PRA Health Sciences, Inc. (NASDAQ:PRAH) Q2 2018 Results Earnings Conference Call August 2, 2018 9:00 AM ET
Executives
Timothy McClain – SVP, Legal Affairs
Colin Shannon – President and CEO
Mike Bonello – EVP and CFO
Analysts
John Kreger – William Blair
Donald Hooker – KeyBanc
David Windley – Jefferies
Eric Coldwell – Baird
Jack Meehan – Barclays
Erin Wright – Credit Suisse
Sandy Draper – SunTrust Robinson Humphrey
Operator
Good day, ladies and gentlemen, and welcome to the PRA Health Sciences, Inc. Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call may be recorded.
I would now like to introduce your host for today’s conference, Tim McClain, Senior Vice President of Legal Affairs for PRA Health Sciences. Please go ahead sir.
Timothy McClain
Thank you Danielle. Good morning and thank you for joining us for the PRA Health Sciences’ second quarter 2018 earnings teleconference. Today, Colin Shannon, our Chief Executive Officer; and Mike Bonello, our Chief Financial Officer will discuss our second quarter financial results.
Following our prepared remarks, we will be available for questions. In addition to our press release, an investor supplement with additional financial information is available in the Investor Relations’ portion of our website.
Before we begin, I’d like to remind you that our remarks and responses during this teleconference may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the risk factors section of our Form 10-K filed with the SEC on February 22, 2018. Our risk factors may be updated from time-to-time in our filings with the SEC. Please note that we assume no obligation to update any forward-looking statements.
Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a more helpful and complete understanding of our results and is consistent with how management views our financial results.
A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure calculated and presented in accordance with GAAP are available in the earnings press release and investor supplement included in the investor relations portion of our website.
I would now like to turn the call over to our CEO, Colin Shannon.
Colin Shannon
Thank you, Tim. Good morning and thank you for joining the conference call covering our second quarter financial results. I’m delighted to report that second quarter was another strong quarter for PRA, which produced double-digit revenue, adjusted net income and new business growth.
Revenue for the quarter was approximately $723 million, which represents an increase of approximately 35% year-over-year at actual foreign exchange rates. Organic revenue growth, which excludes the impact of adoption of ASC 606, reimbursement revenue, and our 2017 acquisitions was approximately 13% year-over-year at actual foreign exchange rates.
Adjusted net income for the second quarter was approximately $66 million, an increase of approximately 28% versus the second quarter of 2017. Adjusted net income per diluted share was $1, a 27% increase versus the second quarter of 2017.
Our net new business increased approximately 11% when compared to the second quarter of 2017 with a record level of $670 million of net new business awards, representing a net book-to-bill of 1.3 times.
Our new business awards and calculation of net book-to-bill ratio excludes the revenue impact of adopting ASC 606, it excludes reimbursement revenue and excludes revenue from our Data Solutions segment.
The addition of our new awards has resulted in our backlog increasing approximately 4% on a sequential basis and 21% year-over-year, finishing at approximately $3.9 billion. As we’ve previously disclosed, our backlog does not include our Data Solutions segment. In addition, we are not including pass-throughs or investigator revenue in backlog.
The mix of our new business awards continues to be consistent with previous quarters, with approximately 60% of our new awards coming from the pharmaceutical sector and approximately 40% coming from the biotech sector.
In addition, our client base also continues to be well-diversified, with our top five clients representing approximately 38% of revenue for the quarter, with our largest client representing approximately 9% of revenue. Both metrics exclude the impact of adopting ASC 606.
Quickly mentioning Symphony Health. I’m happy with how our integration plans are progressing. I’m pleased with the segment second quarter results. Although Symphony’s financial performance was at the lower end of our range in the first quarter of 2018, we remain optimistic about the full year 2018 forecast.
In closing, I would like to thank our team and our clients for their continued commitment to PRA Health sciences. We are delighted with our strong financial results and believe we are well-positioned for continued growth in 2018.
I would like to hand the call to Mike Bonello, our Chief Financial Officer, who will go through our quarterly financial results in more detail.
