Q1 2020 Earnings Call

Good day, ladies and gentlemen, and welcome to the mid.

First quarters, earning conference call at this time, a participant lines on listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.

If anyone should require operator assistance. Please press star then the zero key on your Touchtone telephone as a reminder, this call may be recorded I would now like to introduce your host for today's conference call, Kevin Brady Medsafe Executive Director of Finance you may begin.

Good morning, Thank you for joining med paces first quarter 20, <unk> earnings conference call.

Also on the call today is our president and CEO August Trundle, and our CFO and COO of laboratory operations Jesse Geiger.

Before we begin I would like to remind you that our remarks and responses to your questions. During this teleconference. May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

These statements involve inherent assumptions with known and unknown risks and other important factors that could cause actual results to differ materially from our current expectations.

Putting the impact of the changes to the revenue recognition standards.

These factors are discussed in the risk factor section of our form 10-K, and other filings with the FCC.

Please note that we assume no obligation to update forward looking statements in the future even assessment much change.

Accordingly, you should not rely on any of today's forward looking statements as representing our view as of any day after today.

During this call, we will be referring to certain non-GAAP financial measures.

These non-GAAP measures are not superior to for a replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results.

A reconciliation of such non-GAAP financial measures. So the most directly comparable GAAP measures is available in the earnings press release in earnings call presentation slides provided in connection with today's call.

Slides are available in the Investor Relations section of our web site.

Investor Dot Medsafe Dot com.

With that I would now like to turn the call ever to always trying to.

Good morning.

The covert 19 pandemic has presented a significant challenge to the global clinical trial industry.

Diversion of resources that investigative sites has slowed recruitment in many cases reduce the frequency of critical driven patient visits.

Travel restrictions and access to sites for sponsors and Ciros have necessarily reduce the usual onsite monitoring auditing of trials.

Clients with regulatory and protocol requirements.

Most companies, including ours have been forced to move most employees to remote working environment, which can impact work flow and training of new staff.

Fortunately, we have systems processes and experienced running trials with minimal.

Onsite presence in with virtual say physics and monitoring.

Suddenly conversion of an ongoing trial from classical safe monitoring to virtual site visits is unusual but he's been accomplished across our portfolio studies with minimal disruption a lawsuit trial data quality.

Patient safety, our primary concern has not been jeopardized by the change.

We are appreciative of the regulatory bodies, taking a pragmatic approach within their released guidance is related to covert 19.

We have made a number of changes to our operations to address the pandemic challenges. These include the following.

One established.

An incident response team to address merchant issues, and said companywide policy and workplace requirements.

True.

Sadly should cross functional operations response team to develop revised processes for oversight and management.

Three.

Implemented a global communication plan updating worldwide staff to process changes.

For organized weekly mandatory training sessions for project leadership teams to review process and implement industrial regulatory gain uptick.

Five.

Suspended all non essential travel.

Six.

The most after remote work, while keeping a central functions require office space presence operational.

Seven updated customized monitoring plans as needed for all studies to address virtual safe monitoring and move on site visits as well as activating support technology solutions for source data verification.

Hey.

Organized systems and processes for patient home visits and support.

Nine.

Taking actions to align staff with the current and near term future needs, including the removal of many administrative employee.

According office they staff.

I would like to provide some detailed picture perhaps of the extent of the disruption.

World Health organization declared a pandemic on Jan on Wednesday March 11, 2020.

We'll take this is time zero as until then the disruption to sites was largely issue in China only.

Since March 11.

Was Wednesday.

That week showed only modest impact.

Lab samples were down 6% inpatient screenings I.E. patients scene, that's part of recruitment for trials was relatively more.

<unk>.

The following week lab sample volumes were down 21% inpatient screenings were down 54%.

Week after that the week of March 22nd.

Lab samples were down 34% inpatient screenings would have 75%.

More recently labs sample volume has been down 40% inpatient screenings down 85%.

This has been stable the past few weeks, but it shows no signs of recovery.

