Q3 2019 Earnings Call
Quarter 2019 earnings release conference call at this time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised today's conference is being recorded if you require any further assistance. Please press star zero.
Thank you [laughter] good morning, and thank you for joining us for the P.R.A. Health Sciences third quarter of 2019 earnings teleconference. Today, Colin Shannon, Our Chief Executive Officer, and my Spinello, Our Chief Financial Officer will discuss our quarterly financial results.
Following our opening comments will be available for questions.
Listen to our press release and 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 the responses to questions may include forward looking statements actual results may differ materially from those stated or implied by such forward looking statements due to risks and uncertainties associated with our business, which are discussed in the risk factors included in our annual report on Form 10-K .
Filed with the FCC on February 28, 2019.
Our risk factors may be updated from time to time in our filings with the FCC.
Please note that we assume no obligation to update any forward looking statement.
Certain financial measures, we will discuss on this call our non-GAAP financial measures. We believe the providing these measures helps investors Ghana more helpful and complete understanding of our financial results and is consistent with how management views our financial results.
Reconciliation of these non-GAAP financial measures to the most comparable GAAP measure calculated and presented in accordance with gap is 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 Collin Chen.
Thank you Tom.
Good morning, Thank you for joining the conference call covering our third quarter financial results.
I'm pleased to report that our third quarter financial results pitches solid revenue and earnings growth.
Revenue growth is a core part was approximately 20% year over year, when I say 40 basis.
On a constant currency basis revenue grew 10% year over year and 3% sequentially.
I have been asked a number of times to ultra pervade, New business awards inclusive of reimbursement revenue and not what type of just a book to Bill up 1.65.
The addition of our third quarter, New business Awards resulted in an increase in our backlog up 13% year over year up 3% on a sequential basis with backlog, finishing at approximately $4.6 billion at September back to you.
Our mix up new business awards remains well balanced with 50% coming from pharmaceutical companies and 50% coming from biotech companies.
The environment for reset spending I see I'd like sourcing remained stable from our perspective, and we continue to see a healthy for bodies piece.
Our client base continues to be well diversified with our top five clients, representing approximately 17, 90% of revenue for the quarter I know single client representing more than 10% of revenue.
Adjusted net income for the third quarter was approximately $87 million an increase of 17% actually is the third quarter of 20 team.
Adjusted net income per diluted share was $1.32 cents, a 17% increase that's it took a quarter of 2080.
Turning now to our data solutions segment.
You may have seen in August we I noticed a strategic alliances with close up international a leading Latin America based provider of medical prescription and sales data to pharmaceutical companies.
September we also announced the launch of a new national market measurement tool called matters.
The met this platform as a first of its kind in dollars pharmaceutical market I know it takes and intelligence capabilities to our customers.
These two announcements are significant milestones for the data solutions segment onshore commitment to enhancing our service offering and expand the ourselves to seize internationally.
The other major event this quarter was a secondary offering by kick yeah, I don't concurrently patches of approximately $300 million stock.
We believe that repurchase about she after that get yourself on cash and we continue to have adequate resources to continued to grow their business should an opportunity arise.
I would also like to know what that Justice, we completed the refinancing of our 2016 credit facilities entering into in Ukraine, <unk> agreement with the term loan of $1 billion under revolving line of creator of $750 million.
Mike will provide additional details about this we've thrown in the call.
As discussed in a press release, we are maintaining our 2019 revenue cadence and updating our GAAP and adjusted earnings per state with each year cadence Maple prepaid additional details about the update you twentys engages leases Nicole.
In closing I would like to thank her entire stuff I love claims.
Continued commitment to PRT, how exciting season, we have a strong business I believe we are well positioned for the remainder of the leading into 2020 .
No wait to handover the call to make been Ella.
Chief Financial Officer, What's your quarterly financial results in more detail.
Thank you cone and good morning, everyone.
Lets call. It stated previously we reported revenue of $780.7 million for the third quarter 2019, compared to $717.6 million for the third quarter of 2018.
The clinical research segment reported revenue of $719 million for the quarter well the data solutions segment reported revenue of $61.7 million increases up 9% and 2% respectively.
Regarding our revenue concentration, we derived 54% of our service revenue from large pharmaceutical companies.
10% from small to midsize pharmaceutical companies.
And are in line with what we have reported in previous quarters.
