Q2 2020 PRA Health Sciences Inc Earnings Call
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Your first standing by and welcome to the P. R E Health Sciences second quarter Twentytwenty earnings release Conference call. At this time, all participants are in a listen only mode.
After the speakers presentation, there will be a question answer session.
Please be advised that today's conference is being recorded.
To ask a question during the session you you will need to press star one on your telephone.
If you require any further assistance please press star zero.
I'd now like the hand, the conference over to your speaker today, Mr., Chris dental cheap administrations.
Officer and general cancer.
Thank you. Please go ahead Sir.
Good morning, and thank you for joining us for the pure a health sciences second quarter of 2020.
Earnings teleconference today, Colin Shannon, our Chief Executive Officer.
And Mike Bell, our Chief Financial Officer will discuss our quarterly financial results.
Following our opening comments, we will be available for questions. In addition to our press release, an investor supplement with additional financial information.
He is available in the Investor Relations section of our website.
Before we begin I'd like to remind everyone that our remarks responses to questions may include forward looking statements actual results may differ materially from those stated or implied by forward looking statements.
Due to risks and uncertainties associated with our business, which are discussed in the risk factors included in our annual report on form 10, 10-K filed with the FCC on February 21 2020.
Our risk factors may be updated from time to time in our filings with the FCC. Please note that we assume no obligation to update any forward looking statements.
Certain financial measures, we will discuss on this call our non-GAAP financial measures. We believe that providing these measures helps investors gain a more helpful complete understanding or financial results and it's consistent with how management views our financial results.
A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure calculated and presented in accordance with gap.
Is available in the earnings press release and Investor supplement included in the Investor Relations portion of <unk> Web site.
I'd now like to turn the call over to Colin Shannon Our CEO Colin.
Correct.
Good morning, and thank you for joining us this morning to discuss our second quarter financial results.
This was not that easy quarter, yeah, the tenacity and ingenuity demonstrated by our teams allowed us to focus on applying.
Able to report so that were better than the revised guidance we provided in may.
We watch very closely with our clients it off site and what are you able to members buddies follow up and deliver revenues of $750 million and adjusted net income per diluted share of 86 cents.
I would like to thank our employees for all the efforts to make that's happened.
I'd hate to the pandemic, we estimate approximately 70% of our studies, what I picked on Phil or partial hold that number has declined to approximately 18% by the end of the second quarter and it continues to improve weekly.
We are fortunate to be in are you a unique situation and how about robust and effective global health platform that has allowed us to show walk to remote monitoring our virtual trials, where possible limiting some of the effect on debit cards on our ability to keep a blank studies moving forward.
We continue to see restrictions on access to sites during the second quarter.
At the end of the first quantum beginning of the second quarter, we were seeing between 65 and 80% restriction to site.
We ended the quarter that nobody has dropped to west and 50%.
Asia and Europe showed the most improvement with Latin America, and North America, showing much more modest improvement.
Well. This is an encouraging sign we had a weird things can change very quickly.
New business activity was strong during the quarter and I'm pleased to report $702 million net new business awards, excluding reimbursement revenue representing a net book to Bill of 1.35.
I could think reimbursement revenue, we reported net new business Awards.
One point.
$1 billion odd, but to go up 1.62.
We saw strength across the entire clinical research segment, including our strategic solutions business and we continue to see diversification across therapeutic areas.
Probably the second quarter pick up a high level of new infectious disease studies, which was influenced by the cobot 19 endemic.
46% of I met your business came from top 15 pharma well get I mean, the came from midsize pharma and biotech.
[noise]. The addition of our second quarter, New business awards, excluding reimbursement revenue resulted in an increase and not backlog of 10% year over year, and 4% on a sequential basis, well by well, finishing approximately $4.9 billion at end of June.
Our sales funnel continues to be strong an RFP volumes remained high this quarter.
Got it piece up in diversified with respect to the therapeutic area I didn't quite studies to combat the cobot 19 pandemic.
We continue to see slightly lot decision slightly slower decision, making from our clients.
End of the <unk> that second quarter, we had another record level of pending decisions.
With the level up RFP activity, we've seen in the first topic Twentytwenty I'm not seeing so far this quarter, we feel that the industry remains very solid.
Our client base continues to be well diversified with a top five clients representing approximately 59% of revenue.
No cline, representing more than 10% of our revenue during the quarter.
Revenue in our data solutions segment was in line with those expectations during the second quarter.
I'd like to remind everyone that the data solutions segment is less exposed to the impact to depend damage or to the high proportion of recording license revenue.
