Q3 2022 Science 37 Holdings Inc Earnings Call

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Operator: Good day and thank you for standing by. Welcome to the Science 37 Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode.  After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Halper, Managing Director at LifeSci Advisors. Please go ahead.

At this time all participants are in a listen only mode.

Operator: After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone.

Operator: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Halper, Managing Director at LifeSci Advisors. Please go ahead.

Steve Halper: Thank you, Katherine, and thank you all for participating in today's call. Joining me are David Coman, Chief Executive Officer; and Mike Zaranek, Chief Financial Officer. Yesterday, Science 37 released financial results for the quarter ended September 30, 2022. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Chief Financial Officer Yesterday signed 37 released financial results for the quarter ended September 32022, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal security laws, which are made pursuant to the.

The safe Harbor provisions of the private Securities Litigation Reform Act of 1995. These forward.

Steve Halper: These forward-looking statements are based upon our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. We encourage you to review our filings made with the Securities and Exchange Commission for a discussion of these risk factors, including in the risk factors section of the company's most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings.

To be to materially differ from those anticipated or implied by these forward looking statements. We encourage you to review our filings made with the Securities Exchange Commission for a discussion of these risk factors, including in the risk factors section of the company's most recently filed periodic reports on Form 10-K, and Form 10-Q and subsequent.

Steve Halper: You are cautioned not to place undue reliance on these forward-looking statements which we speak only as of today and the company disclaims any obligation to update such statements for new information. We believe that certain non-GAAP metrics are useful in evaluating our operational performance. We use these non-GAAP measures to evaluate our ongoing operations and for internal planning and forecasting purposes. Information about non-GAAP financial measures referenced, including a reconciliation of those measures to the most comparable GAAP measures, can be found in our SEC filings and the earnings materials available on the Investor Relations portion of our Web site at investors.science37.com. I would now like to turn the call over to David Coman. David?

Company disclaims any obligations to update such statements for new information, we believe that certain non-GAAP metrics are useful in evaluating our operational performance. We use these non-GAAP measures to evaluate our ongoing operations for internal planning and forecasting purposes information about non-GAAP financial measures referenced including a.

Reconciliation of those measures to the most comparable GAAP measures can be found in our SEC filings and earnings materials are available on the Investor Relations portion of our website at investors Dot signed 37 Dot Com I would now like to turn the call over to David David.

David Coman: Thanks, Steve. Good morning everyone and thank you for joining us. Our third quarter top line results reflected some of the challenges we discussed during our second quarter call. In the quarter, we continue to experience delays in decision making representing a 40% increase in the sales cycle from this time a year ago. We attribute this to the biopharmaceutical cost pressure in the macroeconomic environment, in addition to the size, strategic value and complexity of the studies we are solutioning.

Our third quarter top line results reflected some of the challenges we discussed during our second quarter call.

In the quarter, we continued to experience delays in decision, making representing a 40% increase in the sales cycle from this time a year ago.

We attribute this to the biopharmaceutical cost pressure in the macroeconomic environment. In addition to the side strategic value and complexity of the studies we are solution.

David Coman: Seeing these shifts, particularly regarding the need for more in-depth solutioning, we announced a commercial leadership change in September with the appointment of Michael Shipton to the role of Chief Commercial Officer. Michael brings more than 25 years of commercial leadership experience in clinical research and technology, including his most recent role as senior Vice President of Customer Solutions & Strategy at Syneos Health, which he left at the beginning of this year.

The commercial leadership change in September with the appointment of Michael shifting to the role of Chief Commercial Officer.

Michael brings more than 25 years of commercial leadership experience in clinical research and technology, including his most recent role as senior Vice President of customer solutions and strategy at <unk>.

Seniors health, which he left at the beginning of this year.

David Coman: You've surely noted that third quarter bookings were well below our expectations. Offering an early indicator for fourth quarter, we see some positive momentum with approximately $20 million of gross bookings quarter-to-date. It's also important to note that nearly all of those bookings come from repeat customers, including one program that's greater than $10 million in contract value.

Offering and early indicators of fourth quarter, we see some positive momentum with approximately $20 million of gross bookings quarter to date.

It's also important to note that nearly all of those bookings come from repeat customers, including one program, that's greater than $10 million in contract value.

David Coman: Third quarter revenues grew 14% year-over-year to 16.2 million due to our strong backlog entering the quarter. Our revenues were down quarter-over-quarter and below expectations as a result of the recent light bookings and timing on two important projects that Mike will address in a moment. We remain highly confident and focused on our strategic plan that we laid out for our team and our shareholders, and it continues to yield a strong sales pipeline, technology that is powerful and differentiated, and quality that keeps our customers coming back for more.

Our revenues were down quarter over quarter and below expectations. As a result of the recent late bookings and timing on two important projects that Mike will address in a moment.

We remain highly confident and focused on our strategic plan that we laid out for our team and our shareholders and it continues to yield a strong sales pipeline.

<unk> that is powerful and differentiated quality that keeps our customers coming back for more.

David Coman: Our financial goal remains to reach profitability and cash flow breakeven in the fourth quarter of 2024 with cash we have on hand. Given the headwinds, as disclosed in our 10-Q filing from yesterday, we have implemented a cost reduction program which we expect will result in about $21 million of gross cash savings on an annual basis. This cost reduction program incorporates the difficult decision to reduce our staff by approximately 16%.

Given the headwinds as disclosed in our 10-Q filing from yesterday, we have implemented a cost reduction program.

Which we expect will result in about $21 million of gross cash savings on an annual basis.

This cost reduction program incorporates the difficult decision to reduce our staff by approximately 16%.

David Coman: While we eliminate excess capacity and significantly reduce our spend in G&A, we're making additional investments in commercial resourcing and maintaining strong investments in both our technology and operations functions. With these investments, we plan to reaccelerate top line growth, continue to ensure our market differentiation and deliver with high quality on behalf of our customers.

In both our technology and operations functions.

With these investments we plan to Reaccelerate top line growth continue to ensure our market differentiation and deliver with high quality.

Half of our customers.

David Coman: With that, I will now turn the call over to Mike Zaranek, our Chief Financial Officer, to provide additional detail regarding our financial performance.

Provide additional detail regarding our financial performance.

Mike Zaranek: Thank you, David, and good morning, everyone. I'll discuss third quarter results for the period ended September 30, 2022 and then provide our outlook for the full year 2022. In the third quarter, we reported revenues of 16.2 million, which represents a 14% increase from the 14.2 million in the same period of the prior year. As we've discussed previously, at our current size and scale, one or two projects can have a material impact on quarter.

In the third quarter, we reported revenues of $16 2 million, which represents a 14% increase from the $14 2 million in the same period of the prior year.

As we've discussed previously at our current size and scale, one or two projects can have a material impact on quarter.

Mike Zaranek: For example, in the third quarter, one of our large customers achieved the number of patients they needed to reach their safety and efficacy endpoints and therefore chose to wrap up enrollment early. Another large customer opted to slow the pace of initial enrollment to be able to measure early results prior to opening all of our recruitment channels.

Another large customer opted to slow the pace of initial enrollment to be able to measure early results prior to opening all of our recruitment channels.

Mike Zaranek: These two events resulted in more than a $3 million headwind to the third quarter revenue. They will continue to have an impact on the fourth quarter compared to what we had previously expected. We continue to have strong relationships with both customers, one of which contracts with us for a new study already in October.

We continue to have strong relationships with both customers one of which contracted with us for a new study already in October .

Mike Zaranek: We finished the quarter with net bookings of 4.7 million compared to 35.9 million in the third quarter of 2021. As David noted, our third quarter bookings were adversely impacted by delays in expected contract signings given the longer sales cycles we discussed earlier. In the quarter, we also recognized approximately $8 million of scope reductions.

As David noted our third quarter bookings were adversely impacted by delays in expected contract signings given the longer sales cycles. We discussed earlier in the quarter. We also recognized approximately $8 million of scope reduction.

Mike Zaranek: From a fourth quarter-to-date standpoint, we have signed approximately $20 million in gross bookings, including one contract greater than $10 million. We continue to see some strong trends in our pipeline, including the average selling price, which has increased more than 90% year-over-year for both repeat as well as new customers.

We need to see some strong trends in our pipeline, including the average selling price, which has increased more than 90% year over year for both repeat as well as new customers.

Mike Zaranek: Our adjusted gross profit for the third quarter was 4.6 million compared to 4 million in the same period of the prior year. Adjusted gross margin was flat year-over-year at 28.3% compared to 28.4% for the same period last year. Selling, general and administrative expenses, excluding 5.2 million of stock-based compensation, were 19.3 million in the third quarter, a decrease of 3.2 million versus second quarter of 2022.

Adjusted gross margin was flat year over year at 28, 3% compared to 28, 4% for the same period last year.

Selling general and administrative expenses, excluding $5 2 million of stock based compensation were $19 3 million in the third quarter, a decrease of $3 2 million versus the second quarter of 2022.

Mike Zaranek: Adjusted EBITDA, which we calculate by adding back depreciation, amortization, taxes, interest, other income and stock-based compensation, was a loss of $14.6 million in the quarter, representing a $1.9 million sequential improvement compared to the second quarter of 2022.

Mike Zaranek: GAAP net loss was $23.5 million versus a GAAP net loss of $14.7 million in the third quarter a year ago. Our third quarter 2022 GAAP net loss included a gain of $1.2 million related to the change in fair value of the earn-out liability, which was part of the original transaction with SPAC.

Our third quarter 2022, GAAP net loss included a gain of $1 2 million related to the change in fair value of the earn out liability, which was part of the original transaction was back.

Mike Zaranek: Now moving on to cash. We ended the quarter with $130.2 million of cash and cash equivalents. This would imply [indiscernible] in the quarter, an improvement of the $31.2 million of cash burn in the second quarter. As expected, we saw a reduction in our net DSO in the third quarter and we finished September with a net DSO of 25 days.

We ended the quarter with $132 million of cash and cash equivalents this would imply.

At $1 million in the quarter, an improvement of $31 2 million of cash burn in the second quarter.

As expected we saw a reduction in our net DSO in the third quarter and we finished September with net DSO of 25 date.

Mike Zaranek: As David noted earlier, we announced a cost reduction program and our SEC Form 10-Q last night. These actions are never easy. These will result in a reduction of approximately $21 million of gross annualized cash spend. These actions will also enable us to reinvest in our business, particularly around technology and our go to market efforts, we expect to realize most of the benefits of these cost reductions beyond 2022.