[noise] total direct costs were $389.3 million in the third quarter of 2019 compared to $371.4 million and the third quarter of 2018.
The increase in direct costs continues to be driven by increased labor costs in our clinical research segment as we continue to add staff to support growth in the business and increased at a cost in our data solutions segment.
This increase was offset by a favorable impact of $7 million from fluctuations in foreign currency exchange rates.
Direct costs were 49.9% of revenue in the third quarter of 2019 compared to 51.8%.
Third quarter 2018.
Selling general and administrative expenses were $95.5 million or 12.2% of revenue for the third quarter of 29 team.
Compared to 12.9% for the third quarter of 2018.
Adjusted net income per diluted share grew 17% to $1.32 cents per share in the third quarter of 2019 compared to $1.13 cents per share in the third quarter 2018.
The reduction in share count from the stock repurchase contributed to a one cents EPS in the quarter.
Cash provided by operations was $70.8 million in the third quarter of 29, King compared to cash provided by operations of $111.4 million for the third quarter 2018.
The decrease in operating cash flow was primarily the result of an increase in cash outflows from working capital driven by an increase in our days sales outstanding.
Our DSO was slightly higher than what was included in our guidance. However, as we stated in previous quarters. We've always expect your idea sort of trend more in line with industry averages.
The slight increase during the third quarter was purely timing related and does not reflect the change in our collection dynamics.
Capital expenditures for the third quarter of 2019 or $20.3 million compared to $13.6 million for the third quarter of 2018.
As we previously discussed the increase in our capital expenditures continues to reflect our investment in information technology and the expansion of our infrastructure to support our growth.
Our cash balance at September 32019 was $181.8 million of which $56 million was held by our foreign subsidiaries.
Net debt outstanding defined as total debt less cash and cash equivalents at September 32019 was $1.2 billion compared to $1.1 billion at September 32018.
The new $1.75 billion credit facility consists of a $750 million revolving line of credit.
The 1 billion dollar term loan both of which have maturity dates of October 28 2024.
The proceeds from the 2019 credit facility were used to repay the 2016 credit facility in its entirety.
The term loan has scheduled fixed quarterly principal payments of $6.3 million through September 2024, with the remaining balance due at maturity.
The 2019 credit facility also has customary representations warrantees affirmative covenants and events of default all of which are consistent with our 2016 credit facility.
We are happy to have this refinancing behind us and I'd like to thank everyone involved for their support a PR rate and their hard work in getting this finalized.
Regarding our currency concentration, excluding reimbursement revenue and expenses.
84% of our revenue and 62% of our expenses, we are denominated in us dollars, which is consistent with prior quarters in 2018 levels.
Our your exposure continues to be naturally hedged.
As Colin referenced earlier in the call the company's maintaining its 2019 revenue guidance to between 3.02 and $3.10 billion, representing as reported growth of 5% to 8% in constant currency growth of 6% to 8%.
We're updating our GAAP net income per diluted share to between $3.58 and $3.64 in updating our adjusted net income per diluted share to between $5 in seven cents in $5 in 12 cents representing growth of 18% to 20%.
We continue to estimate our annual effective income tax rate at approximately 24%.
Should also be noted that our guidance assumes a euro rate of 1.15 in a GBP rate of 1.3.
Other foreign currency exchange rates are as of September 32019.
That concludes our prepared remarks and now we're happy to take your questions. Operator, you may now open the line.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your Touchtone telephone if your question has been answered.
Hi, Thank you good morning, Thanks for taking my questions.
Faster than we expected in the third quarter. So was was attractive relative to our expectations.
I think the exit our expectation was based on kind of a progressive acceleration through the back half of the year I'm wondering if those factors that we're building in the third quarter and where I think our expectation was that you would get more of a full contribution in the fourth quarter from things like rehiring in your strategic solution.
<unk> business.
If that if that is still a correct progression to think about in which case I would think you would kind of air towards the high end of your revenue guidance. So wanted to kind of understand how thats progressing through the back half.
Yes, Dave I think our revenue from our perspective was in line with where we thought it would be.
We've been able to hire the heads that Colin referenced last quarter in strategic solutions. So weve been able to generate the revenue. We were looking to there are again, our guidance is consistent and that we think we're going to be at that midpoint range, but we do expect to see some progression in the fourth quarter from what you saw in the third quarter.
Youve over the last I think six seven months been able to.
