Q4 2019 Earnings Call
Ladies and gentlemen, please continue to stand by your conference call will begin mainly tally as a reminder to keep up with question. Please press. The one followed by the four on your telephone at any time choosing to presentation. Once again, please continue to stand by and thank you for your patience.
[music].
Well.
Oh.
Ladies and gentlemen, thank you for standing by welcome to the Ikea is the fourth quarter 2019, and inks conference call. During the presentation. All participants will be in listen only mode. As a reminder, this conference is being required on Wednesday February 12 2000.
20.
Now I'd like to turn the conference over to Andrew Mark Quick Senior Vice President Investor Relations in Treasury. Please go ahead.
Good.
Thank you Pam.
Good morning, everyone. Thank you for joining our fourth quarter and full year 2019, earning school with me today, Ari Boothby, Chairman and Chief Executive Officer, Michael Macdonald Executive Vice President and Chief Financial Officer, Eric Sheridan Executive Vice President and General Counsel, Nick Charles Senior Vice President financial.
Timing and analysis, Amgen Healthtech senior director Investor Relations.
Today, we referencing a presentation that will be visible during this call for those of you on a webcast.
This presentation will also be available following this call on the events and presentations section of our key via Investor Relations website at.
Yeah Dotcom.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call will include forward looking statements.
Actual results could differ materially from they've stated or implied forward looking statements due to risks and uncertainties associated with the company's business.
Would you 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, we will discuss non-GAAP financial measures on the school, which should be considered a supplement to another substitute for financial measures prepared in accordance with gap.
A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.
I would now like turn the call Evercore, chairman and CEO already boosting.
Thank you Andrew and good morning, everyone.
Thank you for joining our fourth quarter and for your 2019 earnings call, where we would review how we closed 2019 and provide financial guidance for 2020.
As you know.
2019 marks the final year overall, three your merger integration problem.
We've had 13 quarters since our merger closed.
And I am pleased that you have consistently delivered revenue.
EBITDA and EPS at or above expectation.
Let's review this most recent quarter in more detail.
Fourth quarter revenue of $2.895 billion came in $38 million above the high end of our guidance range.
Revenue growth was 7.7% on the reported basis.
8.5% on a constant currency basis.
If we take a look back I talk to me your loan performance we grew revenue.
6.9% average.
And we exited 2019 of 7.7%.
Or 8.5% on a constant currency basis.
Recall at the time of the merger. We told you that total company revenue growth would be 100 to 200 basis points higher.
Exiting the third view of our merger integration and as you know.
This was achieved during the third you about merger integration.
For your 2019 revenue of $11.088 billion, 8% at constant currency.
And almost 6% on an organic constant currency basis.
That would presents an organic revenue growth acceleration.
Oh, well over 200 basis points compared to 2018.
We see strong topline growth weve, continuing into 2020, and Mike will provide more detail later [noise].
Back to quarter from the second month respect you.
Technology on a unique solutions rather than grew 9% at constant currency as expected technology analytics solutions growth moderated slightly sequentially.
This was the result of an unusually strong Q3 organic performance.
As well as a rule contribution from M&A.
But despite these.
Technology and analytics solutions organic growth.
Came in at over 7%.
7.4% to be precise.
She is well above the he still we trend from the I am as these are some of you will recall was moving to 4% range.
So.
In these segments significant acceleration.
R&D solutions revenue grew 8.1% at constant currency.
Now we told you last quarter that RMBS organic services growth would be higher in the fourth quarter.
And in fact, adjusting for the back of past dues of approximately 400 basis points.
And then M&A contribution of approximately 200 basis points.
Organic services growth on a constant currency basis accelerated to exactly 10%.
Also representing significant acceleration versus the pre merger services organic growth rates, which was just on those 5%.
Contract sales and medical solutions continues to demonstrate that he has turned the corner.
Growing 8.3% on the Constance constant currency basis in two quarters.
Now this is undoubtedly very strong performance, but I would remind you. It was also an easy comparison against fourth quarter last year.
We expect to see SMS to maintain very modest growth.
Going forward.
Fourth quarter adjusted EBITDAC came in at $642 million, resulting in adjusted EBITDA margins that continued to expand the cool.
As you know.
We've been making investments in technology talents.
And go to market resources.
We've also been zodiac TV deploying all about take wins developing the clinical and commercial technology offerings and acquiring take companies all of which have negative impact on our margins.
So in this context, we were very pleased with our result.
Fourth quarter adjusted diluted EPS of $1.74 was at the height and of our guidance range guidance range and grew 16%.
Views it strong financial results.
