Q1 2021 Syneos Health Inc Earnings Call
[music].
Good morning, everyone with me on the call today are Alistair Macdonald, our Chief Executive Officer, Jason Meggs, Our Chief Financial Officer, Michelle Keefe, our president and COO.
Commercial solutions and Paul Colvin, our president of clinical solutions.
In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website and investor dots and he is health dot com.
Remarks that we make about future expectations plans growth anticipated financial results and prospects and our expectations regarding the COVID-19 pandemic.
<unk> forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995 and.
And we disclaim any obligation to update them.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors. These factors are discussed and the risk factors section of our form 10-K for the year ended December 31 2020.
During this call, we will discuss certain non-GAAP financial measures, which exclude the effects of events and transactions, we consider to be outside of our core operations.
These non-GAAP measures should be considered a supplement to and not a replacement for measures prepared in accordance with GAAP.
For a reconciliation of non-GAAP financial measures with the most directly comparable GAAP measures. Please refer to the appendix of our presentation.
I would now like to turn the call over to Alistair Macdonald Alastair.
Thanks, Ronny and good morning, everyone and thank you for joining US today I Hope you and your families are safe and and good health.
I'm excited that our team delivered strong first quarter results exceeding the midpoint of our guidance across all financial metrics as we continued to execute through the continuing impacts of COVID-19.
We had another strong quarter of gross awards across both segments and our integrated product offerings continue to fuel strong backlog growth.
Total reported revenue continued to grow sequentially and importantly return to year over year Greg.
We are enthusiastic that how unique strategy continues to resonate and the market. We continue to deliver on our value creation plan and by further penetrating large pharma enhancing our smid leadership position and accelerating our senior ice one and full service commercial offerings.
We believe our global scale integrated capabilities and unique product development strategy positions us well in this environment as we continue to gain share and remain focused on high quality execution.
We expect strong year over year growth for the balance of 2021, primarily driven by a robust backlog of by a COVID-19 treatment and vaccine trials and Lasalle non COVID-19 related projects as we all know the CRA space has recently witnessed increased consolidation activity. We believe this is a sign of the underlying.
<unk> strength and attractiveness of our sector and provides a positive backdrop for the future.
Now for the key highlights from the quarter.
First we closed Q1 with solid net new business awards, resulting in book to Bill ratios of one three times for clinical solutions 1.23 times for commercial solutions, and 1.28 times and total.
This produced a record clinical backlog with year over year growth of 22, 5% deployment solutions backlog growth of seven 6% on the total company trailing 12 month book to Bill ratio of 1.32 times.
Second we achieved strong profitability gains and the first quarter with 10% year over year, adjusted EBIT growth and 70 basis point, adjusted EBIT and margin improvement compared to the first quarter of 2020.
Third we achieved a strong start to cash flow from 2021 with net cash provided by operations of $127 1 million, which represents a record for the first quarter.
Now getting into the details of our results and operating metrics for each business day.
The first quarter, we continued to recover from the impact of COVID-19, with total revenue growth of 6% compared to the fourth quarter of 2020.
Clinical solutions revenue grew eight 6% over the fourth quarter driven by contributions from our acquisitions of <unk> and ending with research group and an acceleration and the startup of new clinical projects, including a continued recovery in reimbursable expenses.
Our clinical team also delivered a record quarter of gross awards further demonstrating the strong demand we are experiencing.
We did however experienced some pipeline re prioritization that impacted our net book to bill ratio the effects of which were offset by demand from replacement project and the acceleration of existing projects. Therefore, these changes do not impact our revenue expectations for full year 2021.
Our TTM book to Bill ratio remained strong at 1.39 times, including the impacts of acquisitions.
Clinical solutions is well positioned for accelerated revenue growth over the balance of 2021, driven by strong sales record ending backlog and a record pipeline of new opportunities.
We also achieved continued success and winning COVID-19 related clinical projects. During Q1, although this rapidly evolving therapeutic area represented less than 4% of our backlog at the end of the quarter.
Our clinical teams continue to experience gradual improvement and their access to investigative sites, which we believe has stabilized at a point, where we are largely able to obtained the level of access needed to ensure all trials are progressing.
Currently over 70% of size of permitting some level of physical visits which can vary period to period based upon a site's capacity and the requirements of a given trial.
The remainder of our size are accessible via some level of remote monitoring activity.
While sites continue to be cautious amid localized increases and COVID-19 cases, we believe they are well prepared to operate in this environment and we continue to expect the recovery and our level of physical access is 2021 progresses.
We're also experiencing ongoing improvement and the pace of both patient enrollment and start up of new clinical trials.
By mid April the new patient enrollment rates and new site Activations were trending at approximately 150% of pre COVID-19 levels.
We expect this strength and site activations and enrollment along without COVID-19 vaccine trials to increase our backlog conversion and accelerate year over year clinical solutions revenue growth for the balance of this year.
