Q1 2022 Syneos Health Inc Earnings Call
Good morning, and welcome to the Sydney's Health first quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time I would like to hand, the conference over to Ronnie Speight Senior Vice President of Investor.
Relation. Please go ahead sir.
Yeah.
Yeah.
Good morning, everyone with me on the call today are Alistair Macdonald, Jason Meggs, Michelle Keefe and Michael Brooks.
In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at investors out soon yourself dot com.
Remarks that we make about future expectations growth trends anticipated financial results and our expectations regarding the COVID-19 pandemic and the war in Ukraine constitute forward looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995, and we disclaim any.
To update them.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors. These factors are discussed in the risk factors section of our Form 10-K for the year ended December 31, 2021, and our other SEC filings.
During this call, we will discuss certain non-GAAP financial measures, which exclude the effects of events and transactions, we consider to be outside of our core operations.
These non-GAAP measures should be considered a supplement to and not a replacement for measures prepared in accordance with 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, Tony Good morning, everyone and thank you for joining us today before we begin discussing our first quarter results I wanted to share some important news that we announced with our earnings today. After spending 20 years with Cindy Icehouse I've decided to retire from the company.
I am very proud that Michelle Keefe, our current president of medical Affairs, and commercial solutions will be assuming the role of CEO and board member, leading senior Icehouse moving forwards.
Michelle was the unanimous choice following an extensive search process conducted by our board and having worked alongside US since 2017 I am confident that she is the right person for the job.
With the succession planning and how we place I will be stepping down as the.
Member of the board effective today.
However, I will continue as an advisor for the next few months in order to ensure a smooth transition.
During my 20 years with the company, we have made incredible progress transforming itself from a small traditional contract research organization.
So a fully integrated biopharmaceutical solutions provider today with our integrated solutions and compelling market position firmly established we are better positioned for long term growth and value creation than ever before the board and I have full confidence that now is the right time for a new leader to take the company into its next chapter.
During his 30 year career in the life Sciences industry, Michel and has established itself as an accomplished executive with an impressive track record of execution innovation and customer success.
Since joining <unk> south in 2017, our leadership has driven the ongoing transformation of our commercial business, where she has built a world class management team and a strong business development organization has diversified and strengthened our commercial portfolio.
The successes across the product development continuum include launching innovative services like kinetic enhancing our unique product development approach by building integrated services, such as full service commercial and medical affairs, while collaborating to drive growth in our unique senior Vice one offering.
On the Michelle's leadership, the commercial solutions organization is experiencing its second straight year of double digit growth.
In just four years, she has become an invaluable member of our senior team trusted and respected by customers and employees alike. She brings the expertise necessary to take the company into the next day or as a data and insights driven organization and I know she is the right leader to drive Cineaste House continued momentum into the future.
<unk> joins us here today and before we turn back to our first quarter results I'll hand, it over to have some brief comments Michelle.
Thanks, Alastair to start I want to thank Alastair first partnership and guidance over these past four and a half years.
It's been an excellent leader and mentor and it is thanks to his vision and passion that serious health stands where it does today with an industry leading end to end solutions portfolio.
<unk> built to help our customers shortening the distance from lab to life.
I take on this new role my top priority will be to push our capabilities to the next level and accelerate our evolution toward becoming a more intelligent enterprise and impactful health care leader.
I see a tremendous market opportunity to provide customers with a more meaningful insights driven conversation that is tailored to the needs of our patients sites and health care providers.
As we head into our next phase of growth I look forward to building on our innovative data driven approach through disciplined investments in our technology and our people that will position us and our customers for the future.
I am also pleased to share that in connection with this transition I have appointed Michael Brooks, Our current Chief Development Officer, and global head of clinical development solutions to the newly created role of Chief operating Officer.
S T O L. Michael will be responsible for seamlessly connecting clinical development Medical affairs, and commercial solutions with a focus on creating greater customer success through integrated solutions and technology driven insights.
He brings more than 25 years of clinical development and commercialization experience to this role and I look forward to benefiting from his insights as we work together to deliver on the company's strategic goals.
I am energized by the opportunities ahead for city hotels and eager to get started.
Over the coming weeks I'll be listening to and learning from our employees customers partners and investors to.
Do you hear as many perspectives on our business as possible.
I look forward to providing you all an update on our next earnings call.
With that I'll turn the call back to Alistair to discuss the first quarter.
Thank you Michelle and congratulations to both you and Michael and taking these new roles within Sydney Ourself, we'll be watching with great Pride as you take the organization forward now turning to our results I'm pleased to report that <unk> delivered another strong quarter of revenue growth and profitability exceeding the midpoint of our guidance across all financial metrics.
We continue to advance our integrated value proposition working seamlessly across the organization to accelerate success.
Before I discuss our results I want to acknowledge the war in Ukraine and offer care compassion and gratitude to our employees on site partners in the region while.
While the safety of our employees and their families remains our top priority. Our teams have worked tirelessly both inside and outside Ukraine to minimize the impact on clinical trials and more importantly, maintain the safety of the patients we serve thus far the war in Ukraine has not had a material impact on our business our thoughts are with everyone.