These actions are never easy. These will result in a reduction of approximately $21 million of gross annualized cash spend.

These actions will also enable us to reinvest in our business, particularly around technology and our go to market efforts, we expect to realize most of the benefits of these cost reductions beyond 2022.

Mike Zaranek: Now let's turn to the outlook for 2022. In light of the recent business conditions we've outlined previously and earlier today, we now expect revenues for 2022 to be in the range of $68.2 million to $69.2 million, which would represent 14.4% to 16.1% year-over-year growth.

In light of the recent business conditions, we've outlined previously and earlier today, we now expect revenues for 2020 to be in the range of $68 2 million $69 2 million, which would represent 14, 4% to 16, 1% year over year growth.

Mike Zaranek: Likewise, our revised guidance for adjusted EBITDA for 2022 is negative 65.4 million to negative 66.4 million. Consistent with past practice, we intend to provide 2023 guidance on our fourth quarter earnings call. As of September 30, 2022, we had approximately 116.6 million shares outstanding. As we currently anticipate having a net loss in the upcoming quarter and year, any converted options will be deemed anti-dilutive. Therefore, on a GAAP basis, we expect basic and diluted share counts to be the same.

Consistent with past practice, we intend to provide 2023 guidance on our fourth quarter earnings call.

As of September 32022, we had approximately $116 6 million shares outstanding.

As we currently anticipate having a net loss in the upcoming quarter and year end. He converted options will be deemed anti dilutive and therefore on a GAAP basis, we expect basic and diluted share counts to be the same.

Mike Zaranek: In summary, while our third quarter commercial execution was challenging, we are encouraged by the strong start to the fourth quarter. We remain committed to delivering long-term profitability and taking the appropriate steps to achieve this. At this point, I'd like to turn the call back over to David for closing comments.

Main committed to delivering long term profitability, we have taken the appropriate steps to achieve this.

At this point I'd like to turn the call back over to David for closing comments.

David Coman: Thank you, Mike. We remain focused on executing our strategy of building best-in-class technology and solutions to decentralize the clinical trial industry and create meaningful value for our relevant stakeholders. We're focused on our objective of building a sustainable growing business that scales to long-term profitability and maximizes value for all shareholders.

Centralize the clinical trial industry and create meaningful value for our relevance to our stakeholders. We're focused on our objective of building a sustainable business that scales to long term profitability and maximizes value for all shareholders.

David Coman: With that, I'll now turn it over to the operator to open it up for questions.

Operator: Thank you. As a reminder, to ask a question you will need to press star one one on your telephone. Please standby while we compile the Q&A roster.

Operator: Our first question comes from Lucas Romanski from Cowen. Your line is open.

Steve Braun: Hi. This is Steve Braun on for Charles Rhyee actually. Thanks for taking our questions this morning.

Yes. This is Steve Brown on for.

Charles we actually.

Thanks for taking our questions. This morning.

David Coman: Thanks for calling in, Steve.

Steve Braun: Yes, absolutely. So I guess like maybe just on the third quarter bookings, you had mentioned basically falling short on some delays in expected contract signings and longer sales cycles, which was something you had cited last quarter as you'd focus on larger engagements. Do you believe the decision to shift away from smaller engagements is maybe still like the right decision given the trend in bookings over the last two quarters? And then I guess would it possibly make sense to in the near term focus on some smaller engagements to drive near-term bookings growth, while you remain committed to like working on those longer term, larger engagements?

I guess, Mike maybe just on the third quarter bookings. You mentioned. They basically falling short on some some delays in expected contract signings and longer sales cycles. Which is something that you had you had cited last quarter as you'd focus on larger engaged. <unk> <unk>. Do you believe the decision to shift away from from smaller engagements. Maybe still like the right decision given the. The trend in bookings over the last two quarters. And then I guess. Would it possibly make sense. In the near term focus on some smaller engagements to drive near term bookings growth. While we remain committed to like working on those longer term. Larger engagements.

You mentioned.

They basically falling short on some some delays in expected contract signings and longer sales cycles.

Which is something that you had you had cited last quarter as you'd focus on larger engaged.

<unk> <unk>.

Do you believe the decision to shift away from from smaller engagements.

Maybe still like the right decision given the.

The trend in bookings over the last two quarters.

And then I guess. Would it possibly make sense. In the near term focus on some smaller engagements to drive near term bookings growth. While we remain committed to like working on those longer term. Larger engagements.

Would it possibly make sense.

In the near term focus on some smaller engagements to drive near term bookings growth.

While we remain committed to like working on those longer term.

Larger engagements.

David Coman: Yes, it's not that we're abandoning smaller engagements altogether. It is that we are striving to go after larger studies. And we're being pulled that direction too, which is I think a testament to the case studies that we've been able to accumulate to date. And so I continue to think that larger opportunities are continuing to come our way. It is true that the sales cycle on these are significantly longer. As I noted, the decision making process is about 40% longer than it was about a year ago. Just to give you a little bit of color, we have one oncology study that was targeted to close at the beginning of the second quarter. And by the way, this is not one of the $10 million plus specs. But that's targeted to end at the beginning of the second quarter, and we're hearing by the end of the year at this point. So you just get a flavor of what the market dynamic looks like in the context of smaller or larger.

Imagining smaller engagements altogether. It is that we are.

Driving to go after larger studies and were being pulled that direction too, which is I think testaments.

Key studies that we've been able to accumulate to date and so. I continue to think that. Larger opportunities are to continue to come our way. It is true that the sales cycle on these are significantly longer. As I noted. Decision, making processes about 40% longer than it was about a year ago. Just to give you a little bit of color. We have one oncology study that was targeted to close at the beginning of the second quarter and by the way. This is not one of the $10 million plus. But. That's targeted. Beginning in the second quarter and we're hearing by the end of the year at this point so. Just get a flavor of what the market dynamic looks like. In the context of smaller or larger.

I continue to think that.

Larger opportunities are to continue to come our way.

It is true that the sales cycle on these are significantly longer.

As I noted.

Decision, making processes about 40% longer than it was about a year ago.

Just to give you a little bit of color. We have one oncology study that was targeted to close at the beginning of the second quarter and by the way. This is not one of the $10 million plus.

But.

That's targeted.

Beginning in the second quarter and we're hearing by the end of the year at this point so.

Just get a flavor of what the market dynamic looks like.

In the context of smaller or larger.

Steve Braun: Okay, great. And then I guess maybe like on the fourth quarter bookings, they seem to be on a better trend. Could you give us more details on customer mix? Is it skewed towards larger or smaller deals? And then maybe what the fourth quarter bookings could imply for 2023 revenue growth?

Right.

And then I guess, maybe like on the fourth quarter bookings.

Seem to be on a better trend could you give us more details on the customer mix is it skewed towards larger or smaller deals and then maybe what the fourth quarter bookings.

Could imply for 2023 revenue growth.

David Coman: Sure. I'll start. Maybe you pile on, Mike. So the quarter's been really strong to-date in terms of bookings. The mix of the customers that are coming in are repeat customers, which is terrific. They're larger pharma companies, rather than smaller biotechs. While we're really excited to see the trend for the beginning of the quarter, we expect our -- and we expect our results to be stronger in the fourth quarter than even the second quarter, certainly in the third quarter, just want to make sure that we're cautioning beyond the record -- achieving a record number for the quarter. But it is certainly -- the trend certainly is changing in the fourth quarter.

So the.

The quarter has been really strong to date in terms of bookings.

Mix of the customers that are coming in are repeat customers, which is terrific. They are larger pharma companies.

Rather than smaller biotechs.

While we're really excited to see the trends for the beginning of the quarter, we expect our and we expect our results to be stronger in the.

Fourth quarter than even the second quarter, certainly the third quarter.

Just want to make sure that we're cautioning.

Kind of record.

Achieving a record number for the quarter, but it is certainly there.

The trend certainly is changing and so in the fourth quarter.

Mike Zaranek: Yes. And just to be super clear on that. What David's referring to is from a bookings perspective, good start to the fourth quarter from a booking standpoint. As I mentioned, one of the opportunities that was in approximately $20 million was large pharma, greater than $10 million. And so we are seeing and continuing to win those types of opportunities as well as smaller ones.

Good start to the.

The fourth quarter from a booking standpoint, as we mentioned one of the opportunities that within that approximately $20 million was.

Large pharma greater than $10 billion and so.

Seeing and continuing to win those types of opportunities as well as follows.

Operator: Thank you. And just one moment for our next question. We have a question from Max Smock with William Blair. Your line is open.

Operator: And just one moment for our next question. We have a question from Max Smock with William Blair. Your line is open.

We have a question from Max Smock with William Blair. Your line is open.

Max Smock: Hey, David. Hey, Mike. Thanks for taking our questions. Just wanted to start off here asking one about what you're seeing in terms of cancellations. So in the third quarter here, how much of the lower net bookings number was driven by cancellations? And when you do see some cancellations, what are some of the explanations that your customers have given you recently around why they've decided to cancel? I know you mentioned funding, but any incremental detail you can provide there would be helpful. And then in terms of the $20 million in gross bookings here in the fourth quarter, do you have any sense or can you provide any detail around what that looks like on a net basis?

Just wanted to start off here asking one about what youre seeing in terms of cancellations.

So in the third quarter here, how much of the lower net bookings number was driven by cancellations and when you do see some cancellations what are some of the explanations that your customers have given you recently around why they've decided to cancel I know you mentioned funding, but any incremental detail you can provide there would be helpful. And then in terms of the $20 million in gross bookings here in the fourth quarter do you have any.

Can you provide.

Provide any detail around what that looks like on a net basis.

Mike Zaranek: Yes. Let me start and David can provide some additional context as he sees fit. As I mentioned in my prepared remarks, in terms of the net bookings that we reported in the third quarter of $4.7 million, we had approximately $8 million of primarily scope reductions, a couple of small cancellations in there. That was higher, if you recall, compared to the second quarter where we had a growth in the upper 20s and about $25 million in net, so a little bit higher there.

As I mentioned in my prepared remarks.

In terms of the net bookings that we reported in the third quarter of $4 7 million, we had approximately $8 million of.

Primarily scope reductions.

A couple of small cancellations in there that was higher if you recall compared to the second quarter.