As customers continue to search for innovative ways to drive efficiency and bring trials closer to the patients we are continuing to invest and our decentralized clinical trial solutions.
Our recently announced partnerships with science 37, and medical will offer customers, a seamless and integrated technology platform to streamline work orchestration railroad evidence generation and data harmonization.
These approaches will improved data capture patient access to trials and the patient experience, both science and 37, net and medical and now parts of our dynamic Assembly network.
When combined with our home health and mobile research nursing capabilities and willing with research group, we are able to advanced on our best in class decentralized clinical trial and model decreasing patient and sideburn and often allowing patients to remain in their homes and with their primary care physicians day.
Centralized solutions also filters out the Eni machine to engage more diverse representative patient populations and increase access for patients who previously could not participate and clinical research.
Turning now to commercial solutions.
We continue to see sequential growth and our core business with the pace of recovery overcoming our typical first quarter seasonal trend.
This growth was more than offset by the divestiture of our medication adherence business, resulting in a decline and total revenue of one 9% compared to the fourth quarter.
Commercial team once again had a strong quarter of net awards with year over year growth of 10, 6% increase.
Increasing our TTM book to Bill ratio to 1.09 times.
Importantly, a full service commercial gross awards increased by nearly 60% compared to the first quarter of 2020.
Demonstrating that our integrated delivery model is increasingly penetrating the market and appealing to customers of all sizes.
This award performance drive deployment solutions backlog growth of seven 6% compared to the first quarter of 2020.
Our cutting edge customer engagement capability kinetic is being deployed to support the education and awareness of many COVID-19 therapies with emergency use authorization pioneering the frontage of commercial best practices.
Our unique ability to integrate expertise across medical and regulatory communications consulting and kinetic has enabled the delivery of customized education services specific needs of the EUA environment.
This is a further demonstration of the leadership position, we have established and the innovative approaches we provide to customers as they navigate the evolving commercial market.
We continue to leverage our innovative connected capabilities to optimize HCP engagement through a combination of face to face and virtual field team activities, which helped enable very strong first quarter additions of field representatives.
Our communications business. All so continues to see increased demand for strategic integrated programs and our consulting practices are experiencing double digit year over year growth.
This comprehensive suite of capabilities is fueling growth and a full service commercial portfolio.
We expect these dynamics, coupled with strong balance growth and demand and deployment solutions to drive sequential and accelerating year over year commercial solutions growth as we progress through 2021.
Our unique scenarios one product development offering also continues to resonate strongly in the market, particularly with our small to mid sized customers.
The awards influenced by <unk> once a day have primarily been for the clinical component of product development that we are seeing an increasing contribution to commercial awards.
The first and the ice one portfolio asset to begin commercialization and the second half of this year, followed by additional assets in the coming years, providing and incremental pipeline for future commercial awards and revenue.
We're also seeing early signs of success and the collaboration between <unk>, one and <unk> the supporting earlier stage work for these customers.
Before I turn the call over to Jason I again want to offer my sincere thanks, and anti Cindy is health community for their ongoing resilience and focus and collaboration they continue to help build a superior culture with each other and they continue to deliver the best execution for our customers and their patients on the challenging circumstances.
Jason will now provide additional comments on our financial performance and guidance Jason.
Thank you Alistair and good morning, everyone.
Our total revenue for the first quarter of 2021 was one point to $1 billion up three 9% and two 9% and constant currency compared to the first quarter of 2020.
No that is outlined on slides five and 11 of our earnings presentation. Our comments today reflect and recast of our regulatory and operational consulting practices from the commercial solutions segment to the clinical solutions segment.
Moving the practices to the clinical solutions segment more appropriately aligned services to better serve our customers.
Our clinical solutions revenue for the first quarter was $938 million up six 3% or five 2% and constant currency compared to the first quarter of 2020.
These increases include a contribution of 575 basis points from acquisitions and increased project startup activity.
This growth was partially offset by a headwind of 140 basis points from the 2020 divestiture of our contingent staffing business and 130 basis point headwind from the slower recovery and Reimbursable expenses.
Our first quarter commercial solutions revenue was $278 million down three 6% or four 2% and constant currency compared to the first quarter of 2020.
This decline and commercial revenue includes a 420 basis point headwind from Reimbursable expenses, driven by the impacts of COVID-19.
And the 245 basis point headwind from the divestiture of our medication adherence business.
This decline was partially offset by growth and our consulting business.
Adjusted EBITDA increased 10% to $151 1 million, representing an adjusted EBITDA margin of 12, 5% and increase of 70 basis points compared to the first quarter of 2020.
The increase and adjusted EBITDA margin for the first quarter was primarily the result of a favorable revenue mix and our forward bound program.
Partially offset by the impact of foreign exchange.
Adjusted diluted EPS of <unk> 79 for the first quarter increased by 16, 2% year over year, primarily driven by the increase and adjusted EBITDA and lower interest expense.