Were driven by universe operating achievements and milestones I'd like to take you through some of our 2019 operational achievements.
2019 was the fuel told you before our technology business.
Well see he gained significant traction there I mean, he's uavs credibility in the market.
We want to 59 was yields in 2019 compared to 32.
2018, which was the first for you.
Post launch.
We now have almost 60000 contracted seats to Detroit.
We have four top 15 pharma clients what made the decision to adopt our superior platform.
Our deployments with Walsh use compete for several countries in Asia.
With that successful delivery, we are working to accelerate the rollout globally to enable offers worldwide. These tools strategy.
No when all these deployment is well underway and feedback has been very positive.
Additionally, we are excited to start off first largely with Goldman Sachs.
As you've seen in one astrazenecas U.S. business, So we'll see.
During 2019, we also ramped up investment under Pinnacle's technology space and I want to highlight to be our progress into virtual trials.
We recorded a virtual tried technology study hub is a scalable SAS platform beat on sales forces have wow.
We're having success in the markets with these transformative technology and delivery model.
Now executing on several studies on global bases in all key geographies.
Steadily span multiple therapeutic areas, including CNS oncology and did you talked about boutiques to name a few.
And the southern execution can think the foremost either you for virtual trial.
Or a combination of both traditional and virtual trial.
That was strong pipeline in virtual trials and have established ourselves as a premier provider in the space going into 2020.
In real World.
We continue to build our leading position in the real World markets was selected as a preferred provider by you lost pharma company.
With over 20 rewards engagements already over the next five years.
We also have to top 10 pharma company obtained in as the approved license extension for an oncology products using the real world comparator arm.
And lastly, we continued to make enhancements to decreased 60 genomics, our patented technology platforms, which would advance research in the real space.
Through the use of non identify genomic data link to reach patient and then seeks.
The real well team continues to invest in our which clinical data assets.
Which has now grown.
To 800 million, none identified patients globally.
Moving to R&D.
For the fourth quarter, our book to be original was 146.
Both the services bases and including pass throughs.
For the full year, our services to be was one point 34.
And including past dues the book to be was one point 32.
Our backlog at the end of the Europe was a record $19 billion.
Our next 12 months rather than from backlog increased by a further $100 million to $5.2 billion.
In 2019, we want business, we little over 250, new clients into clinical studies during the year.
The important.
We captured tool preferred provider agreements with top.
15 pharma clients that had been locked out previously.
We are clearly seen more anymore trials.
Sponsors come to realize the benefits of our highly differentiated kids movies.
Inside.
Oh coal powered smarts, while offering continues to drive new business wins.
During the quarter, we were awarded over $900 million of coal powered smart pharma business.
Excluding pass throughs today.
Tina I was just top 20 pharma companies are using our coal powered approach.
We improved trial design to speed up site identification and to increase patient recruitment.
As we speak we have over 800 small trials in operation.
Enrolling more than 120000 patients.
Finally.
Just like to see where she was above the business environment.
R&D activity is at an all time high the total number of molecules in clinical development continues to grow.
With the late stage pipeline growing 11% in 2019.
On average over the last three years, yet he has improved 51, new drugs importantly outsourcing penetration.
That's right civil clinical spend has grown to almost 50%.
Pharma companies trying to sell those four expertise in running increasingly complex trials and a recruiting increasingly hard to find patients.
Venture capital funding of life Sciences companies remains robust.
National venture topic of Association reported a record number of deals in 2019.
We dollars invested moderating only slightly.
A record set in 2018.
All of these supports a very solid backdrop for the industry as we go into 20 Twond.
Once again.
Another very strong quarter.
And a very very strong you across all our businesses.
I will now review the financials in more detail.
Thank you are a good morning, everyone.
So you have seen it was a very solid quarter rounding out a very strong year.
Let's turn first to revenue.
Fourth quarter revenue of $2.895 billion grew 8.5% at constant currency and 7.7% reported.
Revenue for the full year was $11.088 billion and grew 8% at constant currency and 6.5% reported.
Technology, and analytics solutions fourth quarter revenue of $1.214 billion being 9% at constant currency and 7.7% reported.
Technology and analytics solutions revenue for the year was 4 billion at $486 million and grew 10.7%.
At constant currency and 8.4% reported.
R&D solutions fourth quarter revenue of $1.471 billion grew 8.1% at constant currency and 7.5% reported.
Full year R&D solutions revenue of $5.788 billion grew 6.9% at constant currency and 5.9% reported.
Fourth quarter contract sales and medical solutions revenue of $210 million grew 8.3% on a constant currency basis and 8.8% reported.