Make some management changes I think makes some investments in sales force, calling you talked on the last call. How important it was kind of get those things in place ahead of US enough ahead of the strong fourth quarter seasonal period.
What's your comfort level with the changes you've made and how do you think data solutions is set up to finish the year.
We're feeling well positioned that got good team in place to continue into Q4.
Obviously still building in the still training going on and.
And you know enough, they're making news service offerings. So there's a lot going on.
We have asked actually noticed a little bit of increasing our data acquisition costs and that's not fed through intermodal yet for pricing, but all about will be so look forward for next year. So we bought with saw this year as being like the building block getting things in place and I think were nicely positioned if we can.
And the same are just a little bit better than we achieved last year will be very very pleased with our achievement.
So pleased with a dollar.
Similar dollar amount as the fourth quarter last year just to clarify.
Okay. Thank you.
Thank you and our next question comes from them.
Her with William Blair. Your line is open. Please go ahead.
Hi, Thanks, very much cotton just building on days last question. How do you think about the data solutions business trending 10 to 20 Kenneth have growth similar to the clinical business.
Progress.
Strategic discussions that we were never able to half before that.
Much longer cycle times. The discussions are being started that made at some point come to fruition into next year. So.
Because our.
Quite dramatic in size and scale.
And I think people are being shot safety data, which is just as an ongoing business. It was actually quite instrumental in the way we are shaping seeing the way things are moving forward in the future.
Has helped us continue to excel and managing data and the use of data within clinical trials and it's kept us with a good advantage and how you actually the Deca works and what works best and what doesn't so.
Part of his is I would love to see.
A different strategic nature as icing on the cake.
I mentioned in the last few quarters. This strategic solutions is definitely being flat to up and would like in this is showing very low growth and the last few quarters and a lot of that was swinging away from higher is being done and lower cost markets. So and we're finding that not trend.
So that's the last number of quarters should be replacing.
You asked based employees overseas, particularly Latin America Asia in Eastern Europe , not trained seem to have shifted a little bit and this quarter was started by I mentioned last thing that we saw the hiding pipeline. We are noted the process exciting.
So it's.
The decline so no more looking for efficiencies and bringing in some of the tools and and.
Processes that we use within the product registration to help support and optimize productivity and some of these larger clients. So it's a base.
We'll see how things generate from next year, when we discuss the client's needs as we move forward and obviously with though we still pleased with that business, but I was actually that client meeting and let on this week.
We got residing thanks for all the what we do and it's one of a lot declining so it makes it or that they are well appreciate you didn't they expect to continue to grow and although not simply as it's been with and past years.
Great. Thanks much.
Thank you and our next question comes from the line of one.
Bank of America. Your line is open. Please go ahead.
Hi.
Thank you My first question is on capital deployment I guess.
Can you talk to us about your M&A pipeline, and whether or not you actually see any real attainable deals that you could complete in the near future.
Thanks.
I share with us where does your long term target in net leverage absent of any M&A deals and confirm or refute my sense that perhaps.
Do you foresee doing more share buybacks than youve.
As always done in recent history going forward.
No were always looking.
I don't tuck in acquisitions.
We've always got something exciting.
At times, it just don't make it through diligence and but we're always working on some thing and if that makes sense and a beef.
Right from a pricing from a business to TG point of view is certainly something that we've definitely looking out and we'd love to find something that would help.
Capitalized on update to assets.
We feel that the Stokes untapped potential there and when you when you look at what we've got with both our clinical six platform in Cincinnati, we feel that that's something in the midst. They are that we could maybe acquire that would help and.
Catalyst to help improve all of these businesses together, so thats an ongoing review and we can tell you we meet with banks to discuss opportunities.
We've we've never really set a target de leveraging ratio and we we've always said that.
Clients don't like any anytime if your levered to over five times. So we've got a long way before would ever reach anywhere where our clients become a little bit skittish. So from that point of view and we always say what to just look for what is the best use of cash if it means we read but.
Purchasing shares we would do so what do you think about what's best for the shareholders any given time.
Really revenues were basically set up for.
Hi situation for any acquisitions the shock town, we are putting still looking and hopefully we find something that can actually we can take advantage over there and then the uptown and one thats why we set up with the refinancing a slightly larger revolving line of credit. So we have the flexibility to pay that down but haven't available to doing.
The acquisitions that we needed to do and keep the term me out there if that's the case.