Our operations generated $127 1 million and cash flow from the first quarter, a significant improvement from utilizing $38 $6 million from the first quarter of 2020.
DSO for the quarter improved to 39 two days.
Further our capital expenditures for the first quarter were $11 $2 million, and we expect $65 million to $75 million for the full year.
We ended the quarter with $264 $4 million and unrestricted cash and total debt outstanding of $2 nine 2 billion.
Resulting in net leverage of four one times.
We remain committed to achieving our net leverage target of three to three five times by the end of this year.
During the quarter, we repaid $41 $8 million of our term loan a and $64 $1 million on our term loan b, partially funded by the $65 million expansion of our AR securitization facility.
We also repurchased $44 $5 million and our outstanding shares.
Our non-GAAP effective tax rate from the first quarter was 24% consistent with our expectations for the full year 2021.
Turning now to our 2020 one guidance. This guidance contemplates our current view of the estimated impact of COVID-19 on our business recognizing that factors related to COVID-19 are outside of the Companys and control.
We continue to expect full year, 2020, one revenue and the range of $5, one 3 billion to $5 three 3 billion.
Representing growth of 16, 1% to 26%.
This growth inclusion and estimated contribution from acquisitions of 540 to 580 basis points.
And the headwind from our 2020 divestitures of approximately 110 basis points.
We continue to expect total adjusted EBITDA and the range of $745 million to $785 million.
This represents an adjusted EBITDA margin of 14, 5% to 14, 7%.
Up 30 basis points from 2020 at the midpoint.
Lastly, we are increasing our expected adjusted diluted EPS to a range of $4.17 to $4 42.
Or year over year growth of 22, 3% to 29, 6% primarily to reflect the impact of our first quarter share repurchases and our expectation of lower interest expense.
Our guidance incorporates interest expense of $87 million to $89 million non-GAAP effective tax rate of 24% and and estimated diluted share count of 105 9 million shares.
Further we continue to expect our net cash outlay for income taxes to range from $50 million to $60 million.
I also want to provide you with some commentary from the second quarter, given our current expectations.
And as Alistair highlighted we expect year over year growth to accelerate and both businesses and we began to lap the 2020 impacts of the pandemic.
We expect second quarter revenue of one point to $5 billion to $1, two 9 billion and total adjusted EBITDA of $167 million to $177 million.
This reflects as reported revenue growth of 23, 3% to 27, 3% compared to the second quarter of 2020.
This revenue growth includes an estimated contribution from acquisitions and approximately 605 basis points and a headwind from our 2020 divestitures of approximately 130 basis points.
This growth also includes an expected tailwind of approximately 150 basis points stage of growth and Reimbursable expenses.
This completes our prepared remarks, and we'd be happy to answer any questions operator.
Operator.
Okay.
Ladies and gentlemen, if you'd like to ask a question. Please press Star then one.
If your question has been answered and you'd like to move yourself on the queue. Please press the pound key.
First question comes from Robert Jones with Goldman Sachs. Your line is open.
Great. Good morning, Thanks for taking the question I.
And I wanted to go back to the pipeline re prioritization and also that you mentioned in the prepared remarks, and I know you guys don't give gross bookings, but you know we're looking at the math it does look like.
These re prioritization or cancellations, obviously drove the net bookings and a lower than than expected. So just anything more you could get there with this with this a large a large change within one client was it from several any commonalities and therapeutic areas just wanted to try and get a better understanding of the impact.
And the quarter between gross and net bookings.
Sure and good morning, Bob Yeah, It's a couple of customers on the larger side.
And one in oncology, where the re prioritize well.
I think some of them are a delay in the delivery a day.
Of that program, so actually just pushes a couple of projects out of our awards window.
So rather than starting and within the next 12 months. They are pushing further back. So we have to take them out due to our bookings policy. So that'll come back in a later stage and 2021.
As awards so on.
And another one and I remember the therapeutic area on the other one but not you know theyre not related I think that just cause customers.
And we review kind of their overall spend and approvals on what they're bringing to market. Some of it's gone backwards to the right, but some of it you know it's just been replaced by other projects that because of that replacement you build and a little bit of a time lag. So it actually pushes out a couple of months, so nothing they rarely and that.
And there's not a trend that we're seeing it's just a couple of customers doing it quite sizable though one of them. So you know I think we would have been a record probably book to bills. If these hadn't happened.
And so you know.
It's a very strong environment I think one three times is pretty good.
Book to Bill anyway.
And on top of that we would've had extra juice and the tank so unfortunate for us that that happens, but that's the nature of our business right.
No no it makes sense.
Maybe just one follow up just because you mentioned the announcements the partnerships and science 37 and medical.
There's some of your peers have done similar.
Similar partnerships with those with those players and some other competitors have taken more of an internal investment approach and I guess the question really is just.