Patient visits for ongoing patients already enrolled trials is down about 55%.

Physical monitoring visits are down 95%.

What about 60% of the lost physical visits are being replaced by virtual site visits.

[music].

Site Activations are down 80%.

We have had multiple cancellations of ongoing studies due to the challenges and uncertainty pandemic.

Since the operational and financial impact of the pandemic response on a trial is influenced by the stage with the trial I would like to provide some demographics on our business portfolio afforded trials.

Following analysis is based on April to December 2020 roll off Oh from awarded studies and as summarized in slide three of our earnings presentation.

We have placed are awarded studies into three buckets.

One studies were grouping is completed.

This subset comprised 30% projected April the December revenue.

For 92% of this category by revenue.

He is 30%, we expect no substantial impact on progress or revenue.

Studies in recruitment.

This subs said comprises 58% of are able to December it projected revenue.

This subset, we expect 32% by revenue they have no substantial impact on progression, 29% have significant impact on progression.

Recoup fabrication is continuing and 39% where recruitment has been interrupted.

The third bucket.

Studies in start up prior to first patient first visit.

This subset is 12 present <unk> percent of projected April December revenue for the subset, 45% still progressing toward for station first visit and the other 55% currently on hold for first patient person is.

A decision to those delay first patient person as it may still be made for the 45% currently progressing toward.

From a current period revenue by task perspective ongoing studies in the first two buckets.

I eat in recruitment for recruitment complete.

The impact of covert 19 will be greatest in areas, where there is high level of unitize services, where the units are likely to be doing such as laboratory as well as our clinics business, where we directly perform phase one fore sight activities.

Pass through cost the bulk of which represent independent investigator site payments and monitoring travel are also disproportionately impacted.

He's revenues are mostly delayed read some lost of course of the trial.

At the other in spectrum or other clinical trials services, such as program management monitoring safety surveillance reporting and medical monitoring that are primarily based on F. T E or effort faced activity, which will be minimally impacted from a current period revenue recognition perspective.

In fact, and probably a program management and say support may require increased efforts over the short term the plan and implement regulatory compliance accommodations to the trials, even while recruitment of stuff.

In general recruitment delays will significantly increase the future revenue and tote and total trial cost of F. T E based activities for these trials to be extended timeline.

For the third bucket.

Recruitment trials the impact for 2020 is primarily related to the timing Oh studies starts the significant delays likely for many and therefore lower revenue 2020.

Well the recruitment delays will slow. These studies one started is unknown.

Bleak picture I should provide a rough break out of our service functions.

Project management monitoring data safety medical and reporting a that do the largest portion of a clinical trial services is approximately 84% of our total revenue.

Labs make up 14% and clinics, 1.5% to 2% the grip.

[laughter].

On a longer term basis, our business in revenue will be impacted by reluctance of sponsors to initiate new trials reward new business in an uncertain environment, where costs, maybe higher due to extended timelines.

This is already apparent in Q1, new business awards, the reduced future revenue from delayed trial starts cancellations and reduced new business awards will be partially offset by additional revenue from extension of ongoing trials as discussed above the recruitment is delayed.

Recruitment is slow I should say.

However, you long dated timelines of studies, where recruitment has slowed may challenge or smaller clients ability to financially support more expensive and delayed trial.

Majority of our clients are small and many do not have cash on the balance sheet to complete their trial without raising additional funds.

Due to the challenges we faced from covert 19 pandemic. We now expect revenue profit for the year for the full year 2020 to be down from 2019.

However, the extent to the drop cannot be reasonably estimate at this time.

This reason, you're withdrawing rather than updating our previous guidance.

Jesse will now cover our financial performance for the quarter.

Thank you August and good morning, everyone.

Net new business awards entering backlog in the first quarter decrease if you're a 0.7% from the prior year to 246.9 million.

Resulting in a 1.07 net book to Bill.

Ending backlog as of March 31st was 1.3 billion.

An increase of 16.8% from the prior year.

