Q3 2020 IQVIA Holdings Inc Earnings Call
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Intercompany.
IRA A.I.E. Ray.
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As soon as it opens it up to the board.
Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the eye cute Yeah third quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you'd like to ask a question. During this time, so does that start the call by the number one on your telephone keypad.
If you would like to withdraw your question press the pound key as reminder, this call is being recorded.
At this time I would like to turn the call over to Andrew Marr quick Senior Vice President Investor Relations and Treasury Mr. Mark would you. Please begin your conference.
Thank you.
Good morning, everyone. Thank you for joining <unk> third quarter 2020 earnings correct.
With me today are already be chairman and Chief Executive Officer.
Roman executive Vice President and Chief Financial Officer.
Eric show, but executive Vice President and General Counsel, Nick Child, Senior Vice President financial planning and analysis and Jen how check senior director Investor Relations.
Today, we will be referencing a presentation that will be visible during the school for those of you want to work on this.
This presentation will also be available following this call on the events and presentation section of our acute via Investor Relations website at <unk> Dot Ikea Dot com.
Before we begin I would like to caution listeners to certain information discussed by management. During this conference call will include forward looking statements actual.
Actual results could differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the Companys filings with the Securities and Exchange Commission, including our annual report on form 10-K, and subsequent SEC filings and.
In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered as a supplement to and not a substitute for financial measures prepared in accordance with GAAP.
A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.
I would now like to turn the call over to watch chairman and CEO already be.
Thank you Andrew and good morning, everyone. Thank you for joining you all through the quarter of 2020 earnings call.
The third quarter marked a nice sequential improvement in our financial performance with results coming in above the high end of our expectations.
You will recall that based on early signs of recovery at the end of the second quarter, we raised our guidance for the year.
Based on stronger than expected performance in the third quarter.
We are again, raising our full year guidance ranges for revenue adjusted EBITDA and adjusted diluted EPS.
We're expecting a continuation of these recovery trends in the fourth quarter.
This of course sets us up well for next year.
As we promised back in April at the onset of the pandemic, we will talk to you today about our outlook for 2021.
Based on what we currently see we think the most significant cobi impacts to our business are behind us and our outlook for 2021 indicates strong performance next year and the return to our growth trajectory.
Ron will discuss 2020 and 2021 guidance in more detail later bye.
Before we review the quarter a quick operational update we continue to experience a gradual improvement in the.
The accessibility of clinical research sites in the R&D solutions business.
Even with the localized flare ups, we've seen around the world we.
We are seeing a return to onsite to monitoring visits and.
And similar to last quarter onsite visits exceeded the number of remote visits.
In instances where sites remain physically inaccessible for clinical monitoring.
Remote monitoring and virtual solutions are proving to be effective workarounds.
The base of start up activity picked up significantly during the third quarter and.
And we are pretty much back to baseline levels for site initiation visits.
Of course patient recruitment trends have started to follow as well.
Moving to technology and analytics as expected ties has remained resilient throughout this crisis in almost every area.
We've had very little interruption in data supply or demand.
Our information services continued to be mission critical to our clients and are therefore, very insulated from the impacts of the pandemic.
The analytics and consulting businesses have performed remarkably well.
Despite business development being hampered by the lack of in person interactions.
One area, we discussed before that has experienced significant disruption.
The event management business, which relies almost entirely on face to face interaction and of course as you know that business is essentially on pause for now.
Demand for our technology offerings remains strong we've added 45, we see clients this year, bringing.
Bringing our total number of clients to 125.
During the quarter, we successfully rolled out we'll see optimizer, a real time mob based territory and sales Rep alignments solution.
These two will receive management teams significant amounts of time previously spent planning and assessing sales data to ensure resources are effectively focused on the appropriate client base and product.
Finally, our CSM as business.
Demand for field reps continues to be soft which of course impacts revenue.
But as we said before one business development has also slowed due to the lack of in person interactions. So far the business has performed modestly better than we would have expected.
As existing clients have largely retained field reps and have been continuing their engagements with us.
Now against that backdrop lets now review our third quarter results.
Revenue for the third quarter came in at $2.786 billion.
Which was $11 million above the high end of our guidance range.
This revenue beat came from strong organic operational performance.
Third quarter, adjusted EBITDA was $604 million with a $22 million beat versus the high end of our guidance range. The EBITDA beat was due to better operational performance and productivity.
Third quarter adjusted diluted EPS was one dollar and 63 cents, reflecting the EBITDA dropped through.
Because the below the line items essentially netted out to zero.