Okay. Thank you and then my second question is did I hear you correctly in your prepared remarks about your net book to Bill, including pass throughs would've been 1.65 and related to that question I mean, I'm well aware that the credibility of the net book to Bill metric has further deteriorated would being.
Susan.
First of all expenses, but.
Doesnt have you given any consideration to start reporting backlog metrics, including pass throughs.
Just like most of the others euros.
That's it.
I guess to two to your first question you're correct, if where we would have included reimbursables. It would've been 1.65 for the quarter.
We have not thought about including Reimbursable revenue into backlog, mainly because we we want to be clear to the investment community on what we feel at the core business is doing.
Part of that increase from a book to Bill perspective, there were a couple of studies in there that has significantly larger than usual reimbursable portions and we just feel like it's clear and easier to understand what's going on the business. If we keep it on a six so five basis.
Thank you I'll jump back to mature.
Thank you and our next question comes from the line of Robert Jones with Goldman Sachs. Your line is open. Please go ahead.
Great. Thanks, Thanks for taking the questions Collin appreciate the breakdown you provide from the contribution from the various bands of clients.
So sorry, sorry, if I Miss that but what was the contribution from the top client I think it had been trending around 9%.
I was curious if that changed at all.
It was right about that it was roughly like 9.49, 0.5%.
Great Great and then just a over on the bookings you mentioned that it was a 50 50 split this quarter from biotech and pharma I think this is more heavily weighted towards biotech than than previously anything different we should think about from the perspective of inherent risks to bookings given the larger portion from biotech and I guess related to that anything.
Different we should think about as far as conversion of these bookings given.
Of that bit of a shift or mix balance between pharma and biotech we've always typically be very strong the biotech and Medina and we've been highly focused on it in the last couple of quarters.
Actually it was quite the opposite we're finding it was a big pharma that were actually changing remained in opening studies.
Just a very to get started in the or you know opening and it was causing us lots of changes sometimes we've taken this constellation who's been back as a complete new study and divide tags.
We find them you know the once we've agreed a new move forward is actually quite robust and we spent the last couple of quarters actually having a much more heavy a focus on a biotech again as an area, we've always be stone and and we wanted to get back to our roots. So that's been a deliberate focus.
It means that when the big pharma starts to come through again, I will give us a much stronger book to Bill which were anticipating at some point EBITDA.
Goes in cycles, we have been happy with what we're doing just now taking on the right balance of breast disease, and you know like that award here. So I think thats that well calculated there's lots of times, where we could go off done chase business.
It wouldn't be the margins for the risk associated with it that we would light.
So we try to get that phones and very consistently during the quarter.
Great. So no so colleges to be clear no no impact on conversion given given this mix shift. This just no it should be bid business as usual just just just normal could ahead.
Great. Thanks, so much.
Thank you and our next question comes from the line of Jack Meehan with Barclays. Your line is open. Please go ahead.
Hi, This is Andrew Walt on for Jack.
Could you provide an update on your preferred preferred partnerships and specifically have you seen any changes in the structure of any of these partnerships.
We try not to talk too much about because we've got lots of.
Pat partners and there's only one that's been public and expect it seems again undo amount of attention. So we do we do have many partnerships that we work with clients and you know every client risk.
Bases I'll walk cycles.
We have a large biotech for example.
Hi, This is a slowing this year I know a sudden is picking up with some good studies coming through towards a lot of top of the year and focus has a good through development, but they move fast when it happens and you know that steady positive for us.
Oh.
Oh, changing a lot of them up in good through Matt just in acquisitions, and that's changing dynamics in the speed of outsourcing.
While we do continue to support our clients as best we can offer them a piece of phase, where we see opportunities for them and we tried to support them through the change and make sure that we keep delivering high quality products while them.
Great. Thank you and in the quarter, how did growth compare cross full service and FSP and maybe you could talk a little bit more about how hirings going FSP business. Thank you.
Andrew we we don't disclose that because it's all part of while one segment.
And we don't want to run a fellow more segment disclosure. So we've we've never disclose that separately.
Regarding the hiring.
We'll be very positive we have that you know up in addressing.
My spoke off a substantial amount of hiding to do.
But we're going through a great everybody's been given thought to engine and what hiding a good number on that so obviously, helping support particularly this strategic solutions, Bob you have the business, but you know.