He SMS revenue for the year was $814 million up 1.6% in constant currency and a half percent on a reported basis.
Turning now to profit.
Adjusted EBITDA was $642 million for the fourth quarter, and 2 billion $409 for the full year of 29 change.
Fourth quarter GAAP net income was $16 million and GAAP diluted earnings per share was nine cents.
Full year GAAP net income was $191 million and GAAP diluted earnings per share was 96 cents.
Adjusted net income was $343 million for the fourth quarter and $1.276 billion for the full year.
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Fourth quarter adjusted diluted earnings per share grew 16% year over year to $1.74 cents.
Full year adjusted diluted earnings per share a $6.39 grew 15.1%.
Let's turn now its R&D solutions back off.
[music].
Closing backlog at December 31, 2019 was $19 billion and the amount of backlog that we expect to convert to revenue over the next 12 months increased by approximately $100 million to $5.2 billion.
As already mentioned, we are well positioned for further acceleration in R&D ESS revenue growth and Twentytwenty.
Let's now review the balance sheet.
At December 31st cash and cash equivalents totaled $837 million and that was $11.645 billion, resulting in net debt up $10.808 billion.
Our net leverage ratio was 4.5 times, our trailing 12 month adjusted EBITDA.
Cash flow from operating activities was $583 million in the fourth quarter and 1.4 billion for the year.
Capex for the full year was 582 million of which 137 nine was spent in the fourth quarter.
As expected we had a large ramp in free cash flow in the fourth quarter.
Fourth quarter free cash flow was 446 million, resulting in full year.
Free cash flow of 835 million.
We repurchased $255 million of our stock during the fourth quarter totaling 945 million for the year.
Now, let's turn to 2020 guidance.
Our full year 2020 revenue guidance is 11.775 billion to $12 billion.
For full year profit, we expect adjusted EBITDA to be between 2.565 billion.
And 2.620 billion and adjusted diluted EPS to be between $7.15 and $7.35.
This guidance assumes foreign currency rates at February seven 2020 remain in effect for the rest of the year.
You should note that since the beginning of the year. When we originally set our plans for the year foreign currency rates have moved against us and resulting and have resulted in a headwind to our 2020 revenue plan.
About $80 million.
So absent these movements for year 2020 revenue guidance would have been about $80 million higher.
In addition, our financial guidance includes our best assessment of potential Corona virus impacts and our guidance a sense, which our guidance assumes will primarily affects our R&D solutions segment.
You can appreciate that this is evolving in real time, but we can already see disruptions to our sites, which are mostly hospitals in China.
We are currently assuming and hoping for a short term resolution to this outbreak and therefore assumed in impacted first quarter revenue of $25 million with heavy drop through and have carried these impacts to our full year guidance.
Before turning to our first quarter guidance, a few additional points about the full year.
Regarding our segments for 2020.
We currently expect technology and analytics solutions revenue to be between 4.775 billion and 4.860 billion representing reported growth of 6.4% to 8.3%.
Our 7.2% to 9.1% on a constant currency basis. This guidance assumes approximately 100 basis points of M&A contribution, which is considerably lower than what it has been over the last three years.
R&D solutions revenue is expected to be between 6.185 billion and $6.325 billion, representing reported growth of 6.9% to 9.3% or 7.2% to 9.6% on a constant currency basis no.
This growth rate assumes a 200 basis point headwind from pass through so R&D solutions constant currency services growth is expected to be 9.2% to 11.6%.
This guidance assumes approximately 100 basis points of M&A contribution.
[noise], we expect R&D solutions revenue growth to be lumpy quarter over quarter, you should not expected growth rate to be linear.
Specifically as it relates to the first quarter of 20 point I would encourage you to look at our past performance you will see it is not unusual for growth rates in R&D solutions to step down from fourth quarter to the first quarter.
Additionally, this year, we have incorporated the impact of the Corona virus, which I just discussed.
See SMS revenue is expected to be about 815 million representing reported growth of about <unk>, 0.1% for 2020 or approximately 8.7% at constant FX rates.
Well, we look at the acceleration of the business overall, we know many of you were focused on the revenue acceleration for R&D solutions, So I'd like to take a minute to highlight our progression there.
[noise] as you know the impact to growth from pass throughs has been lumpy, but since the adoption of assay six so six in 2018, we have continued to see pastors grow at a slower rate and service revenue. This is due to the number of projects. We have in a startup phase we're less pass throughs generated there.
Before we believe it as fast to look at R&D solution services drove adjusted for the impact of pass throughs.