Where we had a growth in the upper <unk> and about $25 million and net.

Mike Zaranek: But again, I think it comes back to that point that I made earlier, one or two projects that are current scale can impact the quarter just sort of given where we are. In terms of cancellations or scope reductions, they can occur for many different reasons. We did see, as I mentioned in the earlier remarks, one customer ended up wrapping up enrollment earlier than was expected, which is great from a customer perspective. It means we're doing what we're supposed to. But yes, that does have an impact on revenue. 

Just sort of given given where we are in terms of.

Cancellations or scope reductions.

They can occur for many different reasons, we did see as I mentioned in the earlier remarks.

One customer ended up wrapping up enrollment earlier than was expected.

Which is great from a customer perspective. It means we're doing what we're supposed to.

But yes that does have an impact on revenue additions.

Mike Zaranek: Additionally, I think it's fair to say that the macroeconomic environment has impacted some of our customers. We're seeing a greater emphasis on the customer standpoint in terms of their costs, in terms of how they're managing costs, and maybe a little bit less focus in some regards around aggressive moves to speed. But part of why we're doing this cost reduction that we announced is to enable us to be more aggressive and nimble in terms of being able to address that customer needs in terms of the cost side and so on. David, do you want to add anything to that?

The macroeconomic environment.

It's impacted some of our customers.

We're seeing a greater emphasis on the customer standpoint in terms of their cost.

In terms of how they're managing cost and maybe a little bit less focused in some regards around aggressive moves to speed.

But part of why we're doing this cost reduction.

That we announced is to enable us to be more aggressive and nimble in terms of being able to.

Yes that customer need.

In terms of the cost side.

So David do you want add anything to that.

David Coman: I'm good, thanks.

Max Smock: Okay. So for my follow up, just following up on your point there about the funding environment, right, and I was hoping we can dig into that point a little bit here. It sounds like that is customers dragging their feet more than anything around whether or not they want to move forward with trials, or are you seeing some actual programs getting cancelled? And then I think in the past, you've talked about how the value proposition for DCT is actually even greater in this kind of funding environment. So can you help us reconcile that comment with your point about funding slowing down your bookings here?

For my follow up just following up on your point there about the funding environment. Ryan I was hoping we could dig into that point a little bit here is that.

It sounds like that is customers dragging their feet more than anything around whether or not they want to move forward with trials or are you seeing some actual programs getting canceled and then I think in the past you've talked about how the value proposition for <unk> is actually even greater than this kind of funding environment. So can you help us reconcile that comment with your point about funding.

Slowing down bookings here.

David Coman: Yes. I think its characterized best in the broader macroeconomic environment in general. A number of our customers are navigating through a challenging cost environment themselves. In some cases, that's driving risk aversion and less priority on aggressive speed, which is the core to our value proposition. And some of the cost actions that we announced and as Mike just pointed out, that does allow us to become more aggressive on how we price and ultimately how we deliver.

Characterized.

Router macro economic environment in general number number of our customers are navigating through a challenging cost environment themselves in some cases, that's driving risk aversion.

And less priority on aggressive speed, which is the core of our value proposition.

And some of the cost actions that we announced.

Mike just pointed out that does allow us to become more aggressive on how we price.

Ultimately.

We deliver.

David Coman: So I think it's kind of the core macro I think view of the world. And then underneath that the decision making timeline is dragging out. And I think it's twofold. One of it is the challenging cost environment for our customers. And the other one is the average deal size that we still continue to see which has nearly doubled since the beginning of the year. And that elevates the approval process within big pharma and then also extended timeline.

Decision, making timeline is.

Ragging out and I think it's twofold one of it is.

The challenging cost environment for our customers.

The other one is.

Average deal size that we still continue to see which has nearly doubled since the beginning of the year.

That elevate the approval process within big pharma and also extend the timeline.

Mike Zaranek: And Max, I think if you tried to characterize on a relative basis, your follow-up question in terms of how much is just delayed decision making versus actual cancellations, it seems to us from our perspective to be more of the former.

We tried to characterize on a relative basis. Your follow up question in terms of how much is just delayed decision making versus actual.

Cancellations it seems to us from our perspective to be more of the former.

Max Smock: Got it. Very helpful. Thank you for taking my questions.

David Coman: Yeah. Thanks for calling in.

Operator: Thank you. And we have a question coming from Matthew Hewitt with Craig-Hallum. Your line is open.

Matt.

From Matthew Hewitt with Craig Hallum. Your line is open.

Matthew Hewitt: Good morning. Thanks for taking the questions. Maybe first up, as you look at some of the lengthening of the sales cycle, is there any way to differentiate between what is based on cost and kind of managing their balance sheets versus how much of it is kind of managing their pipelines and portfolio? Are there shifting focus points for some of your customers and that's kind of what's creating the delay, or is it entirely based upon their balance sheets?

Based on our cost and kind of managing their balance sheets versus how much of it is kind of managing their their pipelines and portfolio.

Are there a shifting focus points for some of your customers and thats kind of whats, creating the delay or is it entirely based upon their balance sheets.

David Coman: Yes, it's hard to tell. I think that it's certainly true across the board. So if it was isolated, then I'd be able to pinpoint it for you, but it feels like it's more of a broad cost consciousness. We do see longer delays in some of the larger studies. But as I pointed out a moment ago on one oncology study that's been kicked back more than two quarters, it isn't necessarily on size alone. And it isn't necessarily the biopharma, large pharma or even biotech, although I think that we see a little bit faster decision making in the biotech space.

It's certainly true across the board so if it was.

Isolated then I'd be able to pinpoint three but it feels like it's more of a broad.

Cost consciousness.

We do we do see.

Longer delays and some of the larger studies, but as I pointed out a moment ago on the one oncology study that kick back.

More than two quarters.

Isn't necessarily.

Size alone.

And the other is.

It isn't necessarily a biopharma.

We are large pharma or.

<unk>, although I think that we see a little bit faster decision, making in the biotech space.

Mike Zaranek: Yes. And just a context, I think we've provided this previously. If you look at our backlog, just to give you some context around how much could funding environment impact backlog, consistent with where we've been the last couple of quarters from what we deem to be emerging pharma and biotech was less than 25% of the total.

The context I think we've provided this previously.

If you look at our backlog.

Just to give you some context around how much lending environment impact.

Backlog consistent with where we've been the last couple of quarters.

And what we deem to be emerging pharma biotech with less than 25% of the total.

Multiple speakers: [Matthew Hewitt] Got it.  [Mike Zaranek] I think it lends itself to more of the delays in decision making is what we're seeing more of.

What we're seeing more of.

Matthew Hewitt: Okay, understood. And then maybe separately, a separate question here. I think you mentioned in your prepared remarks that ASPs are up significantly year-on-year, yet you're seeing a more heightened focus on the costs from your customers. Does that put some pressure on your ability to increase price or on those ASPs, or are they not really tied together? Thank you.

Year on year.

Youre seeing a more heightened focus on.

The costs from your customers does does that put some pressure on your ability to increase price or on those asp's or are they not really tied together. Thank you.

David Coman: Yes. I think that the broad macroeconomic issues from a biopharma perspective in terms of costs certainly is -- applies to our business and how we think about structuring our business. One of the reasons why we took a look at our costs and did our cost reduction program was specifically for that, so that we could take a closer look at the way we price and become more cost favorable for sponsors, even in a world where they're asking for more. So I think that's appropriate.

The broad.

So economic issues from a.

Farmer perspective in terms of cost it certainly is.

Applies to our business and how we think about structuring our business.

One of the reasons why we took a look at our costs did our cost reduction program was specifically for that so that we could take a closer look at the way we.

And become more.

Cost favorable for our sponsors.

Even in a world, where theyre asking for more so I think thats right.

It's appropriate.

Mike Zaranek: And to add to that, you're absolutely right. We're seeing significant increases year-over-year in terms of the average selling price in the pipe. We think that's a great thing. We think that the fact that we're seeing that, particularly on the repeat customer side, is an indicator of the value prop we're able to bring to the customer set. That being said, given our current size and scale with the increased level of project size in the pipe, that can create more volatility in terms of our bookings in a particular quarter. And I think you saw some of that there in the third quarter.

Absolutely right I mean, we're seeing significant increases year over year in terms of the average selling price in the pipe.

We think thats a great thing, we think that the fact that we're seeing that particularly on the repeat customer side.

Indicator of the value prop, we're able to bring to the customer set that being said.

Given our current size and scale.

With the increased level of project size and the pipe that can create more volatility in terms of our bookings in a particular quarter.

And I think you saw some of that Theyre in the third quarter.

Matthew Hewitt: That makes sense. Thank you.

David Coman: Thank you. Appreciate the call.

Mike Zaranek: Thanks, Matt.

Operator: We have a question from Frank Takkinen with Lake Street. Your line is open.

Keenan with Lake Street Your line is open.

Frank Takkinen: Okay, great. Thanks for taking my questions. Maybe to start on a little bigger picture question. Are you seeing any of your RFPs that you're going head to head with brick and mortar, more of those wins being towards the brick and mortar space? Or are you seeing the DCT environment continue to be something that your customers that have used it previously intend to continue to use it? Just trying to get a feel for if any of the headwinds are because of business shifting back to brick and mortar?

Bigger picture question are you seeing any of your rfps that you're going head to head with brick and mortar. More of those wins being towards the brick and mortar space or are you seeing the DCT environment continue to be. That your customers that have used it previously and intend to continue to use it just trying to get a feel for if any of. The headwinds are because of business shifting back to brick and mortar.

More of those wins being towards the brick and mortar space or are you seeing the DCT environment continue to be.

That your customers that have used it previously and intend to continue to use it just trying to get a feel for if any of.

The headwinds are because of business shifting back to brick and mortar.

Mike Zaranek: Well, I think in this environment, you are seeing a little bit more risk aversion and you're seeing less prioritization on speed and more on cost. And so I think it's fair to say there is a little bit of that going on. As we ultimately get into the competitive pitch, the value proposition that we're bringing in at speed and if our sponsors are focused more on cost, that changes the dynamic a little bit.

I think in this environment, you are seeing a little bit more risk aversion and youre seeing.

Less prioritization on speed and more on cost.

So.

I think it's fair to say there is a little bit of that going on as we ultimately get into.

The.

Competitive.

Pitch the value proposition that we're bringing to speed.

Our sponsors are focused.