One who has been impacted by the ongoing war on devastation.
Demand for our high value solutions from development through commercialization remains healthy with a robust new business pipelines across our organization. We continue to see sustained strong demand across all customer segments, including smid customers, where RFP flow year to date exceeds the strong levels of 2020.
One and are well above pre COVID-19 levels. In addition, we are seeing more opportunities for preferred provider relationships with larger pharma customers as the impacts of the pandemic subside.
This continued strong awards and backlog growth positions us for sustained long term growth we remain confident in the growth. We have previously outlined for 2023 as we execute on our value creation plan.
Now some key highlights from the quarter first we reported solid book to Bill ratios of 132 times for clinical solutions and 1.17 times for commercial solutions for the first quarter, excluding the impact of Reimbursable expenses, resulting in trailing 12 month book to Bill ratios of 137 times for clinic.
So at 1.14 times for commercial.
Total company net awards for the first quarter grew 17, 9% compared to 2021, excluding reimbursable expenses driven by a 23% increase in clinical and then the 11, 6% increase in commercial.
Second our commercial solutions business continues to demonstrate strong performance with our full service approach resonating with customers and the <unk> portfolio beginning to achieve commercialization milestones, resulting in an 18, 1% revenue growth with.
With deployment solutions backlog growth of 26, 4% at the end of Q1, excluding Reimbursable expenses, our commercial business remains well positioned for strong growth in 2022 and beyond.
Third under our balanced approach to capital deployment, we repurchased $150 million worth of our own shares during the first quarter.
Now moving into further details on our results.
In the first quarter, we delivered total company revenue growth of 10, 5% year over year, driven by robust growth in both segments and.
In clinical solutions revenue grew eight 4% compared to the first quarter of 2021, including the impact of acquisitions, our organic growth was balanced across our full service portfolio and the FSP portfolio with ongoing strength in our smid customer segment, and our oncology business as well as the continued ramp in our large pharma.
In ships.
As previously highlighted we have not seen a material impact on our results from the Ukraine wall and the related sanctions and we will continue working closely with our local teams and partners to ensure the safety of <unk> employees and the patients we serve.
We delivered another strong quarter of clinical awards, which included expanding an existing commercial relationship with another top 10 pharma customer to secure a global preferred provider relationship. This relationship includes hybrid services across multiple therapeutic areas and is another example of how our product development mindset and commercial capabilities.
Our aging clinical growth importantly, the clinical revenue and our top 20 pharma customer segment returned to year over year revenue growth in the first quarter, marking an important milestone in our growth strategy. This is a product of our new relationships building momentum coupled with stabilization of revenue with a key customer that we've recently.
Highlighted.
Including Reimbursable expenses, our clinical book to Bill ratio for the first quarter was one to two times, resulting in a trailing 12 month book to Bill ratio of 1.07 times, excluding Reimbursable expenses, our clinical solutions year over year, ending backlog growth was 16, 6%.
Turning to commercial solutions revenue growth was strong at 18, 1% compared to the first quarter of 2021.
Commercial growth remains broad based with our highest growth rates in deployment solutions and consulting driven by continued strength in our smid customer segment. We also began to see significant contribution to revenue growth in deployment solutions from the team launches related to the <unk> portfolio assets deployment.
Solutions reached another new five year high in total deployed resources with our highest quarter of additions since 2016.
Our public relations and medical Communications business has also remained very strong in the quarter. The commercial team had a solid quarter of net awards with a book to Bill ratio of 1.15 times for the quarter and $1. One three times for the trailing 12 month basis, when including Reimbursable expenses.
Our unique Sydney ice won't end to end offering continues to resonate with our customers and gain traction in the market. The new product launches from this portfolio continued to progress well across our commercial continuum, along with planning activities for additional launches in late 2022 subject to appropriate regulatory approvals.
In addition to the substantial awards the growing <unk> portfolio has driven into our clinical business. We expect this unique offering to add further commercial awards and revenue over the coming years.
We recently added new senior management talent in Asia Pacific, who bring unmatched expertise to drive high growth across both clinical and commercial in this important and rapidly expanding market.
Ken Lee joined sending ice house as our general manager and Executive Vice President of clinical development for Asia Pac region.
We also welcome Sam Wilson, as our senior Vice President and head of Asia Pac deployment solutions to drive commercial growth in the region focusing on commercial model design and go to market strategies.
Lastly, we recently announced the promotions of Baba Shetty, President technology, and data solutions and <unk> to executive Vice President Medical Affairs, both representing key roles in driving the integrated solutions at the core of our growth strategy.
<unk> will lead development of new customer facing technologies across our business, including AI based tools and advanced data solutions as we continue digital investments across the enterprise to further expand our dynamic Assembly network.
Soon we will have the optimization and delivery of our new comprehensive medical affairs solutions seamlessly connect in the organizations high valued capabilities across the product development lifecycle.
Our ability to attract retain and promote top level talent is a testament to our culture and demonstrates the opportunities for career growth at <unk>.