Revenue was 230.9 million in the first quarter of Twentytwenty, which represents year over year growth of 15% on a reported basis and 15.2% on a constant currency organic basis.

EBITDA of 40.6 million increased 21.3% compared to 33.4 million in the first quarter of 2019.

On a constant currency basis first quarter, EBITDA increased 19.1% compared to the prior year.

EBITDA margin for the first quarter was 17.6% compared to 16.7% in the prior year period.

The increase was primarily attributable to lower reimbursed out of pocket expenses on higher revenue.

Partially offset by higher employee related cost.

In the first quarter of 2020, GAAP net income was 29 million compared to GAAP net income of 19.2 million in the prior year period.

Net income growth was primarily driven by revenue growth and reduced amortization expense, partially offset by higher employee related costs and reimbursed out of pocket expenses.

GAAP net income per diluted share for the quarter was 76 cents compared to 51 cents in the prior year period.

Regarding customer concentration our top five and top 10 customers represented roughly 17% and 26% respectively of our total revenue for the quarter.

In the first quarter, we generated 49.1 million in cash flow from operating activities and our net day sales outstanding decreased compared to the fourth quarter from negative 14.7 days to negative 21 days.

During the quarter, we repurchased approximately 0.7 million shares for a total of $43.2 million and we have $56.8 million remaining under our current share repurchase authorization.

Our strong balance sheet is important in this current environment.

We ended the first quarter with 134 million of cash.

No outstanding debt.

And a 50 million of Undrawn capacity on our revolving line of credit.

As always mentioned due to the economic uncertainty we are withdrawing previously provided twentytwenty guidance.

We will provide updated guidance when we can reasonably estimate the impacts of the covert 19 pandemic on our business results.

Without I will turn the call back over to the operator, so we can take your questions.

Thank you.

As a reminder to ask a question you need to press star one on your telephone to withdraw your question first the pankey. Please stand by multi composites you in a roster and once again, if you would like to ask a question that star one and my first question is going to come from.

Dave Windley from Jefferies. Your line is now open.

Oh, great. Good morning. Thanks, Thanks for the detail August appreciate your.

Your candor here as always.

I was curious if you could talk a little bit more about at some add some color to how the clients are acting you mentioned you've seen cancellations, that's something that we haven't necessarily hard.

From somebody other Cheryl player so far and then it sounds like it's also affecting gross new business as well. So if you could kind of comment on there the relative impact on gross new business and then also cancellations. Thanks.

Sure Dave High Yeah.

We are seeing an impact or you know in and of course, our recognition of a work into backlog requires the study progressing.

And a lot of things you're kind of put on hold a you know that lot of others. A you know do it more based upon just an award was made and they think it will eventually start going or their contract was signed I'm you know ours have to be kind of moving forward. So ended the quarter there was quite a bit of clients a pause.

Causing holding things.

And not moving forward with the project at this time, so that did affect our bookings and we have had several more than five cancellations related to the up.

<unk> <unk> two coated you know you can always take cancellation and.

Identify you know multiple reasons and <unk> and not much was canceled exclusively you know something was going great and and then Oh Cove, it's going to make us decided to cancel the study, but you know these are kind of projects. It might it. So you know that it had been is there their strongest oh opportunity.

A year or whatever and but you know that they see the reason has been cove. It would have progressed if not for so we have seen cancellations I'm surprised others have.

Thanks for that I got fixed my Echo sorry about that the follow up question. Your model has historically had youre.

Your people more centralized less field, they see our age et cetera.

Has that presented.

Has that made it easier or harder for you just transition to work from home and in terms of supporting your clients trials.

Are there ways that.

I I would guess that.

Like for example, having a bolus of your employees in Cincinnati, and having trials distributed and their need to travel out to those trials not having regional field based CRH might make it more difficult for you to get to sites as they begin to open up can you talk about.

How is your labor force, Ken can kind of adjust to a new covidien affected world. Thanks.

Sure <unk>, we do have more of a.

Certainly the U.S. anyway more of a oh.

Hey office based.

Staff or some are more.