Mike Bonello
Thank you, Colin and good morning. For the second quarter of 2018, our consolidated revenues grew 35.4% at actual foreign exchange rates and 34.2% on a constant currency basis. We reported revenue of $722.8 million in the second quarter of 2018 compared to $533.7 million in the second quarter of 2017.
Revenue, excluding the impact of the adoption of ASC 606, reimbursement revenue, and the acquisition of Symphony Health increased 12.9% at actual foreign exchange rates and 11.7% on a constant currency basis. Revenue by segment was $664.7 million for the Clinical Research segment and $58.1 million for the Data Solutions segment for the second quarter of 2018.
Regarding revenue concentration for the second quarter of 2018, we derived 53% of our revenue from large pharmaceutical companies, 14% from small to mid-sized pharmaceutical companies, 17% from large biotechnology companies, and 16% from all other biotechnology companies. These concentration metrics exclude our Data Solutions segment, the adoption of ASC 606, and reimbursement revenue.
Total direct cost were $381.7 million in the second quarter of 2018 compared to $300.6 million in the second quarter of 2017. The increase in direct costs was primarily related to an increase in our labor-related costs in our Clinical Research segment and $41.6 million of direct costs from our Data Solutions segment, which was not included in our second quarter 2017 results.
The increase in direct costs also included an unfavorable foreign currency effect of $5.3 million. Excluding the impact of the adoption of ASC 606 and reimbursement revenue, total direct cost were 66.4% of revenue in the second quarter of 2018 compared to 65.6% in the second quarter of 2017. The increase in direct costs as a percentage of service revenue is primarily due to increased salary and benefit costs I mentioned earlier.
SGA expenses were $91.2 million or 15.9% of revenue, excluding the impact of the adoption of ASC 606 and reimbursement revenue for the second quarter of 2018, compared to 16.6% for the second quarter of 2017. The decrease in SGA expenses as a percentage of service revenue is a direct effect of our continued efforts to effectively leverage our selling and administrative functions.
Adjusted net income, which excludes certain items whose fluctuation from period-to-period does not necessarily correspond to changes in our operating results increased 27.8% to $66.1 million in the second quarter of 2018. Adjusted net income per diluted share grew 26.6% to $1 per share in the second quarter of 2018 compared to $0.79 per share in the second quarter of 2017.
Cash provided by operations was $52.6 million for the three months ended June 30th, 2018, compared to $26.7 million for the three months ended June 30th, 2017. The increase in operating cash flow was primarily the result of an increase in our operational performance and the optimization of our working capital.
Our net days sales outstanding was 19 days at June 30th, 2018.
Capital expenditures were $12.7 million in the second quarter of 2018 compared to $14 million in the second quarter of 2017. Our capital expenditures continue to reflect our investment in information technology and the expansion of our infrastructure to support our growth.
Our cash balance was $122.9 million at the end of the second quarter, of which $55.3 million was held by our foreign subsidiaries. Net debt outstanding defined as total debt less cash and cash equivalents on June 30th, 2018, was $1.2 billion compared to $727.4 million at June 30th, 2017. The overall increase in our net debt is attributable to borrowings related to our acquisitions.
During the second quarter of 2018, we amended our accounts receivable financing agreement. The amendment increased our borrowing capacity to $200 million, decreased our applicable margin from 1.6% to 1.25%, and extended the maturity date to May 31st, 2021.
Regarding currency concentration at June 30th, 2018, excluding the impact of the adoption of ASC 606 and reimbursement revenue, 83% of our revenues were denominated in U.S. dollars while 62% of our total expenses were denominated in U.S. dollars. Our euro exposure continues to be naturally hedged.
Consistent with prior quarters, we currently have less than 1% of our revenue denominated in GBP, while 6% of our expenses are denominated in GBP. As we have previously discussed, we continue to work on ways to reduce this exposure.
