Q2 2020 Syneos Health Inc Earnings Call
[music].
At this time, all participant lines aren't in listen only mode.
Later, well conduct the question and answer session and instructions will be given at that time.
I would now like to turn the conference over to wanting space Senior Vice President Investor Relations. Please go ahead Sir.
Good morning, everyone with me on the call. They are Elster Mcdonald, our Chief Executive Officer, Jason Megs, Our Chief Financial Officer, Michelle Keys, our president of commercial solutions and poll Cohen, our president of clinical solutions.
In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at Investor Ducks and he has held dot com.
Remarks that we make about future expectations plans growth anticipated financial results and prospects and our expectations regarding the carbon 19 pandemic, including our expectations regarding a recovery and its impact on the company constitute forward looking statements for purposes of the safe Harbor provisions under the.
Private Securities Litigation Reform Act of 1995, and we disclaim any obligation to update now.
Actual results may differ materially from those indicated by these forward looking statements as 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 bar subsequent 10-Q's and other SEC 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 and not a replacement for measures prepared in accordance with yeah.
For 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 would now like to turn the call over to Alistair Macdonald 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.
As our business recoveries from the Cobot 19 pandemic.
And we advance customer projects our teams remain focused on the safety about colleagues customers on the patients we also.
Our financial results for the second quarter was very solid, particularly given the backdrop of the environment during the period.
Decisive actions to mitigate the revenue impacts of kind of in 19, along without cost management initiatives provided resilience in our revenue profitability and cash flow.
Our overall net awards also remained strong despite ongoing delays in customer decision, making.
We are well positioned to weather the near term challenges and remain confident in the long term strength by business and strategy, given our robust backlog and unique market position.
We are continuing to leverage our ends and biopharmaceutical acceleration model as the effects of cobot 19 on our business subside and assuming the recovery progresses as we anticipate we expect strong growth in both segments in Twentytwenty one.
Let me start with our key highlights for the quarter.
First we close Q2 with strong net new business awards, resulting in book to Bill ratios of 1.58 times for clinical solutions and no 0.68 times for commercial solutions and 1.34 times for our total organization.
This brings us to $5.8 billion of Nets awards on an aggregate book to Bill ratio of 1.27 times for the trailing 12 month period.
Second our clinical business continues to build a strong position for our two into revenue growth with year over year backlog growth accelerating to 14.8%.
Third we want to new strategic commercial relationships during the second quarter, one of which was with the top 20 pharma company to provide integrated product launch services.
Although these wins did not contribute materially to Q2 net new business Awards, we believe that momentum with strategic relationships of this nature demonstrates the value of our unique integrated offering and these types of new relationships will fuel our commercial revenue growth in twentytwenty, one and beyond.
Finally, we generated operating cash flow hundred $93.8 million during the second quarter further strengthening our overall financial position and liquidity.
After repaying $150 million of our revolving credit facility, we ended the quarter with $431.1 million remaining capacity and $342.8 million in cash. So that we made an additional payment of $150 million after quarter end paying off the remaining balance outstanding on our evolving.
Credit facility.
Now getting into the details of our results.
Across the business, we have a sharp focus on mitigating the impact of coated 19.
Although total revenue was down 13.3% and 12.8% in constant currency, our teams executed well now mitigation strategies three virtual operations and continue to work very closely with our customers to return to a more normalized operation.
We saw improvement in the operating environment throughout the second quarter. Following its low in April and have seen not momentum continue through the month of July.
Clinical solutions revenue declined 12.3% for the quarter, an 11.6% in constant currency, but we remain well positioned to accelerate growth as the recovery continues clinical solutions delivered a strong second quarter of net towards growing nearly 11% compared to last year, resulting in Clint.
Total net towards a $4.6 billion on a book to Bill ratio of 1.35 times for the trailing 12 month period.
These awards were broad based with strong contribution from my new preferred provider relationships with top 20 pharma customers. We're also excited to have recently announced the extension of our longstanding relationship with Pfizer one of our largest customers.
We won 35 cobot related projects through the end of Q2, representing less than 5%, Nevada Awards for the first half of the year and have a substantial pipeline of additional coated related opportunities.
So some customers have delayed award decisions or postponed it start dates for water programs, we have not experienced meaningful cancellations and our clinical segment as a consequence of cobot 19, and our total clinical pipe remains robust.
Our commercial solutions segment experienced the revenue decline of 16% compared to the prior year and 15.8% in constant currency, primarily related to the impacts of kind of at 19.
Commercial gross awards were consistent with prior year. However, that's awards will love it due to elevated cancellations, which will largely attributable to product related decisions by customers. These dynamics resulted in a $1.2 billion of Nets Awards and a book to Bill ratio of 1.04 times for the trial.
In 12 month period.
Our commercial pipeline also remains healthy, although we continue to see delays in customer award decisions.
The the two strategic commercial relationships I highlighted earlier have not yet contributed meaningfully to awards. Since most of this work is currently outside of our policy window for award recognition or is subject to regulatory product approvals.
One of these relationships includes providing support for the launch of a biotech customers flagship product beginning in Twentytwenty one.
Importantly, this win was driven by our deep commercial launch experience further reinforced by our seniors one product development model during the second quarter. We also executed a three year I must say extension with one of our largest commercial customers also a top 20 pharma company.
We believe these wins establish a strong foundation for a return to growth in commercial solutions as the impacts of kind of at 19, subside, which we expect to be primarily in twentytwenty, one and beyond assuming no significant setbacks apart from cobot 19, the macro environment continues to provide a favorable set to commercial growth beyond 22.