Regionally based on the that tends to be largely one of where the sea rays or are based out of so yeah. You ask question that you know like once things are open we'll see your age be able to travel as effectively as where some other company might have oh, a personal onsite in that city.

You know that the the reality of it is that most theorize wind up having get all slate no matter, where where they're based.

But I and I do not anticipate that.

Air flights are gonna be you know the risk the [laughter] the factor restricting access to sites that's been mainly while you know physical access at the site itself.

And and not you know ability to perform air travel so I don't anticipate that being a.

A factor it you know certainly our office based <unk> core operations in Cincinnati were substantially.

You know changed in terms of you know sending went going l., but we did have a great deal IP infrastructure, there and and support you know moved a lot of people would never work from home before into a work from home environment I'm very effectively so I kind of I don't know was that was the helper up and stuff. So I I don't really think there's.

Any differentiation.

Okay. That's great. Thank you for the answers all yield floor.

[laughter]. Thank you.

And thank you and our next question comes from John Kreger from William Blair. Your line is now open.

Hi, Thanks, very much I guess your Jesse realized that there's too much uncertainty to provide any sort of commentary on the year, but what's being one month into the second quarter would you be able to just talk about how much you think revenues might be down from Q1 to Q2 is that possible.

I I don't think weekend <unk>, we can estimate that.

No not with any kind of certainty and had a so I think that's why we flew removed guidance, we're not providing one for second quarter. Okay. Understood have you had any collection issues from your smaller clients.

The Jesse Olympic <unk>, Yeah, Yeah. Thanks, John we we have not seen you know you need to date any uptick in collection issues. We recorded no bad debt expense in the first quarter, obviously, given the customer segment a focus on small biotech were for monitoring credit risk exposure.

Oh, very closely and staying in contact with clients, but we've not seen any any impact currently.

Okay. Thanks, and then finally can you give us a sense about how youre activity levels spread across U.S., Europe, and Asia and are you starting to see any patterns of sites reopening that might you know give some insight about when some movement back towards normalcy could start to.

Happen.

Yeah, Yeah. Okay. It is very country specific China's began to open up again.

You know there. So there are some areas in in Asia, particularly where site visits are now possible again and work you know getting more openness of besides they're.

Beginning to.

We have more activity.

By but you look at the overall global numbers and again, we've seen very little evidence of recovery to date.

We're hoping very shortly things will start improving but sites are still pretty inaccessible and up and disrupted and you know a lot of these cases, it's it's that coordinators Ah you know that that say coordinator at the site is working from home you know, it's it's got nothing do with our staff are going to eat.

Ill ability to get there its itself.

The operations at the site or disrupted.

Okay. Thank you.

And thank you.

And our next question comes from Sandy Draper from Suntrust. Your line is now open.

Oh, thanks, very much in walls that can really appreciate all the level of detail, although I think its and take my my brain a little while it's a process all about that maybe one follow up initially on on the on this when you think about the Reimbursables versus the service revenue obviously, the first quarter we didn't.

I see that much in.

Yes, your our August how should we think about the relative impact should it be more on the reimbursable revenues, because that's mostly travel or I'm, just trying to understand when I'm thinking through the the bucket you talked about where that sort of flows through to reimbursables versus the service revenue.

Sure sure yet [laughter], good look I'll take that <unk>. It. It really are the biggest impact here has been to sites. So you know things that are directly driven by sites.

Is it is going to be down you know so eat a patient visits at sites laboratory samples are gonna be down and sites make there are generally are very unitized in terms of visits in terms of payments. So you know they get paid for doing evaluations on patients and if so.

They don't have the visit they don't do devaluation or they do a partial valuation or whatever they maybe they may not be able to bill it. So.

Jim meeting there were there.

Their criteria for being paid is delayed until they do the site.

You know with the patient and.

That is the largest impact so our pass through investigator payments or.

It more than our services, which are more S.P.E. and and a lot of work regardless of whether the patient comes in or not I'm Gonna do we're doing a lot of work with sites an exact sometimes trying to facilitate a a remote gives it a great home is so you know.