Finally, before I hand, it over to Jason I wanted to highlight an important update on our ESG initiatives. We recently saw in the climate pledge formalizing our commitment to achieve net zero carbon emissions by 2040. Some 10 years ahead of the Paris agreement.
Half of our employees and other stakeholders, we proudly joined the climate pledge with more than 300 other organizations in support of the shift to a low carbon economy.
In closing I want to thank all of my 28000, plus Sydney is how colleagues for their collaboration and dedication as they continue to work tirelessly and seamlessly to provide innovative solutions and exceptional delivery.
We remain optimistic about the year ahead, and look forward to successfully delivering projects for our customers and their patients while executing on our financial growth goals.
Jason will now provide additional comments on our financial performance and guidance.
<unk>.
Thank you Alastair and good morning, everyone.
Before I get into the details I want to say that it's been a pleasure to work with Alastair over the past eight years just to provide some perspective on Alastair his tenure at the company. He joined the company in 2002 as an associate director of business projects. When the company had less than $20 million of revenue and 200 employees.
We are now 28000 employees strong and achieved $1 $3 billion of revenues just in the first quarter of 2022.
Thank you for all you've done for me our employees in the company over the last 20 years and especially over the last couple of years as you've led the company through the COVID-19 pandemic continuing to ramp our Eni and ESG efforts and most recently the Russia Ukraine War.
You will be missed.
As we look to the future I've had the opportunity to work closely with Michelle over the last four and a half years when Michelle joined the company in December of 2017, I was our CFO and the commercial solutions segment, and we've been working closely together ever since.
I'm looking forward to continuing to work with both Michelle and Michael in their new roles as CEO and CLO.
Turning to the quarter, our total revenue for the first quarter of 2022 was $134 billion up 10, 5% and 11, 7% in constant currency compared to the first quarter of 2021.
Revenue came in above our expectations due to the strength in our clinical business, despite an increasing headwind from foreign exchange.
As noted in our earnings presentation, our comments today reflect a minor recast the segment revenue to reflect the consolidation of our customer facing technologies and data solutions under executive leadership within our clinical segment.
Our clinical solutions revenue for the first quarter was $1 2 billion up eight 4% as reported or nine 6% in constant currency compared to the first quarter of 2021.
These increases were driven by balanced growth in our full service and FSP portfolios.
<unk> strength at our oncology business and the ramp in our large pharma relationships.
This total growth includes a 100 basis point contribution from acquisitions.
And a 240 basis point headwind from Reimbursable expenses, consistent with the updated expectations reflected in our guidance.
Our first quarter commercial solutions revenue was $317 $9 million up 18, 1% or 18, 9% in constant currency compared to the first quarter of 2021.
Growth in commercial revenue continued to be driven by expansion across our core commercial businesses with particular strength in deployment solutions, including a growing contribution from field team launches for our <unk> portfolio assets.
Reimbursable expenses did not have material impact on commercial solutions growth.
Adjusted EBITDA increased 14, 9% to $173 $6 million representing.
Representing an adjusted EBITDA margin of 13% an increase of 50 basis points compared to the first quarter of 2021.
The increase in adjusted EBITDA margin for the first quarter was primarily the result of benefits of revenue growth foreign exchange and Reimbursable expenses, partially offset by a less favorable revenue mix.
Adjusted diluted EPS of $1 <unk> for the first quarter increased 27, 8% year over year, primarily driven by the increase in adjusted EBITDA and lower interest expense.
Operating cash flow was $70 9 million for the first quarter and we experienced an increase in DSO to 47 five days that was mostly driven by an increased growth in accounts receivable related to large pharma customers with longer payment terms.
Our capital expenditures were $23 5 million for the first quarter.
During the first quarter, we repurchased $150 million of our outstanding shares.
We funded these repurchases with cash on hand, and short term borrowings on our revolving credit facility.
We ended the quarter with $119 million of unrestricted cash and total debt outstanding of $2 98 billion, resulting in net leverage of three six times.
Our non-GAAP effective tax rate for the quarter was 23, 5% consistent with our estimate for the full year 2022.
Turning now to our updated 2022 guidance. This guidance contemplates our current view of the estimated impacts on our business of the COVID-19 pandemic the war in Ukraine, and the related Russian sanctions and the evolving interest rate environment.
In addition, this guidance is based on foreign exchange rates as of March 31, 2022.
Our expectations for total revenue remained unchanged at $5 6 billion to $5 75 billion.
Representing growth of seven 4% to 10, 3%, despite an increased foreign exchange headwind of $54 million.
Total revenue growth includes the contribution from acquisitions of approximately 100 basis points.
And an estimated net headwind of 210 basis points from Reimbursable expenses.
We now expect our total adjusted EBITDA to range from $845 million to $885 million, an increase of $5 million at the midpoint.
This reflects an adjusted EBITDA margin of 15, 1% to 15, 4% up approximately 55 basis points from 2021.
Lastly, we now expect adjusted diluted EPS to range from $5 <unk> to $5 25.
Or an increase of <unk> at the midpoint representing year over year growth of 13, 2% to 17, 7%.
This reflects the benefit of our first quarter share repurchases, which was offset by an increase in our expected interest expense.