However, we continue to see some disruption due to the lock up in past meetings, the cancellation of many industry events and the p., probably ought to be prioritization of discretionary spend by customers.
In terms of the underlying trends, we continue to invest in this segment by adding headcount the critical positions I think new data sources and enhancing integration with the clinical research segment.
Moving onto 2020 guidance.
Although it remains consistent yet and the impact of the pandemic enough and actually so we.
We anticipate full year revenue of between 3.7 $3.13 billion I expect adjusted earnings per diluted share between $4.55.
And $4 in 55 cents, Mike will provide some additional details that under Twentytwenty gate is way too Nicole.
In closing I'd like to thank again, our entire style I don't clients for their continued commitment to PRT health Sciences. During these challenging times.
I would also like to thank everyone is helping so why don't forget this gas to this global pandemic.
I'd now like to handover the call Tonight been our Chief Financial Officer, who will go through our quarterly financial results more detail.
Thank you cone and good morning, everyone.
For the second quarter of 2020 or consolidated revenue decreased 4% both at actual foreign exchange rate and on a constant currency basis.
As cone stated previously we reported revenue of $729.9 million for the second quarter of 2020.
Compared to $763.3 million for the second quarter of 2019.
The decline in revenue was attributable to the impact to covert 19 pandemic had on us and the global economy.
We saw a decrease in our billable hours and volume related activities during the quarter, which was driven by a lack of access to investigator sites in an inability to screen and enroll patients due to stayed home orders and travel restrictions.
During the quarter. We also had an unfavorable impact of $4.7 million due to foreign currency exchange rate fluctuations.
For the second quarter, the clinical research segment reported revenue of $667.3 million well the data solutions segment reported revenue of $62.6 million.
A decrease of 5% and an increase of 3% respectively.
During the quarter, we derive 56% of our service revenue from large pharmaceutical companies.
8% from small to midsize pharmaceutical companies.
18% from large biotechnology companies and 18% from all other biotechnology companies.
Consistent with prior quarters. These concentration metrics exclude our data solutions segment and reimbursement revenue.
And are in line with what we have historically reported.
Total direct cost for the quarter were $395.3 million compared to $386.2 million and the second quarter of 29 team.
The increase in direct cost continues to be driven by increased labor costs in our clinical research segment as we added staff in 2019 to support current and future business needs.
An increase due to costs in our data solutions segment as we continue to add data assets to expand our offering.
And as we see increases in renewal rates on our current contracts.
The increase in direct through cost was offset by favorable impact of $7.7 million from fluctuations in foreign currency exchange rates.
[noise] direct costs were 54.2% of revenue in the second quarter of 2020 compared to 50.6% in the second quarter of 2019.
The increase in direct costs as a percentage of revenue was primarily driven by the decrease in revenue I noted earlier, which was driven by the cobot 19 pandemic.
Selling general and administrative expenses were $110 million or 15.1% of revenue for the second quarter of 2020 compared to 12.9% for the second quarter of 2019.
The increase in SGN expenses as a percentage of revenue is primarily due to the decrease in revenue as well as an increase in salary related benefits due to increased headcount to support our growth.
As well as additional office space added prior to March 2020, when the covert 19 pandemic begin to have an adverse impact on our operations.
Adjusted net income, which excludes certain items just fluctuation from period to period do not correspond to changes in our operating results.
Decreased 32.4% to $55.2 million in the second quarter of 2020.
Adjusted net income per diluted share decreased 29.5% to 86 cents per share in the second quarter of 2020 compared to $1.22 cents per share in the second quarter of 2019.
As Carl noted earlier these amounts were impacted by the Koby 19 pandemic and were better than the revised guidance we provided in may.
Cash provided by operations was $25.9 million in the second quarter of 2020 compared to cash used in operations a 40.
$45.8 million for the second quarter of 2019.
The increase increase in operating cash flow was primarily due to the impact and acquisition related earn out payment had on prior year cash flows.
Capital expenditures for the second quarter of 2020 were $17.4 million compared to $21 million for the second quarter of 2019.
Our capital expenditures continue to reflect the investment we're making in information technology and in particular, our mobile health platform and the expansion of our infrastructure that was committed to prior to the pandemic.
Our cash balance at the end of the quarter was $160.2 million of which 30 $53.4 million was held in our foreign subsidiaries.
Net debt outstanding defined as total debt less cash and cash equivalents at June 30, 2020 was $1.1 billion compared to $975 million at June 32019.