On that basis constant currency R&D solutions services growth was 5.4% in 2017, which was the first full year after the merger.
For 2020, the first full year after our merger integration period, the midpoint of our R&D solution constant currency services growth guidance is 10.4%.
You can see we nearly doubled our growth rate, which represents a dramatic acceleration.
Let me now give you some color on the first quarter of 2020.
Assuming FX rates at February seven remain constant through the ended the quarter, we expect revenue to be between 2.790 billion and 2 billion 849.
Adjusted EBITDA to be between 595 million and 610 million and adjusted diluted EPS, yet to be between $1.59 cents and $1.65 cents.
And as I mentioned earlier, we have assumed a disproportionate impact of the Corona virus in the first quarter and this is reflected in our guidance.
First quarter guidance assumes foreign currency rates that February 720, 20 remain in effect for the rest of the quarter as I mentioned earlier foreign currency rates have moved against us since the beginning of the year, which has resulted in a headwind to our first quarter revenue plan of about $20 million and so absent these movements.
First quarter revenue guidance would have been about $20 million higher.
And so in summary.
Fourth quarter revenue adjusted EBITDA and earnings were at or above our financial targets.
Full year 2019, organic constant currency revenue growth accelerated over 200 basis points compared to 2018.
Adjusted diluted EPS continues to compounds in the mid teens with 15.1% growth in 2019.
We won 50, new O C deals in 2019.
R&D solutions backlog stands at 19 billion with 5.2 billion expected to convert to revenue over the next 12 months.
See SMS successfully stabilize and 2019.
We deployed almost $1 billion to share repurchase.
And we are planning for a very strong 2020, demonstrating strong continued operating momentum and growth acceleration.
With that let me hand, it back to the operator for QNX.
Thank you, ladies and gentlemen, if you'd like to make just your question. Please press star one followed by the following your telephone.
There are three Tim from technology request.
If your question has been answered and you're not TWIC trial, you registration. Please press star one from minus three if you're using a speakerphone. Please lift your handset before entering usually class.
One moment please for the first question.
Our first question comes from the line of Eric Coldwell with Baird. Please proceed with your question.
Thanks, very much and good morning, I've two questions. The first is a in technology and analytics tough one to ask Im not sure how to best go about this but there's been a obviously a lot of investment a lot of new wins, you've got a lot of onboarding coming with the top pharmacists that you've highlighted here and I'm curious if you have.
Since on win based on the current pipeline in your current wins when the actual revenue and performance of clients that have been onboarded might be able to offset the incremental investments that you're making during the onboarding phase in other words do you see a point is it 2021 or 2022, where you have more momentum with on.
Adding clients that you can absorb future onboarding.
And maintain or grow the EBITDA on the segment.
Hey, Eric This is Andrew and I think I mean, if we go back where I live stay in June we laid out a new plan for the next three years through the 2020 2022 timeframe and we clearly set data we expect EBITDA for growth slow than it has done in the past that would commit to margin expansion and we're looking for.
<unk> expense in the business for the deployments with putting out currently I got a fraction of that and the investments we are seeing and technology, we're going to see some of that revenue coming through now, but obviously, we've got large global deployment for the likes of Russian and we're planning on on being active but I'll go to market as well I hopefully as we as we go forward. This will bring a natural margin.
Creation, because the revenue that we're layering into the base is higher margin, but we're not assuming that's gonna take place during the next three years, so with off everyone's on the right. The missed some guidance, which we do the math on the on the EBITDA growth gets going averaged about 2030 basis point, which assumes kinda continued investment in deployment of technology wins.
Eric Good morning your.
Question is is as always it onto Mark you trying to understand.
When the benefits of higher margin.
Seats license resin.
Offsets the investments.
And obviously, we are hoping that we want it continued to accelerate all selling momentum in this business. So.
It's hard to just isolate the EBITDA contribution on that line of business, because we continue to invest and before you see so hopefully we've continued to grow market share and and expand you know when the business in isolation is more creative to margins it will be some timing.
Makes three year period, but in aggregate those Andrew reminded us we expect to continue to grow.
Our you'd be done faster than our topline and over the period.
And have margin.
Accretion for the company as a whole.
Yeah. This is what.
Yeah, Yeah, it's sort of a follow on on that and it's you I absolutely agree we'd rather see the the business wins and you, making the investments now for the future. So Ah. Thank you for that the follow on and I apologize if I missed it were toggling a couple of reports, but did did you mentioned anything about the pipeline.
Hi, there I know CE or tech more broadly you had the 80 plus wins that Youve decided here on this call since rolling out of see I'm curious what your your pipeline might be in do you have line of sight over the next year on the additional top top 15 Pharmas you know what is what does that pipeline look like based on those clients renewals.