As discussed in our press release, we are updating our 2018 guidance. We are estimating revenues between $2.87 billion and $2.92 billion, representing as reported growth of 47% to 50%, constant currency growth of 18% to 20%, excluding the impact of adopting 606 and reimbursement revenue, and constant currency organic growth of 10% to 12%, excluding the impact of adopting 606 and reimbursement revenue. We expect GAAP net income per diluted share between $2.92 and $3.02 per share and adjusted net income per diluted share between $4.13 and $4.23 per share.
I want to remind everyone that beginning in 2018 we implemented the guidance of ASC 606. The adoption of ASC 606 requires the inclusion of reimbursable out-of-pocket costs and investigator fees in the calculation of revenue and may create a timing difference between the amount we’re entitled to receive from our customers and the amount of revenue we recognize in our financial statements.
The variability and magnitude of this timing difference compared to previous accounting is dependent on progress of the service portion of our projects compared to the progress of the investigator fees and the reimbursable out-of-pocket costs relative to their respective forecast cost over the life of the project.
So far in 2018, we have had an immaterial impact from the adoption of ASC 606. And as we discussed previously, we do not expect the adoption to have a material impact on our full year GAAP net income, adjusted net income, or related earnings per share. Should actual results differ from our expectations, we will update our future guidance accordingly.
We anticipate that our annual effective income tax rate will be approximately 24%, which incorporates the expected changes from the U.S. Tax Cuts and Jobs Act. Our effective tax rate may differ from this estimate if the geographic distribution of our pretax earnings changes or if there are changes in the interpretation, analysis, or if additional guidance is issued related to the U.S. Tax Cuts and Jobs Act.
Finally, our updated guidance assumes a euro exchange rate of 1.2 and a British pound exchange rate of 1.37. All other foreign currency exchange rates are as of June 30, 2018.
That concludes our prepared remarks. And now we’d be happy to take your questions. Operator, you may now open the line for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]
And our first question comes from David Windley from Jefferies. Your line is now open, please go ahead. Pardon me, David, if your phone is on mute, please unmute.
And we’ll go to the next question. Our next question from John Kreger from William Blair. Your line is now open, please go ahead.
John Kreger
Hi, thanks very much. Question about the guidance. Mike, I think if we’re doing the math right. It implies organic revenue growth of around 9% in the second half. Is that correct? And if so, what is driving this slowdown from around 12% in the second quarter? Thanks.
Mike Bonello
That is true, John. And that’s consistent with what we guided to when we initiated our guidance back in February. Just two things there. I think if you remember that we talked about some cancellations that we had in the beginning of the year that potentially could be coming back in the second half of the year. We are making sure that we have those scheduled accordingly.
Also, if you look at our 2017 back half of the year, the growth in those periods was relatively high, right around 19%, 20%. So, when you compare the two periods, period-over-period, that’s what’s slowing down the growth a little bit.
John Kreger
Great. Thanks. And then Colin, there has been one very prominent merger among some of your key clients. Can you talk about if that had any impact on bookings or operations with that relationship? Thanks.
Colin Shannon
Actually, John, no, there has been no change. We continue to value our relationship and work hard with them to provide any assistance we can. But as you are aware, the acquisition is still progressing and has still got a couple of hurdles to get through from a regulatory piece in both Europe and Asia.
So, when — and if we need to get involved with them, I’m sure they’ll ask at the right time. We just make ourselves available at their disposal to deal with and help them in any way that we can.
John Kreger
Great. Thank you.
Operator
Thank you. And our next question comes from Donald Hooker from KeyBanc. Your line is now open, please go ahead.
Donald Hooker
Yes, good morning. So, question on sort of backlog burn. Obviously, I’m assuming the higher burn, obviously, more full service work which is great, which plays out over time. So, that’s wonderful. But I guess is there a sort of a way to think — sort of think about this over time, is there natural floor in backlog burn going forward for modeling? Thanks.
Colin Shannon
What we’ve been finding mainly is that the awards we have been getting have been getting — seem to be slower in starting. We’ve noticed that happening over the last couple of few quarters. It’s just take a little bit of extra time to just get things really up and running.