We are confident or current cash position together with over $600 million, a borrowing capacity position us well to weather the challenging economic conditions that we may continue to face throughout the remainder of 2020.
I would like to note that we're currently in compliance with the covenant requirements included arc credit facility and we expect to maintain our compliance with these covenants.
Consistent with the approach we took in the second quarter, we continue to employ proactive cost management strategies. These include the delay of non essential hires a reduction in our reliance on third party contractors in the management of non essential discretionary spend.
We also continue to proactively conserve cash by delaying non essential capital expenditures and eliminating voluntary debt repayments until further notice.
Regarding our currency concentration, excluding reimbursement revenue and expenses.
82% of our revenue and 62% of our expenses were denominated in us dollars, while our your exposure was naturally hedged.
We continue to have exposure to movements in the GBP as list and 1% of our revenue was denominated in GBP well approximately 6% of our expenses are denominated in GBP.
As Colin referenced earlier the company is providing 2020 revenue guidance between 3.07 and $3.13 billion.
GAAP net income per diluted share between $2.40 and $2.60 and adjusted net income per diluted share between $4.35 in $4.55.
The full extent of the cobot 19 pandemic and its impact on a 2020 operations remains uncertain.
Specifically the duration of the pandemic did geographic location of specific outbreaks in the length and scope of travel restrictions and business closures could impact our financial results in the second half 2020.
These uncertainties could impact the assumptions used in our 2014 guidance. If they result in business interruptions, such as closure of our phase one clinics, a slowdown in recruitment activities or limited access to sites worldwide.
However, we have used our best estimate efforts to estimate the impact of the cobot 19 pandemic.
We haven't our business and the resulting impact on our financial performance for the remainder of the year.
We anticipate that our annual effective tax rate will be approximately 23%.
Our effective tax rate may differ from this estimate if the geographic distribution of our pretax earnings changes from what we have estimated or if there were changes in interpretation analysis or of additional guidance issued by regulatory agencies.
We're also providing third quarter guidance to ensure sequential quarter earnings growth or in line with our expectations.
We are estimating revenue between $754 million and $784 million.
GAAP earnings per share between 50, and 68 cents per diluted share in adjusted earnings per diluted share between one dollar and nine cents and $1.19 cents.
Similar to our full year guidance, we expect our effective income tax rate to be 23%.
It should be.
Assumes a euro rate of 1.15 in the GDP rate of 1.30, all other foreign currency exchange rates or as of June Thirtyth 2020.
That concludes our prepared remarks, and we are now happy to take your questions. Operator, you may open the line.
Thank you if you would like to ask questions. Please press Star then the number one on your telephone keypad well pause for just a moment to compile party when a roster.
Your first question comes from the line of Sandy Draper, which truly securities.
Thanks, very much for taking my question.
I guess, maybe on the chart this is for Collyn.
Or Mike I'm, not thinking about the caution the hiring.
Mentioned that their costs are still going up as you are adding people too.
You basically enabled a higher level or revenue that higher level basis, you're expecting but you also commented slowing down some hard because the co. Good I'm just trying to seek mostly that slower hiring happening down F G and H delaying that but you're still planning on hiring at the cost of goods. One I'm just trying to think about hiring in and also.
Just the generally how much of an impact when you're trying to get people, it's Kevin having on your ability to hire that we want thanks.
Yes, actually we're finding that we have been able to higher.
Good luck in great candidates, Pipelay, which is actually being back quite surprising.
But you're right we are really been focusing in on the revenue generating at people. Although that has some support functions that we've needed to augment our particularly in some of our legal department, where we're doing a lot more contract work and.
Some of our.
Alan acquisition people, we are we're just really.
Finding.
Looking at the talent. So while we are watching at S.J.D. very very closely we're trying to manage our costs I because.
Nobody knows what's going to happen in Q4 in particular.
Let's go to contrasting to see how this plays out but we got some good relevant experience going through the quarter that.
That was why we decided to at least that come up with an approach to provide some guidance because we feel like.
What we've got some plans in place it can get is through the rest of the year, but there's so many unknowns.
Great. That's helpful. Then maybe more not really follow the second question on.
On the data solution side.
Sure Cobalt has had an impact that you guys had made some management changes things are seeing started to turn around just wanted to get an update on how you feel that the changes you made from management in sales and building that back up.
Still confident in the.
Turning to better growth.
Or just an update on that business would be great. Thanks, Yeah, you know that business is actually going well if I did a lot of new capability.
During the pandemic, we may diet data offering metathesis went up our systems. We are by we offered that for the during part of the pandemic.
