Q1 2020 Earnings Call

Good morning, and welcome to the Sydney, Australia first first quarter 2020 earnings conference call.

All participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time I.

I would like to have the conference, which Rodney sprayed senior Vice President of Investor Relations. Please go ahead Sir.

Good morning, everyone.

With me on the call today, our Elster Mcdonald, our Chief Executive Officer, Jason Mags, Our Chief Financial Officer, Michelle Keys, our president of commercial solutions and Paul Goldman Our President clinical solutions.

In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at Investor Day Studios Phil.

The marks that we make about future expectations plans growth.

By the financial results and prospects and expected impacts of the covered 19 pandemic for the company constitute forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act and not be 95, and we disclaim any obligation to update them.

Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors.

These factors are discussed in the risk factor section of our form 10-K for the year ended December 31st 2019.

As updated by our form 10-Q for the quarter ended March 31st 2020, and our other FCC filings.

During this call, we will discuss certain non-GAAP financial measures, which exclude the effects of events and transactions, we consider to be outside of our core operations.

These non-GAAP measures should be considered a supplement to not a replacement for measures prepared in accordance with gap.

A reconciliation of non-GAAP financial measures with the most directly comparable GAAP measures. Please refer to the appendix of our presentation.

Finally in accordance with social distancing protocols all of the executives participating on this call have dialed in remotely from separate locations, we apologize in advance for any potential technical issues or delays and appreciate your patience.

I'd now like to turn the call overtime instrument, though.

Alister.

Thanks, Ronny good morning, everyone and thank you for joining US today I Hope you and your families are in good health and staying safe during these uniquely challenging times.

As the impacts of the kind of at 19 pandemic continuing to evolve.

Team remains focused on protecting the health and safety about colleagues site staff customers and the patients we also.

As part of the global Health care community collaborating to find its pandemic, we're actively working with multiple customers to develop Cabot 19 treatment on the vaccine.

This battle requires unparalleled speed without compromising safety and regulatory requirements.

Because of them as all reaching out to is for everything from standing up trials to targeting communications for accelerated enrollment to crisis communications to have their organizations manage through this challenging time.

We also want to thank the frontline health care professionals, including many of our Encinitas, how clinically qualified volunteers. He's been I see you bound bodine fighting the pandemic they briberies incredible email grateful for their work to protect us all.

Lastly, before we got into the first quarter details I want to thank all of my Sidney I just have colleagues for their shed strength. During this time I'm incredibly proud about team for living our values of challenging the status quo collaborating to deliver solutions and exhibiting the passion to change lives, which is kept <unk> coaching resilient and strong.

We believe our commitments collaborating with customers sites and the public health community will sustain in advance our collective efforts during the endemic and beyond.

Turning now to our financial results, let me start by saying that despite the near term challenges we remain confident in the long term strength by business strategy, given a robust backlog and the unique market position we upgrade to.

The momentum in our business that began to accelerate in 2019 carried over into our Q1 Twentytwenty results. We expect it to continue to build as the impacts of kind of at 19 subside.

After discussing the results for the first quarter I would take some time today to detail. How we are addressing the effects of kind of in 19, and the different impacts and trends, we're seeing across the business.

The first let me start without key highlights from the quota.

First we close Q1 with strong net new business awards inclusive of the record first quarter, but clinical resulting in a book to bill ratio of 1.4 times, the clinical solutions 1.07 times, but commercial solutions and 1.32 times for our total company.

This brings us a $5.7 billion isn't that awards and an aggregate book to Bill the ratio of 1.21 times for the trailing 12 month period.

Second I Pedicle business continues to show strong performance with year over year growth of 8.5% or 9.2% in constant currency.

Did we remain confident in our overall financial position and liquidity at the end of the cool. So had 336 million in cash and 281 million of capacity available on our revolving credit facility.

We expect to generate free cash flow for the remainder of Twentytwenty and I've taken proactive steps to further preserve capital and provide financial flexibility, which Jason will describe in more detail.

Now getting into the details of our results.

We had a solid quarter overall, especially considering the rapidly changing macro environment. During March total adjusted revenue grew 3.8% or 4.4% in constant currency, which was inline with our expectations.

In addition to strong revenue growth clinical solutions delivered a record first quarter of not awards, resulting in a total clinical and that's awards of $4.5 billion on a book to Bill ratio of 1.27 times for the trailing 12 month period.

These awards were broad based as we continue to establish and deepen our presence in top 20 pharma through a new preferred provider relationships.

This consistency of awards flow is one of the strategic benefits of growing associated with top pharma customers.

Our year over year clinical backlog growth accelerated to 12.3 person and I pipeline of new opportunities remains robust.

We did not experience any meaningful cancellations in a clinical segment related to cope with 19, although we have seen some customers Flying award decisions Opus burning start dates for awarded programs.

Our commercial solutions segment experienced the revenue decline of 8.1% compared to prior year, primarily due to an unfavorable revenue mix and lower than anticipated reimbursable expenses.

Well that the team finished the quarter with relatively strong award.

The awards were offset somewhat by high cancellations, the majority of which will unrelated to cope with 19. The majority of these cancellations were contemplated in our full year revenue forecast. However, they did occur earlier in the yet unexpected those impacting book to Bill.

This resulted in 1.3 billion if not towards in a book to Bill of 1.04 times for the trailing 12 month period.

Our pipeline of commercial opportunities remains robust given some delays in customer decisions and increased RFP volume.

As we turn to covert specific commentary protecting the health and safety of our employees customers and industry colleagues is Paramount now response.

Response is led by a business continuity transition management office or piano, which combines the project management discipline of the trust the process without a well established transition management leadership.

Thats, great managers, and monitors employee safety and our rapid and seamless transition to remote operations, all while ensuring consistent business woman's.

The team I always now planning the next phase in October 19 response, which is the safe returned to a more traditional operating model when appropriate.

Anticipate this will occur in phases over several months and we will be ready to deploy I feel teams and reopened our facilities in this new normal.

We have also focused on sourcing personal protective equipment, establishing office cleaning and safety protocols and staging personnel to return based upon prioritization criteria in the meantime, we will continue to comply with all appropriate protocols and government mandates.

In addition to the decisive actions, we have taken to protect our employees and ensure business continuity. We have also supported the public health response within our local communities.

From the onset we have extended that fight against the pandemic by engaging in public health initiatives to address acute needs in local communities, where I'd tell an expertise can help let me share a few examples.

Firstly, a cross collaborative medical and communications team created a public service educational initiative to raise awareness of the use of bilateral positive airway pressure all by top machines to reduce the need for mechanical ventas ventilation for Intubated Cabot 19 patients.

Oh stuff in the UK answered the call also in collaboration with all the AC already members to participate as volunteers to increase the level of cobot 19 testing and as mentioned we also enable that clinically qualified medical staff to practice. During this time, adding to the strengths of the global pandemic response.

Well they proud about people in these initiatives.

The way the passion and energy when Encinias help to help patients is be magnified with our employees and teams at the ready to do whatever they can be a part of the solution.

With that broader context, I thought it'd be helpful to detail some of the impacts we are experiencing and how we are responding.

Let's start with a full service portion of our clinical solutions segment, representing about 60% about total revenues.

It is important to note that over 70% about clinical business is comprised of essential therapeutic areas that we believe may see reduced impacts such as oncology rare disease, and orphan diseases and well the complex disease areas, where patients have limited treatment options.