Cycles them into maybe coming to market.
Yeah, I mean look it's a we are in dialogue housing data since we launched the product we've essentially the old large pharma and the anyone was contemplating.
The either a renewal for the sweet showing it but not grade to the previous CRM platform.
So you know we have an active pipeline and some are more likely than others.
But I was hoping you could use precise.
Members in isolation for that line in addition.
As you know we have all the add ons like pro mode. The on the T. Expedia and the yen products that are.
That can be stitched together, we will see.
And we are very very active in conversations with on the people technology side I mentioned in my remarks, as much which was that I wanted to highlight.
But simply the the other modules of optical technology suites. We also active discussions were safety.
And regulatory modules and others content management. So there is a very large pipeline that we are a lot of conversation, it's going to continue to to lump. Bob. This is what we feel comfortable.
With the guidance.
On the to functionalities segment.
Presents a significant.
Accelerations. This was all history, I think youre be familiar with it used to yet I am SNL or.
You don't quote unquote best in class organic growth, which was more into the 4% range and dealing mine that are meaningful business.
She is a significant portion that see about food or 40% or so overall, taking them any peak solutions segments.
Grows at zero percent, so when do the math.
You realize that the globe on the technology piece at the end Mtbcs significant.
Yeah, no. That's that's great. Thank you so much for the answers and congrats on the strong outlook.
Thank you.
Thank you Sir.
Moving on our next question comes from the line of Robert Jones with Goldman Sachs. Please proceed with your question.
Great. Thanks, so much I guess just wanted to talk a little bit about the cadence for 2020, I know you guys laid out a lot of detail to help us think through that but you know if I. If I just look at the sequential you know total enterprise level revenue step down from from last year, and then what you're indicating for this year. It does seem like obviously.
An easier comp for one Q year over year.
Adjusting for Corona is there anything else you guys, you're thinking about as far as you know what's at play as far as why the revenue in one Q might.
Look to be a bit of a deceleration again off of a an easy comp year over year and then.
What's the line of sight, obviously to get to the full year number that you guys feel very confident in achieving next year.
I'm.
I'm not sure what the push is unfortunately on Q1 whites Q1 again Q1. Unfortunately, we just assumed that the quarter will.
We see what's happening in China.
As a result cooling a virus I don't want to overstate because its you know China presents a very tiny piece of our overall business.
No I don't that's excluding the number of Sizewell went over a 100000 sites you know would widen.
In the particular region in China with these hobbies, there's been 100 sides.
I think in China, we might have somewhere around a couple of thousand sites. So but people know patients sep not going to be bases went all the trial as to be not going to visit the hospitals, where we're all the sites all in China, because that's kind of the.
The most dangerous spot right now and then obviously see always we not send them. So there is only because.
Of the pause.
In business environments. If you will as a result will be said, we've quantified that would be $25 million.
Of impact in the first quarter, assuming resolution by then open.
And that obviously, we've seen baby care, so costs, all there and so most about $25 million is dropping through profit.
As well.
And so that's kind of causes a.
Freshen the first quarter.
And we know that I think that lessening evaluation and it yet.
No I think that makes a ton of sent sorry, I guess I'd, maybe asked another way of I guess, you know exiting out the impact from Corona is there anything we should be contemplating as far as the cadence of 2020 versus the normal cadence of revenue growth.
That we've seen no I mean look I'm generally.
If you look at it.
Every.
If we use it to leases with them.
Two years operations because of the over three years generally the first quarter you that represents 32 less.
Proportion.
Of the wasn't.
Then the other quarters right I mean is like a couple of percentage points rule.
In Q1 than Q4 for example, you know if you're getting treatment. If you take a look at.
So 2019 Q1 was 24% over EBITDA before you.
And Q4 was 27%.
And on a resident basis in Q1.
2019 was 24%.
Revenue.
In Q4 was 26% so generally is two to three points.
Ah different cities the proportion that they would present so that's what's what's chickens generally do case.
And then Furthermore, if you look at actual numbers FX is significant.
And I think relative to prior year, when you compare year over year or the impact of FX year over year is any significant.
It is more significant in the first quarter wanted let Andrew no desire to see FX is a headwind year to year over year growth and for the full year, who don't is going to see that in the first quarter My cool down the since the beginning of year FX has moved against us by by $20 million. So all guidance would have been 20 million higher we have not I've had the history.
I'm going against the dollar or they are last few weeks the growth rates you're reporting on a a report calculated on a reported basis, obviously on a constant dollar basis would probably be about 90 to 100 basis points, Hawaii for that year over year FX headwind as well.