And how differentiated are these decentralized offerings in the marketplace from each other and and it seems like there is clearly a a quickening the pace to have these offerings and I'm just curious any comments on what youre hearing from your sponsors as far as being able to provide these capabilities.
Yeah sure well I think I mean, we've worked with both of these organizations for a while so you know we've got good experience a boat and you know some of the smaller ones I think as customers are driven by COVID-19 to look at more innovative offerings, we're able to bring them through that.
They are fairly similar and they're over offerings, we have customers who come in and say, we like medical so we'd like to work with them and have customers come and say, we'd like besides day, seven and so we'd like to work with them so having the ability to offer both.
Flavors is important for us under the dynamic Assembly model.
And that partnership model that.
Service and good stead continues to do so so you know.
And that there.
Different flavors of the same theme you got to think of it it's like it's a bit different but it's like the old days method of using metadata oracle or something.
Something else.
So I think that pressure to decentralize to open more channels to a trial. Thank you and get to a patient at home and we're doing a coupling the moat with dealing with.
And enabling ourselves to actually take decentralization and all the way to the patient's home.
Which I think is helping us differentiate and helping us differentiate with medical and helping us differentiate with science day summit.
Got it makes sense. Thanks Alastair.
Bob.
Our next question comes from David Windley from Jefferies. Your line is open.
Yeah.
Good morning, Thanks for taking me next because I wanted to follow up on Bob's last question and good segway on Alistair on the DCT environment on two parts of the question here first on.
On the medical Science and 37 comments, it's my understanding that maybe medical was a little bit more maybe tax software driven science 37, maybe a little bit more tech enabled service driven if you can feed on mine drill down a little bit further on.
On the difference and offering if there is any and.
And they were they were pretty much the same Oh I'll, let you answer that one and then I got a follow up thanks.
Well I'm going to ask Paul to give you a bit more flavor that for that because he knows the you know the detailed and service capabilities. So Paul couple of differences if you've.
Sure.
Yes, no I think also you've hit that pretty well and David I think your comment is is pretty pretty accurate I think when I look at that from.
A telemedicine perspective.
And obviously, it's had more experience and that front.
Broader capability.
And science and 37 of those have capabilities to provide.
And the eco E pro opportunities when I when I think about you know.
Why those partnerships really are key for us I think having the illingworth group and that home health care model.
It really does is we have partners and clients that have different.
Yeah.
Different partners they work with so having both science and 37, having medical having with dynamic assembly the ability to pull the best in class technologies, and and combine that with the home health care. We think gives us really that full offering and ability to create something new and different so when I look at those I think both can work.
And.
Specific situations it depends on how the client is building that it just gives us the ultimate flexibility and I think what we can bring to them with our home health care is also a great testing ground as they think around new technologies and how those will evolve over time.
So if I could if the other and perhaps broader strategic question that I had and follow up to that is you have acquired filling and we're so far as I think about the different capabilities needed to bring a decentralized trial to life.
That home health element clearly a very valuable one.
Whats the distinction between.
And what you think you want to acquire and control versus things that you're more willing to plug and play in a dynamic assembly is it as simple as if its software and tech you don't want to own it and if it services you do but.
And I'd love to understand what your distinction is there yeah, it's kind of down that split day. So you know if it's more service oriented.
Where we you know we feel like we're well positioned to own that.
You know Ala and with came with some tech and I think because we've we've matured as a business we actually have more of our own tech than we have historically so at the moment.
We are plugging and playing technology and.
Looking to own more of the service side, but that can transition as we get more tech that comes in with some of the service company. So we like the space, we like the innovation. It brings so we'll continue to look.
Last quick one on you mentioned full service commercial really maybe more under the auspices are sitting on this one as being something that you think launches and the second half.
Would you mind fleshing out a little bit the prospects for your full service commercial launches in the next six to 12 months.
Yeah, I think the comment and we've made and the prepared remarks is really driven by work that michelle's team is winning almost independent of Sydney on this one I think the SR X, one behavior and and seniors while mindset delivering.
A package that is integrated or full service launches connected to clinical and while the commercial teams are picking that up and running with it themselves. So we're seeing a lot more full service commercials of its own right.
And it kind of disconnect a little bit from what we would classes of scenarios, One award, which is clinical and commercial commitments together.
You know I think we are definitely seeing a rise and that certainly small to mid customers are bringing on and I think we're.
So a 60% increase and the amount of business, that's coming through that channel. So starting to resonate pretty strongly with that that customer size and Michelle any any of it and he asks per day.
Hi, David Yeah, just two things.
You heard us talk about power city us one win and Q2 of 2020 on.
That is going to start flowing through commercial and the end of this year and be heavy into 2020, two and one of our first clinical partnerships from Sydney and Swan.
And so we're starting to commercialize heavily in the back half of 2021 and so.
I think that's just the dish and also you know those are wins, we have line of sight to that we're going to start seeing the.