NT fueled by the Grand complexity of customer product strategies, and the rapid pace of FDIC, new drug approvals, which are consistent with a record pace seen in 28 team.
With that broader context, I thought it would be helpful to provide an update on some of the kind of at 19 impacts we highlighted last quarter, along with our mitigation efforts in specific recovery trends.
Last quarter, we provided important statistics regarding the profile of each service line within our segments and we all providing these again on slide six fuel reference. We believe these statistics provide helpful background for understanding the impacts of cobot 19 across our service lines.
I'll start with a full service portion of my clinical solutions segment, which represents roughly 60% about total revenue.
Clinical teams continue to see certain limitations on their physical access to investigative sites, although only about 10% of sites remain completely and accessible.
Sites are in accessible to physical visits we have been able to mitigate this through a remote monitoring.
Importantly, about 40% of sites now plummet physical visits and that rate has been steadily increasing since late April in fact since mid June weekly physical site visits have exceeded the number of remote possess.
Percentage of sites permitting physical visits has been increasing at about 3% a weak although that rate has slowed recently.
We believe the slowing as a reflection of sites being cautious given the fluid environment and localized increases in coated 19 cases.
Although our clinical teams continue to experience delays in both patient enrollment and the startup of new clinical trials have begun to see these areas recover as well since dropping so about 25% of pre cove at levels in late April the level of new patient enrollment has recovered to about 60% of those prior levels during July.
Hi.
We have also continue to experience some delays in studies to also but most of our customers and size of resume these activities and overall new site Activations of recently returned to pre cobot levels.
We are these delays still exist we continue to make progress on the regulatory ethics and other work. The proceed site activation itself such that we stand ready to move quickly on the final startup activities.
Our clinical functional service provider or FSP business represents about 12% about total revenue.
Although these teams have seen similar trends in the accessibility of investigative sites. This revenues being more resilient since the majority of these teams are contracted on an equity basis.
This was evident in our second quarter results as our FSP revenue experienced a much lower percentage decline compared to a full service clinical revenues.
Our early phase business within clinical which represents only about 2% about total revenue includes clinics, representing the portion of our business that requires onsite operational staff.
Why we have temporarily scale back half clinics due to patient safety concerns. These clinics will reopen by the end of the second quarter.
Hi, analytical and translational medicine labs continue to operate throughout the quarter.
Further we have a strong backlog and pipeline of early phase opportunities driven by the pent up demand for our expertise in this area.
And our commercial solutions segment deployment solutions represents the largest component at about 15% of total revenue.
Well I deployments solutions field teams experience limitations early on with physical visits to healthcare providers. They have now quickly we tend to impose some visits where possible and about 50% about territories in July and have implemented advance omnichannel capabilities to ensure continuity and seamless interactions with talking to customers.
Omnichannel represents our advanced analytics capability that combines data technology in behavioral science to optimize the communication experienced the hay CBS.
Beyond field team interaction, we have evidenced across multiple teams I hate Cps have also incorporated virtual communications into their practices.
These experiences validate our belief that the Omnichannel enabled failed represents Davies here to stay further reinforcing the value proposition of our field teams.
The primary impact of Kobin 19 on deployment solutions continues to be delays in the startup of new customer programs, along with reduced revenue from reimbursable expenses associated with travel.
While the extent of Cobot 19 impact on commercial revenue for the remainder of Twentytwenty will depend upon the course of the pandemic in key markets. If we see continued progress through Twentytwenty and we expect strong rebound in commercial revenue growth during 2021.
The communications business, which is comprised of advertising public relations medical communications practices represents about 8% about total revenue.
During the cobot pandemic, we've experienced an increase demand for integrated communication solutions, specifically public relations clients deploying strategies for cobot, 19 treatments and vaccines and corporate communications addressing social equity.
While the primary cobot 19 revenue impact and communications that being within our medical communications practice, which hosts life investigator meetings.
We have been able to transition to virtual meetings and areas like publication planning another medical communications continue to generate strong demand.
Additionally, we have a record communications pipeline end up being winning integrated communications relationships that bring together appetizing public relations and medical education.
Lastly, within commercial solutions, our consulting business represents about 3% of our overall revenue there has been significant demand for our consulting services as biopharma clients navigate the change in the potential payer mix due to the impact of the pandemic no further evaluating the commercial loan strategies.
This business continues to demonstrate strong performance across its diverse healthcare practice areas and it's been largely unaffected by cobot 19.
Our teams also have a strong backlog of work entering the third quarter.
Overall, we are pleased with our second quarter results and believe we are well positioned for robust recovery in the second half of Twentytwenty I'm poised for strong growth in Twentytwenty wanting twentytwenty too.
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.
First I want to take a moment to thank the entire send yourself team for their incredible work to support the company and all our stakeholders during this challenging time.
Our strong resilient organization and collaborative culture continues to help us navigate the unprecedented circumstances of the global pandemic and its impact on our business.
As we mentioned during our first quarter earnings call, we prepared forecasts under a variety of different scenarios to evaluate potential impacts of covered my team our business.
We experienced revenue impacts in the second quarter in line with our expectations.
I believe the second quarter will be the most heavily impacted as we continue to monitor the shape and trajectory of the recovery.
The proactive cost savings measures, we implemented successfully minimized a portion of the margin impact in the quarter.
As shown on slide four our revenue for the second quarter of 2020 was 1.01 billion down, 13.3% and down 12.8% in constant currency compared to the second quarter 2019 on an adjusted basis.
Slide five shows that our clinical solutions revenue declined 12.3% or 11.6% in constant currency to $747.2 million for the second quarter on an adjusted basis.