Our clinical teams have experienced limitations accessing investigative sites, although only about 10% or inaccessible.

The remainder 80% to 90% are allowing at least some level of virtual activity and we have seen these trends continue into April overall, this environment, primarily impacts clinical monitoring activities, which comprise about 30% about full service revenue.

Oh clinical teams have done an incredible job of transitioning to remote monitoring taking a leadership position in partnership with a sale right along with all the virtual activities.

In the second quarter, we expect can but 70% to 80% about site visits to remote monitoring using a highly tailored approach with additional follow requirements dependent upon the science capabilities to provide remote access to electronic health record platforms.

Well I saw access the certainly being more limited in the heavily impacted regions, such as China, Italy, and Spain. We have continued to conduct at least some life site visits in these areas. We have also begun to see sides. In these areas that were impacted the earliest slowly resuming activities.

In addition, our clinical teams have experienced delays in both patient enrollment and the startup of new clinical trials.

Patient enrollment is down significantly thus far in April driven primarily by some of our custom is taking a short samples to ensure patient safety and continuity within their trials.

Although we are also seeing delays and studies thought so it is primarily in the final stages of site activation. Therefore, we are continuing to make progress on the regulatory ethics. Another work the proceeds sites activation itself. So shall we stand ready to move quickly on the final startup activities.

In an effort to drive further billable activity I've clinical teams are accelerating recruitment in less affected regions accelerating other billable activities such as trial Master file work and re signing staff.

Oh clinical functional service provider or FSP business represents about 11% about total revenues.

These teams have seen similar impacts on their ability to access investigative sites, but that only impacts clinical monitoring services, which are about 50% of FSP revenue.

It's important to note most teams within FSP all contracted on a 90 basis not based upon units of activity. Therefore shorter term disruptions are less likely to impact revenue from existing teams, particularly given their embedded knowledge of our customers process. The studies in systems.

The remainder of our MSP business comprises functions like biometrics data management safety, which have traditionally performed most that they work remotely.

Oh really face business within clinical which represents only about 2% about total revenue includes the clinics that represent.

The small portion of our business the required onsite operational staff, we have temporarily scale back half clinics, because we weren't able to host groups of healthy volunteers due to safety concerns and we also seeing Christmas delay some of their related programs.

However, our bio analytical and translational medicine labs within this business continued to operate.

Moving to our commercial solutions segment, where deployment solutions represents the largest component that's about 17% about total revenue.

In this business, we believe the nature of our customer base the mix of the products, we support and the types of health care provider locations, we interact with will position our integrated services to remain in central component of commercialization prime customers.

No that deployment solutions currently derives over 60% of its revenue from top 50 pharma where product portfolios are more diverse and stable.

Over 80% of out deployments solutions field teams are supporting chronic care therapies, a category, where total prescription volume has remained stable.

Approximately 90% of our current call activities in physician offices or outside of the hospital setting would cobot 19 treatment concentration is not prevalent.

Well I deployment solutions fail teams have faced limitations on their abilities to physically visit their health care providers or hasty piece. They have quickly transition to virtual activities enabled by the breadth about capabilities.

Learning solutions and engagement sends the teams collaborated during March to train out failed Rhapsody effectively managed virtual activities given travel restrictions, while taking into consideration the capacity of each individual office and cost them a preferred protocols.

By mid March 19%, if I feel teams have been successfully transitioned to a virtual work from home environment.

By mid April the weekly volume about field teams virtual interactions with our hates GPS had nearly matched the level of in person interactions that were occurring prior to cope with 19.

This transition has been enabled by our investments in omni channel capabilities over the last two years.

Also seeing significant customer interest in our engagement centre, which has enabled with multi channels to engage customers, including telephony video and digital tools. This interest along with increased interest in hybrid representatives demonstrate our customers' interest in evaluating modified commercial models.

It is also in Poland Tonight that out deployment solution field teams are similar to our clinical FSP business and that they are primarily contracts. It on an F. T basis. In addition, the majority of these contracts have substantial termination notice periods of up 220 days well. This also make some less vulnerable to shorter term disruptions.

I can FSP, we have begun see customers delaying the start of of new programs and the Backfilling of open positions.

The communications business, which comprises about 8% about total revenue is more important now than ever helping our customers communicate to the key stakeholders.

A recent survey we completed of over 250 hate to see piece can send their needs continue to stay abreast of new therapies and data as well as they desire for information on materials to support treatment decisions.

The majority of our communications businesses direct to HCPCS, rather than consumers or other audiences and does not include meaningful media buying revenue.

We're also seeing healthy year over year growth in our pipeline of opportunities across communications.

Like how deployments solutions business. The cobiz related impacts is primarily being slow decisions around new business Awards.

Lastly, within commercial solutions, how consulting business represents about 2% of our overall revenue.

This business already operates in a virtual work environment. So it has been largely unaffected by Cabot 19. In fact, we saw continued strength across all of our consulting practice areas in the first quarter with a robust backlog of work going into April.

Over 85% about consulting business is in health care, which has proven to be more durable and on the broader consulting market.

The that practice includes commercial and medical affairs strategy, where we help customers reevaluate their launch strategy for new products, given the changing environment.

It also includes risk evaluation, and mitigation strategy and regulatory quality and compliance practices.

Programs, which are largely driven by regulatory requirements.

Finally, we have implemented cost reduction in cash preservation initiatives in all areas and have additional measures planned and ready to implement if needed, which Jason will outline any more detail.

While balancing these measures with <unk> commitment to maintain excellent delivery quality and quickly to accelerate any impacts of activities for the benefit by customers.

Now, let me turn it over to Jason for more comments on our financial performance Jason.

Thank you I'll start and good morning, everyone.

And navigating the unprecedented circumstances of the global pandemic and its impact on our business I realize and appreciate even more of the importance of having strong resilient organization with a collaborative culture.

So that in I wanted to take them on to thank my entire team for their incredible work to support the company and all of our stakeholders during this challenging Todd.

After I take you briefly to our first quarter results I'll spend some time outlining the proactive steps, we're taking to manage the impacts of cousin 19.

As shown on slide four our revenue for the first quarter 2020 was $1.16 billion up 3.8% and up 4.4% in constant currency compared to the first quarter 2019 on an adjusted basis.

Slide five shows that our clinical solutions revenue grew 8.5% or 9.2% in constant currency to $874.8 million for the first quarter on an adjusted basis.

The growth in clinical solutions revenue in first quarter was primarily driven by higher revenue from net new business Awards and higher gross at Reimbursable expenses, partially offset by the impact of FX.

Revenue growth was somewhat stronger than anticipated in our real world late stage business as we continue to further penetrate that market.

Well clinical outperformed our expectations in January and February we did begin to see revenue pressure in March related to cut the 19.

However, our clinical team continued to focus on driving trial continuity plans, ensuring patient safety.

We anticipate that we will recover revenue for the majority of these kinds of 19 related activities and second half of the year.

Moving to slide six as expected our first quarter commercial segment revenue declined 8.1% year over year to $288.5 million and declined 8% in constant currency.

The decline in commercial revenue during the first quarter was driven primarily by let's say revenue mix and slower go and Reimbursable expenses.

Adjusted EBITDA for the first quarter was $137.4 million, an increase of 1.8% year over year, resulting in adjusted EBITDA margin of 11.8%.