Product registration and the last year, we've we've actually gone through quite a number of management changes and the new management, I know, bringing and a lot more of their team and.
That's now been taking shape and just a couple of weeks ago, We actually had a leadership meeting and really pooling our top talent our out of a number of our top talent together and really focusing in on the way forward and you know it was an exciting time, because we all feel light we've come through.
Like I tell you must change and we're ready for the next and then it transition of a company.
[noise].
Our next question comes from online.
Well.
Open. Please go ahead.
Okay. Thanks, very much so in your prepared remarks, you defined clients two ways, 50% form at 50% biotech was the first way.
When you gave a more segmented approach where it sounded like 20%.
With some bucket of all other that would.
I think probably include pre commercial clients as well as others.
I think first question, how many clients would you define in that 50% pharma bucket versus how many clients that you have that are in the 50%, 50% biotech bucket.
David I'll have to or I'm, sorry, I don't have the number off my top my head off the back to you on that one.
So what im trying way.
So with the one of the 50 50 was and be a the other was coming out of my prepared remarks, and I was around revenue concentration.
Okay. So I guess, what I'm trying to get too is I mean, ultimately I don't.
I don't think we want people to walk away from the call thinking 50% of your client base or biotech in the Wall Street mindset of biotech is typically more precommercial relying on outside capital sources to fund R&D I mean, my sense is that number for you. These pre commercial early stage companies without commercial products.
My sense is that some number out or less than 20% of your of your business today, but I'm, just hoping to get a finer point on that.
Thank you for Alan is to give some quantification Eddie you.
You're absolutely right.
The biotechs, the we work with our well funded by tax that have a good robust and development plan in place that we've got an agreed protocol that we're working closely with them and we are up development on and obviously the funding part is.
Equal for eyes, and as we were always walk. So that's why it's typically fastest starting as much more predictable and out and I like to use at May be went up when I was just a few key product to have under development.
But we do be any from that type of company all the way through to the venue lots biotechs.
We are weak I love repeat from them. So we would talk to a 50% by Texas is all solid companies with good strong cash positions with the decline in place and even some of a larger pharma clients.
Well not mix comes strong strategic solutions, we also do a lot of.
Got it registration war and it's more like we have got biotech divisions, maybe the acquired by Stakes in the past that we were working with and so we want and type of that fashion. So yes, it's no dramatic shift change from the box.
We have set we notice that we are we're targeting more a new clients, new by taking not to them and growing and growing at our new franchisees for the future.
Yes.
That's really helpful and.
Just to just a quick.
Different slant here.
Two of your public peers have in the last few quarters announced some outsized cancellations relating to CNS categories, like maybe Alzheimer's and others.
I'm just curious do you can you talk a little bit about your exposure in the CNS category is there any abnormally large contract exposure that you worry about these days based on what we've seen with some of the gyrations around CNS and also members in particular.
We don't have anything that I mean, we always get surprises we've had a couple issued already we are Dennis we find it typically that there's more modifications on the conduct of the trial as we progressed. It may want to change dramatically, we're seeing a lot more of that.
But going to if we can accelerate in any ways or I guess, maybe some change that they may want to either ex include or exclude certain geographies and you know we're finding a lot of choppiness and just changing their mind not reflection, sometimes from AG somebody cancellations it would be seen coming through its not really from a bakery caf.
Degree, we are saying Oh, it's going to kind so a lot of as and in some cases with initial particularly with the pharma clients. We're finding that date before we even stop they might want to modify and we're always looking at it to be Kate. This is a cancellation is it as a new studies of giving as close enough that we could just actually run it.
And we'll take take any cancellation and with that always making that judgment and so but we do look at book of business. We look at any cost degrees with things that we think may cancel and to backlog at risk. That's a category. We always watch very very closely good Alex is determined.
The risk associated with a backlog conversion to the next quarter. So we don't really forecast much revenue from anything in that backlog at risk. So we can actually held for Jack did meet show that we've got a pathway to guidance.
Yes, that's sounds really good I did not quite sure you guys get full credit for the quality of your bookings but.
That's that's one guys opinion, thanks very much for all the details here and I'll cede to the next door color. Thanks appreciate that thank you.
Thank you and our next question comes from the line of Sandy Draper with Suntrust. Your line is open. Please go ahead.