Third quarter, RMBS contracted backlog, including pass throughs grew 18.5% year over year to $21.7 billion as of September Thirtyth 2020.
We had broad based bookings strength.
But food service clinical and lab were particularly strong.
The contracted net book to Bill ratio, including pass throughs was 1.7 to one for the third quarter of 2020 and.
And one point 42, excluding pass throughs.
The LTM contracted book to Bill ratio at September 30 was one point 55, including pass throughs and one point 45, excluding pass throughs.
I will now turn it over to Ron for more details on our financial performance.
Thank you Ari and good morning, everyone, let's turn first to revenue.
Third quarter revenue of $2.786 billion grew 8.6% reported and was flat at constant currency.
Revenue for the first nine months of the year with $8.061 billion.
Which was down 1.6% reported and.
And 1.2% at constant currency.
Technology and analytics solutions revenue of $1.207 billion grew 10.2% reported.
And 9.2% at constant currency.
Year to date Tech and analytics solutions revenue was $3.433 billion up 4.9% reported and 5.6% at constant currency.
In R&D solutions third quarter revenue of 1 billion and 400 million was down 4.5% at actual FX rates and 5.1% at constant currency.
Excluding the impact of pass throughs.
R&D solution third quarter revenue grew 2.6%.
Year to date revenue, a 4.076 billion was down 5.6% at actual FX rate and five point, 0.4% at constant currency.
Contract sales and medical solutions revenue of $179 million was down 13.9% yeah.
Year over year reported and 14.4% on a constant currency basis in the third quarter.
Year to date revenue was $552 million down 8.6% at actual FX rates and 8.3% at constant currency.
Now moving down that PNM, while adjusted EBITDA was $604 million for the third quarter.
Which represented growth of 1.9% year to date adjusted EBITDA was $1.649 billion.
Third quarter GAAP net income was $101 million and GAAP diluted earnings per share was 52 cents.
Year to date GAAP net income was $160 million and GAAP diluted earnings per share was 82 cents.
Adjusted net income was $318 million for the quarter.
$841 million year to date.
Adjusted diluted earnings per share grew 1.9% in the third quarter to $1.63 cents year to date.
Year to date adjusted diluted earnings per share was $4.32.
Now turning to the R&D solutions backlog as already mentioned art in DS new business activity remains quite strong.
Consequent on the robust booking activity that already talked about our backlog grew 18.5% year over year to close at $21.7 billion and we.
And we expect $5.8 billion of this backlog to convert to revenue over the next 12 months.
Which is an increase of over $400 million versus where we were at June thirtyth.
And I would add that the outlook remains quite positive as RFP leads are growing low double digits in both volume and dollar.
Moving to the balance sheet now at September Thirtyth cash and cash equivalents totaled $1.5 billion in debt was $12.3 billion, resulting in net debt of $10.9 billion.
Due to our strong EBITDA and cash flow in the quarter, our net leverage ratio at December September Thirtyth.
With 4.7 times trailing 12 month, adjusted EBITDA, which was down from where.
Where we were at June Thirtyth.
Cash flow was a bright spot as it was last quarter cash flow from operations was $574 million in the third quarter up 74% over last year.
Capital expenditures were $157 million and that resulted in free cash flow of $417 million.
M&A spending as you saw was negligible in the quarter for the first nine months of the year free cash flow was $769 million, which is about double the same period last year.
As you know when the COVID-19 outbreak became the pandemic in March we temporarily suspended our share repurchase program.
We did not repurchase any shares in the second or third quarters, but.
But the business is recovering well from COVID-19 disruptions underlying demand is robust and.
Cash flow is as well and we have a very solid liquidity position.
In closing the quarter with an undrawn revolver of almost.
Undrawn undrawn revolver, and almost $1.5 billion of cash in the balance sheet and it.
And as a result of all of this we've lifted our suspension on share repurchase program and we're expecting to opportunistically resume share repurchase activity.
And as a reminder, we currently have about $1 billion a share repurchase authorization remaining under the program.
Now, let's turn to guidance on giving that Ken continuing momentum in the business. We are raising our full year guidance range for revenue adjusted EBITDA adjusted diluted EPS.
Our guidance for the fourth quarter and full year of 2020 assumes that business conditions will continue to improve during the fourth quarter.
Specifically, we assume that look like flare ups had COVID-19 will not have a material impact on fourth quarter results.
We now expect 2020 revenue for the full year to be between $11.100 billion $11.250 billion, which is an increase of $125 million.
Over our prior guidance at the midpoint of the range.
For profit, we now expect full year adjusted EBITDA to be between $2.335 billion in $2.360 billion.
