Q3 2019 Earnings Call
Ladies and gentlemen, please continue to stand by your conference call will begin momentarily as a reminder to queue up for a question. Please press. The one followed by the four on your telephone at any time during the presentation. Once again, please continue to standby and thank you for your patience.
[noise], ladies and gentlemen, thank you for standing by welcome to the <unk> third quarter 2019 earnings Conference call.
During the presentation, all participants will be in in listen only mode.
As a reminder, this conference is being recorded Wednesday October Thirtyth 2019.
I would now like to turn the conference over to Andrew Marr quick Senior Vice President Investor Relations and Treasury. Please go ahead.
Thank you.
Good morning, everyone. Thanks for joining <unk> third quarter 2019, earning school.
With me today already pretty Sweet Chairman and Chief Executive Officer, Michael Macdonald, Executive Vice President and Chief Financial Officer.
<unk> Executive Vice President and General Counsel, Nick Child, Senior Vice President financial planning and analysis and Gen Holecek Senior director Investor Relations.
Today, we will be referencing a presentation there will be visible during the school for those of you Wanna website. This presentation will also be available following the school only events and presentations section of our TV a investor Relations website. That's why all built like you've Ya Dot com.
Before we begin I would like to caution listeners that certain information discussed when management. During this conference call will include forward looking statements.
Actual results could differ materially from their stated or implied forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K , and subsequent SEC filings.
In addition.
Well discuss certain non-GAAP financial measures on this cool we should be considered a supplement to I noticed substitute for financial measures prepared in accordance with gap.
A reconciliation of these non-GAAP measures for the comparable GAAP measures is included in the press release and conference School presentation.
I would now like turn the corner I, just want chairman and CEO already be.
Thank you Andrew and good morning, everyone. Thanks for joining our fourth quarter 2019 earnings call.
I'm pleased to report that the first quarter.
He is a continuation of the Saudis momentum we've had since the beginning of the year.
Once again revenue adjusted EBITDA and earnings on came in at the heart and Oracle's all guidance ranges, even after the currency you five.
[noise] third quarter revenue of $2.769 billion came in $14 million above the midpoint of our guidance range.
$34 million above the midpoint of our guidance range when you adjust.
For the foreign currency impact.
Revenue growth was 7.9% on a constant currency basis.
Actually when you adjust for acquisitions and foster homes for the total company.
Organic constant currency revenue growth he is already in the 7% range.
From a second segment perspective.
Technology analytics solution revenue grew 10% of constant currency.
During the quarter, we Mark you can you first to read of several tech business. Since we have acquired in 2018, and therefore the contribution to growth from M&A was about 200 basis points, which is half of what it was not cause.
Yeah acceleration of the task organic constant constant currency revenue growth.
Which came in at almost 8% this quarter was driven by the timing of our real world client engagement deliverables as well as accelerated technology deployments.
R&D solutions revenue grew 6.8% constant currency you scroll through rate included an impact from pass throughs of approximately 200 basis points, which was roughly offset by the contribution from M&A.
Contract sales and maybe Consumptions continues to demonstrate that he has turned the corner.
Growing about 5% on a constant currency basis.
This is the result of our strategy to integrate the business without commercial operations, we expect to see SMS business to didn't even with the flat year over year growth, we projected for the year.
After sustain modest growth in 2020, maybe in the low single digits.
Third quarter adjusted EBITDA of $593 million was towards the high end of our guidance range as I mentioned I'll technology deployments are driving our top line acceleration, but we also incur upfront costs would be deployments, which are.
Included in our margins.
So in this context, our adjusted EBITDA performance in the quarter was quite strong.
Adjusted EPS of $1.60 cents was above the high end of our guidance range and grew 12.7%.
Before scent beads versus the midpoint of our guidance was driven by two cents of strong organic operational performance and two cents below the line efficiency.
Let me give you some color on the businesses and our progress in technology I'm pleased to report that we now have over 17, well see he wins since launch.
In the third quarter Rome.
We signed 20 new.
C E deals, including a win win.
We the top 15 pharma clients too deep role you will see sales and marketing even be was.
And another win with the top 15 farm our client to the broad we'll see in Asia.
Both of these deals we lost farmers.
Has the potential for geographies as well as therapeutic area expansion.
Oh, the 20, new wins in the quarter.
15 were head to head competitions.
Again, the leading dominance incumbent in the CRM space.
And the two top 15 follow my wins.
Outright displacements.
Turning to real World.
We've spoken to you before about all success in supporting single arm studies using real world evidence.
All clients are increasingly looking to us for innovation in this space.
In fact, even just the last 12 months the number of projects. We are working on that use an external comparator arm has quadrupled.
For example.
Yeah. The recent win we didn't talk 10 pharma clients in Europe to conduct in hematology oncology external compared to a project.