Hi, Thanks, very much just a couple of hopefully fairly quick ones I jumped on a little later I apologize if either of you mentioned this in your prepared remarks, well if any huge huge drop but your backlog conversion dropped down to 12.5. After been stable 12, seven just wanted to see if you guys had thoughts on that it's that sort of.
New stabilization of the goes up or if were sort of be going to be persisting in this sort of gradual downward trend.
No. Its ended as Mike we can we continue to believe that this is kind of the bottom of the trough you know if if I would have adjusted.
My revenue towards the guidance rates that we used when we issued arc your guidance. After June 30. It has been at 12.6%. So I think we've hit that trough and that's our expectation is that we'll start to trend up from here, we don't expect a significant step down going forward.
Okay, Great. That's helpful. And then on the margins I think I remember you, giving a comment back and maybe the fourth quarter about thinking about 20 to 30 basis points at a gross margin expansion for for this year looks like by my calculation based on a reported basis. If I just look at it service revenue.
And cost direct costs, you're actually trending a little bit above that.
Is that accurate and what sort of what's going better end and how do you think about longer term, where you see gross margin shaken out.
Sure.
Yeah, We had said 50 to 60 basis points of improvement.
Was what we quoted historically, we knew that the first half of this year was going to be slightly ahead of that number because if you'll recall we had some heads that we had hired back in.
End of 17.
Had some reprioritization of some big studies and we kept those staff on hand to redeploy them later in the year.
I do expect that you will you will see margin continued margin expansion in the remainder of 2019, but it will be more in line with what you saw in Q3 as opposed to what you saw in Q1 in Q2.
Okay. Thanks.
Thank you and our next question comes from the line of.
Your line is open. Please go ahead.
Great. Thanks.
So just modeling questions here I guess can you speak to plans for for debt pay down on the back of repurchasing activity in the quarter in I guess quarter to date from a repurchase perspective, and what does guidance assume in terms of share count and interest.
Sure.
So depending on the acquisition front I would hope that given how the refinances worked out this roughly 200 million that'll be outstanding on the revolver and then we'll have the billion dollars on the term on a I would hope to pay down that 200 million if.
Possible in the quarter, because we did cut off or Q3 debt payments as a result of entering into the refinancing.
On the share count front.
I think we'll probably I think we should be in that.
Kind of 60.
Let's say for the quarter itself say somewhere between.
You know roughly 64, five to 65000 shares outstanding depending on where the price moves in the dilutive impact.
Of our outstanding options.
And with respect to interest at expected obviously to be higher than it was in in.
In Q3, and depending on where we.
Payments, we make on the revolver I'd say, it's probably going to be somewhere between probably say 11 million at $12 million.
Okay perfect. Thanks.
Then.
Just general trends in our the competitive landscape I should say a crisis, the aerospace and any kind of changes in pricing environment that you're seeing any creative bundling tactics or anything that had come out of the would work in the past quarter.
I don't think I've seen anything from a pricing perspective, that's been any different than what we've seen in the last three quarters or two quarters.
Anything on from your perspective goals I don't know only thing I would say side, where you know we have no im seeing more use of.
Our mobile platform plenty from six.
We are seeing that it's being used more and more another clinical trials and and company, we've got and safety child's dollar and fly at various stages upbeat and working closely with using the mobile technologies and decentralized model. So.
So we can continue to expand that and of course dot in conjunction with our symphony data and the real world evidence.
It's really high we're helping shape, where the market is going and we had at the forefront of ensuring that where they have to support our clients as we get through this change.
Okay, great. Thank you.
Thank you and our next question comes online.
Yes.
Please go ahead.
Great. Thank you for taking the questions I wanted to go back just to the data solutions business. If you don't mind. So no growth in the quarter I believe is about 2% so kind of how does that compare.
Your own expectations, what's assumed in the fourth quarter guide and what's realistic as we move beyond the fourth quarter.
It was it was slightly behind where we thought it was going to be either for the quarter to be honest. There were a couple projects that ended up.
Because of trying to get the deliverables finalized end up pushing into the fourth quarter.
But.
I think overall, we're still expecting the full year to be in line with where we thought it would be when we reissued our guidance at the end of Q2.
And then I know you made several comments about.
We have opportunities in the recent deals that you did about you know enhancing their product offering but can just remind us.
So how we think about not necessarily what's going to be for 2020, but how do we think about the trajectory the business overtime kind of what do you aspire to get that business up two or just maybe a range of growth.