More on cost that changes the dynamic a little bit.

Frank Takkinen: Okay, that's helpful. And then maybe a follow up on the 20 million gross bookings figure you've been speaking to. Can you talk to the other elements in that equation to get the net bookings, any expectation around cancellations or scope reduction that you've spoken to about this quarter?

Net bookings any expectation around cancellations or.

Scope production that you've spoken to you about this quarter.

Mike Zaranek: Sure. Thanks, Frank. I don't think we're providing guidance as it relates to the bookings for the fourth quarter. But we did want to give some context that from the starting point, we're coming out of the gate with pretty good momentum. As David mentioned, we continue to be able to talk to customers about these larger opportunities. We have a good pipeline in front of us. And the next couple of months or next month and a half will be important as we look to close out the year strong.

I don't think we are providing guidance as it relates to the bookings for the fourth quarter, but we did want to give some context.

From a starting point.

We're coming out of the gate.

With pretty good momentum.

As David mentioned.

We continue to be able to.

<unk> talked to customers about these larger opportunities.

We have a good pipeline in front of us.

In the next couple of months or next month and half will be important as we look to close out the year strong.

Frank Takkinen: Okay. That's helpful color.  I'll stop there. Thanks for taking the questions.

David Coman: Thanks, Frank.

Operator: We have a question from Eric Coldwell with Baird. Your line is open.

Eric Coldwell: Thanks. Good morning. So I just -- sorry for the technical clarification. On the prepared remarks, I heard about a scope reduction of $8 million. In the Q&A, I heard about cancellations of $8 million. I'm just wanting to confirm that the scope reduction was a piece of the $8 million, so total cancels were 8 or maybe there was an 8 million scope reduction plus cancels on top. Just hoping you could be very specific --?

Eric Coldwell: Good morning. So I just -- sorry for the technical clarification. On the prepared remarks, I heard about a scope reduction of $8 million. In the Q&A, I heard about cancellations of $8 million. I'm just wanting to confirm that the scope reduction was a piece of the $8 million, so total cancels were 8 or maybe there was an 8 million scope reduction plus cancels on top. Just hoping you could be very specific --?

So I just sorry for the technical clarification on the prepared remarks, I heard about a scope and a reduction of $8 million in the Q&A I heard about cancellations of $8 million I'm just wanting to.

Confirm that the scope reduction was a piece of the 8 million so total cancels right or.

Maybe there was an $8 million to go production plus cancels on top of just just hoping you can be very sure yes, yes.

Mike Zaranek: Sure. Good morning. The total reduction between gross and net, inclusive of scope reductions and cancellations, was about $8 million. A vast majority of that was scope reductions.

40 of that is scope reduction.

Multiple speakers: [Eric Coldwell] Got it. Thanks, Mike. And then you've also made a comment about the program that wrapped up early. And if I understood the gist of it, the client got to the enrollment needs faster than they expected, so they wound down. You made some comments about that being good for the customer and you also made a comment that it meant you were doing your job well. But then you also said it hurt your revenue. So I'm a bit confused about how beating timelines and doing your job well actually hurt your revenue. It would seem maybe it would accelerate your revenue, but I'm not sure why it would hurt your revenue? [Mike Zaranek] Sure. Let me start on that. And David, you can add to that. I think in that particular instance, that customer was utilizing both ourselves as well as the traditional site model.

And then. You've also made a comment about the program that wrapped up early. And if I understood the gist of it. The client got to win the enrollment needs faster than they expected. So they will say wound down you made some comments about that being good for the customer and you also made a comment that you were doing your job well. But then you also said it hurt your revenue so I'm a bit confused about how. Beating timelines and doing your job well actually hurts your revenue seemed maybe it would accelerate your revenue, but I'm not sure why it would hurt your revenue.

You've also made a comment about the program that wrapped up early.

And if I understood the gist of it.

The client got to win the enrollment needs faster than they expected. So they will say wound down you made some comments about that being good for the customer and you also made a comment that you were doing your job well.

But then you also said it hurt your revenue so I'm a bit confused about how.

Beating timelines and doing your job well actually hurts your revenue seemed maybe it would accelerate your revenue, but I'm not sure why it would hurt your revenue.

Sure Let me, let me start on that and David can add to that. I think in that particular instance. That customer was utilizing both ourselves as well as the traditional site model.

I think in that particular instance.

That customer was utilizing both ourselves as well as the traditional site model.

Mike Zaranek: And they made the determination after some interim readouts that they were able to effectively wrap the study early. We, I think, did a good job on that. And that particular customer was the one that I referenced that had already given us new work here at the beginning of October. Anything else to add to that?

The study early.

I think did a good job on that and that particular customer was the one that I referenced that already given us new work here at the beginning of October anything else got ahead method.

David Coman: Sounds good.

Eric Coldwell: Got it. And then last one from me. You do work with CRO channel partners where by and large seen most companies put up solid book to bills above 1.2, but one of your named partners did not do so this last quarter. Obviously, not even close. I'm curious if some of the impact you saw on 3Q was related to work performance at your channel partners, or are there any relationship changes among the five that you've publicly named in the past?

Do work with CRO channel partners were.

By and large seen most companies put up.

Solid book to Bill is above one two but one of your named partners did not do so this last quarter.

Obviously, not even close.

I'm curious if some of the impacts you saw in <unk> was related to poor performance at your channel partners or or any or are there any relationship changes among the five that you've publicly named in the past.

David Coman: No relationship changes between them. I don't think it's fair to say that impacts within those individual CROs impact us significantly. I would say that as we continue to forge ahead as an organization, the CRO partnership channel is very important to us. Michael Shipton comes from that environment and is a very strong area of focus for him. So we expect to accelerate in that channel, in particular.

Impacts within those individuals.

Individuals' heroes.

<unk> us significantly.

I would say that as we continue to.

Forge ahead as an organization to CRM partnership channel.

Is.

Very important to us.

Michael shifting comes from that environment.

<unk> is a very strong area of focus for him. So we.

We expect to.

Accelerate in that channel in particular.

Eric Coldwell: Got it. Thanks, guys. Appreciate it.

David Coman: Thanks Eric.

Operator: And our next question comes from David Windley with Jefferies. Your line is open.

David Windley: Hi. Good morning. Thanks for taking my question. Kind of a related question to what Eric was just touching on or your answer to his. You mentioned the trial that you were working on through another CRO. I'm wondering if you could give just rough breakdowns on how much of your business is on trials where you're one of multiple CRO type vendors versus trials that you're running exclusively yourself, kind of pure DCT trials as a first question?

Kind of a related question to what Eric was just touching on your answer to.

You mentioned the <unk>.

While that you were working on through another CRO I'm wondering if you could give just rough breakdowns on.

How much of your business is.

As on trials, where they're one of multiple.

<unk> ROE type vendors versus trials that you're running exclusively.

Yourself kind of pure DCT trials.

First question.

Mike Zaranek: Hi. Good morning, Dave. Thanks for the question. This is Mike. I think what we talked about historically is that we have seen stronger demand in terms of some of those large opportunities. That's trended around, more skewed towards Metasite. In the instance of Metasite, we would typically be one of multiple partners with the pharma. So I think from that standpoint, and as I mentioned on that particular study, there was a Metasite. And so as you think about sort of if we're one multiple or one of solely, majority right now is we're multiple.

I think what we've talked about historically is that we have seen stronger demand in terms of some of those larger opportunities.

<unk> around.

More skewed towards meta site.

In the instance of MSI, we would typically be one of multiple.

Partners with the borrower.

So I think from that standpoint, and as I mentioned on that particular study that was a meta site.

And so.

Do you think about sort of one <unk> or one of.

Solely.

Majority right now is we have multiple.

David Windley: Okay. And then also related I guess maybe trying to reinforce Eric's question, get out in a slightly different way. In instances where -- or I guess I'll start by saying I'm getting that contract structure. And so to the extent that remote capabilities and decentralized capabilities are aimed at speeding patient recruitment and driving faster time to last patient in, can you build into your contracts incentives such that your successful execution that helps the client to achieve the success that you're describing actually rewards you rather than penalizes you?

Yeah, Okay, and then also related I guess.

Maybe trying to reinforce derek's question get a slightly different way.

In instances where.

Or I guess I'll start by saying I'm getting that contract structure and so to the extent that.

Remote capabilities and decentralized capabilities are aimed at.

Speeding patient recruitment and driving.

Faster.

Faster time to last patient in.

Can you build into your contracts incentives such that.

Nor successful execution that helps the client to achieve the success that youre, describing actually rewards you rather than penalizes, yes.

Mike Zaranek: Yes, definitely. And that's something that we've -- as we've gotten more mature as an organization and more confident in our ability to over deliver, we've been more bullish on ourselves. And so that's definitely something that we're encouraging on contracts this year and going forward. And you may recall in the second quarter, we outlined a couple of new sub offerings around Metasite rescue and so on where the thought process is that we make it easy for a customer to say yes. They start off small in terms of a certain percentage of the trial that they're contracting with us. And what we found in many cases is they upsize that over time, given some of the advantages that we can bring to bear from a speed perspective.

And thats something that we have.

As we've gotten more mature as an organization and more confident in our ability to over deliver we've been more bullish on ourselves and so.

Definitely something that we are encouraging on contracts.

Yes.

This year and going forward.

And you may recall in the second quarter outlook.

Outlined a couple of new sub offerings.

<unk>.

Site rescue so on where the thought process is that we make it easy for a customer to say yes.

They start off small in terms of a certain percentage of the trial that they are contracting with us.

And what we found in many cases, they upsize that over time, given some of the advantages that we can bring to bear.

From a speed perspective.

David Windley: Okay, great. And then if I can sneak one more in. David, your earlier answer around, I think to Frank's question, risk versus cost, I totally understand your point. DCT is new. It's more innovative and less well traveled. And so I presume when you talk about kind of stepping away from risk that that's what you mean that clients are -- see DCT as a somewhat riskier strategy to execute. It should save money. And I guess I'm -- I know that in the early days that it hasn't proven that completely yet. But there's also this issue that some of the CROs have raised about site level staffing and limitations around throughput at the site. And I'm wondering how kind of all of those things factor in to increase the incentive, increase the motivation to try to use more remote capabilities?

David your.

Earlier answer around.

I think the Franks question risk versus cost.

I totally understand your point.

<unk> is new.