Before we always seemed to get them quickly going. And we’ve noticed that happening quite often. At one point, for example, we’re looking at the beginning of the year. We expect the cancellations to be replaced and they were. But it has been a much slower start and we are finding as well that the burn rate wasn’t quite what we anticipated compared to the previous trials.
So, I think we’re seeing longer durational trials, particularly the larger oncology programs. And there’s a lot of studies that we’re doing with lots of follow ons. So, we’re getting some studies that are over like a significant time period of, say, 100 months. So, we’re getting tenure studies. Although the bulk of it is done in the first few years, there is certainly longer duration trials out there with follow-on events.
Donald Hooker
Okay. That’s great color. And then — so you’re bringing in a lot of new business. And it looks like your operating margins, your EBITDA margins are also going up a bit, which is great. Are you — what is your sort of situation with your staff? And where you are with the staffing and onboarding new staff and your, I guess, use of contract labor, which can be little bit more expensive?
Colin Shannon
Well, the — we’ve actually had a little bit of nice pause from these sort of like 20% — 18%, 20% of last year. And we’re taking advantage of that by getting ready for the next surge. We’re feeling obviously that all of the bookings are starting to — when they start to come through, it’s going to start full steam ahead.
So, we’re still taking this opportunity to work on internal systems, get them implemented. We’re looking at to drive efficiency. We’re looking at each function, improving processes. We took on an awful lot of staff over the last couple of years. It’s nice to do a little bit of consolidation. And it’s been a good period of — and that’s helping us with our margin improvement. And we should start to see that being maintained over the next few quarters and right in line with our continuing improvement we’re expecting year-on-year.
Donald Hooker
Thank you for the color.
Operator
Thank you. And our next question comes from Dave Windley with Jefferies. Your line is now open, please go ahead.
David Windley
Hi, thanks for taking my questions. So, my — our phones dropped here in our office so I had to call in again. So, apologize if I missed this before. But I was wondering if you could talk, Colin, about the timing of wins or potential awards from some of your more recent strategic partners?
So, in particular, I think, you talked at the end of the last year about kind of proactively canceling out a couple of studies because of the client’s desire to either reprioritize or rework the project and the potential for those to come back. Wondered if you can give us an update on that? And then a larger strategic win that you kind of alluded to on the last quarter call and what the status of that might be? Thanks.
Colin Shannon
Sure David. Thank you. On the cancellation piece. Yes, the work has come back. It’s a very different form with different durations. The impact of it — it was really a pre-quarter situation because there was no way that we can actually swap out the impact of a very fast burning studies and then compared with a slippage of a couple of quarters before it came back.
And so knowing that, we took the time and effort to really look internally and get things strengthened, look at margin improvements. So, we spent a good time really consolidating and strengthening our internal situation.
I then alluded to the fact that we were awarded a new partnership, which we are delighted, beginning of, say, this quarter. And I mentioned it in the last call. Things are progressing exceedingly well. We are putting together the partnership structure. We are pretty close now to getting things finalized.
We’ve got the [Indiscernible] piece to work with and it’s just — it’s really working through with the client, getting that done before we can actually get awards. It was always anticipated it would be Q4 before we actually start getting the benefits of that.
So, we seem pretty much on target from that. And for anything, we were always hoping to accelerate, but I think it will be pretty prudent for us to remain as, I think, Q4′s opportunities.
I didn’t mention this, our other preferred partnership because it was a — that we were awarded just at the end of the last year. But — because it was actually purely on oncology. But actually in the second quarter, we were invited in for another therapeutic area. And interestingly, we have had an awful lot of clients. And it’s interesting how — we have brand new clients this quarter and some of them we know that we have just got to show well and it might be for future opportunities. And we are finding every client has gone its own different way of wanting things done. Some are very progressive and want a whole lot of IT. Some are just wanting to get things done. And we’ve got to manage that accordingly.
But in this particular instance, we were scored directly against our competitors. And it was very pleasing that when we’re doing a scoring, we shared the blinded results [whether], so we don’t know our competitors that we are against. But we scored maximum marks in innovation, technology, adaptive monitoring and our e-platform in general, which obviously includes our Parallel 6 company.