Decrease of 20 basis points compared to the first quarter of 2019.

The decline in adjusted EBITDA margin for the first quarters, primarily driven by commercial solutions margin contraction, partially offset by clinical solutions margin growth.

Adjusted diluted EPS of 68 cents for the first quarter grew by 15.3% year over year, driven by lower interest expense and growth in adjusted EBITDA.

As it relates to guidance given the uncertainty surrounding busted magnitude and duration of the impacts because 19, our business our customers, we will not provide financial guidance at this time.

We will continue to monitor the situation, while staying close contact with our customers and plan to provide an update as soon as possible taking into account all the facts and circumstances.

Devaluated, the expected impacts of come knocking on our business, we have prepared in evaluating forecast under a variety of different scenarios.

While we currently expect that the impact on revenue will be most significant second quarter and persist until at least the third quarter before beginning to recover.

We have developed contingency plans for alternative scenario should the impacts be more significant or extend further and duration.

Accordingly, as outlined on slide eight we implemented a number of proactive cost savings measures to minimize margin impacts, including accelerated certain actions and forward bowel our margin enhancement initiatives organizational and operating model efficiencies.

Delayed hiring of non billable headcount.

Reduced or eliminated third party costs and non essential contractors.

Implemented temporary salary reductions for our board of directors executives and highly compensated individuals.

Suspended our floor one k. batch.

Executed voluntary furloughs and rationalize our portfolio of services.

He collective impacted these proactive measures will vary based on required duration of each.

We currently anticipate total cost reductions, including reduced reimbursable out of pocket expenses.

Will allow us to maintain a full year adjusted EBITDA margin in the range of 13% to 14%.

Generally aligned with our results for the full year 2019.

We are prepared to extend these reductions further and institute additional more aggressive measures as needed.

Further we have also implemented measures to supplement our cash reserves and preserve liquidity and financial flexibility, including drilling 300 million on our revolving credit facility to supplement our cash reserves delaying certain capital expenditures.

Pausing share repurchases.

Executing interest rate swaps to fixed variable rate debt at lower interest rates and renegotiating key vendor terms.

Now turning to cash flow and the balance sheet as summarized on slide nine <unk>.

During first quarter, our operations use 38.6 million in cash flow.

Although cash flow from operations is seasonally lower first quarter. The first quarter of 2020 was further pressure by higher vendor payments, including reimbursed reimbursable out of pocket expenses, along with incentive compensation, partially offset by improved collections and lower restructuring integration costs.

Yeah, so for the quarter was 50.9 days.

Given the 300 million draw on our revolving credit facility in March we ended the quarter with 336 million of unrestricted cash and total debt outstanding a 2.97 billion.

Given the minimal associated costs and out of an abundance of caution we decided to drawdown incremental cash on our revolving credit facility during March.

It is important to note that we had not yet experienced any meaningful working capital NPAC student cousin My team.

Slide nine also provides an update on our debt management and capital deployment activities.

We continue to focus on a balanced approach to capital deployment to drive shareholder value, which we have always highlighted.

However, the uncertainty of the current environment dictates that we focus on capital preservation, while we continue to access the extending the duration of the impact just got the 19.

During the first quarter, we executed additional interest rate swaps in the notional value of $549.2 million to reduce the cost of our variable rate debt.

Yes, you should these swaps also increases the portion of our death as effectively fixed from 36% Decemberthirty, one 2019% to 54% at March 31 2020.

We also repurchased $32 million bar common stock in the first quarter before curtailing these purchases in order to preserve liquidity.

Well this leaves an additional $136.3 million of repurchase capacity. We currently do not intend to repurchase any additional shares during the second quarter and we'll continue to evaluate the program on a quarterly basis as market conditions evolve.

Our non-GAAP effective tax rate for the first quarter was 24% and we expect to maintain that rate for the full year 2020.

Given the benefit of our inner well deductions, we expect our actual.

Net cash outlay for taxes in 2020 to be approximately $20 million.

This completes our prepared remarks, and we'd be happy to answer any questions operator.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one I get telephone keypad. If your question has been answered or you wished or mute yourself.

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First apparently.

Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from a line of Eric Coldwell from Baird. Your line is open.

Hey, Thanks, very much good morning.

Crisis or a downturn, it's historically not been unusual for pre commercial biotechs to.

Tap the brakes sometime slamming the brakes as they preserve capital I'm just curious in the slide you show your smid client concentration, which is helpful. But would you be able to parse out that client diversity a bit more maybe either by number of accounts or specifically what portion of that that business is actually pretty come or.

Bill Biotechs.

[laughter], Yeah morning, Eric I saw us I hope you're doing well good morning. So I think in the accompanying slide says on page seven is a breakout in the left downside that looks a little bit that pretty revenue biotech exposure pool clinical which is on the temp.

Then.

And then on the commercial side, we have some precommercial biotechs that we do consulting for met columns, a mock access strategy that kind of thing. So it's quite low and I think that you know as we've evolved as an organization over the last couple of years you know we've moved away from this expose you to not pre revenue.

Yeah, I biotechs to a much more.

Much more established biotechs and ER and the large pharma, which you know helps into situation like this to have that balanced a portfolio of as customers.

Do you Elster do you do you share my concerns or views that perhaps that client base in this environment could be a bit riskier than large pharma I mean, I've I've heard both.

Both arguments during our channel checks in the last couple of weeks, but.

I think you can look at it a couple of ways right. So they did it people whose liquidity is gonna be most critical.

But there also this section of coast must be like the group of customers with time is there enemy.

So any delay two trials any elongation of the trials you don't have a certain amount of capital on the balance sheet.

Deploying into the execution of a trial you know these delays doesn't help them in that you know they they obviously building some buffer you'd hope that they would but if the trial run six months longer you know if this goes through Q2 Q3, great six month or additional execution timing that color.

Are they running trials you know they got upon the capital to keep going for another six months. So I think that will cause some headwinds there, but what we've seen is you know we very cautious when we take on new customers in that sector to look at their liquidity and their ability to to fund the trials all the way through.

And I think we feel we feel comfortable about the set that we'll keep you know that we or work with that we that we connect with Oh, well capitalized managing the that they've worked well than we've been able to connect with them and have meaningful conversations with them about how we're trying to keep their trials running out of the three rooms.

<unk> activity old Guy you know pushing.

More recruitment into on affected areas at this time so.

Yeah I think this you can look that both ways you know they the people who might not placed the trial that moment because of liquidity issues and clarity clarity on what how long it's going to laugh, but again. These are the organizations with time is not near friend and a you know they've got that push to get back home with that as quickly as it kind of will continue going as.

Much of that come.

That's really helpful. If I could.

You get one more quick went in to Jason Jason I, you know I realize in respect that your with your guidance, but some companies have enabled offer either a framework or perhaps guardrails around the second quarter, just just to help narrowed the range of estimates on the street, perhaps provide some level studying for expectations.

Without.

Christine you too hard on this is there any chance we could get you to do the same.

Hey, good morning.

Good morning, Yeah, Yeah, we're not going to provide the formal guidance as we as we mentioned there, but can't talk a little bit about how we see the sequencing in our internal models.

As mentioned on them and paired remarks, no second quarters, where we see the most significant revenue impact. Your that's also where we will have the highest sort of dollar value of savings, but it's just not you know the savings are taking a little bit of time to get moving here as we responded to the pandemic.