You know that there's a lot of regulatory and other activities that continue on.

And so anyway site pass throughs to sites as well as travel, but again, yes, there's virtually no travel going on so that's a substantially impacted although that is smaller than investigator pipe say payments, but say payments are down investigator beams laboratory samples so laboratories down further.

Other ciro oversight regulatory and monitoring et cetera, or less impacted so yes, eight years see the pass through costs are more than.

The service revenue costs.

Okay. No that's really really helpful. Maybe just one quick follow up to that question is.

You commented that you expect revenue and talking to be down year over year within revenue do you expect me clearly from what you just said reimbursables are gonna be down year over year, but do you think cert. It sounds like also service revenue will also likely be down here for years Alistair assessment.

I don't think we're giving guidance on on either [laughter], we do feel okay that overall revenue will be down Okay got something that's there.

My final question I'll jump back into queue. When you think about the.

The severe enough fortunate capital situation, what with lot of cash no debt [noise] do you bought a little bit of stock back do you have the do you have right now your and preserve cash mode, we're not going to spend or do you feel like comfortable enough that you could be in the market for for repurchases because a lot of come.

But he said basically said, we you know we're not paying dividends, we're not buying back stock. During this time do you have missed the board haven't similar philosophy or do you feel like you've got enough about a cushion where you will easily deploy capital in this environment. Thank you.

Jesse.

Yes. Thanks, Sandy we you know from a share buyback perspective, we did buy in the first quarter.

Well take a balanced view as we go through the rest of the year, we're not actively.

And in our program at this moment, but will be.

Cautious in balancing the cash needs of the business and opportunistic share repurchases.

Okay, Great really helpful. Thanks for all the questions.

And thank you.

And our next question comes from Eric Coldwell from Baird. Your line is now open.

Hey, Thanks, very much and good morning, So first off with your client base I know that to the best of your ability you do financial reviews of your clients and.

Obviously, given the mix collecting as much up front I mean certain of funding is very important to you I was hoping you could give us a little more detail on what you're seeing right now lot of conversations out there about how biotechs maybe are funded for an average of one two or three years, depending on what source you use but obviously that means summer our funded on.

We months or quarters I'm just.

No. If you have an aging schedule or something like that you could share with us, but any details on on that would be helpful.

I see sometimes Dick talked to.

Yeah, Eric so it it's a I don't have an exact.

Jim's schedule to share.

But it is a a mix you know our clients. These small biotechs have you know some have cash on balance sheet. Some have committed investors who are funding a you know as the trial progressive on sell across the portfolio. They have a various amounts of of cash or access to.

Cash, but it's August mentioned in his opening remarks, some of those will need to a you know to <unk> go to new capital or additional capital as though you know as the trial progressive and and things along a you know may need to raise more than they are they would have otherwise.

I guess, a little perspective, maybe I can give on the portfolio composition.

Is that you know about 75% of the backlog is with small biotech.

So consistent the backlog mix is consistent with the revenue and 40% of that small biotech backlog.

His with companies who have partnered products.

With large pharma, 40% of the 75% <unk>.

Category, a small biotech or have you know funding sources, you know in markets, but also a.

It's partially funded through their partnerships with large pharma.

Another way to look at this is public versus private companies, 100% of our large and mid size company backlog is with public companies.

And then our small biotech backlog is approximately 70% with public companies and 30% with privately funded companies I know that there's don't give any insight into the cash on balance sheet, but provide maybe a little bit of insight into you know what the composition is over there a funding so.

Sources as you know at current state.

That's a that's nice helpful. Thank you on the pass through topic, you did mention investigator insight payments being the biggest travel smaller maybe lab. Another external payment smaller I was hoping you could give us a maybe percentages, if you don't mind or or at least some color on.

On the mix of those various buckets in pastors.

Six I'm sorry.

Percentages in what did it sounds like the investigator site payments, maybe I'm going to guess 50 60, 70% of pass through revenue and travel maybe 30%. So it may be lab, another external payments, 510% as my guess, but I'd love your color.

