of our backlog to accurately predict
or convert into future revenue; the fact that our customers can
terminate, delay or reduce the scope of our contracts with them
upon short notice or with no notice; the impact of industry,
customer and therapeutic area concentration; consolidation amongst
our customers, and the potential for rationalization of the
combined drug development pipeline, resulting in fewer products in
clinical development; our ability to accurately price our contracts
and manage our costs associated with performance of such contracts;
any failures in our information and communication systems,
including cybersecurity breaches, impacting us or our customers,
clinical trial participants or employees; our dependence on our
technology network, and the impact from upgrades to the network;
any failure to perform services in accordance with contractual
requirements, regulatory standards and ethical standards; our
ability to access clinical research sites, attract suitable
investigators or enroll a sufficient number of patients for our
customers’ clinical trials; any failure by us to comply with
numerous privacy laws; our ability to keep pace with rapid
technological changes that could make our services less competitive
or obsolete; our ability to recruit, retain and motivate key
personnel, including the loss of any key executive; our dependence
on third parties for critical goods and support services, including
a significant impact from the COVID-19 pandemic on our suppliers;
any violation of laws, including laws governing the conduct of
clinical trials or other biopharmaceutical research, and
anti-corruption laws, such as the U.S. Foreign Corrupt Practices
Act and the United Kingdom Bribery Act of 2010; competition between
our existing and potential customers and the potential negative
impact on our business; our management of business restructuring
transactions and the integration of acquisitions; risks related to
the drug and medical device development services industry that
could result in potential liability that could affect our business,
reputation and financial condition; any failure of our insurance to
cover the potential liabilities, including indemnification
obligations, associated with the operation of our business and
provision of services and changes to our insurance coverage; our
use of biological and hazardous materials, which could violate law
or cause injury or death, resulting in liability; international or
U.S. economic, currency, political and other risks, such as those
from the COVID-19 pandemic; disruptions to our operations by the
occurrence of a natural disaster, pandemic or other catastrophic
events; the current and uncertain future impact from the COVID-19
pandemic on our business, growth, reputation, prospects, financial
condition, results of operations (including components of our
financial results), cash flows and liquidity; changes in tax laws,
such as U.S. tax reform, or interpretations of existing tax laws;
economic conditions, import/export implications and regulatory
changes relating to the United Kingdom’s exit from the European
Union; any inability to adequately protect our intellectual
property or the security of our systems and the data stored
therein; our investments in third parties, which are illiquid and
subject to loss; the substantial value of our goodwill and
intangible assets, which we might not fully realize, resulting in
impairment losses; difficult and volatile conditions in the capital
and credit markets and in the overall economy, including those
caused by the COVID-19 pandemic; the fragmented and highly
competitive nature of the drug development services industry;
changes in trends in the biopharmaceutical industry, including
decreases in research and development spending and outsourcing; the
potential adverse effect that the political, economic and/or
regulatory influences and changes impacting the United States and
international healthcare industry could have on both our customers’
and our businesses, including as a result of healthcare reform; any
patent or other intellectual property litigation we might be
involved in; risks related to our indebtedness; risks related to
ownership of our common stock; the significant influence certain
stockholders have over us; other factors beyond our control; and
other risk factors set forth in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2020, and in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2021, as such
factors may be further updated from time to time in our periodic
filings with the SEC, copies of which are available free of charge
on the SEC website at www.sec.gov. These cautionary statements
should not be construed by you to be exhaustive and are made only
as of the date hereof. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Backlog and Net Authorizations
Revenue is comprised of direct, third-party pass-through and
out-of-pocket revenue from providing services to customers. Direct
revenue represents revenue associated with the direct services.
Third-party pass-through and out-of-pocket revenue (collectively,
“indirect revenue”) represents the reimbursement by customers of
third-party pass-through and out-of-pocket costs incurred by PPD
under its contracts with customers.