Yeah. So that you know the margin impact for the second quarter. Yeah. We'll also be yeah, the largest impact and then as we come into quarter three.

You know the revenue, yes starts to come back in the savings are fully bad it in including some of the permanent savings you know, we anticipate seeing margins you had kicked up and big broadly in line with what we've seen in prior year quarter Threes, and then quarter for you know as always every year.

Our largest margin quarter, and we don't expect there to be any differently. This year can bump from that perspective, so yeah, that's where.

Yeah, well see that the highest margin percentage.

Thank you very much.

You're welcome.

Thanks, Eric Thank you [laughter] excuse me our next question or comment comes from a line of David Windley from Jefferies. Your line is open.

Hi, good morning, and thanks for taking my question Hope everybody is well Oh, one of the things that I think stands out the most to me and in some of your statistics here is is your quantification of a inaccessible sites.

And that's a number that you know, it's quite a bit lower than your peers. So so I wanted to.

Understand I'm more color around that both in terms of kind of how you're defining access and then a are you using do you think you're using sites that are materially different than your peers I'll stop there.

Okay and morning, Dave and I could say from you.

I think there's a few elements at play here. So you know we moved very quickly early in the whole kind of pandemic.

It's gone to move out of China, and Asia, We moved very quickly I think Paul and his team did a tremendous job of starting to switch to remote monitoring. The fact that we have the capabilities in the technology to do it the speed that we did it with and also the relationships we have with site.

No we founded on about sites being a big Paul by model and a the relationships with sites for a long time and I think that helps because we have that relationship. We have good strong relationship with them I also think it the therapies. So you've referenced the type of sites I think it's driven by the therapies that we working so when we look at.

Kind of the percentages of the essential treatments, we work and what I mean by that you know oncology rare disease Olson, the really complex see I CNS and a gen met spaces implement inflammation immunology et cetera, we have a really big load a really big kinda trial loading that was really complicated space.

Yes and.

You know we're seeing those.

Seeing those trial sites stay engaged stay monitoring that patients very closely our ability to plug into the <unk>. The electronic health records, because we did it early.

And maybe got ahead of the pack a little bit let me get that because that really move I think all those things combined to help is staying contacts.

Keep the sites engaged and keep the moving forward.

I'll I'll flip you over to pull for that some of the definitions around what we consider accessibility you know the 10%. It's just way we call get anything out of the sorry, I will tell you that but.

Let me I showed it to pull and Apollo give you a bit more detail on that site engagement from a pool.

Thanks, Dave Yeah, I think it's a great question and I think it comes down to the definition as you think about what accessibility means and you know as Alister said I do think our T. a mix. It plays a big part in that but what we're seeing is that the sites are still very active as well in in trying to engage in start up activities.

And so if you look at what we've seen to date just around regulatory submissions. We continue to work toward Activations and we're still seeing a high percentage of our submissions compared to prior year sites are still wanting to engage and getting ready for the next wave of studies there still also engage.

Aging and.

Remote monitoring we've seen a number of sites that you know where we can have access to remote access to each ours and can continue monitoring were still seeing sites that are actively helping us to ensure patient continuity in treatment and safety reviews.

So we haven't seen much of a drop off on that parts I think it's just when you think about the definition of inaccessibility sites, especially in oncology and other areas or they're going to continue treatment or that patient. They want to continue the safety monitoring and were able to do that across the sites.

So to clarify so a 10% is you can't get us see already on site you can't get remote access to the technology E.M. are you can't get anything that's that's you're kind of 10% quanta for correct, if they're not allowing any site activations, they're not doing anything on regulatory submissions. They just our inundated with.

You know the covenant this point at that level, we're seeing the other 80, 90% that are still active in some form or fashion around continuing the continuity of those studies, okay understood and then a Jason probably for you follow up kind of follow to Eric's question I, just want to make sure given that.

Well, maybe I'm being too myopic care, but given that youre operational path seems a little clear because you're engagement with sites is higher and that seems to be workover. It is the most disruptive. So your operational past seems a little clearer than your others a than your peers.

Yes.

But youre you know you're removing guidance and some of them have given to guidance is Eric comment I just want to make sure that the and your first quarter was quite good I just want to make sure that the the kind of choice to not give guidance is not a reflection of the a significant deterioration.

Beyond March that that is more precipitous it doesn't sound like that's the case, what I just want to make sure. Thanks.

Well, yeah, Jason <unk> cannot just jumping from sorry, I think that's sort of topic that they you know on the guidance side.

Yeah, I think we're well prepared operationally with looked in remotely right across the businesses and able to come back with sites and we're already seeing some great optimism sites Stalin's reopening in Asia Pac and actually even into Europe and some in the U.S. So we're seeing some optimism there as we come through we just don't.

Like pretty much everybody else well the short term overall kind of re opening plans going to look like and it's going to be down to local governments.

It enables sites to get back to full kind of a you know full capability, which enables us to get back to full on site activities, which obviously drives the revenues et cetera. So it's like you said it it's not because of the precipitous you difference overall that were seeing compared to anybody else. It's just that we.

Don't feel confident enough to pick that well that curve looks like on the app on the a you know on the other side of this whether it's a V. Whether it's you whether it's more like a checking all not anything anybody really knows that yet unprecedented say, it's more related to how we feel about that philosophically than than anything else, but Jason I just want to tag.

Going back to add that that thought process.

I appreciate that thank you.

Yeah, Yeah, and they just al you know we.

You know we don't we have not seen you know anything precipitous in terms of the fall off post quarter, one yeah I think.

Alister hit the remarks about pipeline, then and things of that nature, and we talked about the operational metrics. There that you know has continued into the the second quarter. You know, we do have disruption I mean I.

Certainly is is you know what we see how that stacks up to others. You know and definitions is hard I think that top line and how that moves third second quarter in third quarter is the hard part from our perspective, given the depth and duration I think what we focus more on is hey, we.

Can impact our call stays in a way that is temporary and permanent and we do controlled out and we want to do that quickly and go deeply early so that we can whether this as best we can early on and then Peel that back percentage wise.

The total cost base over the months in quarter and that's what we plan to do while we also out more opportunities in front of us if we want to extend the temporary items for we can do more more permanent. So you know we focused on what we could control and that's the call side of things then and that's what you see coming through with the Mark.

As a percentage that we wanted to get some guard rails on as Eric but it.

Understood appreciate that reinforcement. Thank you.

Yes, I, thank you [noise].

Thank you. Our next question or comment comes from a line of John Kreger from William Blair. Your line is open.

Hi, Thanks, guys.

I have two questions Alister can you maybe just comment on what sort of operational performance, you're saying and how it might compare across the U.S. Europe and Asia, particularly as you mentioned just a few minutes ago. Some of the real things that you're starting to see so that's the first question and the second question as you gave us some good stats about site access.

Ability it sounds like that was primarily relating to your ability to do monitoring how about in terms of patient ability to actually yes see see their ER physicians and how is that part of that clinical trial process holding up thanks.

Sure. So on the metric side, John we our regular operational metrics that we look at all you know truven actually from an activity basis sites on a site level kind of on site visits face to face time phone visits remote.

ER visits kind of the real world evidence or side of the business as well. So we track them very closely we try and buy therapeutic business unit and you guys and I was still run therapeutically, we tracked by the FSP visits I the whether that's.