Pretty equal to the successful the project was accused yes proprietary oncology network infrastructure.
It was huge guys to access a very difficult to find comparator patient population.
Oh, no more infrastructure allows us to provide our clients a faster and more predictable path to deep clinical insights on each patient populations.
And enables these kind of novel research.
During the quarter the real World team was also awarded the preferred provider partnership we didn't talk 10 pharma company for hours equal or electronic clinical outcome assessments.
Energy platform.
Our newly launched cloud based technology platforms as a simple interface to collect direct from patients clinical data.
Disallow sponsors to better understand and improve the patient experience.
Resulting in reduced timelines improved transparency and real time insights about patients.
Moving to R&D the team continued their strong momentum and another quarter of extending bookings.
For the quarter on a contracted basi some excluding pass throughs. Our book to Bill was 131 encoding passed through the R&D as book to be was 124.
We are reporting this metric for transparency, but as we've said many times before we think is much less meaning for then services bookings as the estimates and timing of pass throughs can vary greatly quarter to quarter.
For the last 12 months ended September Thirtyth contracted book to be the ratio was 140, excluding reimbursed expenses and once 36, including reimbursed expenses.
R&D as backlog of $18.3 billion grew over 11% compared to the third quarter of 2018 and importantly.
Our next 12 months rather than from backlog increased by a further $12 million to $5.1 billion.
Growing 10.6% year over year.
Of 13.3% if you exclude Boston.
This important for indicator metrics supports our expectations of continues RMBS revenue growth acceleration into 20 Twond.
Demand for our coal powered capabilities continues to be strong.
We now have 13 loss pharma clients using our differentiated solution.
Further during the quarter, we were very excited to secure in preferred provider agreements.
We the top 10 fall my time.
He was previously they looked out the counts.
And our achievement resulted in the displacements of two competitors.
Let's call them, particularly prominent competitors.
The environment for R&D and outsourcing remains very healthy.
Our pipeline of RMBS opportunities, whether you look at bars or number of RFP.
Continues to be at the same strong pace as 2018.
And that was a record year for us.
Our pipeline is growing high teens year to date compared with last year.
BBP segment.
We try to know is often the subject of questions remains very healthy as you know 2018 was a blockbuster you're in terms of funding, but you are today.
2019 funding is tracking seeming to into 2017, which was also a very strong year.
The pipeline of late stage molecules continues to expand growing 8% since the end of last year.
And interestingly, 11% oncology.
Once again.
Another strong quarter across all of our businesses and I'm on a now turning to Mike will review the financials in more detail.
Thank you already and good morning, everyone.
Do you have seen we've had another solid quarter, let's turn first to revenue.
Third quarter revenue of 2 billion at $769 million grew 6.7% reported at 7.9% of constant currency.
Revenue for the first nine months to the year with $8.193 billion and grew 6.1% reported and 7.9% at constant currency.
Technology and analytics solutions revenue of $1.095 billion grew 8% reported and 10% at constant currency.
Second analytic solutions year to date revenue of $3.272 billion grew 8.7% reported at 11.4% at constant currency.
R&D solutions third quarter revenue of $1.466 billion.
Grew 6.1 for Senate axle FX rates at 6.8% at constant currency.
Year to date R&D solutions revenue of $4.317 billion grew 5.4%.
Actual FX rates and 6.5% at constant currency.
Third quarter contract sales and medical solutions revenue of $208 million grew 5.1% on both reported and constant currency basis.
Contract sales and medical solutions year to date revenue of $604 million declined 2.1% axle FX rates.
And a half a percent at constant currency.
Let's turn now to profit.
Adjusted EBITDA was $593 million for the third quarter and $1.758 billion for the first nine months at 29 team.
Third quarter GAAP net income was $57 million and GAAP diluted earnings per share was 29 cents.
Year to date, GAAP net income of $175 million and GAAP diluted earnings per share was 87 cents.
Adjusted net income was $318 million to the third quarter and $933 million year to date.
Third quarter adjusted diluted earnings per share grew 12.7% year over year to $1.60 cents.
Year to date adjusted diluted earnings per share of $4.65 grew 14.8%.
Let's now turn to R&D solutions backlog.
Yes.
Closing backlog at September 32019 was $18.3 billion and the amount of backlog that we expect to convert to revenue over the next 12 months.
Grew by about $200 million to $5.1 billion.
As already mentioned, we are well positioned for further acceleration in R&D ESS revenue growth in 2020.
Let's now review the balance sheet.
At September 30, cash and cash equivalents totaled $863 million and debt was $11.542 billion, which resulted in net debt of $10.679 billion.
Our net leverage ratio was 4.6 times, our trailing 12 month adjusted EBITDA.
Cash flow from operating activities was $330 million in the third quarter, Capex was $149 million and free cash flow was $181 million.