This anticipated decline in clinical solution trend in the second quarter was primarily driven by reduced physical site monitoring visits and out of step work related to Kevin 19.
The associated declining reimbursable expenses, and the divestiture of our lower margin contingent staffing business as part of our portfolio rationalization.
Similar to the first quarter, our clinical team continued to work on trial continuity monitor patient safety to remote activities.
When you ultimately expect to recover revenue for the majority of these incremental covered related activities.
Our second quarter commercial solutions revenue declined, 16% or 15.8% in constant currency to $266.2 billion.
The decline in commercial revenue during the second quarter was driven primarily by the impact of Kevin Knight team.
Including a decline in reimbursable expenses associated with reduced filled team travel and lower investigator meeting expenses as well as deployment solutions project startup delays.
Adjusted EBITDA for the second quarter was $118.7 billion a year over year decrease of 22.8%, resulting in adjusted EBITDA margin of 11.7% decrease of 150 basis points compared to the second quarter 2019.
This includes a foreign exchange benefit a $5.4 million, which is consistent with the benefit reflected in our second quarter guidance.
The decline in adjusted EBITDA margin for the second quarter was primarily driven by the revenue decrease in both our clinical solutions and commercial solutions segments, partially offset by the impact of our cost management initiatives, including fall are bound.
And lower Reimbursable expenses.
It is important to note that approximately 70% of the total expected 2020 impact of our cousins related cost savings initiatives represent temporary programs.
Adjusted diluted EPS of 58 cents for the second quarter declined by 21.6% year over year.
Primarily driven by the decline adjusted EBITDA, which was partially offset by lower interest expense.
Now turning to cash flow in the balance sheet as summarized on slide seven.
In the second quarter, our operations generated a record $193.8 million and cash flow.
The strong cash flow from operations as a result, and solid collections during the quarter, coupled with lower cash operating expenses and interest expense.
So for the quarter improved to 46.3 games.
We ended the quarter with $342.8 million of unrestricted cash and total debt outstanding with $2.7 billion, resulting in net leverage of four times.
Slide seven also provides an update on our debt management and capital deployment activities.
We maintained our balanced approach to capital deployment to drive shareholder value, while focusing on capital preservation given the current environment.
During the quarter, we repaid $150 million about revolving credit facility, leaving $431.1 million of capacity available as of June 30.
Further during July we repaid the remaining $150 million borrowings outstanding under this facility.
We also repaid $19.4 million of our term loan a did not repurchase any shares during the quarter.
We had $136.3 million of share repurchase authorization remaining for utilization through the end of this year.
Our non-GAAP effective tax rate for the second quarter was 24% and we expect to maintain that rate for the full year 2020.
Given the benefit of our Interwell deductions, we expect our actual net cash outlay for taxes in 2020 could be approximately $20 million.
Turning now to guidance on slide eight.
This guidance reflects our estimate the impact of 'cause it 19, including the pace of the recovery, which is inherently uncertain.
We currently expect our site access within clinical solutions to return to approximately 90% of normal levels by the end to 2020.
For commercial solutions. We currently expect our HCP access to also returned to approximately 90% of normal levels by the end of 2020.
Accordingly, we expect full year 2020 revenue in the range of $4.47 billion to $4.57 billion.
And total adjusted EBITDA in the range of $600 million to $640 million, representing an adjusted EBITDA margin of 13.7%.
Lastly, we expect adjusted diluted EPS of $3.16 to $3.38 up year over year at the midpoint.
I also want to provide you with some commentary for the third quarter given our current expectations for the continued pace of the recovery from cut the 19.
We expect revenue of $1.1 billion to $1.15 billion.
Total adjusted EBITDA of $160 million to $180 million.
While we expect a strong recovery and clinical solutions, we expect a slower recovery and commercial solutions, primarily due to the ongoing startup delays we've highlighted.
Finally, I want to Echo alligators commentary earlier regarding 2021, assuming the recovery and 2020 progress as we anticipate we expect to resume the momentum we carried into the year.
Given the strong backlog, we have built our strategic awards across clinical and commercial.
Our current pipeline of opportunities and the continued success of our forward bound program, we expect robust revenue and profitability growth and 2021.
This completes our prepared remarks, and what would be happy to answer any questions.
Operator.
Thank you.
To ask the question you want me to press Star then one on your telephone to withdraw your question. Please press the pound key.
Our first question comes from the line of Eric Coldwell with Baird. Your line is now open.
Thanks, very much good morning, everyone a question.
It's a couple of questions around commercial probably starts with Michelle.
I know the Sta at least at last check if FDA approvals of new drugs. This year's basically flat to up from from last year. So.
We've been working under an assumption that there's going to be a lot of pent up demand for launches these delayed face to face activities.
I'm curious Michel do you have the do you have that seen opinion.
Or perhaps discovered somehow change how farm is think about going to market and maybe is accelerating the secular shift to.
Other modalities of marketing and communicating with clients I'm. Just curious how you think cobot is impacting this and and then as a byproduct of that.
When do all of these new launches or new drugs actually get launched with life sales forces.
Thank you for the question. So there's a lot in that question. So let me let me start with we do not at the FDA right is on pace to approve products at the same rate again in 2018, which was a record year right. So launches are still.
Looking really good for pharma companies I think we've seen that the overall market.
Is.
Right now I think I would call it delayed and and deploying field teams right now and what I mean by that is.
A traditional field team they are seriously considering how do they watch in a world where its probably going to be a mix of face to face along with.
Other modalities remotely along with digital right and we've seen and we've been very successful over the last five month and converting our own sales team to using remote detailing video platform augmenting our efforts with digital amplification and.