Our clients Aloe does the item to utilize update the capabilities.
Just felt that we wanted to wherever we could to help our clients. During this pandemic and we thought that that was an opportunity.
It's obviously until we get back to some level of normality cemented discretionary spend does not need and but we're still seeing a lot of AG. Good contacts in a lot of need there and how were managing that business well I feel very good it by the Directionally are going and we continue to look for opportunities.
To take some of the Lumpiness because we know it's very seasonal business. We are from about September onwards, we had its really strong I would like to see that and drive some change that.
You know, we're feeling pretty good it by direct is going in.
Great. Thanks, so much.
Your next question comes from the line of Patrick Donnelly with Citi.
Great. Thanks, Colin I guess, when you think about the guidance you gave for Threeq you in the back half how are you assuming things trend here in the U.S., obviously, we have kind of the second wave coming up.
Trends Ben through July did you see any pause in kind of enrollments are conversations with customers just curious how the trends have been recently.
You know obviously we.
The economy that is based to try and we open and we were spending through that as we speak.
You know we seem to have I contingency plans for our contingency plans these days.
And it's kind of.
We have got to take the unexpected and plan around that.
Our goal is to make sure that we follow carefully where were.
We need to get some visits Don add we plan Accordingly, and I'd mentioned earlier on about the tenacity and ingenuity. Some of our teams have cannot wait to to enable that to happen and we have just correct.
The persistent and child and figuring out how to get things done and whether it's using on mobile health platform or whatever we've finding ways to help release of mitigate some of the effects of that.
We're seeing obviously some opening up into you asked about trying to Chinese banks, we don't know what's going to happen, but we've got good handle on.
The availability and hope to overcome tell me the obstacles and our and our way. So we we obviously were very trepidation moving forward and coming up with.
You didn't but we felt like Q2, we gave a good view and we delivered on it and you know were as well looking forward I thought we'd get with good plans in place for Q3.
Q4 is a little bit tough park, because at that as a second wave with the flu season, starting we really just I've no idea, but we felt like well leased we can give some general guidance, so directionally, where we see opportunity.
Great. Thanks, one last quarter I think you talked about kind of four times the normal amount of ours piece being pushed out just wondering how those trying to do you see a lot of them come back into queue is any going to be getting a threeq you versus maybe some of those companies pivoting towards more targeted draws just wondering what trends I'm not from.
We actually did see there was some.
We've got some cancellations as yes, Kwok turn it was really we saw those on a lot of repositioning of pipelines and so it's somewhat that that actually happen. We saw a lot of decisions that we what pending come through.
I mentioned here the gain that we still have a high number of pending.
Asians and ended the quarter again, I. So we're seeing a robotic stott FP flow and what not pushing hard forgetting decisions, because obviously I Miss add endemic stage, where we're just walking close with declines.
Thanks are wanting us to go full steam ahead dollars and where were patiently waiting for those decisions.
I've mentioned again that was a number of.
Pending decisions that Dana reached a record high so we feel like we're setting I.
Up nicely with good good visibility and we're feeling that things are moving in that direction, which is.
As I saw that industry phenomena.
That's helpful. Thanks.
And your next question comes from the line of Dave Windley with Jefferies.
Hi, good morning, Thanks for taking the question.
Following your bookings you just answered somewhat to Patrick's question, but your bookings were a highlight this quarter seems like a number of things have been percolating you you upped your emphasis on biotech in the middle of last year, you had this high level of outstanding pending decisions at the end of the first quarter.
You have some partnerships that I think had begun to be productive I'm wondering if you could help us to understand which or or the proportions of the contributions to that record bookings level in the quarter what were the contributors.
You know I was.
Hi, good up all the things you mentioned, Dave we we knew that we'll get into the year and a much smaller solid fixing and I tried to ensure that everybody understood that will or sensing that shifted momentum. We had spent a lot of time rebuilding our management team throughout the company. We are focusing on the one PRT message we're aligning all.
All of our unit to work together on cooperate together and that's been very beneficial.
Pulling together all of the different components to the organization.
So we have got good mix of well diversified client mix for the quarter. So we feel very good I'm. The one area that we expected a lot more work and that's been and slowed down with from the government. We had anticipated dot happening, but you can imagine with all the changes the coupled with BARDA and.
The thing that's happened there things have slowed down. So you know it may even be next year before that starts to get to the labels, we were anticipating but we're ready for it now you saw and so when you look at what achieve we feel like we we spoke a lot of dry powder as well for the future.
Interesting very good from an operational standpoint.