We repurchased $313 million of our stock during the third quarter, including 157 million from certain of our remaining private equity sponsors.
Private equity ownership now represents approximately 5% of our shares outstanding.
[noise] before we turn to guidance a few words on FX.
As already mentioned earlier the Q3 revenue number. We just reported include the impact from FX of about $20 million versus the last time, we reported.
Full year revenue guidance previously included a 110 basis point impact from FX.
This is now increased to 160 basis points.
[noise] as a result of our strong year to date organic performance, we are reaffirming our constant currency full year revenue growth guidance at the midpoint and tightening our range.
As you know we raised our full year guidance last quarter largely to reflect our stronger organic performance.
There is no change here and we still see good momentum on the topline.
On a constant currency basis, we now expect revenue to grow 7.3% to 7.7%.
Reported basis revenue growth is expected to be 5.6% to 6.1%, which reflects the additional 50 basis point impact from FX that I just discussed.
Therefore, our full year revenue guidance is now expected to be.
[noise] between $11 billion and $11.050 billion.
Adjusted EBITDA guidance has been narrowed and reaffirmed at the midpoint.
We now expect full year, adjusted EBITDA to be between $2.393 billion and $2.407 billion, representing year over year growth of 7.6% to 8.2%.
Adjusted diluted EPS guidance has also been narrowed and reaffirmed at the midpoint. We now expect full year adjusted diluted EPS to be between $6.30 and $6.40, which represents year over year growth of 13.5% to 15.3.
Her said.
As expected our adjusted book tax rate was more favorable than normal in the third quarter, but we do expect us to revert back in the fourth quarter and we're still estimating about 22% for the year.
[noise] this guidance assumes that foreign currency rates at September 30 remain in effect for the rest of the year.
Now turning to our resulting fourth quarter 2019 guidance.
[noise] for the fourth quarter revenue is expected to be between 2 billion and $807 million and 2 billion and $857 million representing growth of 4.4% to 6.3% actual FX rates, assuming a 100 basis points impact from.
Foreign currency year over year.
From a segment perspective, we expect fourth quarter growth in technology and analytics solutions to moderate sequentially, reflecting the strong Q3 organic performance.
A lower contribution from M&A as well as a tougher expected cost year over year.
R&D assets, we expect year over year services growth to be somewhat stronger than what you have seen in prior quarters and see if the maps, we expect the trends remain positive and consistent with our expectation for flattish revenue growth for the year.
For profit, we expect adjusted EBITDA to be between $635 million and $649 million representing year over year growth of 8.9% to 11.3%.
Adjusted diluted EPS is expected to be between $1.65 cents at $1.75 cents, which represents year over year growth of 10% to 16.7%.
So in summary, we delivered third quarter results at the high end for above our guidance ranges.
Revenue came in at the high end of our guidance range, notwithstanding an approximate 20 million dollar impact from foreign currency.
Technology, and analytics solutions, and R&D to listen to sustain their strong momentum.
I will see he now has almost 70 wins since launch, including two important wins with top 15 pharma clients in the quarter.
The R&D team secured another strong quarter of net new business with backlog and next 12 months revenue from backlog, both growing double digits year over year [noise].
And lastly, see SMS continue to improve.
With that let me hand, it back the operator for today.
Thank you.
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Our first question is from the line Eric Coldwell with Baird. Please proceed with your question.
Great. Thanks, very much a good morning first off just two questions. The new large pharma when I knew it was a task client.
It also a commercial client prior to the R&D wind.
Was any of your existing sales to that form a kind of a driver of this new opportunity number one number two.
Could you give us a sense on maybe a framework of how to think about sizing that either in terms of bookings contribution this quarter over the next year or maybe long term revenue growth and then I have a maybe a quick follow up thanks.
Yeah, Thanks, Eric looked at the.
We're very excited it took some time you know as we've said many many times.
I'm looking previously Lucked out accounts as it were known industry was a major.
Goal for us and we've done the few by now at least one was very important win that we I've been working on.
You know literally for the past couple of years.
We do when a couple of small studies, where they wanted to test out on capabilities and see whether it was really real value there and that prompted them. So again the main tregaron driver for the displacing the here.
It was all new said, although small detroit or capabilities.
And they decided to essentially replace their existing.
Provides us with with US I can't say much more bookings into quarter I.
Okay, I think who can get you got to full I, but I don't think he was a very significant the.
The preferred provider arrangement was executed in the quarter, that's why we're reporting but.
There was nothing much there the baseline for that particular climbed is very strong.
And we do expect that this is going to result in.
You can just in bookings going forward.
In just quickly my and my follow up here at the that client I knew you displaced too I believe you also had a another public CR road that was that can that participated in that win. So there are two with you in that that new arrangement is that correct, yes yep.
Good thanks, guys.