Okay, Yeah, Jesse do you have that.

Not at my Fingertips, let me follow up Eric.

Okay. That's fair and then maybe just two quick ones decremental margin I know, you're not giving guidance, but could you give any.

Color, perhaps breaking out clinic lab, and then separately core clinical trial activities, you give any views on decremental margin on the revenue slowdown.

Yes, you do you have any input on that I I'm air could you repeat the question I apologize yeah, no a duck decremental margin you know the revenue drop through how much of that would or would fall to EBIT EBITDA and if you have that.

Maybe overall were seen foreseen others heroes come up with.

Basically implied ranges of anywhere from say 35 to 40, 45% decremental margin net of cost actions. So I'm curious if you're in a similar ballpark and then if you could maybe carve it out by lab and clinic as opposed to traditional site business if possible.

No I don't have I don't have that either a you're asking for the good to know from from the forecast from the guidance what are what margin reduction we would anticipate from the lab, yeah slapping clinics versus the rest of the company is that your core or just yet or.

Just in total if it's easier.

I think you know I don't think we have that or does it I you know it wouldn't be pretty high.

Picky labs, and click and you're talking about it it's got to be at least 40%.

But I do not have.

But that's fair and then last one business development I'm I'm, just curious I know the worlds changing quickly we've all been pushed into the deep into the pool on work from home and virtual and doing things Telephonically, how much business development do you think can truly get done telephonically or virtually.

You know video video conference as opposed to needing to be at the at the clients headquarters are out there site shaking hands and having you know all day conversations I'm I'm just curious how much.

You think you could actually foreseeably get done over the next year, if if travel remains a bit of a challenge.

So yeah, so I'll take the air I actually think we're and I guess, it's probably everyone. It pretty good shape than that in that regard that fit the demands there they have to reach out.

Most of our clients don't have a preferred provider so.

I think we're I think we're in the mix and I don't think it's a matter of us necessarily knocking on the door and everything a neat and everyone else has the same disadvantage that you're doing now a remote to virtual bid defense and virtual presentation and I you know so I think it if.

Our strategy was to break into new markets and address clients. It had an existing provider pool, but that's not going to happen in this environment. Yes. That's something that's you know dead in the water, but you know that means it's a you know for for those who have those relationships. It means <unk> very good for them ones that already have a they're sitting on the release.

And shipping its unlikely to be moved in this environment <unk>.

But you can't attack other People's Ah you know sticky relationships, but I think in terms of just clients. It don't have those type of a preferred language, which you know largely we you know we're working with a group that that's coming to us up for you an opportunity in there they're reaching out to several comes.

Ladies and so we're competing but we're competing on level ground because.

You know everyone's in the same predicament and and they're going to outsource. The work. So it's a you know I really don't see a.

Significant impact because our strategy is not based upon.

Attacking you know a preferred provider relationships of others and trying to you know break into a first time.

Okay. That's that's very helpful. Good insights. Thank you very much.

And thank you.

And again, ladies and gentlemen, if you have a question that is star one again, if you have a question that is star one and our next question comes from Donald Hooker from Keybanc. Your line is now open.

Great. Good morning, So I see you guys brought on new employees in the quarter looks like goes up 150, or so in the quarter. So that's great.

How are you managing kind of how are you thinking about hiring over the course of the year and I know you guys are involved in a fairly sizeable sort of internal capacity expansion at our headquarters has that been delayed or you kind of how should we think about both of those things moving forward given the disruption to demand.

Yeah, Okay. So.

First off that expansion in Cincinnati, we are a little bit believe you're planning on getting in there on a into first quarter. It's now looking like may but we are still moving forward that actually gives us a nice up a separation of staff that has been not possible in some of our existing a.

Sure because when you were kind of overcrowded.

So it does permit us to get up you know back into office, maybe sooner with social you know distancing.

But we do expect staff numbers to probably be about.

Flat.