PPD has continued to report backlog and net authorizations on a
basis that excludes indirect revenues and the impact of Accounting
Standards Codification (“ASC”) 606 (“ASC 606”) on direct revenue
(“Historical Basis”). PPD also assesses backlog and net
authorizations on an ASC 606 direct revenue basis (“ASC 606 Direct
Basis”) and on an ASC 606 total direct and indirect revenue basis
(“ASC 606 Basis”).
Net authorizations represent new business awards, net of award
or contract modifications, contract cancellations, foreign currency
fluctuations and other adjustments. Backlog for all periods
represents anticipated revenues for work not yet completed or
performed (i) under signed contracts, letters of intent and, in
some cases, awards that are supported by other forms of written
communication and (ii) where there is sufficient or reasonable
certainty about the customer’s ability and intent to fund and
commence the services within six months. Backlog conversion
represents quarterly revenues for the period divided by opening
backlog for that period. The net book-to-bill ratio represents the
amount of net authorizations for the period divided by revenues
recognized in that period.
Backlog might not be a reliable indicator of future revenue and
PPD might not realize all or any part of the revenue from the
authorizations in backlog as of any point in time.
Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance
with generally accepted accounting principles in the United States
(“GAAP”), this press release contains certain non-GAAP financial
measures, including adjusted EBITDA, adjusted net income, adjusted
diluted earnings per share, net debt, net leverage ratio and total
liquidity. A non-GAAP financial measure is generally defined as a
numerical measure of a company’s financial performance or financial
position that excludes or includes amounts so as to be different
than the most directly comparable measure calculated and presented
in accordance with GAAP.
Adjusted EBITDA consists of net income or loss attributable to
common stockholders of PPD, adjusted for changes in
recapitalization investment portfolio consideration and net income
or loss attributable to noncontrolling interest and before interest
expense, net, provision for or benefit from income taxes and
depreciation and amortization and eliminates (i) non-operating
income or expense and (ii) impacts of certain non-cash, unusual or
other items that are included in net income or loss that we do not
consider indicative of our ongoing operating performance. Adjusted
net income (and adjusted diluted earnings per share) consists of
net income or loss (and diluted earnings or loss per share)
attributable to common stockholders of PPD before the provision for
income taxes, amortization and the elimination of (i) non-operating
income or expense and (ii) impacts of certain non-cash, unusual or
other items that are included in net income or loss that we do not
consider indicative of our ongoing operating performance. In the
case of adjusted EBITDA, adjusted net income and adjusted diluted
earnings per share, we believe that making such adjustments
provides management and investors meaningful information to
understand our operating performance and the ability to analyze
financial and business trends on a period-to-period basis. Although
we exclude amortization of acquired intangible assets from our
non-GAAP expenses, we note that revenue generated from such
intangibles is included within revenue in determining net income or
loss attributable to common stockholders of PPD. Net debt consists
of the outstanding principal balance of the term loan, senior
unsecured notes, finance lease obligations and revolving credit
borrowings, less cash and cash equivalents, and the net leverage
ratio is equal to net debt divided by trailing 12-month adjusted
EBITDA.
Other companies in our industry may calculate adjusted EBITDA,
adjusted net income, adjusted diluted earnings per share, net debt,
net leverage ratio and total liquidity differently than we do. As a
result, these non-GAAP financial measures have limitations as
analytical and comparative tools and should not be considered in
isolation, or as a substitute for analysis of our results as
reported under GAAP. Adjusted EBITDA, adjusted net income, adjusted
diluted earnings per share, net debt, net leverage ratio and total
liquidity should not be considered as measures of discretionary
cash available to us to invest in the growth of our business. In
calculating these performance and liquidity financial measures, we
make certain adjustments that are based on assumptions and
estimates that may prove to have been inaccurate. Our presentation
of adjusted EBITDA, adjusted net income, adjusted diluted earnings
per share, net debt, net leverage ratio and total liquidity should
not be construed as an inference that our future results and
financial position will be unaffected by unusual items.