Thank you.
Thank you.
Our next question is from the line I've ever been right.
[noise]. Please proceed with your question.
In terms of new business wins in the quarter I mean, it sounds like you're still seeing the traction across large pharma, but can you speak to some of the traction across smaller emerging Biopharma segment that was an area of focus during the Investor day, and how should we be thinking about tourist attraction overall cost that cohort. Thanks.
Yeah, I mean, Nokia in all areas, specifically asking about coal powered smaller trial is correct.
Yeah, and traction across them Martine bio pharma segment, the smaller biotech.
Yeah. So we.
As he would want to be a balanced and and we all balance we lose days of human solutions.
Probably more than two thirds of our awards were will you be clients and I've said before he was a lot easier because a single decision making things.
Faster decision cycle in general, let's silos to go through.
But like the way long pharma has been adopting the solution and.
Today, I think we have almost $6 billion of awards.
Bipolar doing I believe that's right there on Smarttrials and on on the dollar value almost two thirds of that easily large pharma, but that's you know isn't quite significant though in the quarter.
It continued that kind of the of a breakdown you gave about two thirds almost two thirds, our pharma and the balance PDP and as I mentioned in my introductory remarks are very.
I'm, a strong continued strong MVP funding and bottom and you do they got their level of 2017.
Okay, great. Thanks, and then on E and you've made considerable headway. There were 20, new field you mentioned I guess can you quantify how much that's lifting the tech segment tariff that <unk> segment and can you speak to what's driving some of those business wins in do you expect that momentum to continue.
Yeah. Thanks, Yeah, so as you know.
Within into markets, we will see for I think we announced the launch at the end of 17, and we really took into market beginning of a team. So it's not even two years, it's a you're in Threeq orders.
And we've had over 17 wins to date, it's a market that.
Occupying largely by you is that one.
Anthony and we believe them.
Feedback from our customers it is that out.
Products and solutions or.
Superior in terms of functionality cost to deploy and.
Efficiency and the number of others are aspects so we.
Again want to over 17 or the new.
Customers for these new products the.
Sales cycle is fairly long, that's why people like technology, it's a.
You know once you're in your you into a long time, so it's hard to displace existing.
Solutions.
Enterprise wide solutions, often and the.
Switching costs are very high.
Blood. So we're very pleased to have one.
So many new engagements. He takes time to deploying you see to global deployment. It could take go you or more potentially two years, if it's no longer countries.
And then the deployment phase does not confused too much.
So.
Yep.
Not so profitable is more labor intensive the into phases and of course the.
Upside is a wind or the.
The solution is being used by the client and they'd be as size licenses, we charge, which are which is when you when we recoup our investments and and contribute significantly to with both revenue and profit. So I think in the quarter.
There wasn't much from the with no of course now can they will be some contribution from implementations over the next 12 months, but from these new wins, but I'm really not much to profits.
Okay. Thank you.
[noise] thank him.
Our next question comes from the line I spend Brennan with <unk>. Please proceed with your question.
Great. Thanks, or am I was just hoping just on the R&D solutions could you just walk through I know you had to pass through kind of headwind this quarter, but in terms of getting to the organic growth I know you discuss M&A as well could you just give us kind of what was your organic growth this quarter and when we think about what's expected kind of going forward I know the expectation is that continue to accelerate as burn rate.
You view you basi burned the very large backlog can you. So can you just walk us through a little bit <unk> about organic growth in the quarter and kind of what the outlook as.
Sure. So why is it for the total company [laughter]. We are we were in the quarter.
For what you when you Peel out the.
The.
Positions contribution and the boss twos.
Oh for the quarter total company was 7%.
As for the.
Technology and anything solutions, we were at almost 8%.
And for the all and solutions was 6.8% yeah, M&A a pass through a roughly offset right offset each other.
Got it and then and then maybe could you speak a little bit more too.
You know the large backlog and in terms of the burn rate kind of how we think about that kind of going forward I know the expectation was as you move through so many older quintiles backlog in into the next Gen backlog that you would begin to see that really convert so I know, we're just guiding for Q4 right now, but just kind of just kind of walk us a little bit about how to pick up.
Out a you know that large backlog burning going forward. Thank you.
Oh, yeah, yeah, so that it's Mike I'd say that.
You know you've seen if you calculate backlog burn just based on revenue over starting for backlog, obviously, we've been adding backlog at a very advanced rate and so that percentage naturally.
Decreases and we're not it's not one that were overly focused on I think the takeaway here as we mentioned in our prepared remarks is that we feel like we're very well positioned a bookings continued be strong we had a very good.
Complement of core clinical bookings during the quarter in particular, and we do see the growth accelerating and R&D s. as we head into 2020, as we said in our prepared remarks.
Great. Okay I'll leave it there thank you.
Yes.
Thank you.