Which represents a $27 million increase or over our prior guidance at the midpoint of the range.
And adjusted diluted EPS.
We are expecting to be between $6.25 in $6.35.
Which is an increase of 10 cents over our prior guidance again at the midpoint of the range.
This full year guidance implies fourth quarter revenue $3.040 billion to $3.190 billion.
Representing growth of 5.0% to 10.2%.
Now this is a wider range than we would normally guide to at this point in the year due to the uncertain timing of pass through revenues associated with the cobot trials that we're working on.
From a segment perspective, we expect technology and analytics solutions revenue to be in the high single digits at the midpoint of our guidance range R&D solutions revenue growth to reach double digits with the caveat that this growth rate could move up or down based on the timing of pass through revenue and.
And see SMS revenue growth to be similar to what we saw in the third quarter.
For fourth quarter profit, we expect adjusted EBITDA to be between $685 million to $710 million, representing growth of 6.7% to 10.6% and a.
And adjusted diluted EPS to be between $1.93 and $2.03 our growth of 10.9% to 16.7%.
This guidance assumes that foreign exchange rate at September Thirtyth 2020 remain in effect for the rest of the year.
As we indicated at the start of the pandemic, we've decided to advance our planning process versus prior years and as a result, we are now in a position to provide our 2021 outlook and this is much earlier than we would have done in the ordinary course.
Okay.
For the full year 2021, we expect revenue in the range of $12.300 billion to $12 billion $600 million.
This represents growth of 10.1% to 12.8% versus the mid point of our 2020 guide.
We expect adjusted EBITDA to be in the range of $2 billion $725 million to $2 billion $800 million, representing growth of 16.1% to 19.3% compared to the midpoint of our 2020 guidance.
And finally, we expect adjusted EPS to be in the range of $7.65 $7 or 95 cents.
Which would represent growth at 21.4% to 26.2% compared to the midpoint of our 2020 guidance.
A little bit more detail for you the adjusted diluted EPS guidance assumes interest expense of approximately 420 million operational depreciation and amortization of about $400 million.
And other below the line expense items, such as minority interest of approximately $50 million.
And also the continuation of our share repurchase activity.
The effective tax rate, we're assuming will remain largely in line with 2012.
Our 2021 guidance is predicated on the assumption that business conditions will continue to improve to the fourth in fourth quarter and the majority of our business will return.
To normal during 2021.
Our outlook for 2021 also incorporates our view that there will be some tail of co bid work the growth in R&D EPS will come primarily from our base business.
So in summary, we're pleased with our team's ability to navigate the challenges that covance presented throughout the year and we're proud to be a critical contributor to the solution. This public health crisis.
Our R&D EPS business has adapted well returning to growth in the skin services revenue and achieving another record quarter of bookings.
Our technology and analytics solutions business improved sequentially and it's returned to pre go cobot growth rates despite the headwinds.
The event management business.
Our solid year to date overall company performance has enabled us to raise our guidance for the full year for revenue adjusted EBITDA and adjusted diluted EPS.
This performance combined with our strong free cash flow and liquidity position position has enabled us to lift the suspension of our share repurchase program.
And finally, we are expecting continued recovery in the fourth quarter and a very strong 2021.
So with that.
Let me hand, it back over to the operator for QNX.
At this time, if you would like to ask a question I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the culinary roster.
First question comes from Eric Coldwell with Baird.
Thanks, very much and good morning, I was curious if you could share with us the percentage of your bookings this quarter that came from Covidien related trials.
You did give us the metric last quarter as did.
I think virtually all of your peers.
I think looking at the.
Contracted.
The services bookings in the quarter it was about 20%.
And are you I assume higher on a pass through basis, given the nature of those large vaccine studies.
Yes, I mean, you know the it's it's very hard.
The timing of pass throughs and the volume of customers is different.
Look we have a lot of cobiz.
Okay wards since the start of the pandemic.
Many of them.
Some more from protocol reviews, I mean, I think we are like close to 200 different awards around the world. So gives you a sense some of them very tiny from.
Protocol reviews that we have lab work.
The range from a again nothing or fees to of course, we are on several of the large and vaccine trials not necessarily doing the entire work but.
[music].
We for example have been awarded work I think on four of the five.
Trials that are part of operational Wolfspeed that are in phase III.
So.
Sometimes we've got any node in a couple of cases, we've got to food service work as of course Vale, we've got to be a fox through numbers.
Other cases, we've got the Labrador the Pharmaco vigilance work. So we are going to be involved in some of that work does not include bust through some of that the doesn't keep us from the lost steroidal.
For clinical work through.
To have Dick.