Beginning in the first quarter of 2021, PPD made certain
presentation changes as described below to the reconciliations of
(i) adjusted EBITDA and (ii) adjusted net income, in each case, to
net income (loss) calculated in accordance with GAAP. The
presentation changes had no impact on previously reported adjusted
EBITDA or adjusted net income for any prior period. In order to
provide comparability between the 2021 periods and the
corresponding 2020 periods, PPD recast its historical
reconciliations of adjusted EBITDA and adjusted net income to net
income (loss) calculated in accordance with GAAP to conform to the
new presentation.
For the purposes of reconciling both adjusted EBITDA and
adjusted net income to net income (loss) calculated in accordance
with GAAP, PPD now presents the provision for (benefit from) income
taxes as a separate reconciling item. In addition, for the purposes
of reconciling adjusted net income to net income (loss) calculated
in accordance with GAAP, each of (i) adjusted income before
provision for (benefit from) income taxes and (ii) adjusted
provision for (benefit from) income taxes are now presented as
reconciling items. The new presentation differs from PPD’s
historical practice of aggregating periodic reconciling items to
present a total of all such adjustments in connection with the
calculation of adjusted net income. PPD believes the new
presentation will assist investors and other users of the
supplemental non-GAAP financial information, primarily in
evaluating the periodic adjusted provision for (benefit from)
income taxes and related periodic adjusted tax rates.
In addition, for both the reconciliation of adjusted EBITDA and
the reconciliation of adjusted net income to GAAP net income, the
amount of PPD’s equity in losses of unconsolidated affiliates is
now presented as a separate reconciling item as opposed to the
historical practice of being included within the reconciling item
titled “other adjustments”. PPD believes the separate presentation
of equity in losses of unconsolidated affiliates provides
additional detail that will assist investors and other users of the
financial statements in evaluating the differences between non-GAAP
financial measures and their most directly comparable GAAP
measures.
PPD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per
share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenue
$
1,560,796
$
1,233,802
$
4,514,648
$
3,317,182
Operating costs and expenses:
Direct costs, exclusive of depreciation
and amortization
529,690
433,422
1,507,510
1,222,700
Reimbursed costs
433,358
335,866
1,330,704
810,523
Selling, general and administrative
expenses
335,624
249,320
959,587
734,712
Depreciation and amortization
74,028
71,317
227,426
206,395
Long-lived asset impairment
—
1,414
1,584
1,414
Total operating costs and expenses
1,372,700
1,091,339
4,026,811
2,975,744
Income from operations
188,096
142,463
487,837
341,438
Interest expense, net
(46,231)
(49,882)
(139,577)
(165,995)
Loss on extinguishment of debt
—
—
(10,677)
(93,534)
Gain (loss) on investments
18,971
(53,100)
(28,127)
16,649
Other income (expense), net
21,022
(17,153)
17,392
(14,097)
Income before provision for income
taxes
181,858
22,328
326,848
84,461
Provision for income taxes
39,993
11,169
81,421
20,682
Income before equity in earnings (losses)
of unconsolidated affiliates
141,865
11,159
245,427
63,779
Equity in earnings (losses) of
unconsolidated affiliates, net of income taxes
27,250
(2,057)
22,488
(5,686)
Net income
169,115
9,102
267,915
58,093
Net income attributable to noncontrolling
interest
(2,044)
(1,587)
(3,955)
(4,499)
Net income attributable to PPD, Inc.
167,071
7,515
263,960
53,594
Recapitalization investment portfolio
consideration
(14,150)
44,468
22,189
(6,529)
Net income attributable to common
stockholders of PPD, Inc.