More innovative and less well traveled and so I presume when you talk about.

Kind of stepping away from risk that that's that's.

What you mean that the clients are.

See DCT is somewhat riskier strategy to execute.

It should save money I guess.

I know that in the early days it may be.

It hasnt proven that completely yet.

But there is also this issue that some of the <unk> have raised about.

Site level staffing and.

Limitations around throughput.

At the site and I'm wondering how kind of all of those things factor in.

Two.

Increase the incentive increase the motivation to try to use more remote capabilities.

David Coman: Yes. So one of the things that we've pulled together in the third quarter, which we're effectively rolling out as we speak, is our new ROI tool. And so if you actually take a look at the data that we've been able to pull from the trials that we've worked on and sort of the broader landscape, there may be cases where we might be more expensive upfront, but the speed that we're able to achieve in terms of bringing patients in early as -- first recruiting patients in earlier, so we save them time in the upfront. And we also save time in the backend in terms of getting to LPI, last patient in, has a real cost and an opportunity cost savings associated with it.

We're effectively rolling out as we speak is our new ROI tool and so if you actually take a look at the.

The data that we've been able to pull from the trials that we've worked on.

Broader landscape.

There may be cases, where we might be more expensive upfront, but the speed that we're able to achieve in terms of bringing patients in early.

Well first of all recruiting patients in earlier, so we save them time in the upfront and then we also.

Save time in the backend in terms of getting to LTI last patient in.

Has a real cost and an opportunity cost savings associated with it.

Multiple speakers: [David Coman] In addition, there are costs that we're able to get. Get out of the traditional model in terms of the need for. As many study visits that needs to take place in order to provide oversight because of the massive number of patients that we're able to bring in as one single site $115 72. And from a quality standpoint. One of the strong thing it's about the value proposition. Is that. Through the entire science III seven network were operationalized everything through one unified platform with one. Set of procedure Sop. Pete. And standardized set of people that are delivering across the whole thing, which really mitigate the risk of a disparate network of individual sites that have their own people processes and technology in order to be able to deliver and you're trying to tie all of those together through monitoring. So we effectively. Great. More consistent product in that case and mitigate the amount of oversight that's required manual oversight that's required in the process. [David Windley] Super. Thanks for taking my questions.

Get out of the traditional model in terms of the need for.

As many study visits that needs to take place in order to provide oversight because of the massive number of patients that we're able to bring in as one single site $115 72.

And from a quality standpoint.

One of the strong thing it's about the value proposition.

Is that.

Through the entire science III seven network were operationalized everything through one unified platform with one.

Set of procedure Sop.

Pete.

And standardized set of people that are delivering across the whole thing, which really mitigate the risk of a disparate network of individual sites that have their own people processes and technology in order to be able to deliver and you're trying to tie all of those together through monitoring.

So we effectively.

Great.

More consistent product in that case and mitigate the amount of oversight that's required manual oversight that's required in the process.

David Coman: Thanks, David. I appreciate you calling in.

Operator: Thank you. And I'm showing no other questions at this time. I'd like to turn the call back to Mr. David Coman for closing remarks.

Thank you and I'm showing no other questions at this time I would like to turn the call back to Mr. David Cohen for closing remarks.

David Coman: I appreciate everybody joining today. We have no further comments to add, and we can close the call. Thank you.

We can close the call. Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Good day, and thank you for standing by and welcome to the Science thirty-seven third quarter 2022 earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Steve Halper managing director at lifestyle Advisors. Please go ahead.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Steve Halper managing director at lifestyle Advisors. Please go ahead.

Katherine and thank you all for participating in today's call. Joining me are David Cohen, Chief Executive Officer, and Mike <unk>, our chief.

<unk> Financial Officer yesterday by 37 released financial results for the quarter ended September 32022, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal security laws, which are made pursuant to.

The safe Harbor provisions of the private Securities Litigation Reform Act of 19 that you've got.

The statements are based upon our current estimates and various assumptions that involve material risks and uncertainties that could cause actual results or events to be sure. B to materially differ from those anticipated or are wide by these forward looking statements. We encourage you to review our filings made with the Securities Exchange Commission for a discussion of these risk factors, including in the risk factors section of the company's most recently filed periodic reports on Form 10-K, and Form 10-Q and subsequent filings.

B to materially differ from those anticipated or are wide by these forward looking statements. We encourage you to review our filings made with the Securities Exchange Commission for a discussion of these risk factors, including in the risk factors section of the company's most recently filed periodic reports on Form 10-K, and Form 10-Q and subsequent filings.

You are cautioned not to place undue reliance on these forward looking statements, which we speak only as of today and the company disclaims any obligations to update such statements for new information, we believe that certain non-GAAP metrics are useful in evaluating our operational performance.

These non-GAAP measures to evaluate our ongoing operations that for internal planning and forecasting purposes information about non-GAAP financial measures referenced including a reconciliation of those measures to the most comparable GAAP measures can be found in our SEC filings and earnings materials are available on the.

The Investor Relations portion of our website at investors Dot signed 37 Dot Com I would now like to turn the call over to David David. Okay.

Okay.

Thanks, Steve Good morning, everyone and thank you for joining us. Our third quarter top line results reflected some of the challenges we discussed during our second quarter call. In the quarter, we continued to experience delays in decision, making representing a 40% increase in the sales cycle from this time a year ago. We attribute this to the biopharmaceutical cost pressure in <unk>. Macroeconomic environment. In addition to the Si strategic value and complexity of the studies we are solution. Seeing these shifts, particularly regarding the need for more in depth soliciting, we announced the commercial leadership change in September with the appointment of Michael shifting to the role of Chief Commercial Officer.

Our third quarter top line results reflected some of the challenges we discussed during our second quarter call.

In the quarter, we continued to experience delays in decision, making representing a 40% increase in the sales cycle from this time a year ago.

We attribute this to the biopharmaceutical cost pressure in <unk>.

Macroeconomic environment. In addition to the Si strategic value and complexity of the studies we are solution.

Seeing these shifts, particularly regarding the need for more in depth soliciting, we announced the commercial leadership change in September with the appointment of Michael shifting to the role of Chief Commercial Officer.

Michael brings more than 25 years of commercial leadership experience in clinical research and technology, including his most recent role as senior Vice President. Customer solutions and strategy. That seniors health, which he left at the beginning of this year. You surely noted that third quarter bookings were well below our expectation. Offering and early indicators of fourth quarter, we see some positive momentum with approximately $20 million of gross bookings quarter to date. It's also important to note that nearly all of those bookings come from repeat customers, including one program thats greater than $10 million in contract value.

Customer solutions and strategy.

That seniors health, which he left at the beginning of this year.

You surely noted that third quarter bookings were well below our expectation.

Offering and early indicators of fourth quarter, we see some positive momentum with approximately $20 million of gross bookings quarter to date.

It's also important to note that nearly all of those bookings come from repeat customers, including one program thats greater than $10 million in contract value.

Third quarter revenues grew 14% year over year to $16 $2 million due to our strong backlog entering the quarter. Our revenues were down quarter over quarter and below expectations. As a result of the recent late bookings timing on two important projects. Mike will address in a moment. We remain highly confident and focused on our strategic plan that we laid out for our team and our shareholders.

Our revenues were down quarter over quarter and below expectations. As a result of the recent late bookings timing on two important projects.

Mike will address in a moment.

We remain highly confident and focused on our strategic plan that we laid out for our team and our shareholders.

<unk> continues to yield a strong sales pipeline technology. Technology that is powerful and differentiated. Quality that keeps our customers coming back to you. Our financial goal remains to reach profitability and cash flow breakeven in the fourth quarter of 2024 with cash we have on hand. Given the headwinds as disclosed in our. 10-Q filing from yesterday, we have implemented a cost reduction program, which. Which we expect will result in about $21 million of gross cash savings on an annual basis.

Technology that is powerful and differentiated.

Quality that keeps our customers coming back to you.

Our financial goal remains to reach profitability and cash flow breakeven in the fourth quarter of 2024 with cash we have on hand.

Given the headwinds as disclosed in our.

10-Q filing from yesterday, we have implemented a cost reduction program, which.

Which we expect will result in about $21 million of gross cash savings on an annual basis.

This cost reduction program incorporates the difficult decision to reduce our staff by approximately 16%. While we eliminate excess capacity and significantly reduce our spend in G&A, we are making additional investments in commercial resources and maintain strong investment. In both our technology and operations functions. With these investments we plan to Reaccelerate top line growth continue to ensure our market differentiation and deliver with high quality. Half of our customers.

While we eliminate excess capacity and significantly reduce our spend in G&A, we are making additional investments in commercial resources and maintain strong investment.

In both our technology and operations functions.

With these investments we plan to Reaccelerate top line growth continue to ensure our market differentiation and deliver with high quality.

Half of our customers.

With that I will now turn the call over to <unk> Serrano Chief Financial Officer. Provide additional detail regarding our financial performance. Thank you David and good morning, everyone I'll discuss third quarter results for the period ended September 32022, and then provide our outlook for the full year 2020. In the third quarter, we reported revenues of $16 2 million, which represents a 14% increase from the $40 2 million in the same period of the prior year. As we've discussed previously at our current size and scale, one or two projects can have a material impact on quarter.

Provide additional detail regarding our financial performance.

Thank you David and good morning, everyone I'll discuss third quarter results for the period ended September 32022, and then provide our outlook for the full year 2020.

In the third quarter, we reported revenues of $16 2 million, which represents a 14% increase from the $40 2 million in the same period of the prior year.

As we've discussed previously at our current size and scale, one or two projects can have a material impact on quarter.

For example, in the third quarter, one of our large customers achieve the number of patients they needed to reach their safety and efficacy endpoints and therefore chose to wrap up enrollment early. Another large customer opted to slow the pace of initial enrollment to be able to measure early results prior to opening all of our recruitment channels. These two events resulted in more than a $3 million headwind to the third quarter revenues. They will continue to have an impact on the fourth quarter compared to what we had previously expected.

Another large customer opted to slow the pace of initial enrollment to be able to measure early results prior to opening all of our recruitment channels. These two events resulted in more than a $3 million headwind to the third quarter revenues. They will continue to have an impact on the fourth quarter compared to what we had previously expected.

These two events resulted in more than a $3 million headwind to the third quarter revenues. They will continue to have an impact on the fourth quarter compared to what we had previously expected.