Yes through numbers.
Which have not been yet into our revenue numbers given that as you.
As you probably know we are in our food service.
We're using the other later stage than perhaps some of our competitors, which have who have already seen that revenue that very strong revenue.
Roll through in prior quarter will we see in this quarter into Q3.
Mostly from pass through revenue.
That's very helpful and if I, if I could get you to just follow on to that a number of investors are focused on how the cobot worked plays out over the next several quarters.
You too.
When do you expect to peak in bookings and or revenue from Covance related trials.
At the point at which point, we would obviously need to core to be back fully to offset any year over year comparisons that might be developing.
Yes look I mean.
Developing I'm, assuming you're talking about 2021 obvious yes, yes of course, yes, yes. So I mean look Eric we have spent a lot of time as I mentioned back in April we wanted to try to give you a sense for how 2021 would.
Shape up and we've spent a lot of time bottom up reviewing what would happen as you know we effect.
Every single.
Piece of work across our business segments with probabilities and an assessment of what revenue will be derived in subsequent periods. So the same applies to the coverage while most of the revenue on the launch foodservice Koby trials is pass through.
Okay, So no impact to profit.
That's just a fact when you have a full service.
Work on those vaccine trial, you have to remember there are cases I've seen.
No I don't know if that's the case with husband is where the pass through revenue easily.
Ratio of 10 to one another was $10 a fast food, which is one dollar of service revenue where.
Whereas enormous with additional trials, we would see one pass through dollar to each tool $3 of service revenue and.
And once again pass throughs is totally irrelevant to our profit has no impact whatsoever. So it makes it very difficult to predict so thats one element of the coating trial the second one.
It is of course, we've taken into account the plus you between the.
Vaccine trials get cancelled you know that could be a vaccine that gets approved for two or three and the other one's field that it's not economically.
Worthwhile for the sponsor to continue the vaccine trial in fact historically.
Well before because we know from experience that vaccine work.
Reis and unusually.
And unusually high risk of cancellation versus traditional.
Other drug.
Developments so.
With all of that in mind, So we know all of that.
No we factored all of that into our guidance.
And so we feel good but we've anticipated the many possibilities of many such scenarios and we feel good about that now you bear in mind that.
A lot of the work that was supposed to come online new projects.
Has been put on hold by our clients because many calls have delivered to their attention resources.
To the covenant.
Whether it's for therapeutics or for vaccine work and we do expect in fact, our clients have told us that when does phase goes away. Then go back to the projects. There was supposed to have been working on it.
In 2020, so we have no concern that all of the southern discuss what youre alluding to there will be a kind of a.
A drop in bookings or revenue, we do not expect doesn't weve factors.
Although a lot of the potential variability into our guidance, that's the benefit of having such a wide diversified portfolio.
As as we do have it by Q via both within our ideas business and I'll Taz business.
You should also read.
I realize that we are getting a lot of interest from.
Probably kessel authorities, but also a lot from from sponsors for pharmacovigilance and other was tracking polls patients are we award business is experiencing strong double digit growth and we expect continued interest in pandemic related work in general.
We all hope this will be the last time Debbie over but we also all know and understand that such crises will happen in the future and perhaps.
The magnitude of the current crisis Hubspot all of US all a lot of interesting.
The things that we are going to put in place going forward in terms of preparedness in terms of patient tracking.
In terms of money touring what exactly you have seen our press release on the.
The care project with the FDA, where we are.
Looking at patients who have potentially been exposed to covidien we are.
Connecting older adults between their medical history, and I'll de identified patient records understanding of.
What types of Vitameal, they've been taking with other drug regimens have been under and trying to to be terming in mop of.
Actual risk populations with a lot more precision than what's been done to date. So all of those projects are in the pipe and I expect those to continue irrespective of whether the Cobi crisis ends or not so again everything has been factored into our guidance.
Alright, Thank you very much for the detailed answers I appreciate it.
Next question comes from John Kreger with William Blair.
Hi, Thanks, very much already just to kind of continue on that I think you mentioned, Eric that about 20% of your bookings were covered related for the other 80% are you able to start those studies up and enroll in a fairly reasonable basis or would you say that's still broadly impaired.
Thank you well.
Well, Okay as I said in my introductory remarks with respect to.
Site initiation visits which in the site startup activity. That's the area of our business that has seen the strongest improvement in fact cite any.
Initiation visits are back to baseline levels and recruitment of patients obviously starting to follow so I think actually very good news on that front. The access CBT two sides for full force for four trials I don't there are in flight.
Causing quite to recover.
We are currently out of bounds I want to say that I look at my team you said about 70% right. We are currently 444 global firm globally as our.