$
152,921
$
51,983
$
286,149
$
47,065
Earnings per share attributable to common
stockholders of PPD, Inc.:
Basic
$
0.44
$
0.15
$
0.82
$
0.14
Diluted
$
0.43
$
0.15
$
0.80
$
0.14
Weighted-average common shares
outstanding:
Basic
351,351
348,672
350,974
338,277
Diluted
359,538
354,830
358,826
343,159
PPD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands, except par
value)
September 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,172,716
$
767,999
Accounts receivable and unbilled services,
net
2,071,676
1,609,718
Income taxes receivable
12,312
22,386
Prepaid expenses and other current
assets
172,363
146,100
Total current assets
3,429,067
2,546,203
Property and equipment, net
509,314
496,474
Investments in unconsolidated
affiliates
78,037
43,178
Investments
241,482
265,894
Goodwill, net
1,798,369
1,820,208
Intangible assets, net
619,749
748,404
Other assets
191,923
201,643
Operating lease right-of-use assets
160,076
171,839
Total assets
$
7,028,017
$
6,293,843
Liabilities, Redeemable
Noncontrolling Interest and Stockholders’ Deficit
Current liabilities:
Accounts payable
$
181,499
$
176,341
Accrued expenses:
Payables to investigators
524,647
404,654
Accrued employee compensation
354,604
331,156
Other accrued expenses
202,465
195,779
Income taxes payable
26,453
21,206
Unearned revenue
1,429,817
1,060,544
Current portion of operating lease
liabilities
44,555
51,643
Current portion of long-term debt and
finance lease obligations
34,521
36,238
Total current liabilities
2,798,561
2,277,561
Accrued income taxes
22,198
18,658
Deferred tax liabilities
50,827
54,535
Recapitalization investment portfolio
liability
169,734
191,923
Long-term operating lease liabilities,
less current portion
128,382
137,657
Long-term debt and finance lease
obligations, less current portion
4,207,811
4,226,192
Other liabilities
37,191
98,908
Total liabilities
7,414,704
7,005,434
Redeemable noncontrolling interest
37,734
34,929
Stockholders’ deficit:
Preferred stock - $0.01 par value; 100,000
shares authorized;
None issued and outstanding
—
—
Common stock - $0.01 par value; 2,000,000
shares authorized;
352,029 shares issued and 351,390 shares
outstanding as of September 30, 2021 and
350,858 shares issued and 350,132 shares
outstanding as of December 31, 2020
3,520
3,509
Treasury stock, at cost, 639 and 726
shares as of September 30, 2021 and December 31, 2020,
respectively
(11,928)
(13,268)
Additional paid-in-capital
1,865,963
1,819,892
Accumulated deficit
(1,985,659)
(2,271,808)
Accumulated other comprehensive loss
(296,317)
(284,845)
Total stockholders’ deficit
(424,421)
(746,520)
Total liabilities, redeemable
noncontrolling interest and stockholders’ deficit
$
7,028,017
$
6,293,843
PPD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended
September 30,
2021
2020
Cash flows from operating activities:
Net income
$
267,915
$
58,093
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
227,426
206,395
Stock-based compensation expense
33,548
16,099
Operating lease right-of-use asset
expense
34,174
34,625
Amortization of debt issuance costs and
debt discounts
6,046
8,263
Loss (gain) on investments
28,127
(16,649)
Deferred income tax (benefit) expense
(8,907)
5,770
Loss on extinguishment of debt
10,677
93,534
Amortization of costs to obtain a
contract
11,793
7,973
Equity in (earnings) losses of
unconsolidated affiliates, net of income taxes
(22,488)
5,686
Other
(1,280)
256
Change in operating assets and
liabilities:
Accounts receivable and unbilled services,
net
(516,639)
(148,501)
Prepaid expenses and other current
assets
(24,150)
26,908
Other assets
(6,570)
(39,813)
Income taxes, net
22,101
(21,445)
Accounts payable, accrued expenses and
other liabilities
167,687
116,503
Operating lease liabilities
(38,203)
(33,165)