Net revenue flow through of commercial as well.
Okay. Thank you thanks for the extra question.
All right. Thanks, Dave.
Our next question comes from Erin Wright with Credit Suisse. Your line is open.
Can you give us an update on the general market dynamics that you're seeing in terms of decided accessibility RFP flow and steady startup enrollment timelines that you've seen and and what does your guidance assume now in terms and returning to that more normalized environment on our clothing.
You sneaked about eight questions and there, but we will ever go right. So demand environment strong. Good I think we have record RFP in clinical and commercials very strong for this time and the year.
Seasonal effects and club and commercial.
Very strong flow this time of year and I think some of that is.
And being fueled by.
E a U.
Requests and Rfps that are coming through from Michelle's team.
<unk> accessibility, we're about 75%, where we can get about 70%, sorry, where we can get fully on site and that continues to improve slowly.
And then the difference I think we've seen and the last quarter is we're able to connect with pretty much every single side. I mean, there were there were a couple of holdouts right, but we're able to connect remotely with just about everybody.
So we're able to keep keep all the sites moving forward et cetera, So that's improving.
Site start up is.
About 150% and where we were pre COVID-19. If I can just saw the head of startup has come into the office for the first Tom and 14 months, but.
They are pretty much flat out right now and that's combination between COVID-19 trials coming through but standard trials coming through and starting up and go through activation. So that's a good sign for us as we drive more revenue and the future you got more.
Timothy rather start a process.
And then enrollment is picking up as well so we're seeing good engagement and enrollment.
We're about we're about 150% and some of that is skewed by a couple of larger COVID-19 vaccine trials that are running through so you get a bit of a skew from the enrollment of those and the pace of those so yes, a good signs I mean, obviously, our thoughts go out to some of the bigger countries.
Daily and the teeth of COVID-19, now, India, Brazil et cetera.
And where we're seeing a little bit of a delay and some of those sites, but that tends to be.
At Tampa, and dampen down a bit by the fact that the rest of the world as it seems to be in recovery and vaccines.
<unk> have a really meaningful impact and some of the bigger markets.
Okay. That's helpful and then I'm, probably reading way too much into this but I guess can you speak to the rationale behind the re segmentation of the regulatory and consulting business has there been any sort of changes to the commitment in terms of that and your poor commercial offering.
Clearly, you're still talking about the into and any.
And that's one offering and strategy still seems to be there, but has there been any change and commitment I mean, the business has changed since the and then to transaction.
Yeah, absolutely yeah, the business has changed and evolved a lot since that transaction. So in the consulting group that sits within commercial we moved pretty much the whole of <unk> into that from day one.
And actually is as the regulatory and QA consulting pieces of that.
Outfit have grown and strength their work is actually on the clinical side, so to make that connection and lot stronger operationally, we've actually taken those two groups and move them into the clinical into clinical development services. Our Cts group. So that they are more aligned with our actual kind of day to day regulatory and <unk>.
Day to day startup activity, because that's who they work with constantly so it seemed a bit.
A bit of a reach to leave them over and the commercial side when 100% of their work and clinical.
Okay, great. Thank you.
Thank you Sir.
Our next question comes from Patrick Donnelly with Citi. Your line is open.
And just one on the commercial side and following up on an earlier question can you just talk through the trends Youre seeing there how much COVID-19 works and there and what's the visibility on that segment relative to the past few quarters. How are you feeling about the go forward there.
Well I'll start and one hundreds Michelle I think we feel very good about the go forward to be honest we.
We're seeing a lot of engagement around kinetics, and a lot of engagement around full service.
Commercial.
And that's low on Jan mature products.
I think we wore on a good slug of COVID-19 work and Q1.
It's gonna go burn relatively quick a lot Michele burns relatively quick and anyway, but Ah.
A good.
Net of COVID-19 work, I think 22 projects twenty-three project something like that.
If it related and commercial and that demand seems to be pushing off as more products come through to market.
So yeah, we feel.
Good about it and feel confident about it I think we had a record number of new reps in the quarter or go into the field. So.
You know that's a pretty good sign of that businesses is robust and and there's good demand that Michelle anything on it.
Yeah, I'd add two things I think one thing is.
Our kinetic enabled a hybrid representatives are really starting to.
It creates and great momentum and the marketplace I think that's a big differentiator and regards to the new way that I would say field based teams are working which is fully virtual are having the ability of our Kelly virtual all in person and utilizing digital.
Our strategy is to communicate with customers based on the channels that they are interested in and so that is absolutely driving significant interest from our customer base.
So I think that's the first thing and.
The second thing I would say is our project based businesses, which tend to be more on consulting and you heard us make the comment that you know where and double digit growth and consulting and communications health care communication, becoming critically important.
And so those are growing and we're seeing some really nice.
And nice growth in those areas and then your comment about COVID-19, and it's really just another therapy. If it's just another.