A lot of focus on.
In the industry.
On site openings and patient recruitment what about.
Your people Youre CRH visibility I.
I guess to get into sites or maybe even to get two sites, maybe you could help us to understand to what extent do those folks need to get on a plane to get to a site and complete the site visit or are they regionally based enough that they can kind of getting their current cover a territory.
Well, we have a betty broad mix and really it's difficult winter when you've got.
Some very difficult therapeutic areas, where you you've got specialists people.
We you've gotta look at arrangements and that's part of the planning process of how do we accessed saizen how do we get it takes a lot of careful planning and we've got a number of people when we try to manage appropriately because they've got to have been trained in a protocol.
Yes that we can send any see at H. I say, you've got to have them.
You know appropriately trained et cetera, and able to go through the same perform the duties I'd expect it and that's part of a whole planning process if I.
To get out and do that.
And one of the areas that we've had mentioned that we affecting difficulty with is.
Our phase one unit.
Okay. So obviously, if there's any big staff that can actually close the units. So a lot of things where we're looking forward as looking forward is Lucas I capacity and this has always had to just capacity because of social distancing et cetera.
But we're still seeing volunteers coming in.
And our stuff is managing to get to the office season, we're still managing to walk through it and so it does all the different parts of our business that we're focusing in on and just we're obviously spent a lot of attention today, the health and safety of employees.
Are you just to be more specific are you finding that CR A's are willing to travel when they need to.
Yes, and general yes.
We we've tried to be I am very accommodative, we had a better understanding.
You know a lot of families at home and various other things by we're finding that we're able to accommodate the needs of our clients and assays.
Very good. Thank you appreciate it.
Your next question comes from the line of Robert Jones with Goldman Sachs.
Great. Thank you the questions Yeah, calling you mentioned the higher level of infectious disease work, specifically related to solve it any more specifics you can share there.
Thank you.
Oh, okay.
Particularly in some of it appears chips and statistics about portion of backlog revenue just just wanted to get a better sense of how you're thinking about the global trial work.
I know I had a substantial portion of we've got some nice study side, we're working in a few with.
The mix of clients, what you're seeing biotech and big pharma doing some at the vaccine work, but also walking and some strong therapeutics I. So we've got good mix, John but it's not like hugely weighted we're still seeing a lot of our traditional type of work.
Obviously, a lot of clients up prioritizing some of the war on coal that to help get through the pandemic and we've got we've had a good share of that type of business I. So we're feeling very good about that and you know with but but we're still making sure that we we focus and on the longer term as well.
Ill.
Hopefully this and I guess timeframe. That's this is going to be went well behind us and that will be concentrating in our new book of business, We're making sure that yes, we're going to be helping Agnes Yorktown, but obviously, we're still building for the longer term as well.
Got it and I guess just on care innovations I know that you were leveraging technology before you're required to just curious if your vision has evolved since it's been an out and maybe how does it help you take share in this in this world where remote capabilities are clearly more important.
Yeah, I mean, and our clinical six platform had walked.
And with kit innovations.
When it was up just a bandar.
And so so we read the actually what very very closely with them and it was just a natural fit.
So we didn't do all pumping circumstance when we meet acquisition because it was very much as a small acquisition that just actually dovetail Beatty very nicely with our clinical six platform, but they have been I agree edition and because what yeah.
Mobile health platform. In addition to what we hide it was his help round a lot of offerings.
We have had a corporate 19 up.
And.
We've been working for over five years on mobile health solutions I, that's a lot of experience.
We have a fairly complying ft EMEA end to end platform with maybe the mobile health connect detail.
And yet shot integration and it meets all of the appropriate Stan Thats, what GMP had 21, Cfive pot 11 et cetera, So we feel.
Very nice position to meet these offerings and.
I think is as being I'd really nice pop that without either just at that time for the pandemic.
Thank you.
Your next question comes from the line of one Avondale with Bank of America.
Hi, Thank you. So if you go back to the gross bookings. So it just happens during the quarter with several of your peers had net bookings decline.
Grew gross business wins, excluding pass throughs for the first time since the third quarter.
So I'm curious what gross sales.
And.
You mentioned.
I mean.
Can you talk about how whether or not we should expect gross.
Bookings to continue going forward how sustainable is.
Perhaps system business, how much of this was driven by the accounts that had some slowdowns in business activity.
Patients or were these completely new accounts.
No as Ed mentioned last year.
It was a lot of changes going on and strategic solutions, where.