We've actually win and we see this as an opportunity to those Oh, we have a lot of growth potential because we were doing a strong compared to doesn't feel we don't have a huge amount of market share and we believe there's a lot of low hanging fruit and we when we actually motor when that.
Quieted, we thought we'd get once we got to under an under our belt and getting going it could easily get to sound way double digit growth.
Is that we're going to be the challenge it what's flowing that is not how do we get to VP of double digit growth year on year for the next few years.
Okay, and then Collyn I think you are one of the only CEO is a few quarters. It go to discuss maybe a pause with some of the customers around drug price concerns I don't think that's come up again, so maybe that was just more of a temporary factor, but how would you characterize.
The decision, making and or the tone of business.
If you what's going on in Washington.
Well I mentioned these things because we have what I'm talking with declines that obviously talking cell phones and.
You know part of our full rationale, but refocusing on biotech was.
Big pharma that actually showing the more and concerns with the political landscape and with pricing and you know that they are they're always preparing for worst case scenarios and the trying to de risk as best as the time and we've seen that impact we stay close with them, we've got lots of folks into our business.
Is that worked closely with that leadership team because of the strategic solutions nature of their business on the there obviously the ticket Isaac as a strong consumption.
Thank you, so who knows what's going to shape up late but are you know certainly on the radar big time, and we try to make sure that we understand the effect of that and if there's anything we need to consider to do today.
Okay, Great maybe final just on the burn just just wondering how we think about I know last quarter, you talked about maybe an increase in mix of business ready to burn so how do we think about the outlet fever.
I think when.
I think for fourth quarter I think it as I said earlier I think it's going to be.
In line with what you saw in Q2 and Q3.
I think as we push forward into 2020, our expectation is that that.
That will pick up it obviously will not.
Get back to the levels that you saw in 2017, because I think we've talked about that flu study that we had there in 2017 that we felt like artificially inflated that number but I do think you should see an uptick.
Going forward, but obviously, we're in the process apparent R 20, 220 budget and I'll be in a better position in February to give you an idea where I think that goes with once we're done with that.
Great. Thank you Mike Thanks, Kyle.
Thank you and our next question comes from line of Stephen Baxter with Wolfe Research. Your line is open. Please go ahead.
Hi, Thanks, I wanted to ask about gross bookings when I look back two years. Prior to 2018 Q4 typically represents the largest contributions to the full year amount, which I assume is driven by the planning and budgeting process at large pharma clients I was hoping you could discuss your expectations are booking seasonality this year and whether you think this looks more.
More like a normal year or is there some other progression that we should keep in mind that I've a follow up thanks.
No. We're looking at the quarter I think we we see a pathway for.
Like getting to that bookings were looking for but.
Yes, so many different side does that fall into that you know I need a detailed a strong operational teams Eddie so we tried to pay whereas the areas that we feel strong and yes. There's a couple of clients are giving this somewhat this year, but it's not typically at end of business cycle and.
Because when not if they've really got to get these studies started out as and when you can't just wait to that end of the year and maybe some things that passes come out that way and we certainly have a fish and we and.
Maybe even biotechs and just wanted to get at South deep and maybe some other metric that theyre going to get it started in the area and that has some natural push but does nothing on an RFP view that seeing that does a speaker anything for I think there's we've got.
Good pipeline that we see and because we're certainly got past weight to the number one to achieve.
Got it Okay, and then just drilling down a little bit on the customer segments like I believe that I heard your revenue said that about 50% of bookings are comment on the biotech side.
So even with flat gross bookings at the company level that would imply biotech bookings are growing at a fairly strong base.
But I guess the other side of that coin is that it would imply pharma bookings are down and you did talk about some of the challenges there with reprioritizations and the like so I'm wondering whether we should think about that is widespread within your large pharma customer base or isolated to a smaller group and then finally do you have any visibility into when you should sort of flatten out or normalized.
Yes, thanks internationally, because yes, that's how we fell as its getting this year, that's full year, there's been more sort of way and flattening off and that by large pharma and Fortunately we go I hate it out by the business development team focusing in on biotech and I love New clients. This year as spending that time and not shutting them.
In bringing in AG.
Opportunities so.
On the last biotech I mean, what you'll you'll recall that last year, we went and you pick out partnership, but we won a lot study with Dot Dot you and then you partnership, but which we actually took into backlog, but then be guys. What it might be stopped they wanted to change priority and so we've actually had to pay dies on cancellation and it was quite substantial.