Our next question is from the line of Ricky Goldwasser with Morgan Stanley . Please proceed with your question.
Yeah, Hi, good morning, So when we think about the fourth quarter guide and de conversion from revenue to EBITDA in terms of gross.
Hi, good how close is around two times to one point in time.
I just a range in terms of growth in more significant conversion that gets you guided to on your and they stay. So if we think about kind of like it makes us business for the fourth quarter, how should we think about it.
In terms of where we are in PMT trial conversion aim in any idea on things that are impacting fourth quarter guide in pain, how should we think about this within the context of soft in the term kind of should we think about this.
Signed thing I'm going to upside opportunity to that EBITDA.
Growth guidance that you provided a back at Investor day.
They refuse under sorry kind of current car for your question, you're asking about EBITDA ramp going into the fourth quarter and it doesn't outlook.
Yeah, So EBITDA growth rate for the fourth quarter, everything kind of like nice acceleration or just kind of like the revenue growth. So how should we think about it within the context of the I'll, Let me turn God that you're providing ananda yeah.
Looking at the fourth quarter in particular, I think if you look back to last year, we see a sequential ramp you pretty key pool for EBITDA could we had about 10% growth pretty good on the fourth quarter last year and I'll start this year and buy something very similar to the full code around the standard for all business I mean, as a reminder, we usually see a technology and analytics solutions business ramp into food gold.
Not revenue is high margin revenue and dry spell noble sequential margin improvement during the year and for the last few years during Q $40 come in around that same kind of proportion of full year, even though I think as you think about the medium term and even though for US. We've said that we're kind of delivering a topline acceleration them.
Oh boy set that we don't want to give up on a point of revenue bird I'm for margin expansion that can deliver a little more value or the time I'm now I think you're very familiar with our history and our commitment to margin expansion and we've also said that we as well as delivering revenue acceleration, we also have woman who deliver or not.
It's an expense as we go through with now it is not going to be to this thing right that you've seen in the phones, but we're committed to that but we need to face them that with this acceleration is coming from technology deployments, which price pressure. The margins were investing we still investing in the process, whether or not be in emerging markets, especially with the areas. We've got the.
During employees into new recruits to deliver on the clinical trials signed as we've won because we're going to launch backup deliver on and we've also got to bring paper and to deliver on the deployments are roshe knows though as well as the other two top 15 comic lines that we secured this quarter. So there's a lot going on in the base way with the mix it to expansion I think the Q4.
Ramp is no more on a sequential basis, and we kind of laid out what to expect for the next few years.
Okay, and just one follow up when you think about he said, taking the quarter M&A and pass through offset each other so how should we think about TV M&A pipeline I'm in acquisition just interesting just kept will decline it's I'm in for a criminal justice here and into next year.
Yeah, I think we've always said, we look to deploy between a billion than a billion and off every year towards M&A and share repurchase and the size of share repurchase will obviously depend on M&A opportunities, but if you look at history on average we spend about $500 million year on them and I feel that stepped down a little bit I think so called if you have reported about a billion dollars and.
And I was really going with share repurchases, we see the stock because a good investment.
Okay. Thank you.
Thank you.
Our next question comes from a line of Tyco Peterson with JP Morgan. Please proceed with your question.
Hey, Thanks, I'm curious if you could talk about the impact to you know backlog and revenue going forward both for the Biogen All time as you know a decision did you add back to 390 million that you'd previously pulled out and then also on the new preferred provider wins, you know what does that do do the revenue ramp going forward.
[noise] [noise] broke even though the good news with US is done no. One a client has an impact you know one way or the other but we have I want to remind you over 8000 clients globally and this is precisely the reason why when.
At that particular clients you know were regulation should with Biogen, obviously, and we're committed to our strong partnership advance the science.
But when they decided to.
With that trial on hold and we took that I've made that adjustment out of our backlog.
You know we didn't change our revenue expectation you will recall that.
So just has a on the downside if you didn't affect us the so too on the upside is no one client that he's going to change our overall guidance for the year or in the U.S the head.
We did our investor day indicate toward view that our expectation for growth.
Over the next three year period.
2020 to 22.
The was higher.
Growth rate as a company overall and for the R&D and to tell the segments in particular.
Well and that includes data included the expectation that we were going to win and we still expect to win more preferred provider my reporting to you that we did song that piece of provider agreements. These other company.
The assembly to support.
Those growth expected growth expectations, there was accelerated growth expectations with respect to Biogen again.
So for obviously there was just a decision to.
We applied.
The particular work associated with it hasn't been yet signs or a totally formalized and therefore, it's nothing the backlog I remind you that changed three years ago or proxies and only gone back on that for which we are.
Contracted for.
And so that's not yet there.