First quarter fiscal Yep Yep got it got it thank you.
Thank you [laughter] continuing on our next question comes from the line of Jack Meehan with Barclays. Please proceed.
Thank you good morning, only went up.
Because on the upside in the fourth quarter. So if you look at revenue came in above the guidance you laid out for the fourth quarter pretty comfortably I guess versus your plan where was the upside at least when I first of all the number I assumed it was pass throughs. When it was actually the opposite obviously there was a headwind and then on the EBITDA line.
I think one NIPT picks would be you didn't see any dropdown. So just wondering if you comment on whether there was some reinvestment back in the business as well.
Yes, well. Thank you Josh. Thank you for the question, yes, the upside versus guidance on the revenue.
Came entirely from the underlying operational performance of the businesses and not Columbus was as you said festivals in Heaven.
The majority of the beat versus our guidance. The vast majority was due to technology segment.
The we just talked about these are doing in my remarks and answers to Eric's question.
We're starting to see I'm living rump on the technology.
Business technology, and then seek solutions segment.
And the freaks ideas.
Mitigating the dropped two will be that which is very strong by the way on the technology side really strong EBITDA jobs group of mitigating that all of it continuing investments in deployment. So when we finish deployment for the our top 10 clients in Asia those residents.
I mean as is very high margin because again the size licenses, but at the same time with deploying in other parts of the world and so that implementation is essentially a no.
No voluntary business, so that offset that and who's our continuing investments as you pointed out.
Nevertheless, I just wanted to know that we can generate good margin.
Margin accretion margin expansion report.
Yeah, that's unfair and Oh My God I was curious as you went about assessing the impact from Corona virus and I know it's to the best year ability is at this point, but just comment is this predominantly the 25 million on the R&D segment is there any impact potentially on that tech side, yeah them.
Majority of it is on the army side, because you know what I'd I'd say, it's virtually 100% on the R&D, yes side, where we would see impact the rest of the business.
I don't see any material impacts yeah, I understand me Ito died just with wide always need is it again he just.
Physical constraints in over the rest of the business usually this.
Does not require you know actual.
Physical movements of people.
All the technology analytic solutions side, so as Mike said at which we can say, 99% if somebody on the site.
Thank you.
[noise] can think is continuing my only I just know how was it I'm sorry, just a temporary these will be we obviously have contingencies and we're working on it needs to be from all of these issues. So I don't want to is obviously, an evolving situation, but but.
We currently expect to these will be resolved.
And we also in 2000 and working on mitigation plans no. We read through we orienting surgeon asides opening up new sites outside of China et cetera. So it's not like we're just sitting and waiting for these sites to be open no blinded. So I just want to make sure.
So we are large company and we can absorb.
These issues.
Contingency for you.
Well, we visit as appropriate if things change.
[noise]. Thank thank you Sir [laughter] Myles I next question comes from the line is Elizabeth Anderson with Evercore. Please proceed.
Hi, guys and thanks for taking my question I've a question on obviously that book to Bill and that was much better than you've spoken to some of them up and outlook is there anything to think about in terms of like the child conversions and chicken sounds like third delays in starts that we should also take into account.
With.
Sorry, but can you can you say that again on this what we call. It the weekly any of the beginning of the question Oh, sorry about that.
Although you can hear me better now so I do know obviously you guys put up a very impressed that book to Bill and it comes on the back of several other really nice talked about so I know that you spoke about how does that impact does the trial lumpiness in the quarter, but I wanted to know if there was anything you guys had to comment about sort of trial conversions or increased complexity or delayed start time Chinese.
Im not sure does like out more I brought her level that you're seeing that would also potentially play into some outside the <unk> intra quarter movement in Brazil, I know your guidance.
No I think when you look at the first quarter I think you'd be looking history, what kind of pretty much along those lines with what we've seen historically, there's nothing nothing unusually nor do I you setting if anything where we're moving forward. It all Banco next 12 months revenue is nice and healthy and chose continued increases Kuwait every quarter at this stage.
In this business as you grow.
Sure, Okay, very very strong very strong bookings continuing across the board.
Weve pointed out before that we believe we're gaining market share and I think it's pretty obvious if you look at the size of our revenue and Uh huh.
The level of the I think we've had seven quarters, you'll lose and book to be lease was a bold one to them.
Correct Yeah.
The last couple of years.
One of the Atlas and then the strong bookings and 40 you.
One 133 to 130 42, but they don't services that bases and you can't across the board, even very very strong pool from their leaders on the vast majority being full critical work.