Our guidance now incorporates interest expense of $76 million to $86 million.
This range is based upon current market forecast for LIBOR and reflects that 40% of our debt is variable rate.
Guidance also assumes a non-GAAP effective tax rate of 23, 5% and an estimated diluted share count of $103 9 million shares.
Further we expect our net cash outlay for income taxes during 2022 to range from $70 million to $75 million.
We expect second quarter revenue of 1.38 billion to $1 4 billion.
And total adjusted EBITDA of $200 million to $210 million.
This reflects as reported revenue growth of seven 6% to nine 2% and adjusted EBITDA growth of 14, 5% to 22% compared to the second quarter of 2021.
This revenue growth includes an estimated contribution from acquisitions of approximately 100 basis points, a foreign exchange headwind of $19 million and a headwind of approximately 190 basis points due to reimbursable expenses.
This completes our prepared remarks, and we'd be happy to answer any questions operator.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key please standby will require the Q&A roster.
Our first question comes from the line of Patrick Donnelly from Citi. Your line is now open.
Hi, guys. This is lindsey on for Patrick I was just wondering if you could talk about the current M&A environment and what your view is on.
For deals.
Just your outlook there would be great to hear from both of them.
Sure good morning.
Yes, I mean the environment.
As has cooled off a little bit I think in terms of M&A you know we've got.
Our list of priorities and targets that we want to continue out into the business as we move forward both across clinical and commercial.
On the medical affairs folks actually is a place that we look.
Have good engagement and.
But we've we've.
We've had that kind of capital deployment priorities for awhile now looking at tuck ins things that help us capitalize the business things like Rx data science, I think with that we did see interacts and steady kick et cetera.
We're also continuing to look for things that.
Digital kind of engagement and digitization of processes and systems, while I mean, Michelle your thoughts on that.
Well, what we've seen is yes, there are opportunities for some tuck ins to really build out our integrated solutions approach.
We're pleased with the performance of our.
Existing acquisitions that are really helping us become a much more data driven organization and we're excited about.
Nothing things as they come along.
But we feel really good about.
The business and the way, we're running the business right now.
Great. Thank you and then just one more on the <unk> guide and given it's a pretty strong does that assume any conservatism at all in the back half theory and thanks for taking my questions.
Well, thanks, Jason you answer them.
Yeah. So.
It is early in the year to your point and as we've looked out at.
The back half, we felt really good about the ability to have the Q2 guide where it was.
And just some of the balance that allows for the back half as we let some of these macro.
Situations in the world sort of work themselves out so I wouldn't say conservatism I would say balance and we also want to look at where we want to take the investments in the company across everything that we've talked about previously whether it's people or.
It's data and technology or.
Whatever it might be to help us drive growth in future periods.
Thank you. Our next question comes from the line of Eric Coldwell from Baird. Your line is now open.
Hey, Thanks, very much Alistair let me be the first to congratulate you on the retirement and Michelle and Michael on the promotions.
I wanted to hit on.
I won't hit on commercial.
First Michelle just I'd love to get some broad comments on the market dynamics two years into Covid, how clients are <unk>.
Going back to the market is work returning to it sounds like workers returning to more normal levels of deployment and regular way activity.
But I'd love to get the update on the balance between.
Virtual digital remote versus life meetings.
Second I'm curious about the competitive landscape you've had good wins good growth rates. Good backlog growth is is this the market recovery or is this changes in the competitive landscape. For example, one of your largest competitors recently changing hand, sometimes that causes.
<unk> and then finally.
With <unk> you sound very positive on it today I'm curious if this is new wins or in growth in the backlog there or if this is just an Tuesday azzam about the reset.
Product launches and the momentum you have on.
The maturation of the existing pipeline.
Thanks very much.
Well thanks for the question, Eric I'll start with <unk>.
First the performance of the commercial team has been really impressive.
Trailing 12 months book to Bill of one one for us.
Really beat while we've kind of given that is the area, we want to focus on which is between <unk>.
Five in one so to your point, we can continue to see some really great.
Momentum deployment solutions has backlog growth of over 26% and I think a lot of times people think deployment solutions is just feet on the street I mean, the real success has been the fact that we really used <unk> to create this hybrid solution, where our representatives are unable.
But digital and.
Call Center and video capabilities to manage multiple channels to communicate with customers. We are seeing a rebound in in person visits for sure obviously that varies by therapeutic area, but we have been really impressed with the fact that our hybrid and tech enabled solutions are truly differentiating ourselves.
The market, which is why we're having the growth we're having I really believe its our differentiation that is driving the success. So I think that would be the first answer to the commercial question I'll take the second question with finance one.
As you know, it's a great portfolio of assets many of them are still in clinical.
We're very excited about <unk> and that really starts to ramp in the second half of this year, which is.
Why we have the growth we have in the second half of the year.
Good ramp.
We also were awarded you saw in our press release, we were awarded the Canada and European teams for IRC as well and.
Our consulting business and our communications business does get early and early with finance one on the clinical side and we're looking forward to seeing how that portfolio.