So that was very, very pleasing. And we actually got a new therapeutic area award and so that’s progressing nicely as well. We’re building up these nice partnerships and we are seeing a lot of new opportunities. So, we’re feeling very good about our future potential.
David Windley
That’s a great full answer. Thank you, Colin. To Donald’s question about staffing, you can — I may be reading tea leaves here, but you kind of talked about the pause. You have talked about this before and your ability be able to optimize systems and also maybe where your people are? Right, level loading of your staff around the world.
And you kind of said before this next ramp or push or something to that effect. And so I guess what I’m curious about is, with the wins that you just described and strong book-to-bill, are you anticipating that your clinical organic growth is poised to reaccelerate to levels that we might have seen in several quarters ago? Thanks.
Colin Shannon
I think that depending, obviously, for the rest of the year, new business awards if we can maintain the same type of volume. And we’re seeing a lot of strength coming back, yes. We did mention the impact of the cancellations that were just too difficult to fill in the time frame. But obviously, the continued strong booking is building up. And really the bulk of the — a lot of really some of the larger studies are all really starting to kick in toward the end of the year.
So, yes, I think we are feeling very good about the end of the year and next year. And there might be a ramp-up in staff. So, what we’ve tried to do is consider all that when we’re issuing our guidance. We didn’t want — we wanted to give a realistic view, not get ahead of ourselves because we wanted some room in there that if we need to ramp-up fast, that we will obviously still make sure that we hit our guidance.
David Windley
Very good. Thank you. Appreciate the answers.
Operator
Thank you. And our next question comes from Eric Coldwell from Baird. Your line is now open, please go ahead.
Eric Coldwell
Hey, thank you and good morning. Curious if we could get a little bit more detail on Symphony? What you’re doing with the integration? What phase you are at there? What the outlook for integration is over the next couple of years? Thoughts on the revenue growth, frankly, relative to our model, which was predicated on fairly limited information, it was a bit of a miss the last two quarters. So I’m hoping for some update on what you’re thinking for revenue growth? And then, any comments on cross-selling or integration with the CRO opportunity would be great? Thanks so much.
Colin Shannon
Thank you. Thanks Eric. Obviously, this is a different business sector. When we have acquired it, we had strategic plays in mind. But obviously as you know our major goal is to make sure we maximize the opportunity of this business as well.
We are learning this business. We are finding that — they’ve always traditionally had very, very seasonal and cyclical business with the bulk of the opportunities being awarded in one and Q4. And we are finding that a lot of that activity in the first couple of quarters is really gearing up towards the end of the year. So, there’s been a lot of activity, a lot of push, a lot of drive. They’ve still got to obviously close these deals, but they’re very optimistic that a lot of good leads and things that are going on are preparing themselves for the future.
And as we have been getting to understand the business more, we’re seeing opportunities to look at having less of a seasonality and maybe bring some of the clients that PRA has, and we’re starting to introduce them. It’s a slower duration sale. But where we’re slowly starting to see an impact there, we believe that in the future we’ll be able to start to get better our visibility in each quarter. But this year was always really just a case of, let’s understand it
Let them continue doing the way they’re use to manage and run their business. We are augmenting them as best as we can. We’re supporting them where we need to and providing help where we can. And everything is going nicely. We are very pleased with the team. They are very diligent in their performance. They’re working through a lot of details. We obviously keep abreast with them of everything that’s going on.
And we are seeing a lot of collaboration with other parts of the company. It did take a little bit of time. I think it is now only in this last few months that we see an acceleration in the combination. And they’re actually seeing the benefit of the collaboration of the rest of the PRA group. Yes, so I’m pretty excited about where we’re heading.
Eric Coldwell
And Colin, do you have any sense or can you share any goals for our revenue growth, constant-dollar revenue growth?
Colin Shannon
Yes, I think in our guidance, we’ve got — and it’s at a low double-digit area. That’s where we expected it to be by the end of the year.
Eric Coldwell
That’s great. Thanks so much guys.
Operator
Thank you. And our next question comes from Jack Meehan from Barclays. Your line is now open, please go ahead.