There seems to be a willingness.
From HCP to communicate in that fashion, you know I think one of the things that's going on in the market right. Now is HCP is themselves have gone from 19% Tele health to 15, 59% Tele health and when you talk to them about a post covered world. So they see themselves continuing to use tele health as a strategy to manage their practices.
They say yeah that they are absolutely going to continue to incorporate it into their practice so.
The fact that physicians are communicating remotely with their patients makes it a natural extension for them to communicate remotely with the from sales representatives are nurses around myself. So I do think that is going to be a critical part of the strategy for launch.
Our communication business and our consulting business is as busy as ever I think you've seen the holding company isn't communications talk about the fact that their healthcare sectors have been the most resilient and have been the busiest of all the sector said that they have been working in and our consulting business is very busy because there really really looking at launch.
Plans for these companies that you're referencing and how to launch into a market, that's probably not as predictable as it used today and how to launch into a market understanding that the payer strategy might change a bit with the large number of patients that are now in unemployed situation. So.
You know I do think that Oh, we are kind of in a pause from a deployment of face to face.
It seems as 100% face to face it and that's the delays that we're seeing in deployment solutions right now they're delays there not they're still absolute commitment to wanting to continue to deploy field representatives to.
Making sure that they have the ability to communicate with a physician regardless of the environment around them. So hopefully that answered. The question. Yeah. That's really helpful. My follow on and I'll leave it at this you talked about the two new strategic commercial accounts, one of which interesting a biotech with a flagship launch I'm curious if you can give us a son.
So on.
The totality of what you're doing for for clients like this or maybe that quite obviously without naming them.
What.
What does that kind of oh relationship or contract encompass in terms of the services, you're providing and then maybe a technical one perhaps for Jason but.
You know a launch in 21 ice assume there's a lot of pre work financially how does that work for you or you are you weeding those costs up front and then you know.
Yeah, the beneath the Bonanza after the drug is launched or do you get some compensation upfront to cover any pre work done in advance of the actual a kick off data for that product just just curious technically how that works.
Good morning America Sollecito, let me, let me kind of a again, let me unpack that question a little bit.
[noise] so relationship a new commercial relationships, both pretty significant we're very happy with them. Both obviously and shows the strength in the model again resonates with biotech as well as large pharma, but they're very similar thing in terms of the deployments. So these are really what we.
Consider now more of a full service launch do you think back in 90 days of CRM doing FSP and any evolved to full service clinical this is what would be working towards in in commercial and michels.
Efforts, so that team to build a much more integrated offering at a much more kind of connected launch platform with attack with the communications with the call centers with the with the reps whether the rep saw straight sales reps hybrid reps more digitally oriented and myself.
No. So it's what the CE pro.
<unk> programs one these relationships to one.
All focused on.
Foodservice commercial and we're really pleased to see that we actually won one similar to this in Q1, so a big and again with the Big pharma. So were happy to see how customers picking up the thread on fully integrated outsource launches.
On the second part of the question kind of the finance fees.
These launches all contingent upon final approval.
So you know that doesn't meet our criteria for is to take them into bookings.
And there's a when we have a time window, where these will these launches will officially happened beyond the end of that time window at the moment. So two reasons why we don't second take them into bookings there isn't an element of long that we have taken into bookings because it has a lot of that lead at work. The you spoke to any service portfolio. So we've taken a little bit of wall.
And the bulk of it is out there to take but as you say you know as we get into that window as the product gets approved that's when we get to take the the award into bookings and then obviously revenue we start work in the and the revenues and so on and so forth.
All of that so very pleased to that it's a big combination our technology data center as one team.
The commercial integration that we've been working towards and these things are starting to bear fruit. So well that we you know a little lie on the net bookings. We got these two big platform sitting there waiting to come into bookings that will help us drive 20, and 21 21 and 22 I should say.
That's a that's very helpful. Thanks, very much guys.
Thanks, Eric.
Thank you. Our next question comes on the line of David Windley with Jefferies. Your line is now open.
Thanks, Good morning, Thanks, very much Eric Unpacked, a bunch on commercial pivot over to clinical you've had.
Three really solid really strong bookings quarters in a row on the clinical side.
And obviously Cove. It is a has been kind of an interruption to what might have otherwise been some pretty strong momentum building for the company on the revenue line I'm with you know the prior two quarters of of bookings. So I would I wanted to get a sense for the you know maybe the duration the composition.
And.
Of the bookings, particularly in this quarter and how those roll out into revenue over the balance of the year in and into 21 kind of leading into your your 2021 gross comments.
Yeah, well, thanks, I'll I'll start and I'll pass you over to pull and congratulations on your 20 year on basketball so that almost thank you see on social media over that.
So bookings this quarter Oh quite they're the same as really a normal bookings and I think that plays through to the durations as well now we're seeing sites reopened starting a trials stuck in neutral.
So I'll ask both comment on that we've won a fair amount of coated work, but only a very small percentage of our overall and we kind of like that balancing it keeps is.
You know inline with what we would normally I expect to see we have had good bookings over the last three or four quarters, we're very pleased with it but again and it's similar to the commercial story.
You know we went through the manager we put a lot that fit into that integrations doing we got a lot of innovation out into the model. The scale that we have has enabled us getting to the large pharma is and we've been very competitive they're winning much more about fisher than we've ever done before so lot of the you know the a lot of the kind of.
Promises of the managers that are coming through and driving that consistency still very credible in a you know winning our fair share in the smid market. So it's a balance between winning those big pharma relationships. We now find that corner in this midmarket winning in this mid market and I think it's just how would this be more consistent as we go but.