You know in aggregate across our FSP business all by the actual cost in that business units that sit within there and then we've been looking at how those have been ramping opened back down. So what we saw it obviously is a big drop off in in face to face visits we still have face to face because it's going on I I think metrics wise.

About 15% of what we'd normally I expect to see.

It's still active and that nice actually across all regions. So U.S. and Asia I think more so than Europe right now, but we continue to track that as we've seen a huge pickup obviously and the remote numbers because as we switched you know you got that transition in the two lines crossed and.

Where a good numbers on the remote monitoring business I'd like we said before we've got good site engagement still we still look into the majority of our sites still supporting them in what they need talking to them now about go you know how do they returned to work successfully and what we can do is how famine.

And that that kind of stuff. So there's a constant review of those metrics and how we get how we make sure that the team have to take the tech that it needs to support that it needs and obviously, there's a lot of offsite time as well that onsite Tom is about 30% them, but the overall and then you've got tea.

Matt So you've got some kind of writing a reports and all the associated activities that go along with those visits but actually kind of on connected to be in actually engage with somebody on the side, we're actually on the site itself.

Second part of your question I think it is more difficult for us to see in the metrics about how many patients going back on site.

Obviously, a lot about sites are engaging with patients directly that it from their homes. So they kind of remote for the patients as well because of a you know social distancing protocols, we've been working with sites to make sure medication, where applicable and where appropriate can be sent to a patient.

Weve call. If you think about a relationship we put in place with <unk>, we can actually watch the patient take their medication I saw that system dose, so and that's not putting on old trials, but it's on you know some of the CNS trials et cetera. So it can actually make shows a patient is compliant and that kind of thing.

But those patient numbers I don't I'm going to ask Paul, but I don't think we have much metric around that patients returning to sites. Yeah. No. We're seeing in Asia to send degree I mean, some locations in the U.S.. We've we've seen it comes to its been a constant but Paul I don't know if we track any metric either doing.

Well I mean I think these this metric to look at would be just dropouts and yeah. We have not seen a lot of patient dropouts from studies I think again it goes back to your original comment Alister on the T. a mix many of the conditions were treating patients need to cap that continuity of therapy and so they are going to continue that therapy.

But I think the biggest indicator is on dropouts and we have not seen a spike in patient dropouts from studies, we do we do monitor that and we're continuing obviously to measures you said that the lied visits we actually saw a spike you know an increase in the last two weeks around like visits we are.

As you said between the 10% to 15% range on live visits and submissions continue to go up. So I think those are the biggest indicators that those sites are still active and patients are still active on study.

Alright very helpful. Thank you.

I show.

Thank you. Our next question or comment comes from a line of Aaron right from Credit Suisse. Your line is open.

Great. Thanks can you speak to some of the opportunity than change orders for you or extended enrollment timeline generally speaking tragic CRL our solution provider in this industry key anticipate that being a meaningful offsetting factor for you and have you I assume you're having this conversation at the state well it sounds like.

Yeah. Thanks, Aaron I think it's a natural Paul that's right. So.

The impact of kind of it is going to elongate trials.

In General terms, you know you're going to see a reduction you know the statistics on kind of change that the power of these trials is not going to change.

So we still going to need you know.

500 patients for 500 fashion trial, but he's going to take longer to get to them. So I expect that extends let's say six month kind of a elongation of trials that's going to mean.

Expand project management time and generation things units, the driven by durations.

And that's going to you know those things are going to get passed through to customers in some regards.

Which will move that revenue doesn't go away just moved to the right like you say it will drive change order activity and it will move that revenue to the right effectively. So you know we think we see that those activities moving along now there's also the shift.

The remote monitoring there was some you know changes to the cost structure for that and we know you know the E.M.A. issued guidance on what they think about remote monitoring the changes around kind of it the day before yesterday. So we are still evaluating those regulatory comments et cetera, and the impact.

So you're going to see a reduction if you like in the cost of monitoring in the cost of the monitoring visit as it moved from onsite to remote take out the travel time.

This is the you can do everything that you could it on site. So you probably going to get 70% if the revenue for that but then you know that's can offset to some degree by the increase in project duration.

Okay, great. Thanks, and then a broader question here do you think some of this call that disruption should drive any sort of stepped up.

Industry consolidation across this year really do you think that there's opportunity there.

There how much consolidation standpoint thanks.

It's a good question. It's it's a question I haven't given much thought too.

Because of that wants to have been <unk> occupied.

And all the way recently obviously.

I don't know if this will be an individual driver of more consolidation I think if it's a see all right maybe some of the smaller ones without liquidity you know have problems I dunno, maybe they become you know targets for consolidation I don't I, but I I don't think at a high restaurants at the business. It will it will drive.

They should meaningfully.

From all saw there already.

Great. Thank you.

Okay all right. Thank you.

Next question or comment comes from line of Tyco Peterson from JP Morgan Your line is open.

Hey, I was pretty much in recruiting patients from less affected areas I'm just curious how successful that strategy in this environment that you are there other actions you're taking cristiano.

Patient recruitment standpoint.

Wanting to talk I I think early before the pandemic spread much wider yes, we had some good success with.

You know divest in recruitment to other locations, we still having some success with that.

We have I don't think there's much out there. They can do right now to increase or enhance patient enrollment because you have that affect patients fare of going into a center. If that's required as part of the as far the recruitment I'll ask Paul if he's got any thoughts up and pull in a second if he's got any thoughts on that but.

Okay, I don't I don't think the that that we're seeing much that's really accelerating a trial at the moment, although unless it's a kind of at 19 trial, obviously, which we have a few of those guy.

Hold any thoughts on that.

Yeah, and taking <unk>. It's a good question I, we I think at this point its its global enough that there aren't places you really can go to to find you know and offset from that perspective, you know I do think that you know again the mix of therapeutic areas. We have patients still are going to want to join therapy I'd also say.

You know some of our larger partners are also looking at action plans to start opening enrollment remember part of enrollment drop off was a decision by some of the larger.

Client base, but I think there are reevaluating that and I think that will be helpful. As you look at enrollment as well sites are still actively wanting to have enrollment in many therapeutic areas. So I think we'll start to see that overtime improve just because of the decisions from a other client base.

And then a follow up on the question earlier on change water costs. I. Appreciate you think it'll be pushed out to the right. But is your view that you'll you will be able to pass on most of the incremental costs and then as we think about kind of be trial protocol changes.

How how how about you muscle those discussions I guess being with the sponsors are now how much you know production could there be incomes are going back and hard to get beat your work and or is it certainly understood, but yet does not require the extent that work needs to go back and won't be God.

Well again, Oh hospital, so he's coming because he's closer to that to me, but I do think that you know it's a pandemic post is handled by customers in the same situation say you know when all gotten back to customers.

You're trying to explain change orders that they don't really understand what happened in you know, which is always a driver for getting into an argument with a customer on on the change ought to say I think the customer the very clear at the moment you know I I think we've had more engagement with customers them, even normally doing we're heavily engaged organization when it comes to the customer.

And so you always have deep discussions we've had detailed discussions around the impacts like I said before we're still you know the M.A. released its guidance on what I expect to see from remote monitoring and a the situation only two days ago said, we're evaluating that still and how that will guide conversations around.

Change orders, but I think I've custom is certainly on the Stan.

Either through the trials that running themselves or through as another sale Roes that.

This that and chemicals that data in a in that change in in the trial, which will lead to a change order you know it's.