We continue to have strong relationships with both customers one of which contract with us for a new study already in October . We finished the quarter with net bookings of $4 7 million compared to $35 9 million in the third quarter of 2021. As David noted by third quarter bookings were adversely impacted by delays in expected contract signing given the longer sales cycles, we discussed earlier. In the quarter, we also recognized approximately $8 million of scope reduction. From a fourth quarter to date standpoint, we assigned approximately $20 million in gross bookings, including one contract greater than $10 billion.

We finished the quarter with net bookings of $4 7 million compared to $35 9 million in the third quarter of 2021.

As David noted by third quarter bookings were adversely impacted by delays in expected contract signing given the longer sales cycles, we discussed earlier.

In the quarter, we also recognized approximately $8 million of scope reduction.

From a fourth quarter to date standpoint, we assigned approximately $20 million in gross bookings, including one contract greater than $10 billion.

We continue to see some strong trends in our pipeline, including the average selling price, which has increased more than 90% year over year for both repeat as well as new customers. Our adjusted gross profit for the third quarter was $4 6 million compared to $4 million in the same period of the prior year. Adjusted gross margin was flat year over year at 28, 3% compared to 28, 4% for the same period last year. Selling general and administrative expenses, excluding $5 2 million of stock based compensation were $19 3 million in the third quarter, a decrease of $3 2 million versus second quarter of 2022. Adjusted EBITDA, which we calculate by adding back depreciation amortization taxes interest other income and stock based compensation was a loss of $14 6 million in the quarter, representing a $1 9 million sequential improvement compared to the second quarter of 2022.

Our adjusted gross profit for the third quarter was $4 6 million compared to $4 million in the same period of the prior year.

Adjusted gross margin was flat year over year at 28, 3% compared to 28, 4% for the same period last year.

Selling general and administrative expenses, excluding $5 2 million of stock based compensation were $19 3 million in the third quarter, a decrease of $3 2 million versus second quarter of 2022.

Adjusted EBITDA, which we calculate by adding back depreciation amortization taxes interest other income and stock based compensation was a loss of $14 6 million in the quarter, representing a $1 9 million sequential improvement compared to the second quarter of 2022.

GAAP net loss was $23 5 billion versus a GAAP net loss of $14 7 million in the third quarter a year ago. Our third quarter 2022, GAAP net loss included a gain of $1 2 million related to the change in fair value of the earn out liability, which was part of the original transaction was back. Now moving on to cash. We ended the quarter with $132 million of cash and cash equivalents this would imply. At $1 million in the quarter, an improvement of $31 2 million of cash burn in the second quarter. As expected we saw a reduction in our net DSO in the third quarter and we finished September with net DSO of 25 date.

Our third quarter 2022, GAAP net loss included a gain of $1 2 million related to the change in fair value of the earn out liability, which was part of the original transaction was back.

Now moving on to cash.

We ended the quarter with $132 million of cash and cash equivalents this would imply.

At $1 million in the quarter, an improvement of $31 2 million of cash burn in the second quarter.

As expected we saw a reduction in our net DSO in the third quarter and we finished September with net DSO of 25 date.

As David noted earlier, we announced the cost reduction program and our SEC Form 10-Q last night. While these actions are never easy. These will result in a reduction of approximately 21 million of gross annualized cash spend. These actions will also enable us to reinvest in our business, particularly around technology and our go to market efforts, we expect to realize most of the benefit of these cost reductions beyond 2022. Now, let's turn to the outlook for 2022. In light of the recent business conditions, we've outlined previously and earlier today.

While these actions are never easy. These will result in a reduction of approximately 21 million of gross annualized cash spend.

These actions will also enable us to reinvest in our business, particularly around technology and our go to market efforts, we expect to realize most of the benefit of these cost reductions beyond 2022.

Now, let's turn to the outlook for 2022.

In light of the recent business conditions, we've outlined previously and earlier today.

We now expect revenues for 2020 to be in the range of $68 2 million. $59 2 million, which would represent a 14, 4% to 16, 1% year over year growth. Likewise, our revised guidance for adjusted EBITDA for 2022 is negative $65 4 million negative $66 4 million. Consistent with past practice, we intend to provide 2023 guidance on our fourth quarter earnings call. As of September 32022, we had approximately $116 6 million shares outstanding. As we currently anticipate having a net loss in the upcoming quarter and year any converted options will be deemed anti dilutive. Therefore on a GAAP basis, we expect basic and diluted share counts to be the same.

$59 2 million, which would represent a 14, 4% to 16, 1% year over year growth.

Likewise, our revised guidance for adjusted EBITDA for 2022 is negative $65 4 million negative $66 4 million.

Consistent with past practice, we intend to provide 2023 guidance on our fourth quarter earnings call.

As of September 32022, we had approximately $116 6 million shares outstanding.

As we currently anticipate having a net loss in the upcoming quarter and year any converted options will be deemed anti dilutive.

Therefore on a GAAP basis, we expect basic and diluted share counts to be the same.

In summary, while our third quarter commercial execution was challenging we are encouraged by the strong start to the fourth quarter. Committed to delivering long term profitability. Taken the appropriate steps to achieve this. At this point I'd like to turn the call back over to David for closing comments. Thank you Mike we remain focused on executing our strategy of building best in class technology and solutions. Centralize the clinical trial industry. And create meaningful value for our relevance to our stakeholders. We're focused on our objective of building a sustainable growing business at scale to larger profitability and maximizes value for all shareholders.

Committed to delivering long term profitability.

Taken the appropriate steps to achieve this.

At this point I'd like to turn the call back over to David for closing comments.

Thank you Mike we remain focused on executing our strategy of building best in class technology and solutions.

Centralize the clinical trial industry.

And create meaningful value for our relevance to our stakeholders. We're focused on our objective of building a sustainable growing business at scale to larger profitability and maximizes value for all shareholders.

With that I'll now turn it over to the operator to open it up for questions. Thank you as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster. Our first question comes from Lucas <unk> from Cowen Your line is open. Yes. Hi, yes. Yes. This is Steve Brown on for. For Charles actually. Thanks for taking our questions. This morning. Thanks for calling.

Thank you as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.

Our first question comes from Lucas <unk> from Cowen Your line is open.

Yes.

Hi, yes.

Yes. This is Steve Brown on for.

For Charles actually.

Thanks for taking our questions. This morning.

Thanks for calling.

Yeah absolutely. So I guess, Mike maybe just on the third quarter bookings. You had mentioned. Basically falling short on. Some delays in expected contract signings and longer sales cycles. Which is something you had you had cited last quarter as you'd focus on larger engaged. <unk> you. We believe the decision to shift away from from smaller engagements. We still like the right decision given the. The trend in bookings over the last two quarters. And then I guess. Would it possibly make sense. In the near term focus on some smaller engagements to drive near term bookings growth. Why you remain committed to working on those longer term. Larger engagements.

So I guess, Mike maybe just on the third quarter bookings.

You had mentioned.

Basically falling short on.

Some delays in expected contract signings and longer sales cycles.

Which is something you had you had cited last quarter as you'd focus on larger engaged.

<unk> you.

We believe the decision to shift away from from smaller engagements.

We still like the right decision given the.

The trend in bookings over the last two quarters.

And then I guess.

Would it possibly make sense.

In the near term focus on some smaller engagements to drive near term bookings growth.

Why you remain committed to working on those longer term.

Larger engagements.

Yes. Sure. Imagine a smaller engagements altogether. It is that we are. Driving to. Go after larger studies and were being pulled that direction too which is. I think a testament to the key studies that we've been able to accumulate to date. I continue to think that. Larger opportunities are to continue to come our way. It is true that the sales cycle on these are significantly longer.

Sure.

Imagine a smaller engagements altogether. It is that we are.

Driving to.

Go after larger studies and were being pulled that direction too which is.

I think a testament to the key studies that we've been able to accumulate to date.

I continue to think that.

Larger opportunities are to continue to come our way.

It is true that the sales cycle on these are significantly longer.

As I noted. As youre, making processes about 40% longer than it was about a year ago. Just to give you a little bit of color, we have one oncology study. And with targeted to close at the beginning of the second quarter and by the way. This is not one of the $10 million plus. But. That's targeted. The second quarter and we're hearing by the end of the year at this point so. Just get a flavor of what the. Market dynamic looks like. In the context of smaller or larger. Okay.

As youre, making processes about 40% longer than it was about a year ago.

Just to give you a little bit of color, we have one oncology study.

And with targeted to close at the beginning of the second quarter and by the way. This is not one of the $10 million plus.

But.

That's targeted.

The second quarter and we're hearing by the end of the year at this point so.

Just get a flavor of what the.

Market dynamic looks like.

In the context of smaller or larger.

Okay.

Okay great. And then I guess, maybe like on the fourth quarter bookings. Seem to be on a better trend. Could you give us more details on the customer mix is it skewed towards larger or smaller deals and then. Maybe what the fourth quarter bookings. Could imply for 2023 revenue growth. Sure I'll start and maybe pile on. So the. <unk> has been really strong to date in terms of bookings. Mix of the customers. They are coming in are repeat customers, which is terrific. They are larger pharma companies. Rather than smaller biotech. While we're really excited to see the trend for the beginning of the quarter. We expect our we expect our results to be stronger.

And then I guess, maybe like on the fourth quarter bookings.

Seem to be on a better trend.

Could you give us more details on the customer mix is it skewed towards larger or smaller deals and then.

Maybe what the fourth quarter bookings.

Could imply for 2023 revenue growth.

Sure I'll start and maybe pile on.

So the.

<unk> has been really strong to date in terms of bookings.

Mix of the customers.

They are coming in are repeat customers, which is terrific. They are larger pharma companies.

Rather than smaller biotech.

While we're really excited to see the trend for the beginning of the quarter. We expect our we expect our results to be stronger.

Fourth quarter than even the second quarter, certainly the third quarter. Just want to make sure that we're cautioning. Beyond our record. Achieving a record number for the quarter, but it is certainly the trend certainly is changing. Sure. Yes, just to be Super clear on that with David's referring to is from a bookings perspective. Good start. Due to the fourth quarter from a booking standpoint. You mentioned one of the opportunities that within that approximately $12 million.

Just want to make sure that we're cautioning.

Beyond our record.

Achieving a record number for the quarter, but it is certainly the trend certainly is changing.

Sure.