I don't see I don't think we've seen a big difference in the burn rate. So the durations of the trials or when they'll start so in Q2, otherwise we wouldn't have been able to take them into bookings policies. So a pull any further detail on that and if any more color today.
No I think you hit that pretty well sure I would say you know if that we've seen no. We've we've said we wanted to continue to grow in the top 20, I think you've seen you'll see in the mix that there's some good growth there as well. So I think we continue to see some some strength in that segment and as Alster said, we've maintained the Smith's it's been a pretty balanced.
A portfolio of wins across the board so.
I don't anticipate that having any.
Impact as far as you know I think it through burn rates or how we'll see that rollout in 2020, I think we continue to build that backlog and.
As soon as we get back to to 90% or greater with what we're seeing from site.
Access I think you'll continue to see that strength to come back and then momentum flow through the rest of the year and into 21.
Great if I could follow up I've got a two parter I think is for Jason. So so one could you get the could you give us I apologize if I should already know this but give us the size of the divestiture that there was mentioned how much you know kind of negative revenue impact in the quarter and then to Jason in your prepared remarks, you mentioned.
I think you mentioned out of scope work as a reason for pressure on revenue and so I wanted to understand kind of the the call it change order dynamic.
As as it might come back to you and when those change change orders are out of scope factors get no approved.
Yep.
Hey, good morning.
Yes, so the contingent staffing business that was a part of our SSD business. Good good business. However, it wasn't exactly core for us as we were look into the future. So we as part of our portfolio rationalization, we did sell that business in quarter, two and it was less than 10 million headwind in and quarter to so.
Not meaningful and I think it's probably about on the clinical side 100 basis point headwind for the year, so not not huge.
But some headwind there and then on the on the Autoscope, Yeah, I mean, when I look at the and think about the quarter two impacts from kind of it it really to one just you know all the delays and things for start up and enrollment and customers pushing things out so backlog moving out and shifting to the right.
The other is where we were performing work to transition to remote monitoring or doing site management related because of it or all the things that come along with actually managing kobin at Autoscope work.
That we had utilization say up but a realization or billability is down and that is a headwind in the revenue in the margin in the quarter in a pretty significant way that yes overtime. We believe we will be able to work with our customers to collect a large majority of that and that'll come in second half and into 2021.
That's great. Thank you.
Thank you. Our next question comes from the line of Patrick Donnelly with Citi. Your line is now open.
Great. Thanks, Alastair new ones for you just on the critical business I know you talked about some delays and the or award decisions. There I guess can you just talked about the conversations you're having with customers do you expect a stupid loosened up as we go through the second half she maybe a bolus or increased flow coming in the back 21.
Oh, Yeah morning, Patrick it's.
So the conversations varied between Christmas and we're having good conversations now and some customers are moving things forward, but that that bolus will take I think we'll take a little period to to kind of.
Move through their organizations because.
You know when when customers outsource a trial, it's not they don't just wringing their hands vet and there's no resource f. on their side. There's a there's a lot of after on the pharma side still to get a outsourcing going and often times you teams unplugging together so.
Bolus of work is jamming up some of the some of the customers as well as.
They come together work the call good work processed to outsource and get their own teams rubbed off so I expect there will be a bolus whether it'll be.
Spread across one and two quarters or whether it was spread a bit further than that into you know into Q1 in Q2 of next year I'm just not sure I think gets.
You know I think is likely will take two or three course without assuming that you know kind of it goes away. The vaccine comes through and you know mitigation strategies that are helping us to two manage through it.
As a as a planets you know I think yeah, probably two or three courses, but the conversation is getting pretty much back to normal you doing exec steering committees, we doing a you know discussions bit defenses et cetera. So it feels it feels like it's getting back to normal pretty pretty well.
Okay. That's helpful. And then maybe this one might do for Jason you talked about the site reopening rates they slowed a little bit due to the increase.
Recent new Kobin cases, and pick their ticking up around 3% each week before that you just talk us through what you factored in there and the 20 times for the back half.
Think things normal kind of tick back up or we assuming from some flattening here.
Yeah I'll start Patrick then Paul can can chime in a in the prepared remarks, you know what we have.
Have a considered in the guidance as we're getting back to sort of 90%.
On site and things being relatively normal into quarter four so quarter to most heavily impacted we'll continue to see progress as we move through quarter three and it has been.
Impacted a bit here with some of the you know the states around the country had an impact in the U.S., but nothing thats outside of the pace that we had factored into our guidance and our models.
So that's why we're thinking about the recovery in the second half and the related impact on guidance.
Yes, Jason I'm happy to you know comment there as well I think what we've seen is a consistent.
Growth in the number of sites along like visits that continues to trend up and we're continuing to see our start up.
Activities.
Actually in the last few weeks at or above what we've seen post cobot. So we're starting to see those things ramp up and as Jason said, I think they'll flow through and in the second half a starting in Q3 and hopefully ramping then well back to normal in Q4 in early Q and 21.
That's helpful. Thank you.
Thank you.
Our next question comes on the line of Dan Granite with UBI, Yes. Your line is now thing.
Just some of your peers have I think reported some bigger percentage of it where it's coming from corporate so just can you give us a little color on you know what you're seeing them from covid, what's the opportunity and kind of what state in in the back half.
Yeah sure mm mm. Good morning, Yeah, we're pretty happy with the balance of the work week. One I think we talked about 5% of the wall, it's kind of some kind of it during a covered related during Q too and yeah. Some of our peers have one more than that but a lot of our peers have.
A lot more penetration than we do into lodge farmer accounts on that vaccine side. So.