And because we don't start up phase for all of those very strong bookings that we generated last year you will remember in the third and fourth quarters. All 2018, we had moved to be lease was over 1.7.
And those were majority lots of them were 14 equal.
Award and the all in startup phase and doing desktops sub fees.
They they are there's no pass throughs, obviously right. So so that's what's causing the headwinds from fast food higher headwinds on vessels in the fourth quarter.
I'm now the good news is no food feed equal or other nice sweet spots of all the CIO business, where you want to be then they have a higher margins and when you expect.
Strong margin drop through you know in the next.
Couple of years as we continue to deploy those.
Oh perform those goals clinical trials.
Okay. That's very helpful and obviously with your your best tobacco and that you know continued revenue. Brad you guys are putting up seven habits, what I assume I. Some nice share gains versus peers is there anything you'd like to call out either qualitatively or not about sort of reasons that people you know sponsors are choosing.
Do you any particular like product offerings or other things.
Yeah, Let me we've mentioned the size of our capabilities our unique.
The what we call the core pounds.
Smart trials.
Using data analytics and technology to.
Sort of model out the trial early on the healthy trial design optimize protocols accelerate site densification to optimize.
The plan to try to strategy and almost all of that supporting a faster and more precise patient recruitment recruitments, which is demonstrated now by body outperformance on those trials.
When we started after the merger I think we were very very pleased to see quarterly awards not talking about bookings would awards of small trials being 200 $300 million a quarter.
I mentioned in my introductory remarks that this past quarter, we had over $900 million of the world and that's services food.
In terms of Oh of coal powered small trials.
You know, it's becoming do we do business, we are applying a coal powered smartphone into the vast majority of which would be on today with a higher we rate as a result was to do these thank you.
Okay perfect. Thank you.
Thank you continuing on my next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed sir.
Hi, Thank you very much for taking my question is already there given all the wins that you've had to know C.
Can you talk a little bit about just is to have you seen a competitive response off from major competitor over there is there anything that they're doing in terms of pricing.
Also there's some commentary comments that I've heard from speculation that you did in order to when some of the business you could be subsidizing the only CE with the fact that you have such a big base of info services is the pricing that you're going out to the market with a competitive in the March.
Hi, Good are you winning based on capabilities or is there some of that subsidy going on thank you.
Thank you so more and we know there's a lot of noise and.
As you know these events friends.
Dominant competitor in the space that has had its essentially neely.
For many years essentially for a decade and sows for sure we are coming from behind.
And you know that today I was on a fantastic job and we Meyer.
Performance, but we believe that to our product is superior.
In terms of functionality I remind you that.
These based.
On the different Salesforce platform, then the competitor products was.
Compared to.
Product was built on the Salesforce platform of 10 years ago.
Since then it's a totally different platform, we're going to lots more fun functionality that he's been built into the platform and from which we have benefited so the added functionality is really what helps us when there are eight I imagine modules builds into these we'll see.
Platform that do not exist at the competitors you noted to match those didn't have to build the custom need modules now hours, our standards and built from the start that's the fundamental difference that's the fundamental difference and this is why we were able to win.
You don't Trust me on AIDS in global deployment over 100 countries as we do full rush for such an important tool for rush.
A few.
Dollars more or less I'm not going to make them switch. This is one of the moves.
Sophisticated.
From a complicated around they will pay a higher price for better functionality will even be grand scheme of things. This does not represent huge line item in Russia is PML. Okay. So we are not I underlining stress we are not price.
No we actually in some cases have priced at the premium.
Okay, Great and has there been a competitive response that you want to point out or what does it look like to you.
Look I I.
Usually refrain from.
Commenced commenting on on the competitors are doing I mean, all I know you can tell you bought a company.
Good.
To that kind of food.
Works, we got excuse quote cross across I guess.
Something like that in a couple of agency that has a little bits of data or that will that works with data I'm not quite sure what it needs to be Frank.
But clearly it's an attempt that at providing capabilities additional.
And then they all the reactions that I'd, rather not comment on that.
I.
We just focused on wood on executing on our strategy.
Okay, great. Thank you very much.
Thank you continuing on our next question comes from the line of John Kreger with William Blair. Please proceed with your question.
Hi, Thank you already another technology question for <unk> for you could you give us an update on the owes CTG suite of products curious if you could give us a sense about timing and whether or not you think that cut off for a similar opportunity is the success, you're seeing now with let's see thanks.
Yeah. So today look we have a few modules are already.
Available in that are being sold a with specific technologies like the site fulfil the investigator payments and the consent. So obviously the market and there are quite successful.