Even on fixed price trials, where we happened what we would call a material change at the end of this will qualify under that it's something that's outside complete outside of our control an expectation you know that the trials that are up and running sorry, Yeah. I think those conversations will take place there.

Yeah, we already laying some of the out for customers.

And expectations around that but right now the focus really has been on how do we can say how do we get the sites moved over to remote how do we manage the patient like how do we manage to keep these trials compliant patients compliant et cetera, and now we're moving on to well the financial impacts of moving.

It's very much Stan.

And ER and the location of trials and of course.

Customers, where they want to do that once they know the full impact of the change. So how long are we going to be remote how long are we gonna be delayed et cetera, which so you can give them the whole packing one guy so what we're looking at I got into those discussions.

Oh, Okay, [laughter] <unk>, yeah, I mean, if I can add to that I <unk> I think what we've really also done is the amount of you know proactive communication that we've put out from our communications team. You know we've created links for clients to view what the actions are that we're taking and to be very honest day I have a lot of interactions with our CLO.

Once I've never been prouder to be a part of this industry because I think every single client that I've spoken to their first you know messaging is patient safety continuity of this trial in the therapy for the patients. So we've been very transparent about that and I think we're we're seeing a real partnership with most of our clients where they were.

I want to see that patient safety and continuity and they were all doing the right thing to keep these trials going so I do think we'll be able as we work through this together to find the right solution and make sure. We're doing those the right things to keep continuity for patients I don't anticipate that being you know a huge headwind.

Yep, Okay, and if I could not just one more just on commercial you know how do you think about the recovery there obviously the margin.

That's not running costs grace bias towards that.

Or is that not not directly.

Thanks.

Well michelle's on the fine. So we can talk about other michel as well, but the cost savings and looked at talk of a corporately across the business I think.

What was saying on the commercial side is you know.

Again, a good so a quick and enabled switched to remote and engage with the haste hates GPS across that business. So Michelle any comments on that.

Sure how are you take up so a couple things first.

Dallas Your talks about our deployment solutions business quickly moved to remote engagement with customers and.

Because of the capabilities that we've invested in an omni channel and frankly, our expertise from our engagement center of Ah you know accessing customers over the phone or over the web video as well as our learning solutions team. We basically took that learnings in those capabilities and talk to our field representatives, which sounds.

Like a little thing, but is actually a very big thing really understanding how to navigate in office enter phase through difficult times. So.

The field Representatives.

Did really rally.

Well I had already back to see coal they'd call activity to virtual channels right. So I think that that's really important I think the other saying that we've we've seen in regard to the pipeline, which is encouraging as we're just seeing delays and decisions when I see you know any customers pulling you know.

He is back work, we're saying that they're not going to continue to focus on the area, but they've been focusing on so you know most of that but the issue has been pushes and decisions from a pipeline perspective. So you know that's why they the pipeline is looking is looking strong so in regards to convent consulting those businesses.

Work, a very effectively remotely we've done multiple virtual pitches were winning business virtually and so that business has been.

No.

Operating pretty.

Successfully in a remote.

And our remote environment as well. So you know we're ready to go when they can get back in two offices and back into customers, but our interaction.

You don't remotely have met coal. So you know we're confident we have what we need to to be successful throughout this.

Throughout this delay, but then to be able to quickly get back into a thriving revenue and driving.

Yeah, that's likely to its Jason here just to finish that all you on the margin side.

You know as Michelle in Alister, both hit Alister little bit during the March but.

When we started seeing that the delayed there yeah, you know at close to the ended the quarter.

Particularly on our field team side and things of that nature that did result in that revenue kinda down Solomon and therefore, the margins did take a hit I would say, though when you look at our internal plan, we were only down about yeah.

A point because in prior year, we had some favorable revenue mix items that pump that margin up so.

Thats historically, one of the lower Mark this is our lower margin quarter. So just to give a little color that color. There in terms of the mix and then how that compares to an internal plans.

Okay. Thank you.

Thank you. Our next question or comment comes from the line of Sandy Draper from Suntrust. Your line is open.

Thanks, very much and good morning, a lot of my questions have been asked and answered.

Maybe this is probably morford for Jason.

Yeah, you are operating very differently today, when you as the CFO start to look across the the operations are there areas, where you say yeah, we want to get back to normal clearly, but these are things. We actually are realizing we don't have to do any more of these are expenses, we don't have to spend and I'm thinking obviously.

You guys were doing via a bunch of cost savings plans and getting synergies and had ongoing initiatives, but are there material new areas. You are uncovering from this unfortunate unfortunate circumstance that you're saying hey, going forward over the long term.

These are these are identifiable cost saving carriers that we had not necessarily considered a contemplated before thank you.

Hey, Sunday morning, It saw stuff just you know I think this whole environment this whole issue.

You know really is the driver for is to evaluate more than just cost savings. You know we're looking at we have strategic plan you know planned strategic planning cycle that we run on a three year basis, we're in the middle off.

Right now and we're looking at what do we learning from this activity you know people working from home I mean their efficiency of people working from home. It's been a founding right people that everybody's I'm everybody's doing it so that works.

What does that mean for a strategically from an office footprint location footprint a perspective.

We've invested wisely over the last few years the thing to make sure everybody in the organization I mean, everybody has a laptop southern immobile, they're able to go remote et cetera, we invested in the infrastructure to enable that as well. So we're learning a lot of things from this experience that we should that we're using his imports to challenge.

Current current strategy.

What it will mean to our strategy in the future what it would mean in terms of customer changes you know when lobbying and questioning customers about their thoughts on it. So I think it's a bigger issues and just cost savings you know there they captured in that but also it's really strategically how do you think about this well what about water the rack.

If it sees will they strive how will that change the by the business that we work in and the way that the business operates on top of that so.

But really using this challenge as an opportunity to think hard about where we go in the future in general terms, but Jason I questions on the cost side, what do you any any difference in the way that we think on that.

Oh, Yeah, I would just I mean, yeah, I think alister ground, obviously I would add you know we are accelerating some of the the things that we already solved saying you know in fall, we're bound and you know pulling that forward and those are permanent type items and then you know the other thing that we hit on but we haven't talked.

Talk to you know about and it's nothing huge but we did take the opportunity to look out the portfolio services right across the business what might.

Not the as core as perhaps it once was or things of that nature that you know, we think will you know obviously help us and longer term as we focus on the business and help us margin wise to as we come out of the other side.

Great. Thanks, so much as my question.

Thanks, Andy.

Thank you. Our next question or comment comes from a line of Elizabeth Anderson from Evercore. Your line is open.

Hi, guys. Good morning, I, just kind of question in terms of how you're thinking or how your conversations have been go in a with sponsors around virtual trials I people sort of receptive to that idea, though it is that more of like a receptive in principle versus you know willing to implement now are there certain segments.

Your client base that have been more interested any because you could provide that would be helpful. Okay.

Okay Elizabeth morning.

So I want to make sure that Definitionally, we're all talking about the same thing because.

Well with what we're seeing in a moment is a shift from onsite monitoring to remote as we get through this which has always been an element of monitoring Watson any other last few years risk based monitoring all you know efficiency based monitoring how have you want to look at it virtual trials or something completely different right, where there's a virtual trolleys, where there was no investigates away.

We refer to them is de centralized trials. So they were different kind of subset of trials. So de centralized he kind of easier to administer the medicine easier to do it but through tele health.