And then on Oh Cighi you know, it's great to see the momentum can you just spend a minute on you know what in your offering is particularly resonating relative to the competition as we think about some of these head to heads you know what what isn't really the differentiating factor.
Yeah, we've spoken about does these before it will not.
I wasn't sure yet and I talked with Andrew I'm going to see I think we've spent a long time in 17 building it the new offering that.
And one of the key moves toward for us with the ownership so schools, who oversee platform. We're gonna see on a a best in breed technology platform that it helps with us in terms of the functionality.
For us all southern beds multiple different functions or it's not just a CRM tool for sales were up to sort of brings into the mix marketing campaign management brings instead of mix I'm office operations soybean when you look at the likes of a launch from a bonds or even many of the 70 plus when do we want to date, because we like the fact that I can put this tool in the house.
End of more than one person within their organizations library sales rep in the marketing thing at the same until they have the same version of the truth. The sales rep becomes aware that the marketing thing to saying yeah email campaigns. They know what adult has done without they know the doctor is open to it and they requested more information available phones in social media and comment that amount it they've just been.
From a lot more informed the tool. So then the U.S artificial intelligence and machine learning and to help streamline the talk so I silos are up we'll get suggestions for meeting invites it will help place those calls in the south drops calendar. If its sales reps gets the stage, where they've got one last visit they can make it today.
Will you don't artificial intelligence to make next best Docs are recommendations and look out rankings adult as it is and then next best does that give them where they can have the most success. So really we're bringing a very intuitive towards a market that brings together multiple functions within an organization and utilizes AI and machine learning, but in Africa.
She was 100 gig platforming on site with schools as key as the there that could have great technology that they can folks on the platform and capabilities and it gives us the ability to really focus on building best in breed and user applications.
Okay, and if I could ask one last quick one are there any offsets on organic growth that you're factoring in your leaving it unchanged. Despite the topline momentum since we think about the fourth quarter are there any you know kind of headwinds that left on your guidance unchanged inorganic.
Well yeah.
Let me Mike gave a commentary in his prepared remarks regarding the fourth quarter I can cause wherever he saw an acceleration in the school to I think is you got to Q4, we see continued strength.
There is obviously a tough calling us when we started to see the acceleration in Q4 2018, R&D continue strengthening and services basis, we expect that in prison don't forget we see lumpiness from pass throughs and this quarter. It was about 200 basis points Edwin.
Via some that's kind of flat for the years Lisa.
Okay. Thank you.
Thank you.
Our next question is from the line of Jack Meehan with Barclays. Please proceed with your question.
Thank you good morning.
I want to go back to the two new Oh see wins, you talked about could you maybe just walk through the framework for why they're starting in one geography in.
The U.S. in Asia, and what's the timeline would be to expand from there what are they doing in other regions.
Okay, well I said before it's very hard to these plays a incumbent technology providers by definition.
We've said for a long time ago that that was our goal.
These are large companies multiple therapeutic areas.
Sales order geographies.
We very precise.
That's for each one of them in a very large geography, you was an Asia, respectively and for one of them, one particular till up yoyo.
HM we were able to to do the displacement now it's natural that that's the way. It works, we are working hard to expand our relationships with all customers.
And.
No we hope to expand from there.
Great and maybe just on the investment side. If I look you know the overall company level gross margins were down year over year, and I think down sequentially. So you know clearly there's a lot of investment going behind that when when do you think you hit the tipping point, where the level of.
Growth from these projects begins to accelerate to match the level of investment. So you had gross profit line that becomes more neutral.
Yes, we are more inpatient than you are about margins or you don't Trust me, we were working very hard on trying to or you know.
To even a.
Sustainable as margins I think it's a very very good level performance given the amount of investment in world that's going on.
The first one with I'd like to highlight these margin expansion can be lumpy between quarters and even years. Okay. When we talk about margin expansion, we look at it in terms of trend line over multiple years.
No. We've always said, we're not going to sacrifice topline growth for margins.
You can do the math.
One extra points of revenue growth.
There was did leave it was always more value to shareholders, then one extra points of margin.
[noise], having said that.
You know our history and Allstate admission.
And then he is that we not going to compromise on margins, we've committed to an expanding margin trend line, even though as you just pointed out there all quarters, where that might not be the case.
When you explained during our recent Investor Conference and every time, we interactions you guys that.
We have been investing for growth acceleration and that can cause additional lumpiness in multi extension, we've got the laws, who see deployments, we won Ross and noble deployments globally.
We are bringing in a suite of products to market. The we'll see t. orchestrated pinnacle trial, a suite of applications.
We've been investing seems the merger three years ago on on the smaller trial automation techniques are we continue to do that.
Virtual trials, you could be doing a very expensive data scientists and.
And software.
Experts you know we had their expense he we compete in the marketplace.
The view on employment the economy.
So all of that.
Has you know if we didnt nothing else certainly our margin contract.