The growth in the accounts, where I was the head counts were moving to lower cost countries Latin America Asia, even eastern Europe, and so we saw that while while product registration was growing great pace, they strategic solution part of their business.
As was.
Betty Betty's modest growth, we've seen activity pick up again, this year and strategic solutions as expected and you know we didn't make some investments and strategic solutions last year, we I'd add more leadership positions and so what's helped us around our offerings and we continue to.
Respond that the these opportunities. So that's what's really helped drive back to where we were seeing the growth because.
I think people are not understanding the the revenue growth, we gol and why that.
Strategic solutions is actually.
As.
We basically only with taking only 12 months of the backlog into account, what basically just replacing our our AD revenue with a.
Every single quarter with a small amount a growth that we are anticipating so yes. The book to bill for the strategic solutions can be anywhere between 1.03 to 1.05, and yet actually 3% to 5% growth, which we said no but that that was high we're structuring and.
So we've actually had I felt good growth and I'm trying to make sure people understand that you know the product registration partner business has been really accelerating very strongly and they were seeing that extra de solutions pick up we're seeing an overall growth again, so we feel very pleased about it and.
We're seeing lots of opportunities in the pipeline, we're seeing a lot of good RFP flow. So.
And if we can get decisions made me feel pretty good it by where we stand and relationship today you know the challenges, but go ahead of us.
Thank you.
My second question is that backlog.
For some of your peers went down by more than a pump.
Sequentially in the second quarter, but yours, only went down by 70 basis points quarter over quarter. So what did you do to hold backlog conversion a little bit better than expected.
You know one I don't know that I can comment on where our competitors backlog conversion is following because that's all obviously dependent on what they have and they're taking for new business awards, that's going into backlog, but I think we've talked in the past, we we have a conservative approach to what we put in backlog.
We go through every project.
Month by month to make sure we understand how that's going to move through.
As Colin just referenced.
Strategic solutions is showing some growth so that's a quicker burn as he was trying to indicate there than the rest of the business. So I think that helps us stabilize that burn and quite frankly.
The burn rate came in right in line with where I thought it was based on our revised projections that we provided back in May.
Thank you.
Your next question comes from the line of John Kreger with William Blair.
Hi, Thanks very much.
Can you just expand a little bit more on the comments, you're making about strategic solutions is the repositioning to lower cost regions gone and can you give us a sense about at this point, how much of that activities happening in the U.S. versus versus other regions.
Hi, we felt that that was I.
Really out of the way towards end of last year yeah.
There was quite a shift as the clients, while repositioning our that work and to the low cost countries.
And we we didn't know how long it was going to last but we think that it was more or less by the end of the yet so I I actually signal that midway through the because we saw the shift happening and I thought it was kind of over halfway through the year, but a trickle down a little bit longer.
So I feel like that part is no way on where no concentrating on.
We are the placing their walk through what what adding throughout the world now so.
Well, we're hiring and the you asked as much as anywhere else. So we're seeing that it's back to solve a good mix again and and that's obviously, helping the strategic solutions side and.
There are obviously getting some new offerings from clients as well as on.
New opportunity, so we feel like that that position.
Businesses nicely positioned and to take advantage of where we are.
Great. Thanks, and if you think about kind of RFP.
Growth of late is would you say, it's pretty balance between kind of more FSP work and traditional or is it still tilted more towards the traditional product registration.
Still tilted towards traditional product registration the strategic solutions is fairly consultative sale. These these types of deals like the long PD to time and it's typically rarely are not a P. Type of walk is like you have a lot of discussions with decline before it gets to a point.
We are you want to make decisions about changing the way to do what they did work because it's really very senior leadership and.
Let decision because it's got to come from the top down a changes.
The minor stuff behalf.
Sourcing some some some stuff that a lot clients late to keep retain and hopes and so striking that balance as some things they the FICO and.
So we've got a lot of experience in that field and we worked closely with clients as we help them through the journey.
Great. Thanks, and then one last one how do you feel about the ability to turn some of these new awards on are you getting to the point, where startup activity and patient enrollment can start to kind of return to some degree of normalcy or is that should we view that as being still pretty pretty constrained at this point.
Yes.
Not getting things started we I mean, that's when we look.
We would drive tickets cancellations, if we're seeing any delays and that's how we actually went through.
All of our backlog could we do a regular mostly as well just and if we see anything that we're not getting sebaski that drive out just that.
I pick I mean, and even if it's not true kinds lease we don't forecast revenue from it until we start to get indications of when the client really wants to go up and running right. Now we've got we've actually been hiding and not a whole if our contract department et cetera to help with the study startup activities.