So I'm not to get something else, we done and we're expecting to get the Rio Award I knew guys or whatever it is going to be very shortly so.
There's a lot of that big pharma is where we finding that they're going to vary cast with up to be prioritizations. Yeah. No doubt there thinking about what steps are going to do and there are other factors that come into play that we just don't get shifted I'd say the opportunities to discuss with them and so there's some things comes is about the surprise to us.
Yes.
Okay. Thanks for all the color.
You're welcome.
Thank you and again, ladies and gentlemen, if you have a question at this time. Please press Star then one.
We do have a follow up question from the line of David Windley with Jefferies. Your line is open. Please go ahead, Hi, Hi, just said to two quick follow ups. Thanks.
Like we had talked about some line of sight that you had to.
Efficiency improvements from rollout of technology, both at one one platform last year, that's helping this year in one platform that's rolling out now implementing now.
The gives you I think some line of sight.
So nice cost.
The frail in 2020.
I wondered if you could elaborate on that how much of your margin improvement outlook does that kind of give you line of sight to next year.
I think Dave until we actually logistics up budgeting exercise just now, but you're correct that as the two new systems on one highs enrolling this year in and it really takes another year before we get the still effectively efficiency. The other one has actually been causing.
As a lot of mine you reworked.
And that will not be implement the till the end of Q1 next year.
And we'll be going through next year. So I don't have you expect huge benefits from it next year, but it certainly paves the way for future. We always look is as we say for improvements in our margin every year and we've got a number of little things that we're looking out to help that improvement. So we'll as we as we approach for Dave.
Things will will be thinking I have we continue to nines and performance I thought delivering an improvement to bottom line.
Thanks, and then my second question is you made some general a reference to bringing in new leadership, a I think in the last just couple of months Margaret Keegan has has gone live with you for my Q.V. I wondered if you could talk about what she's bring into the organization.
Well you know obviously a lot of experience and we are.
It's been an industry along times, you've been a senior leader.
And she had an immediate strong fit within our company culture, and so we were having important between the rest of the management team and not only with market Keegan, but with Truskin Enzo at meant that all of a sudden where you are able to.
It's more attention on a day jobs rather than covering the.
The oldest exit duties and so it was a market and Chris of both committed made an image and Pat has taken a lot about the north of the rest of the mine has been as always is to give us more focused mining mining is able to then get the hiding dine and disciplined so I think that helped us get did I really strong.
A question and that's why I was mentioning we had everybody together, obviously and.
Positivity was just palpable it was great to hear they and see the energy the everybody hide and we're starting to see things coming through that really positive that we feel a settings. So it was up really nicely for next year.
I appreciate that color. Thank you.
Thank you when we have another follow up question from online.
Bank of America.
Please go ahead.
Hi, Thank you for the follow up.
So this is related to the very first a question on mature Canadian so organic growth, but coming ahead of our expectations in pretty cute, but yet you said that it was in line with your expectations and so looking into four to we do know that I guess seasonality in the data solutions business is typically strong.
And you're also all around on the overall company basis Youre facing a emmys your prior your comp and so.
Can you tell us why you still expect to come in.
At the midpoint of your organic growth guidance of 6% to 8% and because that would essentially implied a sequential deceleration from the third quarter did you have any pull forward stream to the preclude you from four to.
No, we still want to see acceleration in the fourth quarter.
From an overall dollar perspective from revenue for the thing you've got to remember is that there's a lot of you know vacation and holiday time in that fourth quarter that creates a little bit of.
Fluctuation in the number hours that are available to work, especially on the product registration side. So I do expect to see growth.
From a revenue perspective, and obviously the pick up that you'll see in strategic solutions I. Just I think Dave's question was more moving us towards the high end of our guidance and I just wanted to sit everyone's expectation in terms of where we feel that we're going to fall out.
Is more around the midpoint that may be slightly above the midpoint, but I didnt want to get everybody's expectations outpacing reality.
And do expect.
Gross margin to expand on a year over year basis in Fourq, you as well.
Do.
Thank you.
Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to.
Shannon for any further remarks.
Oh, Thank you everyone for participating in our call today. If you have any additional questions. Please feel free to contact US. We hope you have a great I forget the thank you.
Ladies and gentlemen, this concludes today's conference.
Everyone have a great.