That's not the case on on the trend line.
Of course, there's also a mix issue but.
Our data business, which is very high margin is essentially flat and the other businesses ongoing. These are businesses that will have as attractive margins.
We've acquired some businesses most of the time. These businesses are small rural properties or no profit margin contributors and that also adds to the or to the problem in the mix.
And finally I.
They had to see SMS business is improving but.
But you know it's supposed to other lower margins. So it will affect our money. So we are dealing with a.
Growth.
Horizon, that's a very attractive with topline acceleration.
Generally doesn't get to invest that's obviously headwinds to our margins.
Dealing with the changing the mix.
And that also heavily into our models. So we expect to see margin expansion resuming into fourth quarter.
That's what I expect.
Now that's.
In line with normal seasonality into business.
And [noise] book, we we all the highest margin performer in Switzerland into in the into being in the industry.
And you certainly if you compared to our a public concern appears on the on the clinical trials side on the C. O side by several points and so we continue to face pressure from competition, we squeezing that we've been gaining share. Although these competitors is one place.
They can go too.
And then we're trying very hard to to hold the line. So this is a complex were facing not easy its context.
Come in.
We are.
Profits above Oh midpoint guidance I think it's very good and we're very pleased to be about I know you're inpatient you'd like to see further margin acceleration in a week too and we expect that to happen you know over the midterm as we signaled although investor conference.
I appreciate it thanks, sorry.
Thank you.
[noise] thank him.
Our next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed with your question.
Hi, Thank you very much I Trust. This is the book to Bill metric is one that investors focus on a little bit and if you just kind of compare sequentially from twoq to Threeq you looks like I think from the reported number 1.35 to 1.31 can you just comment a little bit on is there is this just the vagaries of the Lumpiness.
Oh, how contracts pull out or is this quarter or have.
Any particular, you know anything different about it in terms of contract signings versus what we've seen from a prior quarters looks like Twoq was a particularly strong contract signing quarter.
You know there's nothing unique about quarters uses a exactly as you said it somewhat leases.
Lumpiness in close lender comfortably get signed I remind you that goal.
We all know contracted they see so.
The contract gets signed by the end of the quarterly to local races. Now it's going to be the next quarter. So I don't I wouldn't read too much the environment remains very healthy.
Our pipeline a 45 needs is going.
Yes.
Fuse.
Versus prior year.
It's really very very strong across the board, particularly stronger bookings I might add them.
To give you a bit more color on the 14 equal.
Side of the House leave me stronger mini I don't know when do you want to do those numbers, but.
In the full clinical side, which is the more attractive segments of where we do it's actually over 1.5.
The quarterly on new services bases, which is really what Matt is frankly, I don't know like people pay any attention whatsoever.
To be ratios on the.
Let's see so seems spaces that absolutely meaningless, the lumpiness and difficulty to approximately.
Past two payments as you know when you look at all members on an LTM basis, we have the big adjustment.
In the first quarter.
Which were just reminded of one of the rule by one of your colleagues and that was disproportionately weighted towards pass throughs. So really into two first of all we got to focus on NCM numbers and higher strongly encourage you to us from our peer that beginning December .
On the services revenue only because these.
Yes rooms are extremely lumpy. They can vary a lot by mix of business and there is a high degree of estimation.
No problem, you seek estimation judgment evolve and we want we tend to be extreme you can sort of the team.
So that's all see on that but again a win.
The rise of anything even conclusions one quarter versus the other disease.
It's very strong with gaining share we continue to have a very strong momentum on our bookings a teas exists executing superbly.
And Ah, it's frankly is exceeding our expectations.
Okay Fume on one follow up just tend to oversee he has been a lot of wins a number one or do you have the manpower to really deploy all these different wins, a you know it in a timely basis and then you know over how many years of of the 20 that you one I mean, how many years does it take to deploy them before they are at.
At a steady state, where you can kind of growing from there.
Okay, I think that last part of the questionable most of the those wins it's about the they are we in the mid size or rose 40 bps segment and those will take.
No more than a year to Detroit the loss pharma Deos again, if it's one country once they're up you're right. It's also about a year.
No I'd almost six months to you.
You know when you've got two large deployments like the rough way, which is in over 100 countries then that could take.
A couple of years, you're gonna have to a couple of years and then and then that's when you start seeing the wrong and the and the revenue and profit contribution we switch we are starting to see from two wins.
Last year.
So that should come in and at that time, you know in the who want to quantify I would say you know towards the the middle to end parts of 2020, we should start seeing significant.
Contribution tumbled those wings accumulated to date and asked to demand part where youre absolutely correct.
Disease, you know to someone else's question, who this is what is causing some pressure on all mountain is we've got to hire people, we've got too and they are expensive they are scarce commodity.
And so strong economy, then got so we we are we are facing.