Obviously, one of the they bought two Nixon industry is getting the legal contract with sake, so up and running and it gets more difficult when they've got staff working from home.
So yes, it's definitely been challenging, but we've got a lot of things moving and you know, we're driving hard and some of these studies that we've done in qubec not been accelerating a very very fast street and.
It's great that when when everybody's got a main to do it a happens very very fast and I'm, hoping that these long term benefits will.
Hi.
Changed the way that we're doing things in the future and that we can show things are done Fox that in it and I actually changes the way, we do clinical recess no becomes Boston in more streamlined and future.
Sounds good thank you.
And your next question comes from the line of Eric Coldwell with Baird.
Hi, Thanks, Thanks, very much just a couple of quick ones I think first state.
No from the earlier remarks that coverage was perhaps not as coverage related trials for perhaps not as material for you at some of your peers, but.
I think all but one of the company so far if given a percentage I was hoping we could.
We could extract that from you today, whether it's a percent of stick so five or six so six bookings.
I think we'll have to get by not when I don't actually have that number on as just now.
Maybe we'll get it when we speak to your way into Alright, and then follow up is on the data business.
Pre covered you had talked about making investments in.
New data solutions, new geographies et cetera, and.
Head to head a little bit of an impact on gross margin. This quarter I'm. Just curious if you can give us a sense on where you think gross margin plays out for that segment over the next couple of quarters, maybe the next year and then I know you've talked in you mentioned again today about the seasonality in revenue that typically.
Perks up starting September in certainly in the fourth quarter are you expecting that same kind of momentum this year given.
The dynamics and everything going on in the world or should we perhaps rain in rain in the numbers a little bit here, given the uncertainty and I'm just not sure what you're really expecting for fourth quarter strengthen the data business has typically plays out.
Yes, Eric we have tried to factor that into our guidance obviously.
As we said we're not entirely sure how everything is going to certainly play out.
Still do see some strong growth in that.
Segment for the for the remainder of the year compared to where it was last year, but I would say it's more.
I'd say modest single digit as opposed to we were talking I think earlier when we give our full year guidance. We said we were hoping for high single digit maybe low double digit growth. There. So we've tempered that expectation slightly.
With respect to margins as we indicated on last call. We expected Q2 margins has come down slightly because we had employed a new data asset that was that we got to a point, where we could sell it so that whole costs was coming through in Q2, I do expect margins to moderate.
I guess more inline with what you have seen historically and the big caveat, obviously would be the fourth quarter and how much revenue were able to generate because obviously when we when we can generate that revenue it's straight drops through because of the type of business that it is.
Thanks very much.
Your next question comes from the line of Dan Brennan, what do you.
Hey, thanks for taking the questions.
On the burn rate, Mike I'm just wondering.
Covis.
We are disruption this year as you guys climb out of it I'm just wondering as you kind of look beyond this year can you just remind us like kind of the mix of your business that's in the backlog today.
Is there a way to characterize how you think about that burn rate trending beyond this year.
To start you know I know you've talked in the past Im just wondering for like a modeling purposes.
Well, we haven't really provided any guidance on those out years, but our expectation in the hope was that.
During the pandemic out that we would start to see a flattening of the burn rate and a slight uptick.
You know towards the back half of this year and al in into 2021 for instance.
I don't expect that will have it will ever get back to those burn rates that you saw maybe at the you know the end of 17 in the beginning of 18, because if you recall, we did have a pretty large study that was infectious disease that ran pretty quickly.
So really it will depend on mix.
My hope is that in the back half of this year, we start to see a trend up obviously from where we were in Q2.
I think it will be.
Right around or maybe just slightly less than what you saw in Q1, and we can see a slight or uptick to hopefully we're in kind of that.
Kind of that 12% to 12.5% burn rate range, and obviously as cone indicated earlier.
If we continue to see some strong growth in strategic solutions that burn rate will start to increase because obviously, we only have 12 months of revenue or revenue in backlog in.
In the system. So we're burning that pretty quickly so as that continues to grow that will help our burn rate.
Great. Thank you for that and then and then.
As we look out.
Towards next year, and obviously not going to give.
Numbers on this and I'm just wondering Colin mentioned kind of a higher that you guys have done and next year should be.
Take a nice recovery for yourself and this euros.
Your peers, but.
Is there a sense as we look out how much more hiring.
John.
The cost actually.
You're kind of how that normalizes out.
So I.
Yes were strong the level of revenues any anyway, again without giving specific numbers how to think qualitatively maybe about.