Really suits kind of or who have more chronic diseases, where the patients. So you know doing their own medication.

Darrens at home and ER, maybe in the real world setting so we already run virtual trials.

In that sense now the remote site is where you're not getting on site, but that the patient is still being treated by an investigative sites and I think there's been a little bit confusion around those two they the interchangeability. If you like of the words virtual and a decentralized and remote so we're seeing receptor ability it.

The moment from customers to go to remote trials to remote monitoring trials. This year in this pandemic and that you know the guidance coming up regulate says this is kind of working around that as well what they expect to see on the virtual trials and you know we already have that capability, we deliver those in more real well.

[noise] settings, and less complex medicines so.

It's not really a customer by customer I think old customers are interested in virtual trials and what they can bring to them. It's more about the applicability of them by therapy and by phase of the therapy rather than customers themselves.

So it it's kind of a definition all thing and I think people into change virtual and get virtual in remote.

Mixed together with else actually separate things.

Yeah, that's helpful and should be so just to just absolutely type I see you haven't seen like and none of your trials are converting from you know either in person or or remote to something on the virtual because that would just sort of be from New York the way, you're positioning and it's like a whole separate contracts that would require different protocol.

And stuff.

Yeah, but essentially yeah, I mean pool any any additional thoughts, but not with you can do the remote and the on site together virtual is like you say something different in terms of it several comes from.

No I mean, the only thing I would add I've Alister I think you're spot on which is you know every trial is really a customized solution. It really depends on the T.A., you're working and we are dealing tele medicine on on a number of trials. We have we are using clients systems in some instances.

We have multiple models that were putting in place, but when you think about tele medicine in a lot of the t. as we work in you're not doing a a C.T. scan or an infusion typically that way, so I think where customizing those fits for the specific client need, but we are working across all of the above and.

And have partners that are helping us from a tele medicine perspective to do that.

Okay, great. Thank you.

Thank you. Our next question or comment comes from a line of Dan Brennan from you'd be yes. Your line is open.

Great. Thank you thanks for taking the questions here.

So I just wanted to ask one kind of clarification come up a few times even in the last question. So in terms of the percentage of series that can get to sites I think Alister, Jason you mentioned, 15% was that correct.

I'm just trying to level set kind of back to a few questions kind of what some of your peers have talked about which is how I think there to finding it but I'm just trying to clarify so 15% of so basically 85% of sites are inaccessible for CRH physically being there.

Yeah.

Got it and any any sense of how that changes if you look out over the course of you're giving your various planning strategies, you've got probably you know good plan and the bad plan, but when you think about the middle plan like what would what would that look like as we get the Q3 Q4.

Well I think what we aspect as we set out areas [noise].

Impact throughout Q2, you know I think it's going to depend on local come in protocols and if they peel back the social distancing requirements, what that looks like in Q3, we expect it to.

Be a big increase and then big improvement as we go through Q3, not only is kinda coated hopefully blows itself out all that you know the social distancing measures take effect, but as we learn well the best routine is for a site to protect themselves in the staff you know wall to clean it probably is calls our et cetera, where helping sites with that and then.

You know by Q4 I'm, hoping.

The we'll see a a heavily reduced impact.

And to be back to a majority of on site work I think some of the trials may stay as a mix of on site and remote as well. So you can quote a number of visits down and that can cause the exposure down by continuing to do remote little bit longer. So you know, we I I really don't have a crystal ball that tells us when we're gonna be.

Out of it and what that's going to do to April visits we have trend lines. Like you say, we have a good to a good scenario and an a downside scenario or you know.

And it all relates on how quickly it feels back but one of the reasons not given guidance is we don't know that so you know that's kind of the patent we're expecting to see what you think is at the same as everybody else is.

But in terms of local size ability to see it to allow modest is back on site.

Can be a case by case side by side basis.

Great. Thank you for that Alpha and then and then you made some comments in the prepared remarks and then.

That's continuing its come up in in terms of your ability.

To recapture a what is a lost here early on in the year is the idea that it that it does just get pushed out or is or is there slack in the system. Obviously, you know patients and insights and people, it's hard to kind of accelerate things, but I'm just wondering.

How do we think about over the course it this year and then even in the next year is there the ability to kind of accelerate some of that the shift here to kind of caught you know get to a point, where you've caught up.

I think the catch it will take several quarters I don't think it's Gotta you know if Q2 in Q3 down you don't get the change orders only in place and it and you don't recoup all that you don't get rid of the backlogs at site and things like that in Q4, So I think it well over all being impacted to the whole of 2020.

[music].

From a operational and revenue perspective, you know and then as we go through 2021, if there's no second wave if there's no kind of reverberation of this around the world as the second wave then I think you know will largely be caught up with trials through through some point in 2021, whether that'd be the middle to the end I, but.

It doesn't all come back in the first week that we got back to work as but you know it's a much more phased in gradual.

A piece of that because sites I only have a certain capacity the patients even if there is a big battling for patients.

When those sites reopened there's going to be a prioritization of which marks this can go back out and sites.

Because we all along with his views stimulus sites, so they're not going to one tendency already showing up on day, one is gonna be facing so it'll take a while to catch Michael.

Great and interest of time I'll leave it there thanks, a lot and congrats.

Thank you.

Thank you. Our next question or comment comes from the line of Robert Jones from Goldman Sachs. Your line is open.

Great. Thanks for taking my question. This is Jack robots on for Bob.

So I'm trying to understand the range of outcomes embedded in the 13%, 14% margin range I guess is getting a meaningful progress in the beginning of the glasses decided by the fourth quarter and its commercial decisions were still believing the fourth quarter would you say they'll be able to maintain the range.

Yeah, Hey, Jack was Jason here.

Yeah. So.

We.

As I mentioned, a little bit earlier, Jack we we've gone on the cost side.

Heavier on the front ends with temporary and permanent items and we have.

You know a certain percentage of the call space that we're targeting in quarter three quarter, four and Oh, I'm, sorry quarter to quarter three in quarter four and then on top of that we've got about 50% more identified that we could pull in if we need to by extending items were adding more more permanent items. So you know with that level of.

The and and what's in front of US you know the rain weeks, we what we feel confident in getting in that range based on that the range about ones. We've looked at you know than our internal models via those items.

Got it that's helpful. Thanks, and then just following up on the the complex disease area that you talked about having high school here too I'm curious what the split is for you between hospital based site and outpatient sites for the trials like you're running.

Yes.

Yes. Good question, all I've done a crap out staff and we can see I don't Patrick.

But I think given our you know our pipeline and what we had therapeutically I would.

Let's say likely that well have a lot more hospital based but I'd have to go back and cut it I haven't got it that way.

Well I didn't catch up without there.

Thanks.

Thank you our next question or comment comes from them on our Steven Becker Baxter sorry from Wolfe Research. Your line is open.

Hey, Thanks for the questions also first I wanted to ask about your effort to add incremental heard provider relationships with large pharma. Obviously, we're all working remote right now it's hard to say how quickly things will sort of get back to normal. So for the companies that you would have expected to be able to pitch. This year I guess, how are they handling their process or the pushing out.

There are and decision making are you they extending their current providers and a short term basis extending them for you know something more like a whole contracts cycle, yeah, we'd love to get better sense of what you're hearing on this and then just as my second question I'm, just thinking about headcount I guess, how do you think your year end head count will compare to where it would have been if we.