On the year. So we did have some reductions as I mentioned in in staff in in the past a month and we expect to end the year about where we entered the year in terms of staff numbers.

Okay. That's that's helpful visibility and then maybe separately always interested in your broader perspectives on the space I mean and move into virtual trials and risk based remote monitoring I guess, one one ongoing debate is how sustainable is that going to be you know maybe after kind of an 18.

Winds down what is your just broader view of that women are people is this potentially in your mind, a sort of a catalyst for your clients to maybe.

We are client vertical to maybe reconsider how studies are done in anyway.

You know I think <unk> you know you. This this gives up if it's just the overall industry you know for them for the short term it.

It may facilitate some technologies longer term, but you know the regulatory authorities have been very.

A comedy there have been very she you know a very helpful and allowing us to work around difficulties, but most of the trials were doing not designed and not appropriately.

I'm able to long term it you know meet the regulatory requirements.

This virtual ER visits there will be required on site visits you know you can.

Do more more remotely and overtime weve done more and more remotely, but it's still does require on site visits to verify things end up you know some things just or are.

Require that forms like review.

So I I don't see that he and I didn't know none of these trials have been converted to a two you know to virtual visit type environment.

<unk> <unk> and meet the expectations for the full trial you know you there will be make up you know the will be some time spent on site or a in the future to to try to catch up into.

Ah you know meet all the requirements of the trial. So I I I don't I you know I don't think that it's I don't think it's going to push the industry to to switch and for regulatory authorities to accept the type of trial oversight. That's currently ongoing for a longer.

Every time.

Okay. Thank you for that perspective.

Yeah.

And thank you.

And our next question comes from Dave Windley from Jefferies.

Your line is not open.

Hi, Thanks thought I'd come back since your call is relatively short Oh, it gives us a little more time follow up questions.

Are these one is around cost actions that you've taken August you talked about reducing some in office admin support our you.

Are you also taking action on on direct head count on billable headcount or has it been mostly.

Limited to two admin and I guess, just if you can put an order of magnitude on.

On what actions you've taken I appreciate it.

Okay. So the overall action represents about.

It close to 10% of staff, but.

Again heavily weighted towards add them.

And other functions, but it does include Bob.

You know some billable staff et cetera, if we had a as you know going into the year expected a at least 15% or you know growth in revenue.

And we're shooting for even more.

And we're preparing for 20% and a you know we caught up with our or hiring.

Needs work, you know getting well ahead.

For that growth. So it's good and now we expect a no growth over the years. So we did add have to readdress that but I think we ask.

You know plenty of.

And plenty of staff in place to.

Well when things turnaround to be able to grow rapidly.

Okay.

Do you in thinking about.

Your your the the one of the early slot I guess, a slide three that that you had your your pie charts on affected and.

Ah trials by bucket.

Do you think you're largely using the same sites that your peer CR Roes are using and so.

Your level of accesses is gonna be the same as theirs or are there are differences either.

In the in the sites that you use or your access to the sites. The it that you use that would be different from.

Let's say a larger appear that is perhaps you know maybe they they have more pull because they're doing more studies with a particular site or you are you have that because you are for example are there are there nuance differences in in your ability to access the site.

No I I'm not aware of any I guess I don't think anyone's going to I I've never heard of such a thing where you'd allow one client in not another.

You know one study to be Ah you know reviewed not another one ciro access and another by enlarge the sites. We views are the same as others, but you know again it depends on the study in the therapeutic area or whatever you're doing currently so it's a you know it's a overlapping subset of say.

What's that everybody's using.

Yeah, you know you could go to the sites that are most capable of Ah Ah you know recruiting patients and you go to the geographies and sites where.

They can have the effectively a found and entered and retain then.

You know participate in a trial and that you know winds up being the same sites or you know across a everyone. I guess you might say, there's certainly a high concentration of.

So those sites.

You know would be used by one zero up.

See early owns their own sites, a there there would be.