Costly manpower deployments in the initial stages, but look we're here for the long term, we believe were much higher Marty.
I lose compromise longer term growth prospects and we don't want to do that.
That's a question.
Excuse that I think we're coming up on the cement from the ounces on squeezing.
One more and then I think they'll be on last question.
Thank you.
Our next question will come from a line of David Windley with Jefferies. Please proceed with your question.
Thanks, very much thanks for squeezing me in so we'll see I wanted to focus on pads with the.
Growth in Oh see in particular, you've talked in the past about kind of the three pieces of has been about a third a third a third I wondered if you could update us on the relative contributions of those I've I figure that may have migrated a little bit.
And if you could talk about or are you mentioned O C. P clinical trials and its progress maybe more specifically where is it in its go to market commercial availability have you want any clients there yet and then lastly, you talked about you have talked about in the past kinda.
500 trials on the smart trial platform and maybe 200 of those having completed.
Patient recruitment I believe if you could update us on any perspective around that so I snuck in three.
Hopefully you'll take them. Thank you.
[laughter] Lifestride three highly dresdner specific strong questions I know, we spend an hour on these okay. Let's could you take no you want to talk about quickly to bring down thousand times segment. I mean, I think we've told you before what I segment is roughly about 4.5 billion nothing you're right, Dave It kinda breaks out roughly into at the third.
The effect of that segment is the legacy RMS Dicer, offering, which is kinda script and whole side of the data, which we pretty much sell through every one but in order to grow in other areas. We maintain not business flat. So you should expect kind of flattish growth in that area the to grow stronger than the in that segment of really real world and technology, they're growing nice double digits.
Real World, obviously, a little bit of acceleration this quarter as while driving organic growth for the segment out to the 8% and often tech continues to be strong as well and then you like what kind of analytics and services based businesses, which are kind of in not mid single digit range. They could be a little bit lumpy, maybe high singles low singles, but kind of mid single digit growth on average I think so like.
Yes, you to that I'm kind of the growth rate. We're seeing now the segment in engine was high single digit organic growth I'm in the acceleration going forward will come from those kind of the there is a high quality high margin, a future, which is real world and technology and the question was and what would your second question again Dyskinesia T O C.
And where it is in its own commercial traction.
Yes, the traction that yeah, I think will the branded offering we've said before we're looking to deploy that in the end of 20, and it's coming up to the end of this year. So the full suite isn't in market yet we've had success with different policy offerings. So if you look at all regulatory compliance.
Hi Tech platforms vigilant since I will now around in the market. We've had good success that mobile see already we've actually got the bulk of all CR raising the organization actually using most LCR Ryan I'm, just trying to sell that cellphones is off each CMS as long as in the market as long we've had some good success I'd note that the Roche deal that we announced previously with videos.
He contract each CMS is one thing my focus like what on the conduction side, we made a kind of a horizontal play better and built not platform out the commercial content management capabilities as well. So we've already got large pharma kind of coming to the table in interested in these offerings I think the 70 plus she goes we have so far this year plus on the final.
Got Russian neglect sign up and two more top 15 large pharma clients. This school to goes to show further that way, but building all sales to become an increasingly larger technology based company I'm not I think that's what we want to approach the coming from in the future.
Yeah I.
Your first question, Dave I think was around was just kinda 200 to 500 trials that have progressed on smart trial.
<unk>, yeah, yeah, and what you're seeing on we've seen a lot of success I would the trial thing you're right. We said at our analyst day that we had roughly 200 trolls that what kind of deep into the mix, where we were able to monitor and look at the success. We're having buses trolls. We've got into phones. We set then that the speed in terms of reduction in sorry.
I think he comes to US is about a bunch of all three were seeing about a 40% improvement I'm predictability, which would be the reduction in London molding songs versus historical benchmarks was around 60% and productivity improvements in terms of thoughts the recruitment rates versus historical benchmarks was around 30% set up so Dave was asking how many more I mean, we sold it can you.
Some some stats on board so all in terms of what we so we've got 5.8 billion in terms of cost a awards for the court found with small draws.
This quarter was how about on.
On the so what was the number.
In terms of 600, and they say I was looking it sounds like it was almost 700 million. This stuff in terms of the bookings and has already said that kind of for more into the offering today about two thirds of those are the lost almost everything large farmer increased 13 of the talent.
Okay.
Great. Thanks very much.
Thanks, very much died and thanks, everyone for taking the time to join us that I'm. We look forward to speaking with everyone again on our fourth quarter 2019 earnings school, though it's still a lot of questions in the Greek use agenda know every available spike any follow ups for the rest of the that.
[noise] [noise] [noise], meaning how might that does conclude the conference call for today. We thank you for your participation and ask that you. Please disconnect your lines, thanks and have a great Dane.
But.