Sites, we have back to about 70% north.
Normal accessibility.
Thats below what we would have expected, but interestingly in its critical size because the size is not the studies on his side. There are signs that are very tiny and the relative incremental value of opening that sites doesn't yield much. So we are focused on the ones that are most significant so that's for in flight.
Trials and we are returning.
Gradually to normal activity there.
A full moon.
Trials again site startup activities does resume site initiation as essentially the visits are where they should be normally pre cobiz levels.
Normally patient recruitment lives, but but has increased significantly throughout the quarter patient recruitment was fundamentally disruptive okay because.
Essentially everything was was booked on a on a hold and we are gradually going back when we have good momentum and the.
We don't think we will recover to baseline level and in some time in 2021, but again all of that is factored into.
Our our guidance.
Great. Thank you one quick follow up can you give us a sense about where your focus is on sort of new.
Technology development I think in the past you've talked about on RCT suite launched by by year end is that still on the table.
Yes.
Absolutely as you know.
We've had great success with CE coming from behind and.
And we had.
We therefore, along with our partner Salesforce, we expanded the relationship between the clinical pick.
Platforming tools on on behalf cloud, we have certain technologies available today.
And for digital sites and patients suites. The digital patients suite includes products such as E consent, Ecova and also a patient portal.
We will by the end of the year have the digital trial management suite.
Go lives.
Probably by the end before the end of the year and the products would include CTM CTM as risk on risk based monitoring and.
The mobile CRM platform, so again to fully orchestrated solution, we'll see that you're referring to will be available by the end of this year again, we have also coming from behind in this area, but we.
We will be claiming our fair share as we are doing on the commercial side. Thank you sounds good. Thank you.
Next question comes from Bob Jones with Goldman Sachs.
Great. Thanks, Thanks for taking the questions I guess, maybe just a follow up there you are saying that site activations are getting back to normal unpaid patient recruitment, obviously catching up.
You saw X. pass through growth in Rds, I think of around 2.6% I guess what needs to happen to see the double digit R&D EPS growth in Fourq, you and more importantly, what has to happen between now and over the course of 21.
You know to kind of get to that guidance range is there is there a lot that needs to improve or is it just kind of a normal normal course of what you're already seeing that needs to play out in order to get to these for Q1 2021 Rds targets.
Well look.
We've said.
That we should be seeing well, reaching double digit on India's growth in Q4.
Okay.
And we do expect meat.
Mid teens in 2021.
So that's.
What needs to happen. These all normal course of business.
Based on the work that we've done that I described earlier in my reply to Eric's question. Our guidance is built bottom up as we always do project by project and we make an assumption.
Of look I mean.
What needs to happen. These things are going to happen. Okay. The elections are going to be behind us there will be more currency on the environment.
They will be.
These two or three vaccines out there people have room to live with these people are moving on and all of that it would happen sometime in 2021 during the year.
Obviously this assumes when we say quote unquote normal business conditions. It means that what we are seeing today the trends that we're seeing today the improvements that we are seeing today.
Continue.
We have a bit more stability in 2021 due to all of these.
No.
Factors.
I've got three again elections behind more clarity on the environment vaccines learning to live with this thing all of.
All of these six assumed when I when we say stable business conditions mean, there's no movement, then if god forbid or anything like that and gum and you know this it's a new normal if you will and that's what we're assuming no.
Nothing extraordinary nothing needs to happen I should point out that you know we haven't done any acquisitions of significance as you know really for the bust.
Two years I mean, we haven't we spend.
The grade that we used to.
This is all organic for the most part.
And so again.
So again, we feel very.
We feel very good about these guidance.
No that's fair and I guess, maybe just one follow up we haven't spent a lot of time on T. As you described it as resilient, but I think the growth rate is the highest we've seen in years can you.
Can you, maybe just spend a little bit more time, they're talking about what's driving the performance and yes, I know you mentioned real world evidence, but just wanted to get a little.
Yes, a little bit more clarity behind the record growth you're seeing in that segment.
No. The performance is a reflection of the sales I can say is a different way of the the the resilience of the business you know a lot of what we do is mission critical to our clients, we though without defend them.
So putting the data business has to.
It doesn't move if anything you know there was a.
If approved the whole mission critical it was.
We were really on we probably had the best visibility I mean, you guys and the and the lot of people out there felt we were insane.
Back at the beginning of the pandemic forgiving relatively precise guidance for the balance of the year and now here, we are and it looks like.
More or less quarter on target and that it's not because we were geniuses. Its because we have visibility we've got.
You don't businesses that they are.