<unk> continues to grow I will turn it over to Michael to talk a little bit about it from a clinical perspective, Michael Yes, sure. So Eric.
Got it from the lens of leading our clinical group.
The city is one operating model is resonating very well with our clients. They like the idea of how we approach to product development mindset. How we're operating at the end of mine just as importantly, the integrated solutions that we're bringing forward data tech patient insights is also resonating with clients because it's very practical and can see how it's bringing values how they design.
The protocols, how do we think about the geographic landscape for selection on site now we target patients.
Our recruitment.
I think one of our other differentiators. This year, we've been really focusing in on customer customer customer customer.
And on the delivery and quality.
And simplify our operating model our customers are seeing that come through.
Perhaps against the backdrop of some of the changes with our competitors that's been an advantage for US and then finally, we have great talent here. We've also brought in some really exceptional talent from.
<unk> pharma biotech who have also come in with good relationships and helping us to really increase that pipeline.
So Eric did I Miss one of your questions maybe one in the middle.
Okay.
Yeah.
Probably the least important but I'm just I was curious about the competitive landscape and if you've seen any changes in the behavior of your your peers, especially the large one that recently changed hands to private equity.
I'll kind of talk about Eric.
I don't think we've seen any change in behavior I mean, obviously thats.
Bringing in the full kind of horsepower of.
My capabilities to some if there are opportunities obviously you would.
But not really seen any real changes in the landscape I mean.
<unk>.
What we are seeing is good pipes good funding across with penetrating large following we talked today about a new cross sell from commercial over to clinical on the large pharma side, that's going to be a significant relationship for chip for us as we start to ramp up towards the title of this year or Michelle and the team ramping up towards the top of this year.
We're super excited about that and I think.
Kind of the.
The questions you asked together.
I truly believe that what we've built here is something very different and we've built a culture that supports that and that's really resonating with people who want to come work here and that resonates with the.
Projects, we win and the customers that we serve.
I'm very proud of that and I know Michelle continue that legacy.
And push that forward and.
I think the.
Service catalog, we built <unk>, one capabilities, our ability to engage smiths in a different way more more holistically take them all the way on whatever journey they want to go.
I mean, great advisory skills as well as execution.
Plus the fact, we have the scale to compete for really big projects.
We've put it all in a very good package in a very good situation. So.
Healthy market healthy company.
Heading in the right direction, Yes, Eric I'll, just add one thing.
In regards to the commercial market, specifically and the one competitor being less private.
What we're seeing is that our value proposition our integrated value proposition is resonating beautifully with customers.
And regardless of where we intersect with a customer whether it's earlier and med affairs full commercialization.
They really like the strategy and Thats anyhow as health talent thinks about the product holistically to make sure I guess commercial success.
And I think we have a winning strategy and I think what we're seeing with other competitors as they are thinking about what is their strategy that try to compete with us because right now we are the market leader by far.
Great Congrats on a good update thank you very much.
Alright.
Okay.
Thank you. Our next question comes from the line of Casey would rank from JP Morgan. Your line is now open.
Hi, guys. Thanks for taking my questions I guess first of all Alastair Congratulations Michelle.
Welcome.
Thank you I guess, you talked a little bit about about strong RFP flow and smid cap customer segment can.
Can you talk about your outlook for the segment for the rest of the year, given where capital markets stand out.
Anything to call out maybe on the <unk>.
Direct business or anywhere else in terms of maybe cancellations or delays.
Just.
Mid market.
Yes sure.
Sorry.
Thanks, Casey Thanks for your comments much.
Much appreciated.
So I think like we said that the last thing is coal.
When we talked about Schmidt environment funding et cetera, we really look at Smith as a multichannel.
Exercise.
Sector. So we've got the funding obviously coming through public events that got trapped in the biotech funding index Ipos secondaries et cetera.
Hi, Matt.
A pause that that goes also feed the work that goes in through most of the <unk> model.
And that emerging biotech.
We see that it's still pretty strong.
Yeah.
It's moving along we have good engagement with customers I think the fact that we're able to take those customers a very different model now with.
Cindy I schwan wrapped around it the ability to go end to end and we look at the private funding in the biotech space.
The big equity houses, putting money to work through the biotechs et cetera, we have great relationships with them again, they are very keen on the <unk> one model on the end to end model because.
Every dollar of their spending is pushing the molecule forward its not building an office is not hiring.
The people to do outsourcing etcetera.
And then a big Paul if I work for.
Smith in biotech is coming out of Asia.
And so I think we set a new record in Asia in Q1 in terms of the sales primarily smid work coming through and we're very capable of delivering that both in Asia, obviously than the rest of the world, but for us those channels combined.
Healthy I think the showing good.
Against where we've been in the past even when we look back at 2021, which had the COVID-19 catch up in it.
The pylon is equivalent to that so we're not concerned by that.
Add to that the fact that we're breaking in more and more to large format getting new relationships there.
Adding anchor tenants to the backlog through that.
Very healthy picture for us so funding environment fine good engagement with customers.
We're not seeing that.
As an issue at all.