I'm happy in a way that we're winning a normal balance of work with a little top up from Cove. It Covid revenue as quick.
Vaccine trials are always a little bit faster.
The revenue Burns fast so a lot of companies will not taking that revenue burn initially.
Concern around the amount of covered work out there is.
How quickly it got stolen but also.
If the virus mutates out which this.
Some hope that that happens.
Or if somebody comes up with a virus.
With a vaccine pretty quickly.
The stability of all that code with work and your and your backlog.
It could be a.
Big Rush into back log in a big rush back out backlog, so I Wanna make sure that we build a balanced portfolio. So what we've been working for Ya.
Working towards for a long time to bounce our portfolio between Smith and lodge and all the different indications et cetera, and if you get relying on any one it can be a danger. We've won a lot of earlier phase Cove at work.
Phase won't face to which could pop into a phase three pretty easily and we've got quite a big pipeline of Cove at work.
So we're going after it with.
Competitive with the customers.
Where we have.
Presents and we have vaccine experience et cetera.
Some of those ones some of those organizations of <unk> of one of the really big ones. Good luck to them that's great I've got those relationships.
On their fair share and we'll see how that plays out.
Great. Thanks House, right and then and then maybe just a.
Second question, maybe two parties. So chasing can you help us think about how you think about the progression of clinical in commercials look in the back half of the year and then I know other Eric as a bunch of questions to Michelle.
Early on it but I'm just wondering if if if the future holds more of a hybrid model as opposed to full kind of physical access kind of what are the.
What's the impact on revenue capture and or economics from sending a as in that I know, it's hard to answer because there's a lot of permeation, but I'm wondering is is it kind of less of a revenue capture but maybe a higher margin because you have less people. So any any thoughts on that would be helpful. Thank you.
Yeah, Hey, Dang mornings, Jason so yeah, I'm looking at the second half.
Clinical what's the most impacted from the Covid perspective on the revenue side during quarter too and.
When you think about the backlog pushing out in the recovery taken hold we see that bouncing back nicely and quarter three plus the whole out of scope work.
Yeah that side of things and getting that.
[noise] minimized in quarter, three in quarter for and actually starting to push through some some level of of.
Modifications of scalp should help us see clinical you know getting back to growth and the second half on the commercial side, it's gonna be a little bits.
There was a little bit less of a code that impact.
And the actual revenue in quarter to some of the delays and canceled that we've talked about will impact quarter three in order for so really getting back to growth year over year in that business.
In 2021, but sequential girls link quarter for.
Jason do I'm gonna have to the second part of the question. So I think you know it's really interesting.
Integrating services is a skill set right and our company is.
[noise] investing for almost three years now and how we integrate omnichannel experience into everything we Dale and how we integrate commercial services horizontally and so when you think about.
Outsourcing your commercial footprint, including you know tackler data enabled representative give me that is a unique skill set that not everyone can do and we are uniquely position to do that so when we look at you know when we're looking at the business, let me see it as.
Where enhancing our current business, we're not replacing our business right. So I think that's really really important that.
The way we've been looking at this is this is.
Enhancing the growth that we've been talking about all of a lot and commercial.
Great. Thank you.
Thank you next question comes on the line of Tyco Peterson J P. Morgan Your line is not open.
Hey, Thanks. This is all any I'm, sorry, Tyco Ah first following up Patrick question.
Research and ZIP code like infections process to go business Ah reopening a fight smoke, but wondering whether you have seen a similar <unk> enrollment trends.
And also can you give us an update on patient dropped bathroom.
[noise] sure morning around here.
I think I mean the.
The trend for site reaction is it a little bit different region to region. Obviously is different places are going through it in a different paces.
The <unk>, we've been seeing about 3%.
Per week.
Overall that slowed a little bit recently as little local outbreaks of been climbed down and things like that and I think sides of been evaluating kind of local procedures and stuff, but generally that trend continues. So please about that I think in terms of enrollment whereabout, 60% of where we.
We were pre Cove, it and that's come back from about 25%.
Which was a low point in April.
[noise] therapeutically related so.
Therapies, Yeah, we don't see much but oh back to fully normal Ah dropout trends I'll have to I'll have to push you over to pull I don't think we've noticed too much.
In that in that area.
No <unk> has been trekking not pretty closely with the same so cool any comments on the on the drop out trends patients dropping out.
Yeah, I, what I would say is that you know we're seeing that certain therapeutic areas. Obviously are more impacted than others, but we are we are tracking that and I think because we've been able to shift.
To remote visits we're doing everything we can help that site to help the patient feel comfortable to come in it is something we are continuing to track and I think the industry is that an issue with just to us it's an industry concern his patients.
And that dropped out right. So we're monitoring that with our clients across the board I think it's too early to tell what that impact is across abroad swath at this point, but but again I think in a lot of the therapeutic areas we work.
[noise], it's less of a concern than it is if you're working in and some the less complex T. As in programs, but certainly something we have an island are working with our clients to make sure. We're proactively thinking through as you think about the powering of each of the trials.
Thanks, and then one follow up on napkins and commercial I was wondering how how can we think about sort of what went into the product decision T sidled or they changed you want extra cancellation is there any special transfer seeing or is there a specific customer group that stands out.
Michelle do you want to.
Sure sure. So you know we had.
A couple of things right. So.
We had mostly product delays right most of <unk> like you know the laying up lunches of the teams N D. S and I think it's really important that it's a delay right. It's it's not a cancellation that's just delaying the lunch of the team. So that's been the main you know area I'll <unk> for the commercial.
A words.