That allow us to have that visibility and we are global so different stages of the pandemic in different parts of the world. So we we can model. This out we are going to enroll.
Yeah.
You know.
Database deep analytics predictive analytics modeling capability.
The tile business is.
He is very very critical and our clients have seen that we've had extremely strong and positive feedback from our clients. So again.
The reason profit the business Thats that face to face, which is why we had the headwinds.
No I think it's not huge but as always if you have disclosed the numbers in the past not a huge business, but even if you took out a little bit and sizing to be honest with you, but given its $50 million and the $50 million. The superior it's a headwind the unifi to hundreds again so soon.
So so we had some headwinds.
With this thing happen.
Now we're returning to two strong growth and we told you back in June of 19, when we gave long term guidance you know vision 22 goals that we did expect this business to sort of you find high single digit trajectory and gradually continue to grow driven again by our net.
So real world evidence and of course, our technology offerings remember real world business.
Does not.
Waiver practically I mean, we've had some.
In phase four work we've had some.
Sites access issues, and so on and and but but which is you know waits a bid similar to the clinical trial business, but.
At the end of the day continued to perform solid double digits on a.
Beta.
Ron just one thing I would emphasize Bob if there was a surprise versus where we were expecting early in the year, It's our analytics and consulting businesses continued to be very strong and I think already highlighted that needs prepared remarks that.
We were expecting some disruption due to business development activity face to face selling being affected and in fact, it hasn't our analytics and consulting business has been quite strong.
Thanks for all that appreciate it.
Next question comes from Tyco Peterson with JP Morgan.
Hey, Thanks already starting out with R&D does the Fourq guidance assume resumption of any of the trials that have been halted with Jane Jane Astra Zeneca and then what gives you the confidence that Celtic flare up won't impact results. I know you talked about segmentation visits back to baseline levels, but I guess, what I'm really asking is have you taken steps to try to kind of mitigate any impact.
The play reps.
Then as we look ahead to 2021, an R&D can you just give us a sense of how much have you too.
You to that mid teens growth you talked about thanks.
Yes, I mean, you asking about the impact of.
Of the delays in the in the us.
Seen work.
Yes, I mean the.
First of all you know interruptions in trials in general are a common occurrence.
The adverse events it in the case of the vaccine trials, where you have the number which is by the way one of the reasons why pass throughs are so big is because the number of patients enrolled but seen trials you talking about massive amounts 30, 40, 50 60000 people.
[music] trial.
You are going to have adverse events and those adverse events, we caused an interruption.
Of the.
Of the of the trial, but again, we've factored that in you know, it's holding our guidance on that we don't expect.
And by the way as I mentioned before that they also cancellations.
In the in vaccine trials that are more.
More likely so.
Look we again, we factored that in we put probabilities on all of our vaccine work.
Very minor cancellations on resulting in 100% loss revenue does wind down and so on and finally frankly since for the foodservice trial was the one that you talked about.
We.
Most of the of the of the rather than we pass through so and this is clearly to work. So it's not like we are making even on the service.
The small portion of the revenue that's service, it's not like we are making in the margin or margin at all right. Because this is bulk of our contribution to the efforts.
So thats for four years I've seen and what was the other question Matt.
Okay, and then second question.
Second question, Yes, I mean, it was whether you taking proactive steps to mitigate any impact from calling flare ups you talked about fed into Houston that baseline levels, but what gives you confidence in no impact and then on the 2021 outlet you talked about probably being 20% of awards, but how much do you think it contributes to growth that mid teens growth next year.
Yeah, I don't if I can give you the exact contribution.
Contribution to growth, but it's not it's not what's creating the.
The very strong double digit growth that we expect we have solid growth next year in revenue and R&D EPS, even excluding recovered where like that's the short answer by the way we would have had growth this year underlying growth without recoveries were also yes.
No that's not bad trade growth, but we will have a <unk> and Q4 also in Q4's, yes.
The first rocks I mean Luca.
It's a.
If it continues in the same proportion and the occurrence and frequency as we see now thats what spot 30 now.
Guidance, but.
Again eventually we the advent of vaccines by the end of the your early next year with the goal of that.
People will learn how to work with the Central review, it's already happening. If you look at again I know China is is a good bye.
Things are back to normal.
Sean.
Let's end type of I mean sites and it's not a 100% is 95% plus accessible.
The Adair, our florist bioglue in China, but people just don't work with so.
Also again.
You know we have to do some catch up work, but bear in mind that Thats also factored into our guidance, we did a lot of our remote monitoring.
This year for when when we couldn't access to sites and I think people forget that.