Got it that's helpful. And then you guys talked about year over year growth returning in the top 20 pharma customer segment.
<unk>.
Specifically.
Around that large pharma global preferred provider win can you talk toward your momentum here on the large pharma side and how youre doing business with these customers specifically thank you.
Yeah, absolutely well I'll kick it off one of the points of great in Sydney I saw the merger back in the Davis credit with scale to be competitive in scale.
Transactions like that and we've done that and we've done that on the clinical side and we've done it on the commercial side.
We are the biggest in commercial we are top three in the in the clinical side and I think when we were able to combine those skills with.
<unk> capabilities in medical affairs, etc, we have a very compelling engagement.
<unk>.
The feedback that we're getting about the culture that we have our abilities around building hybrid and being able to deliver that clinically as well as bringing that advisory and from commercial the cross sell that we're seeing as well.
Okay, Michele to talk a little bit about the new the new awards that we've got in the large pharma.
Really where michelle's team effects out delivered very well these people want us to announce come in and deliver clinical Michelle.
It's been an exciting quarter for sure.
We had a top 10 pharma win and clinical one of the largest commercial clients and this really goes to the why we're a different kind of company. The way we think about these opportunities from an integrated perspective, and getting our best talent, regardless of which business units they sit and to work together to really deliver.
An exceptional differentiated offer to our customers in this top 10 win was a real a true integrated offering between.
Some of that expertise that sat in commercial are working together with the expertise in clinical and so we're really excited about that because.
Other top 10 pharma win I can tell you have had the other happened as well one of our biggest clinical clients has just opened the door for us on the commercial side and we've had a big commercial win in Q1 as well from one of our top 10 clinical clients. So.
The integration between the businesses is there and customers really are responding to the way we approached them with these innovative integrated solutions. So.
Ill give Michael a chance to top it off and then we can go just.
Two key points Casey first with our existing partnerships, what I really love about the relationships right. Now this is not just order fulfillment.
We're actually talking to us about how can they restructured their operating models how can they better.
Power solutions outside of whatever the existing contract might be.
And so.
It's much more.
Alright, and integrated solutions and being transactional in addition, with other.
Pharma companies, where we may not have existing clinical work, we've got quite a few irons in the fire, we're talking to clients around solution capabilities. What are the problems they need us to help them solve so we're really pleased with the momentum.
The future holds for us.
Thank you. Our next question comes from the line of Christine range William Blair. Your line is now open.
Hey, congratulations on the quarter and congratulations Michelle.
Just two for me.
Yeah.
Often the first one is.
Yeah.
If theres a staffing update as it relates to retention and hiring.
If theres any difficulties you're experiencing on this front.
And then the other one is given the new CEO announcement can you discuss any changes in strategic vision, our execution that may come.
Sure. Thanks for both questions Christine I'll start with <unk>.
With staffing we've seen a stabilization and.
And staffing across the board I mean, it is a very competitive marketplace out there right now.
But we have seen it stabilize I think for a couple of reasons people are really excited about the culture and what its what were offering here is the value proposition of sending us health and I think we're doing some really innovative things that I will turn it to Mike on a second to talk about some of the the really innovative things that we're doing from a talent acquisition and retention perspective.
So I think that would be the first thing in regards to.
Anything new strategy can I really believe we have a winning strategy.
<unk>.
We are poised to enter this next era of data and insights driven intelligence provider you know, we've been really focusing on insights and analytics and we've really focused on how we can support decentralization through steady kick in how we do better targeting through kinetic.
I'm really excited about the strategy that we have but obviously every strategy over time has enhanced has enhancements based on what customers need and it goes back to what Michael said in the last question around we're really trying to help customers as they think about reimagining. Their models that we can help them with the transformation that they're going through and be there Paul.
<unk> of choice, So I'll turn it over to Michael to go back to a little bit about the staffing.
Yes, absolutely so from the lens of the clinical group in my prior role as Michel said it has been and continues to be a tight labor market. We watch the data every single day really pleased to see that.
Our retention has stabilized where there are a couple of pockets.
It is a therapeutic or geographical pressure, we're taking very specific actions around how we can support those individuals and those families.
The career development.
Whether it's through new training opportunities, even give them choices and the projects that they are going to be working on.
Seems to really resonating.
With our employees in terms of some of the innovation one of the really unique features that I was excited about here at Citi.
We have our traditional zero talent acquisition. We also have tailored strategy partners that exist within our commercial group.
Been leaning on that could help bring in new ideas of how do we recruit top talent, how do we create a job opportunity a career opportunity that's very attractive to them. Obviously it was really good compensation of benefits and then as we onboard them how do we make that an exceptional experience for those employees.
Christine we have also invested and professional development infrastructure to provide why management mentoring support and a variety of other things that does seem to be really resonating with our employees.
Okay.
Thanks for taking your time.
Our next question comes from the line of Justin Bowers from Deutsche Bank. Your line is now open.
Hi, good morning, everyone.
Happy times, Alastair and congratulations Michelle.
Thank you.
Yes, it's really positive.
<unk>.
Comments on the call and I was hoping that we could dig in a little deeper on the strategic partnership opportunities that you mentioned.