The pipeline for to swing a strong uhm it looks good N I N as the share the two commercials strategic partnership or not significantly contributing to arkose I'm worried that this time they will start to really drop in heavily in 2021 in 2022. So you know that that it's kind of <unk>.
<unk>, Yeah, you do have customers that uhm.
You know that portfolio.
[noise] priorities change over time.
And so you know they may switch south teams between products and things like that but we didn't see anything that would lead us to any you know great longterm concern I think it was you know just you know mostly <unk>.
N T O S. Jason I would just I'll just add to that to michelle's poignant at least a couple of the the.
The sort of later June.
Cancels, we saw we're actually just policy cancels for us where to start moved outside of our windows. So those very well could come back once we get into our bookings policy window backlog policy window.
Alright Super helpful. Thank you.
Thank you next question comes on the line of Courtney Owens with William Blair. Your line is not open.
Hi, Good morning. This is quite neon forgotten Krieger just another question on that kind of three per cent metric that you guys mentioned earlier.
Yeah graphically kind of how is that trending uhm, just kind of between not necessarily just domestically, but between Europe and Asia as well.
What would you got the status on Asia, and Europe, and how can I can post to the U S.
Oh, you're muted or you want yeah, sorry, I was want me yet so are you you're talking just in particular around side activities, but just to clarify.
Yeah.
So what I would say is right now obviously, we saw a big return in Asia, and then when they've had a secondary spike that slowed but at this point, we're continuing to see fairly.
Balanced return.
Europe is also coming back fairly.
Well I'd say you know the U S. We're probably doing more remote then we are in others, but right now you know, it's it's a hybrid in the U S probably more leaning towards remote I'd say to live visits are increasing more in Europe and Asia. Then they they are in the U S pick up for obvious reasons that that we've seen with some of the rates and <unk>.
<unk> regions of the country.
[noise] got it thank God.
Thank you. Our next question comes on the line of Bob Jones with Goldman Sachs. Your line is not open.
Oh, great. Thanks for taking the questions I guess, maybe it's just on the on the remote capability topic. You know I think it's clearly are growing trend across the clinical providers I'm. Just curious if maybe you could way in a little bit to help us understand how your capabilities, maybe compare to some of your peers is there.
A real differentiation as far as the different remote capabilities from one zero to the Knights.
Hi, Barbara sounds good yeah, I I think there is I mean, because the service provision is goodbye, it's like any of them service provision right about tech it's about the people there motivation that training et cetera.
I think the way the you design and implement the the remote monitoring protocols.
What.
Protocols suited to it more than others and then how you can operationalized rove very differentiate cause I mean, you could look a lot of the big <unk> why you can look at wholesale always really inside while you're essentially do the same thing for the differences in nuances or in kind of how you how you deploy the tech how you do it the insides.
Do you drive from it and you know the the way is ultimately delivered I mean [noise].
Any any thoughts on the above and beyond that.
Yeah, No I think the way we viewed this is <unk>, we're taking a really targeted approach right now there isn't a right now when you look at the different countries and you look at the different rates that are ongoing I think and different trials and indications there's not a one size fits all out there. So we've taken a very targeted in customized approach for each and.
Dividual program and I'd say when you you talk about virtual trials Teller medicine.
[noise] centralized trials, we we have been working across all of those and continue to refine what does that post covid platform looked like but again I didn't get to targeted approach. There are a number of indications and therapeutic areas that don't lend themselves as well to a long-term telemedicine approach.
So we're taking a very customized approach and working with our clients to put forward. What we think is the best in most efficient way to manage that during cove. It and also working with them on what does postcode that look like.
Got it and I just made me just one on the commercials side a lot of the the you know more practical questions I've been asked and answered, but you know, we we talked about the cove it opportunity on the clinical side it might be a little early but any discussions with biopharma and how they're thinking about the Kobe category overall as it relates to commercialization do you anticipate.
These these companies leveraging the typical sweet a commercial services that you offer.
Well Barbara I'll give you some help and then asked Michelle her comments, but yeah, we're already seeing.
<unk> in our consulting business and then communications business. This work being one there right now helping people deal Throught and navigate this their way through Cove it.
Operationally and kind of socially on the commercial on the consulting side the projects would do that but then on that communication side. The P O.
The messaging internally and externally for our customers on their approaches to Cove in N out of handling it. So this work being one and delivered by Michelle's team in those areas already.
And I think yeah. They you know is.
Cove. It issue is going to be with us and people are going to go products and put them out into the market is gonna be commercial support required for that so I do think there's an opportunity and sector, probably a little bit further down the line, obviously from timing but.
It will be on the neighbors when when that come through so I'm, Michelle any any other thoughts.
Yeah, I mean, that's one thing I would say is when you think about this is like the hopefully the only public health issue of our lifetime right major have public health issue up our last time when you think about the amount of communication, that's gonna have to a card all stakeholders.
It's gonna be a huge and that should have been a huge Alaska and the fact that.
We have relationships with most of the company that are dealing either the vaccine trials or the treatment trials in working with them right now I think our expertise around using omnichannel and integrate a commercial solutions to get to the right patient R. A C. P. R payer at the right time to make sure that the effort is coordinated I think.
[noise], we're gonna be very well positioned to compete in that space.
Great. Thanks, so much.
Thank you. Our next question comes on the line of Donald Hooker with Keybank. Your line is not open.
Oh, great great good morning, everyone.
Yeah, obviously, a lot of questions I've been that's gonna be a more detailed question in the phase one area, obviously small for Ya I Grand knew that but.
My understanding was that was almost completely shut down by you guys in the second quarter in Seattle reopened and across the industry as well and you can't really rush patients back at the clinic.