Jack Meehan
Thanks and good morning everybody. I want to stick on the Symphony Health theme and just if you could just elaborate a little bit on how the margins are trending there? And just as you get more comfortable with the platform, just how leverageable you think that’s going to be as you start to scale it going into the end of the year?
Colin Shannon
It’s an interesting question because a lot of fixed cost there. And once you are beyond that, the margins can improve significantly. They’ve got to acquire a significant amount of data. But then when they have used it and package and sell it, there comes a nice point and an inflection point when we start to hit the decent growth levels that we’re talking about, the margins start to improve significantly.
So, there’s — because there’s a lot of investment in the data. So, what we’ve done is we’ve modeled where we intend to be. And we’re pretty satisfied with where we are with the margins. We do see that in the future that we can have opportunities there.
But obviously, we’re continuing to look for new data sources and that will obviously have an impact. So, it’s still very much an involving situation until we lock down some of these longer term agreements. It’s fair to say though that we feel it will be a positive benefit to the company as a whole.
Jack Meehan
Great. thanks for that color. And maybe just turning to the free cash flow profile. It’s been a little bit of a slower start of the year in terms of cash generation. Can you just help us with what the target is there for the full year? And as that starts to pour in, what the priorities are for the deployment at this point?
Mike Bonello
Yes, Jeff. We’re still projecting to be in that kind of $300 million, $350 million range for the full year. Obviously, our DSO improvement over last year is driving the majority of that. And as Colin has commented on other calls, we’ll look at either strategic tuck-in acquisitions or we’re going to be paying down debt with that cash.
Jack Meehan
Thank you, Mike.
Operator
Thank you. And our next question comes from Derik De Bruin from Bank of America. Your line is now open, please go ahead.
Unidentified Analyst
Hi, this is [Indiscernible] on behalf of Derik. You’re quarterly net book-to-bill was competitive at 1.3 times. But a couple of your competitors posted even better quarterly net book-to-bills north of 1.5 times in the second quarter. Are you seeing any notable changes in the competitive dynamics or market share gain reversals or changes relative to what we’re used to in the last couple of years?
Colin Shannon
I think I mentioned in the last call that we’re seeing the highest volume of RFPs. A lot of them is new visibility for clients who we’ve not worked with before. Sometimes that can take a number of iterations before they actually give us an award. So, it might be a year or so. But our goal is obviously to impress the client and keep them in mind for the next time.
So, we know that a lot of our business development activities may not bear fruit in the quarter. But longer-term, it is important that we leave a lasting impression. We saw that high volume. We’re still seeing a good visibility of RFP flow. We feel the market dynamics are pretty strong.
It’s very hard for us to look and say where share gains are and there’s big companies out there that are private with PAREXEL, PPD that we don’t get any visibility for. So, very, very difficult to see where things are going.
I agree it’s lovely to see such a strong bookings across the sector. We’ve been pretty consistent. I believe we are conservative in the way we take our new authorizations. We are building up and you’ll see it reflecting through into our revenue recognition. And that’s the major goal for us is to make sure that what we book, is it converts soon, and we start to see the correlating growth.
Mike Bonello
And don’t forget that we only, for our strategic solutions business, we only take in a quarter. We only have 12 months of backlog for that business. And each company could be doing it slightly different.
Unidentified Analyst
Got it. Thank you. And then on your — you had a nice sequential pickup in your adjusted EBITDA margin. Did you tell us explicitly what was your adjusted gross margin and SGA as a percentage of net revenue under ASC 606?
Mike Bonello
Yes, it’s roughly 27 — a little over 27%.
Unidentified Analyst
That’s the adjusted gross margin and SGA?
Mike Bonello
And SGA was roughly 15%.
Unidentified Analyst
Got it. Thank you. And then one very last quick one. You did narrow down your revenue guidance under ASC 606. I suspect that some of it has to do with FX. But can you tell us what’s embedded in your expectation for reimbursable revenue and the impact of the adoption of ASC 606? What’s embedded in your total revenue guidance?