Predominantly used by them, a but otherwise you're talking about largely the same a pool of sites that is used variously in trials and I believe there's any different enact the any different excess others and again in those owned safe networks.

Got it. Thank you for that you talked about.

Having.

Ah conversations kind of operational crisis action plans and interacting with clients on the study by study basis about how to keep those forward keeps us moving forward or keep them alive I.

I suspect that kind of operations and and clinical and patient safety come first and then the discussions around change orders and things like that come second.

I appreciate again, the candor you know on where some of your clients set I'm wondering if you've gotten to the point with most of those clients of talking about how you get this study finished its going to cost as much more.

And whether you know I'm thinking that that conversation that makes perhaps your clients in particular have to think about how much cash. They haven't can they do it have you gotten to that point or is there still perhaps a waterfall event.

As you begin to address the financial side of all these changes.

It it it is a.

You know as it is in process. It is.

He is ongoing discussion of our clients by and large or you know we keep them appraised. If there is delays in the project we.

You know we like.

Make sure were proactive and letting them know that any anything that might be coming up.

They are also been very proactive many asking about what the impact of.

This is you know there's just no delay the the recruitment in this study you know what's the we you know how to how does that you know how does that feed through into our total cost. So we can you know be prepared.

So it's a two way discussion its ongoing as I as I did say by and large many of our activities are not or not a highly unitized. They are.

Mostly based on allocation of staff and you can change the allocation to staff and if you knew that recruitment was going to go it.

One third of the rate that you'd anticipated initially you might be able to do with a different staffing.

You know model a different number of staff on the project.

But you know in the middle of the project you have to take off some staff and reassigned some things and you know restructure.

The the peak staffing on the project, which then if recruitment picked up again you'd have to maybe restrict your third Guy you know again, because now you need more staff on the project. So clients are reluctant to pull people off in the putting back on there's lot of transition cost continuity you know.

Quality can be jeopardized.

So it does wind up making the project more expensive you know to us and more expensive to the client.

And you know I can get that but those discussions are ongoing and generally proactively.

Okay.

Last question for me you've talked about.

Kind of the impact to my earlier question about kind of cancellation or lack of inclusion in a booking because of the timeliness of win win you recognize that so that kind of addresses the very kind of the bottom of the funnel I'll call. It.

Things that are very ripe in mature and moving into study.

What about.

The I think the Eric's question, what does the top of funnel look like how how much change has there been inquiry and RFP issuance by your clients that would represent bookings in the next quarter or too. Thanks.

But if I if I went back to cope with my team projects. It would be you know fantastic. There you know your exploding.

You know overall RFP flow, it's been about flat, which means pretty darn good because ah.

Things were good in.

In Q4, I think that there is a a lot of activity I mean I obviously.

A lot.

Better near term interest in specific therapeutic areas. So like I say covert 19 actually you know <unk>.

You know trials addressing the pandemic itself are you know or do you make a big our overall anti viral you know Andrei effective group, a very busy and Ah that's been kind of up like you know a shift towards Ah you know I D group.

And the oncology has continued to be pretty strong. It's one of the areas where there continues to be demand just like the environment. Most other therapeutic areas are little bit less near term active but still have projects that are moving to be you know once things open up.

Are you going to want to go forward. So I I think that overall D.

Fundamental demand is substantial I haven't seen.

But you know we've seen times, though.

Of.

In which funding was challenged and you still see a lot of opportunities, but I think we've seen we see a lot of pretty well funded.

Good opportunities that are.

Held only in view of the greater cost and uncertainty around running a trial today. Rather then hopefully three months from now were six months from now, but so I do think demand is is looking pretty good and pretty consistent with what what it was last year.

Okay fantastic thanks for the extra answers.

And the thing and thank you and now I'm showing no further questions I would now let's turn the call back over to Kevin Brady for current Arts.

Thank you for joining us on todays call and for your interest in that phase. We look forward to speaking with you again on our second quarter 2020 earnings call. Thanks, and have a good day.

And ladies and gentlemen, this concludes todays conference call. Thank you participating you may now disconnect.

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