Certainly so is there any therapeutic areas, where you can have a bottleneck, where you're kind of need that phase one worked to move into phase two <unk>, how do we think about.
A bottleneck in phase one in various areas impacting you know progression interface, two and three as we think about the next few quarters too.
Well I think.
The the shut down in phase one class was quite sure you know, we put in place and I'm sure everybody else's.
Ah rigorous testing protocols and screening protocols for both staff and patients.
Volunteers as they stole the trial and then regular testing as we go through so.
Probably clinics, we're closed for six weeks or so and that will have it knock on effects. You know you create a pencil demanded by the fact that have the capacity went down for a period. So yeah, I think that that will.
Cause a ripple downstream.
But there's plenty of phase one capacity out there so it's people needs to get.
Projects placed an entity phase treatment I think some of the clinic. So we left well utilized we'll be able to pick up some of that works, which will help clear some of that backlog I didn't think any one therapy scary over and over is would be affected by it I mean, obviously a lot of phase one in a love the treatment trials happens in regular.
Locations.
Faithful oncology. That's that's right you know you treat an actual patient throw them and how people into his butt.
For the healthy volunteers, we're kind of I don't imagine it.
Impact in any specific therapy I'm attending the impact I don't think the delay and all the closure fazon clients will create a huge demand.
Oh, I love overcapacity in that sector anyway.
Okay, and maybe just one quick follow up and then I'll jump off again again on that phase one topic would you <unk> ballpark I guess it to you guys are open but would you.
I kind of get a sense, they're still a lot of clinics in phase one that or.
That are shuddered or or or significantly curtailed is that fair would you venture guests as to what percent of that phase one capacities open.
I wouldn't venture guests.
Pulls got a feel for it but.
I think we found it relatively straightforward to get a capacity open again so so.
I can't imagine.
It's too badly affected I can pull you heard anything about the only thing I haven't done and analysis of it but you know the sense I get is there are other competitors out there that have opened backup as well and I would say there certainly is demand that we're seeing coming from a number of friends. So I.
I I don't have data to answer that question, but my sense is that where we're not the only ones. We see confessors out there that I've opened as well.
Super Thank you would be well.
Thanks, Thanks, Tom.
Thank you. Our last question comes on the line of Jack Man with not fun research.
Mine is not open.
Thank you good morning.
Hello to two more follow ups first was on the commercials segment. So revenue was down 16 per cent and the quarter, but I was actually surprised profitability was flattish year over here. So I know you talked about the pace the recovery and the second half, but I was curious get your thoughts.
How profitability on the commercials segment was expected and the second half do you think.
Level of profitability and to choose sustainable.
His team start to travel again.
Hey, Jacks, Jason here, we we did have mixed benefits are in quarter too.
We are really strong performance and consulting.
And.
And I'm actually kind of out your relative to last year, and we had lower reimbursed of all kosher and a quarter. However, you know right across the business with while we're bound and just good.
<unk> of of heads to work and utilization the business at a nice job on managing the the the call side of the equation.
As we go into quarter three.
Probably not a significant difference.
But as we start getting more of those pass throughs, an investigator meetings start to creep back into.
I used to face and that sort of thing we will see the make shift a little bit and then as the appointment solution gets these project started which you know the good news is we are starting to see some starts that will be.
<unk>.
Challenge or it'll go the other way slightly but not huge but goes quarter fours always.
Our best quarter in terms of utilization and we get a lot of the bonuses and things that we achieve for ourselves teams and things of that nature in quarter for as well. So yeah. That's how we're looking at it as we look at the second half.
Great and then maybe for Alastair Paul.
I'm just curious to get your thoughts on workforce management.
You know some of your competitors are aggressively hiring distaff. Some of these big back smells, which are about to kick off or Covid. So you know how are you managing the workforce whenever you're turnover rate has been you know I missed the pandemic and do you think you'll see any pressure on wages.
Ah well, we're doing what we normally do Jack which is building.
The overall coach you that people want to work and so and that's a differentiator from a lot of <unk>. So you know we've seen pretty well through the pen Demick I think if you saw an initial dip into an iva.
Quite significantly why people hunker down it started to come back up to a more normal levels is like you say people are aggressively trying to fill their stock rose Ross. This.
To provide the people that they promised.
For projects and nuts normal business. So, it's just an indicator that our industry and sector as a whole has just gone back to normal.
We're in a very competitive industry is very little beria to put people moving from one zero to another and some jurisdictions.
Zero three small order for people to move roles.
And will all it takes a lot longer so you're generally got that pressure and the quicker to it alright turn around location is such as the U S.
So you know a big organization like house, we expect to see a certain level of 10 I've, it's not back to anywhere near that you know and I think the way that we've treated personnel through the through the logged down where we all shit and.
Containment etcetera, and the amount of communications, we've done in the Kutuzova Lefferts that we've had throw out in the engagement would happy with a stepson zinc upset with that so it's not anything on unusual.
There's nothing that we wouldn't expect to say so it feels it feels pretty normal from that perspective.
Thank you.
Okay. Thank you.
This concludes today's question and answer session would now I'd like to turn the call back to Alice over Mcdonald's My clothing remarks [laughter]. Thank you. So you can ask.
<unk> things go out to the whole send you guys help team for all they've done in the face of these unprecedented conditions that we've experience through the first half of the we remain very confident in a long term momentum and the market position that we've taken without a unique muddle. We look forward to voting on momentum is recover free is the recovery from Cove in 19 <unk>.
So the end of the year. So thank you very much for your attendance today any interest in in the investment in San yourself. Please be safe have a great day <unk>.
Be good thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may know disconnect.
[music].