Yes, just to be Super clear on that with David's referring to is from a bookings perspective.

Good start.

Due to the fourth quarter from a booking standpoint.

You mentioned one of the opportunities that within that approximately $12 million.

Large pharma greater than $10 billion. We are seeing and continuing to win those types of opportunities as well as follow on. Thank you. And just one moment for our next question. We have a question from Max Smock with William Blair. Your line is open. Hey, David Hey, Mike Thanks for taking our questions. I wanted to start off here asking one about what youre seeing in terms of cancellation. So in the third quarter here, how much of the lower net bookings number was driven by cancellations. When you do see some cancellations what are some of the explanations that your customers have given you recently around why they've decided to cancel I know you mentioned funding, but any incremental detail you can provide there would be helpful. And then in terms of the $20 million in gross bookings here in the fourth quarter do you have any sense or can you provide.

We are seeing and continuing to win those types of opportunities as well as follow on.

Thank you.

And just one moment for our next question.

We have a question from Max Smock with William Blair. Your line is open.

Hey, David Hey, Mike Thanks for taking our questions.

I wanted to start off here asking one about what youre seeing in terms of cancellation.

So in the third quarter here, how much of the lower net bookings number was driven by cancellations.

When you do see some cancellations what are some of the explanations that your customers have given you recently around why they've decided to cancel I know you mentioned funding, but any incremental detail you can provide there would be helpful. And then in terms of the $20 million in gross bookings here in the fourth quarter do you have any sense or can you provide.

Provide any detail around what that looks like on a net basis. Yeah, Let me, let me start and David can provide some additional context as he sees fit. As I mentioned in my prepared remarks. In terms of the net bookings that we reported in the third quarter of $4 7 million. Approximately $8 million. Primarily scope reduction. Small cancellations in there that was higher if you recall compared to the second quarter. Where we had a growth in the.

Yeah, Let me, let me start and David can provide some additional context as he sees fit.

As I mentioned in my prepared remarks.

In terms of the net bookings that we reported in the third quarter of $4 7 million.

Approximately $8 million.

Primarily scope reduction.

Small cancellations in there that was higher if you recall compared to the second quarter.

Where we had a growth in the.

The upper Twenty's and about $25 million net. So a little bit higher there, but again I think it comes back to that point that I made earlier, one or two projects at our current scale can impact a quarter. Just sort of given given where we are in terms of. Cancellations or scope reductions. They can occur for many different reasons, we did see as I mentioned in the earlier remarks. One customer ended up wrapping up enrollment earlier than was expected. Which is great from a customer perspective. It means we're doing what we're supposed to. But yes that does have an impact on revenue. Additionally, I think it's fair to say that the.

So a little bit higher there, but again I think it comes back to that point that I made earlier, one or two projects at our current scale can impact a quarter.

Just sort of given given where we are in terms of.

Cancellations or scope reductions.

They can occur for many different reasons, we did see as I mentioned in the earlier remarks.

One customer ended up wrapping up enrollment earlier than was expected.

Which is great from a customer perspective. It means we're doing what we're supposed to.

But yes that does have an impact on revenue.

Additionally, I think it's fair to say that the.

The macroeconomic environment as impacted some of our customers. We're seeing a greater emphasis on the customer standpoint in terms of their cost. In terms of how they're managing costs and maybe a little bit less focused in some regards around aggressive moves to speed.

We're seeing a greater emphasis on the customer standpoint in terms of their cost.

In terms of how they're managing costs and maybe a little bit less focused in some regards around aggressive moves to speed.

But part of why we're doing this cost reduction that. We announced is to enable us to be more aggressive and nimble in terms of being able to. Yes. Great. In terms of the cost side. So David you want to add anything to that. Thanks. And then okay. So a follow up. For my follow up just following up on your point there about the funding environment, Ryan just hoping we could dig into that point a little bit here is that.

We announced is to enable us to be more aggressive and nimble in terms of being able to.

Yes.

Great.

In terms of the cost side.

So David you want to add anything to that.

Thanks.

And then okay. So a follow up.

For my follow up just following up on your point there about the funding environment, Ryan just hoping we could dig into that point a little bit here is that.

It sounds like that is customers dragging their feet more than anything around whether or not they want to move forward with trials or are you seeing some actual programs getting canceled and then I think in the past you've talked about how the value proposition for <unk> is actually even greater than this kind of funding environment. So can you help us reconcile that comment with your point about funding. Slowing down Buckingham. Yes. <unk>, that's in the broader macro economic environment in general.

Slowing down Buckingham.

Yes.

<unk>, that's in the broader macro economic environment in general.

A number of our customers are navigating through a challenging cost environment themselves in some cases, that's driving risk aversion. And less priority on aggressive speed, which is the core of our value proposition. And some of the cost actions that we announced and Mike just pointed out that does allow us to become more aggressive on how we price. Ultimately. We deliver. So I think it's kind of a core macro I think view of the world and that underneath that. Decision, making timeline is. Taking out and I think it's twofold one of it is. The challenging cost environment for our customers. One is yes.

And less priority on aggressive speed, which is the core of our value proposition.

And some of the cost actions that we announced and Mike just pointed out that does allow us to become more aggressive on how we price.

Ultimately.

We deliver.

So I think it's kind of a core macro I think view of the world and that underneath that.

Decision, making timeline is.

Taking out and I think it's twofold one of it is.

The challenging cost environment for our customers.

One is yes.

Deal size that we still continue to see which has nearly doubled since the beginning of the year. That elevate the approval process within big pharma and also extend the timeline. Hey, Max I think yes. Yes sure. I had to characterize on a relative basis. Your follow up question in terms of how much is just delayed decision making versus actual. Installation it seems to us from our perspective to be more of the former. Got it very helpful. Thank you for taking my questions. Okay. Thanks, Scott.

That elevate the approval process within big pharma and also extend the timeline.

Hey, Max I think yes.

Yes sure.

I had to characterize on a relative basis. Your follow up question in terms of how much is just delayed decision making versus actual.

Installation it seems to us from our perspective to be more of the former.

Got it very helpful. Thank you for taking my questions.

Okay. Thanks, Scott.

Thank you and we have a question coming from. Matt. From Matthew Hewitt with Craig Hallum. Your line is open. Good morning, Thanks for taking the questions maybe first up as you look at some of the the lengthening of the sales cycle is there any way to differentiate between what is. Based on our cost and kind of managing their balance sheets versus how much of it is kind of managing their their pipelines and portfolio. Are there a shifting focus points for some of your customers and thats kind of whats, creating the delay or is it entirely based upon their balance sheets. Context, I think we've provided this previously.

Matt.

From Matthew Hewitt with Craig Hallum. Your line is open.

Good morning, Thanks for taking the questions maybe first up as you look at some of the the lengthening of the sales cycle is there any way to differentiate between what is.

Based on our cost and kind of managing their balance sheets versus how much of it is kind of managing their their pipelines and portfolio.

Are there a shifting focus points for some of your customers and thats kind of whats, creating the delay or is it entirely based upon their balance sheets.

Yes, it's hard to tell I think. It's certainly true across the board so if it was. Isolated and it'd be able to pinpoint I agree, but it feels like it's more of a broad. Cost consciousness. We do we do see. Longer delays and some of the larger studies, but as I pointed out a moment ago on the one oncology study that kick back more. More than two quarters. It isn't necessarily. <unk> alone. And it is early. It isn't necessarily the biopharma. We are large pharma or. Although I think that we see a little bit faster decision, making in the biotech space. Yes.

It's certainly true across the board so if it was.

Isolated and it'd be able to pinpoint I agree, but it feels like it's more of a broad.

Cost consciousness.

We do we do see.

Longer delays and some of the larger studies, but as I pointed out a moment ago on the one oncology study that kick back more.

More than two quarters.

It isn't necessarily.

<unk> alone.

And it is early.

It isn't necessarily the biopharma.

We are large pharma or.

Although I think that we see a little bit faster decision, making in the biotech space.

Yes.

Context, I think we've provided this previously.

If you look at our backlog just. Just to give you some context around how much lending environment impact. Backlog consistent with where we've been the last couple of quarters. What we deemed to be emerging pharma and biotech was less than 25% of the total. Got it alright. Thanks. More of the delays in decision, making is what we are seeing more of. Okay understood and then maybe separately separate question here I think you mentioned in your prepared remarks that asps are up significantly. Year on year. Youre seeing a more heightened focus on. Even in a world where they are asking for more so I think thats right.

Just to give you some context around how much lending environment impact.

Backlog consistent with where we've been the last couple of quarters.

What we deemed to be emerging pharma and biotech was less than 25% of the total.

Got it alright. Thanks.

More of the delays in decision, making is what we are seeing more of.

Okay understood and then maybe separately separate question here I think you mentioned in your prepared remarks that asps are up significantly.

Year on year.

Youre seeing a more heightened focus on.

The costs from your customers does does that put some pressure on your ability to increase price or on those asp's or are they not really tied together. Thank you. Yes, I think that. The broad. <unk> economic issues from a. Farmer perspective in terms of cost it certainly is. Applies to our business and how we think about structuring our business. One of the reasons why we took a look at our cost did our cost reduction program was especially for that so that we could take a closer look at the way we. And become more. Cost favorable for our sponsors.

Yes, I think that.

The broad.

<unk> economic issues from a.

Farmer perspective in terms of cost it certainly is.

Applies to our business and how we think about structuring our business.

One of the reasons why we took a look at our cost did our cost reduction program was especially for that so that we could take a closer look at the way we.

And become more.

Cost favorable for our sponsors.

Even in a world where they are asking for more so I think thats right.

It's appropriate. And to add to that. Absolutely right. Seeing significant increases year over year in terms of the average selling price in the pipe. We think thats a great thing, we think that the fact that. We're seeing that particularly on the repeat customer side. The indicator of the value prop, we're able to bring to the customer set that being said. Given our current size and scale. With the increased level of project size and the pipe that can create more volatility in terms of our bookings in a particular quarter. And I think you saw some of that during the third quarter. That makes sense. Thank you. The headwinds are because of business shifting back to brick and mortar.

And to add to that.

Absolutely right.

Seeing significant increases year over year in terms of the average selling price in the pipe.

We think thats a great thing, we think that the fact that.

We're seeing that particularly on the repeat customer side.

The indicator of the value prop, we're able to bring to the customer set that being said.

Given our current size and scale.