That we not going to move to 100% of remote monitoring Okay. We did see the requirements by all.
Regulatory authorities around the world that source document verification has to occur on sub.
Hey, all the regulatory explicitly.
Will require that.
That the source documents should not be shared removed.
So again, obviously what has changed is the number of beta form that might be Luca remote.
Key safety and efficacy data for example, and so there is reduced requirements on less critical data.
But in general.
We see how to do that work that we were not able to do so all of that is quote unquote pent up demand that needs to be addressed.
In the coming quarters catch up work if you will.
Okay and then our last quick one on T. SMS can that return to call. It low single digit growth next year.
I don't know about that because as you know I'm not going to.
I'm not going to venture to make prediction on on CMS I've been wrong, we in both directions.
I assume that would go down and they went up and that was some of that will go up and they went down so look I will what's factored into our guidance is kind of flattish type.
Growth, Okay, if it's a plus 1% for us to be I don't know.
Flattish growth guidance for next year.
Okay. Thank you.
More detailed on the segments when we provide guidance.
In the ordinary course at the beginning of 21, when we share full year results and Q4 results and as we traditionally do and we'll give more detail and segments.
Sure you can derive based on the on the comments, we made and on the overall guidance.
The momentum we see all three business segments, we can see.
Next question comes from Erin Wright with credit Suisse.
Thanks, and in terms of capital deployment here that share repurchase activity, what's embedded over on your guidance for 2020 2020 line and in terms of the sharing purchase activity and have have you been active in the fourth quarter to date and I guess on that topic as well you mentioned it was largely organic growth that you're pointing to I just want to.
Clarify it.
Does the guidance assume any acquisition can I guess.
Okay, I guess activity consistent with your past profit. Thanks.
You mean, the fourth quarter.
Fourth quarter and 2021, yeah. So first of all congratulations to you earn nice to have you back.
Yeah and.
And secondly look.
No we have not done any share repurchase since we suspended our program so other than to the shares that we repurchased in the first quarter of <unk>.
When the last.
Private equity sponsors shares were sold and we participate in to that secondary and you know about that it was in the first quarter of pre pandemic.
We haven't done anything since then I wish we had buckled the shift by the we had $85 shift, but we didn't.
And so we.
So we are going to stop now paternalistically.
After.
The earnings release, and we'd be probably the market too.
We don't have lots and lots of time since we have to start before the end of the year anyway.
And with respect to acquisitions, no I mean, not there's nothing here.
For the balance of the year that.
That would be materially different than what we've seen this year that is relatively negative negligible M&A activity in.
In 2021, what's the assumption where you can expect in 2021, we'll spend some on acquisition share repurchase together will trade off between the two and our normal assumption there which is valid in 2021 is about a billion and a half dollars between two during the course of the year.
And Thats, what we heard that floor before but Debbie why that's where we had 18 consistent with past practice.
Okay, Great and then and then get cost mitigation efforts and further flexibility I guess, if we do continue to see things get a little bit worse in terms of the covered flare ups. Eight there are ample leverage you can pull here from a cost mitigation standpoint correct.
Yes, I mean, when you make a very good point as you know.
We made a deliberate decision not by enlarge not to do any restructuring of our workforce, we have maintained employment and I might add based compensation as well.
First of all you allude crisis situation.
Say to that that was the right thing to do to focus on our people and take care of our people and number two but we enter.
Anticipated the strong V shape recovery Q4 and 2021.
And obviously, we want to preserve our talent and resources and so we have not.
Donna.
Don anything now obviously, we had any sustained situation that is systemic way.
Would force us to look at the pull through the different environment for long term than we would change that.
And we have we do have levers we are I mean, the only thing I can tell you is that we've had strong productivity. Despite.
Not reducing our workforce or our base compensation.
You know that we've we've ruined does like most companies to work remotely.
We have a very.
Importance.
Study going on called the future of work internally and we are.
Trying to determine which rolls and as you know we have about 70000 people. So we have a lot of different roles in the company and we are detailing which rolls can actually work from home what we've rooms during the spend any what office space do we really need you know if you're going to be behind.
And your workstation all day.
Not interacting with other people, what's the need for having a.
Physical presence at an office again again depends on the geographies. There are countries, where that's just required back in Japan for example, others not what.
What do we do with home office.
And so on so forth a lot of questions depending on the roles and so there will be changes too.
Changes to our real estate footprint no question like most companies but.
I see investments that we're making in order to solidify the remote for more capabilities, even further et cetera, but again, we've got very significant levers that we have by and large not touched.
Okay, great. Thank you.