Unearned revenue
395,136
(52,065)
Net cash provided by operating
activities
586,393
268,467
Cash flows from investing activities:
Purchases of property and equipment
(88,213)
(116,418)
Capital contributions paid for
investments
(3,827)
(5,382)
Distributions received from
investments
112
19,704
Investment in unconsolidated affiliate
(5,000)
(10,000)
Other
(1,600)
321
Net cash used in investing activities
(98,528)
(111,775)
Cash flows from financing activities:
Proceeds from New Term Loan
3,034,750
—
Redemption of 2015 Term Loan
(3,064,006)
—
Borrowing on revolving credit facility
—
150,000
Repayment of revolving credit facility
—
(150,000)
Proceeds from issuance of 2025 and 2028
Notes
—
1,200,000
Redemption of HoldCo Notes
—
(1,464,500)
Redemption of OpCo Notes
—
(1,160,865)
Payments on long-term debt and finance
leases
(18,118)
(32,080)
Payment of debt issuance costs
(24,120)
(18,525)
Payment of contingent consideration for
acquisition of business
—
(4,338)
Net proceeds from initial public
offering
—
1,772,960
Recapitalization investment portfolio
distribution
(12,819)
—
Proceeds from exercise of stock
options
16,075
14,272
Payments related to tax withholdings for
stock-based compensation
(2,314)
—
Purchase of treasury stock
—
(626)
Net cash (used in) provided by financing
activities
(70,552)
306,298
Effect of exchange rate changes on cash
and cash equivalents
(12,596)
(5,087)
Net increase in cash and cash
equivalents
404,717
457,903
Cash and cash equivalents, beginning of
the period
767,999
345,187
Cash and cash equivalents, end of the
period
$
1,172,716
$
803,090
PPD, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
(in thousands, except per
share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months
Ended
September 30,
2021
2021
2020
2021
2020
Net income attributable to common
stockholders of PPD, Inc.
$
152,921
$
51,983
$
286,149
$
47,065
$
359,237
Recapitalization investment portfolio
consideration
14,150
(44,468)
(22,189)
6,529
4,820
Net income attributable to noncontrolling
interest
2,044
1,587
3,955
4,499
6,321
Net income
169,115
9,102
267,915
58,093
370,378
Reconciliation to Adjusted
EBITDA:
Interest expense, net
46,231
49,882
139,577
165,995
190,514
Provision for income taxes
39,993
11,169
81,421
20,682
79,544
Depreciation and amortization
74,028
71,317
227,426
206,395
300,147
Stock-based compensation expense
12,600
5,409
33,548
16,099
38,723
Option holder special bonuses (a)
45
1,486
1,234
5,629
1,893
Other (income) expense, net
(21,022)
17,153
(17,392)
14,097
31,251
Long-lived asset impairment
—
1,414
1,584
1,414
1,584
Severance and charges for other cost
reduction activities (b)
173
(178)
1,369
2,060
1,614
Transaction-related and public company
transition costs (c)
2,184
2,886
14,363
8,944
15,596
Loss on extinguishment of debt
—
—
10,677
93,534
10,677
(Gain) loss on investments (d)
(18,971)
53,100
28,127
(16,649)
(7,961)
Equity in (earnings) losses of
unconsolidated affiliates (e)
(27,250)
2,057
(22,488)
5,686
(19,987)
Other adjustments (f)
3,209
7,789
11,288
41,838
16,536
Adjusted EBITDA
$
280,335
$
232,586
$
778,649
$
623,817
$
1,030,509
Reconciliation to Adjusted Net
Income:
Net income
$
169,115
$
9,102
$
267,915
$
58,093
Provision for income taxes
39,993
11,169
81,421
20,682
Amortization of intangible assets
37,783
39,513
122,517
118,598
Amortization of debt issuance costs and
debt discounts
2,077
2,250
6,046
8,263
Amortization of accumulated other
comprehensive income on derivatives
—
(3,107)
—
(9,253)
Stock-based compensation expense
12,600
5,409
33,548
16,099
Option holder special bonuses (a)
45
1,486
1,234
5,629
Other (income) expense, net
(21,022)
17,153
(17,392)
14,097
Long-lived asset impairment
—
1,414
1,584
1,414
Severance and charges for other cost