Let me to generate incremental margins on that versus reinvestment.
I mean Jack.
We had no change to our backlog from the pandemic and I mean that was actually the major reason why we then.
People solve these are far low staff, our let people go because we needed up people and you know that's been I went over well in the industry and is a low dies to be able to go ahead with our hiring plans.
We're not aware nicely positioned I think with at the right thing by our people. We've always said that our most important asset we show that we we put money with our noses and you know, we followed through or not and it's a low dies to continue the goal.
So it means that all of the new what that we're winning we need to add people and were able to attract them. So we feel nicely possession dies, we have picking up new are that we were able to high it appropriately and get the what completed.
I mentioned earlier on about all if the studies that with one not in stocked up. So we do have a bolus of what is getting done and what that we're walking through so there's lots of activity with plays nicely for day.
Seeable future and so we we feel very good it by the industry dynamics on.
We've positioned and Dan I would say that were probably still targeting that same kind of gross margin growth that we have talked about in the past so kind of in that 50 basis point range and that's what we would be looking at.
Trying to push through the organization as we move forward.
Maybe if I can see one final one and just and I'm not familiar with it should be but youre.
Exposure in vaccine.
Keep abilities there anything the highlight I know you're going to get back to Eric in terms of the mix from cold I'm, just wondering coming to discuss.
How well positioned balance capabilities, how would you characterize your vaccine capability, we have obviously.
A strong infectious disease franchise, but I mean, we don't have like a central lab, where a lot of our clients would able to get worked on that I mean, we've just bio analytical labs and that's very much.
For other patients in the dependency on getting access to patients and all of the and samples that get to that so I.
I think that.
Franchise.
We were just using at expertise to to actually run trials and using our mobile health platform and using out I know innovative approach but.
Fortunately we have.
Good bye.
People in the organization that has the infectious disease knowledge and can help and we'll be able to pave onto the call with 19 work.
But certainly we start something what was said is.
One of our.
I would say just differentiation factors, but we're certainly have to be strong and infectious disease.
Obviously, I want to walk over the years and not at the area.
Terrific. Thank you very much.
And again, if you would like to ask a question Sam. Please press Star then the number one on your telephone keypad, well pause for just a moment to compile the culinary roster.
Your next question comes from the line of Steven Baxter.
Research.
Hi, Thanks for the question.
So it's good to see the bookings come through in the second quarter I wanted to ask about your expectations for bookings in the back half of the year.
The kind of the basis for the question is if I look at the first half either on the gross or net line.
Well down a little bit burst either half of last year. So as you move into the second half of this year.
Are you expecting to return to bookings growth and what needs to happen for that'll occur. Thank you.
As I've mentioned that lived on that we are we're still seeing.
Very good RFP flow and that's obviously our lead indicator for.
The what this out there. So you know we are seeing strength or not and.
It's obviously have to protect what proportion we're going to win but.
We have feeling very optimistic that when a good position to continues.
Some very good bookings.
And your next question comes from the line of Jack Japan with net foreign research.
Thanks, Good morning, guys.
Couple of follow ups first based.
Mike I'm not disclosures on the midsize pharma it seemed like a lot of the pressure in the quarter was concentrated there by my math that was down revenue is down 30% year over year, we're somewhere in that ballpark I was just wondering if you're talking about that customer class I don't know if it's something definition on the way reporting it.
Talks about what you're seeing there.
Yes, I think just to make sure we are grounded.
Year over year revenue was down roughly 4%.
Okay, I added going from 11% of sales.
Percent, but maybe.
Sure.
The.
Second question I, just want to file buys within clinical research overall.
Is it possible to call out.
The relative growth rates between strategic solutions product registration.
As you look at the guidance in the second half the year just.
The relative shaping the curve you're assuming for both of those yes, we can't do that Jack because that's part of just the one clinical research segment and Unfortunately, we don't break that out separately. So.
I think.
We commented or cone commented earlier on on what we're seeing a strategic solutions and that we're starting to see that business pick up and and obviously, we've talked about in the past how.
Kind of the core CRM business have been growing faster than that strategic solution business. So.
I wouldn't say that strategic solutions is going to be growing as fast, but it is picking up in the second half of the year.
Thank you.
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And there are no further audio question at this time, we'll turn the call back over to Mr. Colin Shannon.
For closing remarks.
Well. Thank you everyone for participating in our call today. If you have any additional questions. Please feel free to contact guys. We hope you have a great rest of the data and thank you.
Thank you.
Thank you for your participation. This concludes today's conference call you may now disconnect.
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