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Transcript : PPD, Inc., Q2 2021 Earnings Call, Jul 29, 2021

29/07/2021 | 13:00

Presentation Operator Message
Operator (Operator)

Good morning, and welcome to PPD's Second Quarter 2021 Earnings Conference Call. Please note today's call is being recorded. At this time, I'd like to turn the conference over to Tracy Krumme, Vice President and Head of Investor Relations for PPD. Ms. Krumme, you may begin.

Presenter Speech
Tracy Krumme (Executives)

Good morning, everyone, and thank you for joining our second quarter 2021 earnings call. With me today to share our results are David Simmons, PPD's Chairman and CEO; and Chris Scully, our CFO.

Before we begin, I would like to remind everyone that our discussion includes forward-looking statements that are subject to risks and uncertainties and that could cause material differences in our actual results. Please refer to our 2020 annual report on Form 10-K for a discussion of these risks. With the exception of revenue, all references to income statement results are on a non-GAAP basis.

I would also like to remind you of a few important details which are consistent with previous earnings calls. When referring to our financial performance, we'll be doing so on an ASC 606 basis. When referring to our commercial performance, including metrics related to net authorizations and backlog, we'll be doing so on a historical ASC 605 basis to maintain comparability with prior periods. Lastly, due to the pending transaction between PPD and Thermo Fisher Scientific, I would like to point out that we will not be conducting a Q&A session following our prepared remarks today. And with that, I'll turn the call over to David.

Presenter Speech
David Simmons (Executives)

Thank you, Tracy, and good morning, everyone. Thank you for joining us today on our second quarter 2021 call. I'm pleased to report that we had another strong quarter of performance across the board and are now marking 7 consecutive quarters of solid financial performance as a public company. We are excited about the proposed merger with Thermo Fisher Scientific, which is expected to be completed by the end of 2021. Until then, it is business as usual at PPD, and our teams are continuing to fire on all cylinders. I'm very proud of our colleagues around the globe for their hard work and commitment to the high-quality levels of service PPD is known for.

Let me share a few second quarter highlights. We delivered year-over-year net authorizations growth of 58% and a net book-to-bill ratio of 1.55. We realized 56% revenue growth with our Clinical and Laboratory Services segment, each up significantly. I'd note that this is on top of revenue growth in the second quarter of 2020 despite the onset of the pandemic last year, and we delivered year-over-year EBITDA growth of 32%.

Lastly, our balance sheet continues to strengthen as we further reduced our net leverage ratio to 3.4x as of quarter end. With a long trend line of robust new business awards and continued improvement in site-based activity, it is critical that we are staffed to effectively resource our customer study. To that end, we now stand at more than 28,000 colleagues globally, representing 15% year-over-year growth in our employee footprint. With our long-tenured employee base and infusion of top talent and strong training program, our best-in-class team remains well positioned to service our record-ending backlog, while our expertise across priority development areas continues to grow, such as cell and gene therapy and vaccines.

In addition to employee growth, we continue to expand our facilities footprint and capacity ahead of demand. In May, we held the grand opening for our previously announced 67,000 square-foot multipurpose lab in Suzhou, China. We also announced plans to expand our GMP laboratory in Athlone, Ireland, both significantly increasing the size of our GMP facility and adding cell and gene therapy to the locations portfolio of services.

Looking ahead, I'm optimistic about the future of clinical research with strong underlying industry fundamentals, including cutting-edge scientific and technology advancements and robust customer funding. The investments that we are making in digital technology, real-world evidence and reducing site burden will enable trials to be even more patient-centric long term. It's an exciting time in the industry. And as I look ahead to our expected acquisition by Thermo Fisher, I'm excited about the possibilities to meaningfully impact the development and delivery of life-changing medicines. I'll now hand it over to Chris to go into more details on our financial results.

Presenter Speech
Christopher Scully (Executives)

Thanks, David. Good morning, everyone. Similar to last quarter, I'll dive right into our results.

On the commercial front, net authorizations grew 58.4% over Quarter 2 of last year with double-digit growth in both the clinical and lab segment. The continued solid performance across the business contributed to a net book-to-bill ratio of 1.55x. We closed the quarter with record ending backlog, up 22.3% year-over-year. With respect to the P&L, Quarter 2 revenue grew 55.8% over last year, underpinned by 59.5% growth in clinical and 40.7% growth in lab. Adjusted EBITDA growth for the same period was 32.4%. Our revenue growth outpaced adjusted EBITDA growth, primarily as a result of the timing of certain discrete cost items in Quarter 2 and the continued higher mix of indirect revenue on COVID study, which has continued to result in an optically lower adjusted EBITDA margin. Excluding indirect and on a year-to-date basis, the first half year-on-year growth rates for revenue and adjusted EBITDA are relatively aligned. Rounding up the P&L, adjusted EPS grew 56% year-on-year to $0.39 per share.

Turning to the balance sheet. We closed the quarter with cash of $949 million. With respect to our liquidity, our cash balance and available revolver capacity increased by total liquidity position to $1.55 billion as of June 30, up 56.1% from the same time last year. Our net leverage ratio at June 30 improved to 3.4x trailing 12-month adjusted EBITDA, down from 3.8x at March 31 and 4.5x at June 30, 2020.

Before wrapping up, I'll echo David's comments about being incredibly proud of how our colleagues across the organization, continue to deliver for our customers quarter after quarter, truly exhibiting the operational excellence for which PPD is known and as highlighted in recent accolades. With the healthy CRO industry backdrop, our momentum and the enhanced capabilities of the combined company, we remain excited about our plans to join Thermo Fisher and the resulting opportunities to bring new medicines to market faster and more efficiently. And with that, operator, we'll conclude the call.

Presentation Operator Message
Operator (Operator)

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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