Area of expertise that we've built because of the unique product development platform that we have you know where we're so good now and integrate and capabilities customized or whatever.
And our customers are interested in doing that and we're seeing.
And a lot of integrated offerings around some of these COVID-19 treatments that currently either have emergency use authorization or about to have emergency use authorization and that's kind of a place and the middle of that customers haven't traditionally had to communicate the information about right. You know Eli has become very common in the last year and this.
Environment.
And so really understanding from a regulatory perspective, and a compliance perspective, along with the need to communicate this information on our customers and a very.
Pacific eight.
And a very.
And the channels that we needed to get it out and say, let me just think about how many hcp's across the world need to have this kind of information and our unique ability to manage that with kinetic is while our digital capabilities has been you now and we're starting to get a lot of traction there as well that we felt really good about where we're going as a commercial division.
Yeah. That's helpful. Thanks, and then maybe just also on the improved backlog.
Pat and fill it.
Alright, Yeah is that just around the pent up clinical trial demand coming back and and what's your line of sight into how quickly that plays out sounds like it sounds like you're pretty confident and accelerating growth into <unk>. So just around the improved backlog burn there.
And so some of it I mean.
And remember Q4, and it seems so long ago, we had a 1.5 plus book to Bill I don't remember the exact number one five fives from another.
And at 1.3 on top of that and Q1 feels good to me.
Those projects that we've won and starting to get and to start up from the Q4 Awards in Q2, plus you've got revenue that's still unlocking from the work that was pushed backwards out of 2020. So you've got that we're coming back you've got demand coming out of the market that we're taking share on.
We've got new recruits coming through so we're able to burn that revenue off pretty well.
So yeah, I'm very confident where we're sitting and looking at what we've got in terms of backlog.
And the coverage that we have through to the end of the year.
And we're off to a good start we.
Where we thought we were going to be and very optimistic about the rest of the year and and out into 2022.
Great and then.
Okay.
Yes, Patrick just add on that.
Your first question there relative to commercial on visibility.
We talked about the southern and 6% backlog growth and deployment solutions and the overall commercial backlog, which we don't disclose but we track internally is higher than that.
And as we look at the balance of the year, given we only take 12 months of of.
Bookings into our backlog it really does give us good visibility naturally to be stronger and we will get to June but right now feel good about where that's at and on the consulting or I'm sorry, the clinical.
Burn rate, we will see that tick up.
And to the mid nines percent and and quarter to quarter three a little below the mid nines and quarter, two and then back up closer to 10 and quarter four based.
Based on what we see just for modeling purposes.
Understood. Thanks, guys.
Okay.
Our next question comes from John Kreger with William Blair. Your line is open.
Thanks much.
Great to hear you guys talk about NXP.
And expectation that revenue growth will accelerate I know you've got some puts and takes there with acquisitions and divestitures. So if you just can you give us a sense by the second half of the year, maybe by the fourth quarter, what do you think sort of a normalized organic.
Growth should be relative to your plan and clinical and commercial.
Okay.
Yeah, Hey, John it's Jason here, So, yes, I mean.
We do have a lot of moving pieces as you say I mean, if you and that includes Reimbursable expenses right as we still work through the COVID-19 recovery.
If you just kind of strip everything out and both businesses year over year, excluding reimbursable expenses.
And the first quarter.
And.
And sort of mid single digits, and then as you look to quarter two.
And you start to see the clinical business really rebound strong strongly given the year over year compare as well as all the things Alastair outlined relative to study startup metrics and everything being really strong and our COVID-19 trials, particularly the vaccination trials really ramping.
The commercial business is going to get up.
And the second quarter into the.
And it closer to double digits.
And quarter, two and then both businesses will be and sort of mid double digits and the second half if you think about by quarter.
The way it works out so clinical recovers quickly more quickly and then.
And to the mid double digits organically and then.
Commercial is more double digits, and then up into the mid double sort of the patient.
Very helpful. Thanks, and Jason.
Can you just give us what the COVID-19 revenue contribution was in the first quarter and and in both segments and maybe a rough sense about COVID-19 awards relative to the total that you reported.
Yes, so on the award side, we talked about it being less than 4% of our total backlog and on the award side. It was less than 2% I think on and quarter. One so not a big component and we haven't really talked about it the actual COVID-19 revenue.
What we have said is that it's not material yet and last year, it was less than $25 million.
And total for us and I would say as it ramps and quarter. One is probably not far off of that full year number of last year, but really starting to ramp and the second quarter and beyond.
Great. Thanks, and maybe just one last quick one Alistair you gave that I'm pretty remarkable stat that youre startup.
Metrics are running something like 150% of pre COVID-19 normal.
Is that just really asking the staff to sprint as fast as they can or has something changed structurally that you think you can maintain.
No. We think we can maintain it with enhanced processes, we have been building out.
And our offshore capabilities through forward bound.