You know never had the outbreak thanks yeah.

So I think some of those large pharma processes, we've seen them continue to rule.

And we are actively engaged with them a it's a bit different obviously not been out suppressed the flash but.

You know where were doing the virtual pressing a flash and Oh, yeah continue into two midsize prices for it I think it will take a bit longer.

Them they might have done if it were right we've got face to face, but so we know.

Well, we got any concerns that those things are not progressing as as we expected them to say and then in overall headcount you know we've got a hiring freeze on at the moment, saying as everybody else.

The ready looks at billable Oh, sorry, non billable and then looks at a on the billable side, we're always going to be interested in talent, we're always going to be looking for talent.

We have been building significant backlog, we've had great growth I'm gonna needs continue fuel and not with talent as we move forward, but we are obviously being very cautious and are making sure that we we you know keep the cost side of the business under control and while the revenue suppressed little bit sorry.

I think would probably come out here with a roughly what we've got now.

But you know it depends on how quickly O comes back I mean, if where if we see a a strong solid resilient rebound in Q3, and you know we need to get the staffing for Q4 will be doing that and moved behind them best sorry, but it just again depends on that the shape of that kind of.

Okay. Thanks Red information for sure.

Just to.

Thank you. Our next question or comment comes from the line of Donald Hooker from Keybanc. Your line is open.

Oh, great. Obviously this is going on for a while so lot of my questions have been asked and answered I want to area, maybe sort of as an aside question or have the floor had been interested in the past in your we got a medication adherence data business, which I think would be pretty timely.

Asset right now being able to sort of digitally connect with pharmacies and whatnot I think you pick that up as part of Inventiv health.

Yeah, there's been some hiccups in that business a few quarters back has that I've had those hiccups the revenue headwinds there kind of reverse then.

Maybe just a in a briefly what is the state of that particular business unit.

Yeah, I'll pass you have to Michelle for the detail I mean, some of those historic hiccups, where on the cost and decide whether that I think that a data breaches something all that would show one of the big programs down.

I'd say, we kind of a they're receiving end of that one but you know like you say I think there's a lot of a effort going in fracking in pricing and dates with them and so it is an interesting business right now Michelle.

Sure I'll, let Jason chime in if I Miss anything. So you know we it was a headwind in 2019, you recall for a variety of reasons, many of which alister already discussed.

You know back on track this year versus budget and we are.

Actually finding a lot of interest as you can imagine if if you look at the data around Trx is on chronic care medications oral medication.

Through the end of March we see that actually that was our that prescriptions that are holding up pretty well and we're getting a lot of data.

From from those pharmacies around the importance of keeping people on medications right now right. I mean, you think about tele health and the fact that a lot of patients are choosing to communicate with their customers over video versus in person in certain geographies important.

Keeping patients on medications right now, especially in chronic diseases is critically important and we're seeing a lot of interest from our customers and discussion around how do we continued to do that because you know you don't want the next wave of a health crisis to be that.

Once we get the on corporate 19 patients who are chronically taking chronic medications are now falling off their medications and now we have new issues right. They sudden and I'm not being compliant so I'm absolutely Ben I'm very valuable suite. This time and Jason I don't know if you want to add anything on the financial.

Just so you know year over year, it still must we outlined it still a drag you on terms of performance year over year, but as Michelle alluded to we were quite pleased with the help wanted the court one relative to our club budget.

Oh.

Thank you.

Thank you.

Our next question or comment comes from a line of Patrick Donnelly from Citi. Your line is open.

Thanks, guys Alister, maybe one just on the virtual trial side and you talked about this amount on the call here. So in your conversations with customers do you feel like there could be an inflection point here, where you see a bigger shift towards the virtual trial model on the other side of co. Good and then if so what's your guys positioning there relative to peers.

To capture some share.

Yeah, I think that's really good question I think that goes back to you know what are we learned from kind of it so.

So you know we've been stuck in this.

Gradual move over to risk based monitoring and you know the parts of that the required remote monitoring instead of face to face <unk>.

The they real kind of handbrake on that it's been the clarity from the regulators you know, it's I'm chairman of AC already this year as well and with Cindy burst and see call is helping the rest of the team what we've been trying to do is make sure that there's a linkage between well the regulator asks school and our ability to execute it.

Operationally across the industry, so pharma see all right and regulator working together on an operational solution. That's that's doable.

The handbrake on as being a little bit more than anything else is the lack of clarity when the <unk> when the regulate to say adequate monitoring what is adequate mean, how does that relate to remote. This is on saw et cetera et cetera. So you know as we get better clarity and experience with these models with the regulators I think customers.

Oh, I'm open to suggestions and the solutions that we roll out which could be remote virtual trials etcetera.

You know nothing that's the push this is Paul the push that that that process is needed. So I'm optimistic that we'll see a more of a shift to more remote monitoring I think the qualities just as good I think it helps drive the cost down little bit you get higher throughput from people.

Because they're just not on planes traveling you know you get that that utilization Oh in terms of where we sit for a remote I think you know I think Paul's comments speak for themselves and the fact, we were able to ship to remote pretty quickly and then on the virtual side, we use our I don't.

Comic Assembly model for that you know we were able to look any data into any system. We you know we've we've run several virtual trials with different systems different platforms. They don't all fit exactly what you that you know that each platform in of itself is not the solution to every problem that comes through.

Through or every challenge the customer comes with which is why we like to have optionality around the different systems in a different platforms. We deploy side you know I think we're very well positioned will be at the front to that went on the front, we already will be very much in front of it in terms of partnering with those organizations and there are several of them out there.

It's like 15 years ago, when he D.C. took off right you had a thousand different options and about three of them with that's a virtual trial space at the moment as well so.

Okay. That's helpful. Then a quick one for Jason I know you've talked about the commercial side. This is knocking on the margins I tend to think about is a lot heavier on the variable cost side can you just talk through the cost structure. If revenues don't do pull back significantly how nimble can you be specifically about segment on the call. So thank you.

Yeah, Hey, Patrick Yeah, So [noise].

Yeah. The businesses are similar in terms of the variable versus fixed you know on the on the cost of sales up.

Commercials, probably 95 and the cost to sales is is is variable.

And you know the S. Una side, yes, given the profile that with the reps and most of the head count being out and.

Someone customer systems in S&P several hours you know the S. DNA load. There is so it's pretty favorable to from my perspective, So Phil I feel pretty good in the business does a good job adjusting that as needed.

Great. Thank you.

Thanks, Patrick.

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Thank you I'm showing no additional questions in the queue at this time I'd like to turn the conference back over to match my for any closing remarks.

Thank you well, thanks, everybody and a out sincere. Thanks also go to entice any I was how team role they don't and all they are doing in the face of these unprecedented conditions in all we're very pleased with our overall performance in the first quarter and with how our organization has responded to this to serve our customers and a community.

These throughout this time, we remain very confident in our long term momentum and market position in an all focused on protecting the health and safety about colleagues and mitigating the impact of covered 19 on the business.

No full it's continuing to build on them and some of the last several quarters. This environment normalize. This so thank you very much thanks, ladies and gents for your attendance today appear in trust and investment in our company. Please be say take care of yourselves have a great day and be good. Thank you.

Ladies and gentlemen, thank you for participating in todays conference. This concludes the program you may now disconnect everyone have a wonderful day speaker standby.

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