reduction activities (b)
173
(178)
1,369
2,060
Transaction-related and public company
transition costs (c)
2,184
2,886
14,363
8,944
Loss on extinguishment of debt
—
—
10,677
93,534
(Gain) loss on investments (d)
(18,971)
53,100
28,127
(16,649)
Equity in (earnings) losses of
unconsolidated affiliates (e)
(27,250)
2,057
(22,488)
5,686
Other adjustments (f)
3,209
7,789
11,288
41,838
Adjusted income before adjusted provision
for income taxes
199,936
150,043
540,209
369,035
Adjusted provision for income taxes
(g)
(44,422)
(41,854)
(121,528)
(97,196)
Adjusted net income
$
155,514
$
108,189
$
418,681
$
271,839
Diluted weighted-average common shares
outstanding
359,538
354,830
358,826
343,159
Adjusted diluted earnings per share
$
0.43
$
0.30
$
1.17
$
0.79
PPD, INC. AND
SUBSIDIARIES
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited)
(in thousands, except net
leverage ratio)
Calculation of Net Leverage Ratio as of
September 30, 2021
Gross debt
$
4,292,047
Less: Cash and cash equivalents
1,172,716
Net debt
$
3,119,331
Trailing 12 month adjusted EBITDA
$
1,030,509
Net leverage ratio (net debt/trailing 12
month adjusted EBITDA)
3.0
x
____________________
(a) Represents PPD’s costs associated with
special cash bonuses paid to PPD’s option holders.
(b) Represents employee separation costs,
exit and disposal costs associated with the full or partial exit of
certain leased facilities, costs associated with planned employee
reorganizations and other contract termination costs from various
cost-reduction activities.
(c) Represents integration and transaction
costs incurred with completed or contemplated acquisitions, costs
incurred in connection with PPD’s initial public offering (“IPO”),
secondary offering, costs associated with PPD’s public company
transition, costs associated with the proposed merger with Thermo
Fisher, which is subject to regulatory approvals in addition to the
satisfaction of customary closing conditions, and other transaction
costs.
(d) Represents the fair value accounting
gains or losses primarily from PPD’s investments in Auven
Therapeutics Holdings, L.P. and venBio Global Strategic Fund,
L.P.
(e) Represents unconsolidated earnings or
losses from PPD’s equity method investments in Medable, Inc. and
Science 37, Inc. During September 2021, Medable completed a round
of financing to raise capital which resulted in a dilution of PPD’s
ownership. The effect of this dilution resulted in a net gain of
$31.9 million for the three and nine months ended September 30,
2021.
(f) Other adjustments include amounts that
management believes are not representative of our operating
performance. These adjustments include implementation costs
associated with a new enterprise resource planning application,
one-time costs incurred in 2020 associated with the termination of
a long-term incentive program which was replaced by a traditional
stock-based program in 2020, advisory costs associated with the
adoption of new accounting standards, one-time costs and income
associated with the COVID-19 pandemic, management fees incurred
under consulting services agreements with certain investment funds
of Hellman & Friedman LLC and its affiliates and The Carlyle
Group Inc. and its affiliates which terminated upon consummation of
PPD’s IPO and other unusual charges or income.
(g) Represents the estimated tax effect on
adjusted income before adjusted provision for income taxes using
applicable statutory rates and other adjustments that are not
representative of PPD’s operating performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211027006089/en/
PPD Contacts Media: Ned Glascock +1 910 558 8760
media@ppd.com
Investors: Tracy Krumme +1 910 558 4186 investors@ppd.com
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