A lot more horsepower and that team, they're more automated and more streamline so yes, definitely we can sustain it and grow and actually so we are continuing to recruit and that area and having good success, bringing people and with good experience. So you know we've built a good culture and I think people want to be a part of it.
Sounds good thank you.
Thanks, Joe.
Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open.
Hi, guys good morning.
And my last question how are you thinking about the pacing of Reimbursable revenues over that course day, obviously, there's some COVID-19 work that has a different profile.
And any thoughts there you could provide would be helpful.
Yeah, Hey, Elizabeth Jason here, So it's kind of a.
Bob.
I guess really we seek which as COVID-19 continues to fill back in quarter. Two as we have said in the past and.
And we get.
These patients enrolled and investigators back engaged and in these trials that Alistair mentioned accelerating and the COVID-19 standing up at least on the clinical side, we'll see strong growth and and the indirect as well sort of in line with with what I was saying earlier and then you know on the organic side and then you add in.
And.
The the acquisitions, which doesn't really change the trend that much.
On the commercial side is going to be strong as well <unk>.
Rebounding pretty quickly and quarter two.
And then accelerating and quarter three and four get on the easier comp from 2020, so yeah, its recovering and quarter two and then continuing to move up a bit but not significantly. It's just the comps get easier when you think about year over year.
That makes sense and can.
Can you do you have any updated comments on net.
And it is environment honestly and number of your peers are involved into strategic action. So I didn't know what you were seeing.
Our last night, and then and.
Conjunction do you have any have you come across any clients that have concerns about it and go on a relative scale versus some of these large rps.
Yeah.
And as with it has been an interest and few months that's for sure.
We haven't had any customers who are worried about and scale.
I think what we did when we did the IMC invented merger close to a point, where we have all the scale that we probably need in the clinical.
Rina, So we haven't seen anything like that from customers. You know we work with some of the biggest companies out there and you know biggest pharma companies out there and they're not worried of ask out and so.
So that's all good.
What we are seeing is obviously a bit of hesitancy that you get when there's a bit of disruption we're seeing opportunities for you.
And to recruit people and to win work. So it's a good environment, there's lots of work out there and.
But no we don't see any issues with Africa.
Perfect. Thanks.
Our next question comes from Donald Hooker with Keybanc capital markets. Your line is open.
Yeah.
Hey, great. Good morning, So you guys have a.
Very interesting sort of list of technology partners that you work with this came up a couple of times and the Q&A here I'm. Just wondering do you get any economics or any kind of direct economics or anything from them as a channel partner or is it more sort of a convenience factor for the client that's harder to quantify I would think you have so much from a size and scale.
And all that you could be.
And maybe leverage something there.
Yeah, I mean, we've got some obviously big spend to channels that come through scenarios. So there is some rebate structure and some of the partners whether its big volume.
But not all of them.
Cause you know wherever we poke some and rarely.
But yeah, and there's some good efficiencies there as well so when.
When we're bidding out.
Ah Stewart and.
Set of partners, we have all the language ready to go they understand how they plug in and and through startup. So some efficiencies that we can capture there as well and passed through to the customer.
So yeah, you know, there's some system economics and some of the model.
Okay, and how and if I can add on though I think too it really is and you're having the size and scale. We do it's the steering committees, we can put together and how we continue to drive innovation together, so I mean from a productivity and process perspective with those large scale partnerships I think it just is more around the innovation and productivity.
And we can drive for the clients and and that's that's a big part of why we want those partnerships.
Great and then as a quick follow up maybe also and in the large pharma space Center. That's part of the vision person he hopes to get bigger and the top 20.
I know, it's it's you or in your appendix you had the percentage of revenue from large pharma ticking down a bit year over year, but I guess, the other components and probably growing so fast it's hard to look at that as any indication of anything but can you give us any sense of kind of conversations with large pharma going forward.
Yeah, I think the the large pharma capabilities that we have and the penetration and we've had has been good.
We're still.
And that ticked down and and Australian place thoughts, but I think it's related to a big program.
We finished our guests at the and I'm guessing it and kind of in the middle of Q2 last year.
And so you've got it.
We've got plenty of large pharma work and start ups.
As we lap that that will correct itself, but Jason and thoughts on that.
Yes, I mean, we haven't published the stat.
This quarter on but we have talked about it in the past and I think we've talked a little bit about at Investor day, but we're in this period of winning the work from our large pharma strategic accounts.
And it's gone into backlog or backlog growth and that area has been quite significant at one point and I think we've talked about it being north of 25%.
And now that's starting to pull through revenue is just not completely there yet given COVID-19 push some of that out 2020 and into 2021 and addition to the dynamics that Alastair just mentioned so it's just a timing thing until that backlog really starts to flow through into the revenue line.
Super Thank you so much.
Okay.
As a reminder to ask a question. Please press Star then one.
Our next question comes from Dan Brennan with UBS. Your line is open.