Mike Bonello
Sure. Yes, you are right, Juan. We did bring it down. And the two impacts were FX. And as we look at our kind of pass-through and investigator revenue, when we initiated our full year guidance back in February, the range that we were kind of looking at was roughly between 25% and 30% of service revenue. It’s coming more in line with 26% to 28%. So we adjusted those percentages to get it more in line with what we’re seeing is actually happening.
Unidentified Analyst
Thank you.
Operator
Thank you. And our next question comes from Erin Wright with Credit Suisse. Your line is now open, please go ahead.
Erin Wright
Great. Thanks so much. A follow-up to an earlier question on Takeda, Shire. Do you have visibility or better visibility now on the relationship with Takeda? And how that has progressed according to plan and how should we be thinking about onboarding of new Shire business? And when do you think you’ll know in terms of timing magnitude or what have you looked at in terms of the mix or type of new business that could bring on Board? Thanks.
Colin Shannon
Obviously, this is — that’s a decision for Takeda. We partnered with them. And we will continue to work with them diligently. We have got a lot of people invested in the partnership. We work closely with them. And any conversations we have, they don’t — obviously can only share anything that’s public.
So, we really don’t know anything that’s different from anybody else in the public domain. And then I saw your note following the call you had with Takeda, which I thought was very nice and that added a lot of color for everybody. So, thank you for sharing that with everyone. And I think that’s been very helpful. I typically would prefer our client to talk about it rather than us. And in the meantime, we avail ourselves to, obviously, help them as best as we can.
Erin Wright
Great. Thanks. And then just a broader question, are you seeing anything from a pricing environment standpoint, is everyone behaving fairly rationally out there? Thanks.
Colin Shannon
It’s a very foolish game when people start playing prices. There’ll always be odd instance where you may see it where client — where they’re trying to buy into a client. And we found this something the industry’s always got to be guarded against, because the studies last too long and the impact is long-term. That short-term isn’t really — nobody benefits from it.
And in general, things are pretty rational. We’ve got — we have seen the odd occasion, but generally it’s pretty stable.
Erin Wright
Okay, great. Thank you.
Operator
Thank you. [Operator Instructions]
And our next question comes from Sandy Draper from SunTrust. Your line is now open, please go ahead.
Sandy Draper
Thanks very much. Lot of my questions have been asked and answered. So, I appreciate all the commentary. Maybe just a housekeeping item, probably for Mike. Just on Symphony, can you remind me is there still an earn out — another earn out, out there? And that that’s why you’re — they are sort of standalone. And once the — either one more or however many earn outs are left, do you plan to integrate? Just one on the update on what’s actually out there in terms of earn outs left? And then the plans once that’s done, is that changed the way you guys think about integration? Thanks.
Colin Shannon
Yes, there is another earn out for all of our 2018. And that’s exactly the reason why we have actually allowed them to continue almost uninterrupted, and to their own devices really. And we are actually accelerating some of the integration work because they are also seeing the benefits and I’m excited to be part of the bigger group and seeing new opportunities.
So, I do — and I’ve always felt this that the latter half of this year will always be a bigger and faster acceleration towards more integration. And looking opportunities and crafting a way to really accelerate the growth in that business. So, yes, we had to deal with the earn out pace and we are getting to the end of that toward the end of this year, but we’re starting to make inroads already.
Sandy Draper
Okay, great. I appreciate that, Colin. And have you guys disclosed what the different metrics are that they are being judged on further earn out?
Mike Bonello
Yes, Sandy, that’s in the stock purchase agreement.
Sandy Draper
Okay, great. thank you very much.
Operator
Thank you. And I’m showing no further questions. I would now like to turn the call back to Chief Executive Officer, Colin Shannon for any closing remarks.
Colin Shannon
Well, thank you everyone for participating in our call today. If you have any other additional questions, please feel free to contact us. Thanks again and hope you have a great day.
Operator
Thank you. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone, have a great day.
Article source: https://seekingalpha.com/article/4194844-pra-health-sciences-inc-s-prah-ceo-colin-shannon-q2-2018-results-earnings-call-transcript