Next question comes from Patrick Donnelly with Citigroup.
Taking the question are you maybe just on the remote monitoring virtual trial side lot of talk about that during the pandemic I guess as you see general bookings and trials pick back up.
Seeing any notable shift in activity towards that or and then how are you guys positioned maybe just talk through that.
Two women remotes.
Yes.
Anybody wants things.
Welcome.
Yeah.
The remote monitoring side and stop me Patrick I'm not answering your precise question here, but the remote monitoring side, we have largely.
Been able to substitute for the work, we wouldn't otherwise be doing on site, but not 100% because theres still the requirement to.
You know to be onsite to check source documentation at the site under FDA guidelines.
Now I know you know remote monitoring we should say is different than virtual trials virtual trials include patient tower visits home health nursing combined omni Serv business you said.
You know a patient diary things of that nature, so quite different in that regard. So I think sometimes these two terms are confused and people are saying that they are doing virtual trials. One in fact, what theyre doing is remote monitoring right, our remote monitoring of that which.
Couldn't be money to remotely which is about everything right not all components of the trial may be wanting to remote villages.
Virtual fly always a trial that has been designed.
To be virtual.
And that doesn't mean that there won't be on site monitoring visits either.
But if you use it.
Donaji is and has been designed from the start whereas remote monitoring as a component of a regular trial. That's just happens to be that some of the data some of the activities are monitor remote.
Okay. That's helpful. And then just on the Ts business and following up on Bob's question. You know you guys. Obviously long talks about the quality resiliency. There. So it's encouraging to see the high single digit growth. This quarter outlook, certainly seems bullish for Fourq you in 21, I guess when you think about 21, continuing this high single digit growth.
Thanks for the one or two key drivers you see their customer conversations I assume certainly trending positively, but would love just a little more.
Granularity on the outlook for for next year on that side.
Look we have.
We.
Hello.
Developed hour hour.
For our guidance on positive assuming what we see today. It continues and there is no reason again, we've seen it in the worst of the pandemic performed very well so certainly when things return to a more stable environment.
We will continue our high single digit growth trajectory.
Where are we on you know now.
And so.
Not that there aren't any specific parts of the business remember the data business is.
Yes.
Zero to low single digit.
Growth and that's kind of very stable.
The analytics and services business began was mid to high single digits and continues so.
On on the high end of that range.
The real World business is just on fire to be Frank I mean will it was before on fire I mean in a positive way.
In the firing on all cylinders and it.
It was already.
Already in a very strong double digit territory before the pandemic. It continued to be solid double digit territory before the time that me and he is now.
Expected to come.
Continue to grow.
That same base technology continues to pick up as the deployments of we'll see a well on their way going very well might than all of that to start generating the license revenue we expect.
I'm not sure not a huge portion of our does business with very nice.
Given what nice margins. So all of that will will continue and so.
It's this for.
Segments of our business and the.
When you do the math and you look at the.
The momentum there is no reason to anticipate there's no there's no big.
Does the one big good guidance that we own I affect these this growth rate and there's no one big bad Guy that we that would affect that.
Okay, Andrew you haven't.
Touching the top of the hour. So I was wondering do you want to squeeze in one more question quickly.
Yes.
Question is from Shlomo Rosenbaum with Stifel.
Hi, Thank you very much for squeezing me in at the end I just wanted to piggyback off the last question or maybe you could talk a little bit about more just on the implementations.
It's a good one for us to tell you mentioned there were like 60000 seats to deploy just like where you are how long do you think this is going to take in.
Is there anything changing in terms of.
You know competitively or is it really the same.
The same kind of win rates that you talked about in prior earnings calls.
Yes. Thank you so much.
We'll see US continues with exactly the same momentum that is where we know about two thirds of the time.
As I mentioned in my.
Through remarks, we.
Now since the beginning of the year.
One another 45.
None.
Clients and that now is on total of older than 25.
Distinct clients when we talk about the clients. We mean one company there are.
There are competitors out there that the counts.
Five five different wins with the same client as five.
I would count as one.
You mentioned 50000, I think we are now correct me if I'm wrong indirect 63, 64000, maybe just over 63, a close to 65000.
Users.
In deployments.
And we expect that to continue to grow we've got a nice pipeline lots of conversations continue to go so the momentum year is.
He is on a bit that no no changes.
Thank you. So thank you everyone. Thanks very much. Thank you everyone and thanks for taking the time to join US today, we look forward to.
We look forward to speaking with you again on our fourth quarter 2020 earnings call and as always John and I will be available to take any any follow up questions you might have throughout the day.
And this concludes today's conference call you may now disconnect.
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