They're also patient portals virtual trials that I discussed is really.
What we've been pushing and by the way to accomplish that don't want to bring it up again in context of what's going on in China. This virtual trial technology actually shows that.
We don't that's the way over the future.
Risk based monitoring and mobile CLR, we'd go live in the third quarter of 2020.
And we've got the diesel products, Lexia, Gms, which would be released in Q4, so which again with a full suite as we said the force which would be a essentially available by the end of the but we really see modules as we go.
[noise] very helpful. Thanks, and Mike a question for you I think you talked about backlog, increasing 11% last year compared to where it ended and 18.
Is there anything you want to call out in terms of mix shifts within that backlog that could perhaps be a tailwind or headwinds for for margins over the next couple of years. Thanks.
Hey, John It's Andrew and I think I mean, we have if you have a very large backlog, which we're very pleased with them. We see continued.
Growth in next 12 months revenue from backlog I think all of its becoming increasingly I'm sorry first in terms of client mix. It really is more concentrated towards large pharma. This space. We've obviously had a lot of success with the emerging biopharma.
Collins, which are the segment that we really wanted to focus on post merger and we've seen a lot of success that how does the gate with our core Alex solution I think that's where I really weak. So does coins that hungry for data analytics I have the right kind of products and got a focused on on on that kind of approach as a.
Our full power business has grown and already mentioned earlier, we were kind of a couple hundred million dollars. The Cooper closely I guess now we're running at a quick but more like 900 million a quarter large pharma are really coming but something that type of then.
And I'm looking at that offering so I think.
Think assessment on segments. This still mainly loss farmers. The main mix. So they know our revenue base and backbone.
Okay. Thank you.
Thank you.
And our next question comes from the line of and right with Credit Suisse. Please proceed with your question.
Great. Thank you historically been very diligent on the cost management front I understand that you've completed the initial integration post merger, but what are your guidance assume in terms of continued incremental cost savings here right now and then 2020 or even beyond thanks.
Yeah, Aaron Thanks for the for the question a we indeed as you pointed out actually exceeded.
Our plans for the $200 million.
Synergy costs.
Takeouts that we have announced at the time of the merger and we achieved that sometime.
Earlier in 2019.
We also announced at our Investor Conference in June There, we were launching in 200 million dollar.
Cost elimination you should see.
For which we named V 22 for the next three year period, 2020, 122, and we're doing this in order to take advantage of the need larger scale. Although business. We now have lots of things of inflection point, frankly, but when you see growth accelerating.
And we have to make sure when this happens in a business that we don't lead costs creep up.
You know the head or revenue.
Oh, even at the same timelines 11 at the same time, we've got support that broke so it's a more complex.
Equation to manage and therefore, we see important though we have is specific program and we do other program office with a full time team has dedicated to running those initiatives across the company.
Adores runs the gamut from continued efficiencies on procurements.
On infrastructure.
Optimization, whether it's really saved I see a systems and of course, the more complex aspects of automation are using bots and AI and tools, we renewed our own operations.
Offshoring, which can seems scaling up our Philippines, our India and our other offshore centres Eastern Europe, and South America to continue no supporting the growth from those centers.
And all of those HM combination, we expect to generate exceeding 20 $20 million to $200 million of cost savings, which we believe is necessary.
To more than offset.
The headwind to margin that we would otherwise have if we did nothing else.
And we didn't that that is going to be lumping, usually you know.
Smaller portion the first year.
Maybe I'm going to see 20% also of that $20 billion weve coming in 2020.
And then perhaps another 30% also in 21 and then the balance the last 50%.
June 2022, so that's not the best estimate we have yours, how the she's going to ramp up.
Thank you very much and check that's perfect and then on factual trial.
I think that you're leading the market now in virtual trial concepts and you mentioned the strong pipeline. There do you think that the your weight when rates are disproportionately higher and wait for control trials and how many virtual trials are you actually parking I now thanks.
Okay, we it's into double digits right. So what it is with.
Number you have to number I don't even want to disclose yeah, we're not going to gather information.
Oh, no more than 10 less than 20 [laughter].
Okay, and it's only last fall.
Okay, great care enough for the questions are.
I I think we're approaching that somebody out now serving US well then Nicole that thank you everyone for taking the time to join US today and we look forward to speaking with you regarding on our first quarter 2020, earning school Genon rvs variables like any follow up questions you might have to the rest of that thank you very much.
Thank you, ladies and gentlemen that does conclude the conference call for today, we thank you for your participation and if you. Please disconnect your lines. Thank you once again.
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