One is the top 10 win.
Part of that bucket and then.
Can you just kind of elaborate on the landscape. There are these things that are outside of the typical renewal cycle new.
Two of these for you.
Clinical commercial et cetera, et cetera, just trying to get a better sense of the landscape there.
Yes.
Yeah. So yes. This is a new strategic opportunities top 10.
Our partnership so very excited about that.
This is one that we have actually been waiting for.
Its original cycle would have had at renewing some time in the right in the middle of Covid. So.
It's a little bit overdue, but we knew how I think we knew how to position ourselves well against it we've done great work for that customer in the past, both commercially and a little bit and clinically. It has been on the clinical side, where they acquired assets that we were already working on.
I think we took quite an innovative approach to it to rich from commercial over to clinical which is the power of <unk> really.
By working with them to help them find staff in all defined roles and the areas throughout Taylor strategy partners offering and then being able to kind of parlay that into a large amount of hybrid FSP as well as full service work, which will start to come to us.
Later in the year so.
Landscape I think was one that was kind of delayed by Covid people, who were on a normal cycle for renewals pushed that out a little bit.
Which is very understandable, obviously and.
We are very compelling when we get in front of large customers I think so.
Absolutely.
We've had a lot of success this quarter. So the first one Alex you talked about.
What was the win that we were.
Getting ready to win and we won.
We've had some others, which are really exciting we're starting to see.
RFP flow.
On the clinical slot on the clinical side from Big commercial customers were starting to see the opposite too.
Clinical customers are now reaching out on the commercial side and we've also seen on.
On the commercial side partnerships that some of our competitors have had have opened up to us and we've been winning some business on the commercial side and top 10.
That as well and so you know when you think about the fact that we've been on this journey to have this integrated value proposition to be able to enable a more intelligent enterprise.
And that Michael and I have been working so closely over the last year to really put the pieces together.
It's kind of like you push Iraq upheld for a while and then you get to enjoy watching it roll down the other side, we are hitting on all cylinders on this integrated value proposition and I think our customers are responding.
Appropriately not just in <unk>, but we're starting to see it happen rallying and that the top 10 top 20 pharma, which is really very exciting for us. So I don't know if you want anything Michael one of the nuance on this top 10 pharma.
We want to win as much as we can and we want to grow. This particular client. It just has a fantastic culture and fantastic leadership.
Always want to work with this customer and the current labor market that matters.
The cultural mix between our customers employees fits together, so when originally sat down with them with Alastair Michelle and I had a chance to talk to their leaders. We started talking about what is the problem you're trying to solve what are the solutions, we're bringing together and it wasn't a sales message we committed to them, we'll give you all synthetic and transparent about what we can do today and what we may have to build in the <unk>.
And I think that authenticity really resonated with them. So we have a strong foundation of honesty and candor.
Right cultural fit and I think it's going to.
Give us some just pose.
Both parties with great success, and I think that will translate into other customer relationships as well, where they don't want to sales the sales relationship. They want they want ideas solutions authenticity and candor.
Okay.
I appreciate all the detail.
One maybe just one quick follow up.
So Jason can we talk about maybe the capital deployment philosophy from here you guys did a good job buying back stock.
In the quarter it sounds like the M&A market is.
It's not as tight.
The stock is trading.
Pretty much at the lowest multiple it has I.
I think since the original AMC IPO.
Just how you guys are thinking about that through the rest of the year.
Yeah sure Hi, Joseph.
It really hasn't changed in terms of we still want to Delever.
And get in and around that three times.
By the end of the year that just creates flexibility for us that we want to have in the event, we want to do something.
Later.
Besides that it is M&A and tuck in in the pipeline.
Within that space.
<unk> continues to be fairly robust as alastair alluded to.
We're just picking our spots here as we work through what's going on in sort of in the macro environment.
And then finally, given that and where we are on leverage coming out of last year at three six and with.
The market, where it was we were opportunistic in and <unk>.
<unk> the $150 million of shares we typically will every year, we will do them at a minimum enough to prevent.
Dilution from our issues and options and things vesting, but we had $182 million in change on the remaining <unk>.
<unk>.
Used the majority of that so.
Those those three.
Three key areas remain the focus as we move through the rest of 'twenty two.
Got it I'll hop back in queue. Thank you.
Thank you. Our next question comes from the line of David Windley from Jefferies. Your line is now open hi.
Hi, Thanks for taking my questions Alistair congratulations on a long successful career, Michelle and Michael Best of luck in your new roles. Thanks for taken taken these questions I wanted to.
Kind of.
Come at the strategic relationships that you've talked a lot about on this call from a margin angle.
And could you talk about I guess, when we think on the commercial side, specifically going from individually sold solutions Michelle to more of a kind of a full service launch that you've kind of pioneered.
Is that a margin enhancement opportunity because you because you kind of control and orchestrate the broader.
Base of services, and then if I expand that to the cross sale between clinical and commercial are those opportunities also giving you more margin levers as you capture them.
Okay.
Sure.
I'll start Dave Thanks for your comments.
Really enjoyed a long engagement with you as well so.