Great. Thanks, and thanks for taking the questions and congrats and I know there's been a couple of questions on COVID-19 and I'm. Just wondering could you help us think through implicit in your 'twenty. One guidance is it possible to think about like how much COVID-19 benefit is baked into the revenue stream and 'twenty, one and obviously youre not going to guide for 'twenty, two and I'm just wondering how we think about kind of the.
And opportunity as we get beyond 'twenty one.
Yeah, well, let me.
Give you my thoughts at the moment.
Around this so.
I think yesterday and I think today again.
Record number of COVID-19 cases, and the world.
So what we've contemplated in guidance is the impact COVID-19 is having both as a tailwind from projects and revenue coming through and as a potential headwind.
If if we have a big resurgence in markets around the world. So you know when you when were putting the guidance together at the moment and you've got a bit of a double edged sword from COVID-19 and so.
And we're just trying to make sure that we capture all that and think that through you know, we got big offshore service centers, some of them and India. Some of them in Argentina et cetera. So you got to contemplate the impact that it can have on.
As a headwind as well as a potential tailwind and and and kind of the revenue stream, so Jason any and.
So it's.
Yeah.
Yes.
Dan in terms of the revenue and 2021, and the guide and the burn rate and how we thought about it on.
On the clinical side I don't think it's changed much from what we had said previously in terms of you know.
Things are still working their way through the system largely stable, but sort of mid year summer is where we think we back to a more normal operation in terms of quantification around the amount.
I think the backlog information that we gave as a reasonable proxy to think about the percentage of your of your revenue and then you know.
And the pipeline and and you know what we're continuing to see.
We're continuing to have plenty of opportunities and in fact I saw on COVID-19 win this morning. So we.
We continue to have that flowing through.
Great. Thank you and and and I was I was hopping between calls, but I think there was a question that.
Related to the M&A environment, but I was hoping maybe.
Is there a view that you have toward the opportunity to maybe accelerate new business wins are you seeing any any impact from that.
And what I don't know that same question was asked but I was just kind.
Kind of see what you guys are thinking about and what you're planning on board.
Yeah, I mean customers worry about sale rose that going through big integrations that they have not got any experience and doing before so.
So if I can be I can attest to how difficult integrations can be at large scale. So customers naturally get concerned about that and I don't think it discounts people, but it sets a little.
Thought process going and.
And customers minds of how stable those organizations are going to be two and.
Over concerns anxiety of staff et cetera et cetera. So.
Yes, I think it opens the door for us it maybe gives us a slight edge, but we've been through the other side of that and.
And we'll.
We will do what we can to win work on.
For those companies.
Excellent great. Thank you guys.
Thank you.
Thanks, Dan Our next question comes from Luca <unk> with Barclays. Your line is open.
Thanks, Hey, guys. One quick one from me and thanks for squeezing me in and so this is pertain mostly to bookings so as I think about.
<unk>, one and the complete offering that you guys have can you give us an update on that.
And does the size of the backlog that you've developed there and I think about the COVID-19 work and and all of those things that are coming out of biotech and it seems that you'd be well position. There and then just overall from a bookings trajectory you know given the strong recovery and and all the commentary.
And that you've given with that I would.
Just wondering how big the cancellations were so that the.
And I would've thought that the bookings would have been up.
Uh huh.
More steeply in the quarter and maybe it's just because it's and theres not as much COVID-19 work or just any type of color. There. So I can get some idea on them on that on those businesses.
Yeah, so the last bit.
I think on the bookings.
The the re price the REIT priore <unk> can say that we took half of bookings and took his cancellations in Q1. Some of those will come back later and the year or early 'twenty. Two is as we get back within the one year start window.
We are very disciplined around.
I think I think that is the difference I mean, I'm pretty confident we would have had without that the same kind of level of bookings that we had in Q4 around the book to Bill basis.
So yes.
I don't see anything wrong with the demand environment I think on the scenarios one side continue to see traction with our small to mid customers.
And not not specifically around COVID-19 and and if that makes much difference because people are moving very quickly on their own through emergency use authorization. So.
Speed the Cdos, one and brings the regulatory development and doesn't apply so much to the COVID-19 side.
So I don't think of that and that.
And that creates much of a tailwind for scenarios one.
Okay. That's helpful. All right. That's all from me. Thank you.
Thank you.
Yes.
There are no further questions I'd like to turn on the call back over to Alistair Macdonald for any closing remarks.
Thank you again, you know on sincere thanks to the entire <unk> team for all they continue to do to manage through challenging circumstances, particularly those currently battling the virus and India, Brazil and other places.
We remain very confident and our market positioning and I look forward to strong growth and profitability in 2021 as the recovery from COVID-19 continues. So thank you very much for your attendance today and for your interest and investment and our organization. Please be safe have a great day and be good. Thank you.
Ladies and gentlemen, this does conclude the conference you may now disconnect everyone have a great day.
And then.
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