Pleasure.
Really looking forward to see Michelle Linn.
Like what type of this business to the next level.
The new strategic relationship in terms of margin, it's right, where we would expect it to be but that kind of.
Relationship yes.
You make.
Kind of when you're putting up proposals together something thats with the smid and as full service is higher margin, but you get a much bigger utilization out of the relationships with large format scale. So they kind of.
And each other out this is a hybrid so it's going to have a bit of both.
And we're very excited to engage with them in it.
And I think.
Build upon it. So this relationship now will be something that stretches right across from clinical to commercial its not were not taken assets across legacy Neo it's one store, but it's a big cross sell we will be doing a big part of the commercial work and a big part of that clinical work and we're very excited about that so I think more to multi come.
If a relationships of that stalled I think only <unk> capable of winning and that's a key differentiation that I think we can carry forward.
Okay, and then I guess, Dave just add on the cross sell and commercial and then the full service commercial.
With full service commercial.
It depends right.
Doesn't.
Wouldn't think of it as simple as FSP monitoring no utilization risk cost plus two utilization risk.
Different margin profile et cetera within full service commercial at the moment it depends on what services are in that full service commercial if you have full consulting full communications fulfilled teams and the operations around those field teams, yes going to be a far better margin.
If you put one of those pieces out and just go with the field team.
And a little bit of consulting the margin profile is going to be a little bit lower than the prior so it really depends on the underlying services within that on the cross sell.
I'd, just say that it depends on again the services in which way it's going if its cross selling from the commercial side into clinical full service great.
Great margins, what we want to see.
In terms of the standard business, if it's a cross sell from clinical into a field team then you're just going to be the standard margin that you'd think about in fill James yeah. So kind of just depends on what's in it.
Yes.
In focusing on I tend to ask about sending us one in the pipeline that you've built there.
Michelle you mentioned, specifically I think it's <unk> and the ramp there.
There so part a would be how does the lineup stack up in terms of more launches and the timing of those and then if you wouldn't mind to elaborate on our Dorsey essentially you mentioned it what is the driver of the ramp there is it the geographic expansion or is it.
Is it really just the raw launch of the product itself.
So I'll answer that in two ways said that the FERC is both but the.
The back half of 2022 is the full U S launch right you saw the press release that <unk> put out that they chose us as their partner.
Jennifer I understand and you can see the advertising market.
Okay.
I should have been on that bad in that.
Okay.
So.
The full U S launch is going to be occurring right. Now. So we'll have the full breadth of the U S launch occurring in Q3 and Q4 right. It was a ramp up in Q1 and Q2. So that's why you see that that U S launch taking hold as fully in the back half of this year and obviously will continue.
The second announcement from my Dorothea was the <unk>.
Asking us to take on Canada, and the EU and obviously that comes with regulatory approval those are still.
Not approved in those countries and absolutely country by country right. The approvals across all of the E. M will happen over time and as they happen we will layer in additional resources.
Into 2023 and beyond right. So that's that's a dorothea specifically, which as you know they've publicly named us as their partner when you look at the full sitting at.
Portfolio as announced one portfolio as you know some are smaller assets rare disease more targeted commercialization. Some our larger <unk> is absolutely on the larger side.
Dollar value because it's insomnia asset and we all know Thats insomnia has a very large and wide physician.
<unk> base versus something like in oncology and rare disease, so as the sending us when assets come through obviously we are.
Hoping that they first they get approved and then yes that we continue to win that business, whether it's through consulting in comms, which happens early on.
Then obviously deploying resources over time and so as you know we've talked about the full potential value of those assets.
But we know all of them are not going to make it or some of them might license their asset. So, but we just think it's a really very well defined pipeline that we should get our fair share of that business.
Thanks for that and congrats yes. It does I've asked a long question, so I'll back into the queue, but congrats again, thank you very much.
Youre welcome.
Okay.
Thank you. Our next question comes from the line of Sandy Draper from Guggenheim Securities. Your line is now open.
Thanks.
Question, but just wanted to see.
Graduating alastair it's been great working with you.
Gratulation to Michelle.
And looking forward to.
Working with you going forward.
For me I'll turn it over to other people. Thank you. Thank you. Thanks, Andy appreciate it.
Thank you at this time I'm showing no further questions I would like to turn the call back over to Rodney sacks for closing remarks.
Okay.
And then I'll turn it over to Alastair Mcdonald.
Thank you Tony.
Before I sign off I want to offer my sincere. Thanks to the entire Sydney has helped team for all they continue to do to serve our customers saw some patients, particularly stuff in the Ukraine and the neighboring countries. We remain confident in our market positioning and look forward to strong growth and profitability in 2022 and beyond as we exit.
On the value creation plan.
Serving as Sidney Icehouse CEO has been a great honor.
I'm incredibly proud of all of this team has achieved.
I'm, leaving the company in the most capable hands and I look forward to watching you will continued success as he has to come come through so thank you everybody for your attendance today and for your continued interest and investment in our company. Please be safe and have a great day and be good.
This concludes today's conference call. Thank you for participating you may now disconnect.
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