With the increased level of project size and the pipe that can create more volatility in terms of our bookings in a particular quarter.

And I think you saw some of that during the third quarter.

That makes sense. Thank you.

Thank you I appreciate the call. Thanks, Matt. We have a question from Frank. Keenan with Lake Street Your line is open. Hey, great. Thanks for taking my questions maybe to start. A little bigger picture question are you seeing any of your rfps that you're going head to head with brick and mortar more of those wins being towards the brick and mortar space or are you seeing there. The DCT environment continue to be. Something that your customers that have used it previously and intend to continue to use it just trying to get a feel for if any of.

Thanks, Matt.

We have a question from Frank.

Keenan with Lake Street Your line is open.

Hey, great. Thanks for taking my questions maybe to start.

A little bigger picture question are you seeing any of your rfps that you're going head to head with brick and mortar more of those wins being towards the brick and mortar space or are you seeing there.

The DCT environment continue to be.

Something that your customers that have used it previously and intend to continue to use it just trying to get a feel for if any of.

The headwinds are because of business shifting back to brick and mortar.

Well. I think in this environment, you are seeing a little bit more risk aversion and youre seeing. Less prioritization on speed and more on cost. So. I think it's fair to say there is a little bit of that going on as we ultimately get into. Hey. Competitive. Yes. Value proposition that we're bringing in a seat and if our sponsors are focused. More on cost that changes the dynamic a little bit. Okay. That's helpful and then maybe a follow up on the $20 million. Gross bookings figure you've been speaking to can you talk to the other elements in that equation to get to net bookings any expectation around cancellations or scope. In the next couple of months or next month and half will be important as we look to close out the year strong.

I think in this environment, you are seeing a little bit more risk aversion and youre seeing.

Less prioritization on speed and more on cost.

So.

I think it's fair to say there is a little bit of that going on as we ultimately get into.

Hey.

Competitive.

Yes.

Value proposition that we're bringing in a seat and if our sponsors are focused.

More on cost that changes the dynamic a little bit.

Okay. That's helpful and then maybe a follow up on the $20 million.

Gross bookings figure you've been speaking to can you talk to the other elements in that equation to get to net bookings any expectation around cancellations or scope.

Gold production that you've spoken to you about this quarter. Sure. Thanks Frank. I don't think we are providing guidance as it relates to the bookings for the fourth quarter, but we did want to give some context. From a starting point. We're coming out of the gate. With pretty good momentum. As David mentioned. We continue to. Be able to. Talk to customers about these larger opportunities. We have a good pipeline in front of us.

Sure. Thanks Frank.

I don't think we are providing guidance as it relates to the bookings for the fourth quarter, but we did want to give some context.

From a starting point.

We're coming out of the gate.

With pretty good momentum.

As David mentioned.

We continue to.

Be able to.

Talk to customers about these larger opportunities.

We have a good pipeline in front of us.

In the next couple of months or next month and half will be important as we look to close out the year strong.

Okay. That's helpful color I'll stop there thanks for taking the questions. Thanks, Rocco Thanks, Rick. Sure. We have a question from Eric Coldwell with Baird. Your line is open. Thanks. So I just sorry for the technical clarification on the prepared remarks, I heard about a scope for a reduction of $8 million in the Q&A I heard about cancellations of $8 million I'm just wanting to. Confirm that the scope reduction was a piece of the 8 million so total cancels right or. Maybe there was an 8 million scope reduction plus cancels on top just hoping you can be very sure yes, yes, okay.

Thanks, Rocco Thanks, Rick.

Sure.

We have a question from Eric Coldwell with Baird. Your line is open.

Thanks.

So I just sorry for the technical clarification on the prepared remarks, I heard about a scope for a reduction of $8 million in the Q&A I heard about cancellations of $8 million I'm just wanting to.

Confirm that the scope reduction was a piece of the 8 million so total cancels right or.

Maybe there was an 8 million scope reduction plus cancels on top just hoping you can be very sure yes, yes, okay.

Eric and good morning, Yes, the total reduction between gross and net debt inclusive of scope reductions and cancellations was about $8 million vast majority of that is scope reduction. Got it thanks, Mike. And then. You've also made a comment about the program that wrapped up early. And if I understood the gist of it. The client got to win the enrollment needs faster than they expected. So they will say wound down you made some comments about that being good for the customer and you also made a comment that you were doing your job well. I think did a good job on that and that particular customer was the one that I referenced that already given us new work here at the beginning of October .

Got it thanks, Mike.

And then.

You've also made a comment about the program that wrapped up early.

And if I understood the gist of it.

The client got to win the enrollment needs faster than they expected. So they will say wound down you made some comments about that being good for the customer and you also made a comment that you were doing your job well.

But then you also said it hurt your revenue so I'm a bit confused about how. Beating timelines and doing your job well actually hurts your revenue it would seem maybe it would accelerate your revenue, but I'm not sure why it would hurt your revenue. Sure. Let me, let me start on that and David you can add to that. I think in that particular instance. That customer was utilizing both ourselves as well as the traditional type model. And they made a determination after some interim readouts that they were able to effectively wrap the study early.

Beating timelines and doing your job well actually hurts your revenue it would seem maybe it would accelerate your revenue, but I'm not sure why it would hurt your revenue.

Sure. Let me, let me start on that and David you can add to that.

I think in that particular instance.

That customer was utilizing both ourselves as well as the traditional type model.

And they made a determination after some interim readouts that they were able to effectively wrap the study early.

I think did a good job on that and that particular customer was the one that I referenced that already given us new work here at the beginning of October .

It sounds good. Got it and then last one for me. Do work with CRO channel partners were. By and large seen most companies put up. Solid book to Bill is above one two but one of your named partners did not do so this last quarter. Obviously, not even close. I am curious if some of the impact you saw in <unk> was related to poor performance at your channel partners or or any or are there any relationship changes among the five that you've publicly named in the past.

Got it and then last one for me.

Do work with CRO channel partners were.

By and large seen most companies put up.

Solid book to Bill is above one two but one of your named partners did not do so this last quarter.

Obviously, not even close.

I am curious if some of the impact you saw in <unk> was related to poor performance at your channel partners or or any or are there any relationship changes among the five that you've publicly named in the past.

No relationship changes between them I don't think its fair to say that. Impacts within those individuals. Individuals' Crs. <unk> us significantly. I would say that as we continue to. Forge ahead as an organization to CRM partnership channel. Is. Very important to us. Michael shifting comes from that environment. <unk> is a very strong area of focus for him so and we expect to. How much of your business is.

Impacts within those individuals.

Individuals' Crs.

<unk> us significantly.

I would say that as we continue to.

Forge ahead as an organization to CRM partnership channel.

Is.

Very important to us.

Michael shifting comes from that environment.

<unk> is a very strong area of focus for him so and we expect to.

Accelerate in that channel in particular. Got it thanks, guys I appreciate it. Okay. Thanks, Eric. And our next question comes from David Windley with Jefferies. Your line is open. Hi, good morning, Thanks for taking my question. Kind of a related question to what Eric was just touching on or your answer too is you. You mentioned the <unk>. While that you were working on through another CRO Im wondering if you could give just rough breakdowns on.

Got it thanks, guys I appreciate it.

Okay. Thanks, Eric.

And our next question comes from David Windley with Jefferies. Your line is open.

Hi, good morning, Thanks for taking my question.

Kind of a related question to what Eric was just touching on or your answer too is you.

You mentioned the <unk>.

While that you were working on through another CRO Im wondering if you could give just rough breakdowns on.

How much of your business is.

As on trials, where there one multiple. Scott ROE type vendors versus trials that you're running exclusively. Yourself kind of pure DCP trials. First question. Hey, good morning, Dave. Thanks for the question this is Mike. I think what we talked about historically. We have seen stronger. Some of those larger opportunities. <unk>. More skewed towards meta site. In the instance that site. We would typically be one of multiple. <unk> with the borrower. Yes definitely.

Scott ROE type vendors versus trials that you're running exclusively.

Yourself kind of pure DCP trials.

First question.

Hey, good morning, Dave. Thanks for the question this is Mike.

I think what we talked about historically.

We have seen stronger.

Some of those larger opportunities.

<unk>.

More skewed towards meta site.

In the instance that site.

We would typically be one of multiple.

<unk> with the borrower.

So I think from that standpoint, and as I mentioned on that particular study that was a meta site. And so. As you think about sort of where one. <unk> are one of. Solely. Majority right now is we have multiple. Yes. Yes, Okay, and then also related I guess. Maybe trying to. Reinforce derek's question get out in a slightly different way. Instances, where.

And so.

As you think about sort of where one.

<unk> are one of.

Solely.

Majority right now is we have multiple.

Yes.

Yes, Okay, and then also related I guess.

Maybe trying to.

Reinforce derek's question get out in a slightly different way.

Instances, where.

Or I guess I'll start by saying I'm getting that contract structure and.

So to the extent that we. Remote capabilities and decentralized capabilities are aimed at. Speeding patient recruitment and driving. Faster faster time to last patient in. Can you build into your contracts incentives such that. Nor successful execution that helps the client to achieve the success that youre, describing actually rewards you rather than penalize us.

Remote capabilities and decentralized capabilities are aimed at.

Speeding patient recruitment and driving.

Faster faster time to last patient in.

Can you build into your contracts incentives such that.

Nor successful execution that helps the client to achieve the success that youre, describing actually rewards you rather than penalize us.

Yes definitely.

And that's something that we have. As we've gotten more mature as an organization and more confident in our ability to over deliver we've been more bullish on ourselves and so. It's something that we. We're encouraging on contracts. Yes. This year and going forward. And you may recall in the second quarter, we outlined a couple of new sub offerings. Site rescue so on where the thought process is that we make it easy for a customer to say yes. I totally understand your point.

As we've gotten more mature as an organization and more confident in our ability to over deliver we've been more bullish on ourselves and so.

It's something that we.

We're encouraging on contracts.

Yes.

This year and going forward.

And you may recall in the second quarter, we outlined a couple of new sub offerings.

Site rescue so on where the thought process is that we make it easy for a customer to say yes.

They start off small in terms of a certain percentage of the trial that they are contracting with us. And what we found in many cases, they upsize that over time, given some of the advantages that we can bring to bear. From a speed perspective. Okay, Great and then if I can sneak one more in. David your. Earlier answer around. I think the Franks question risk versus cost.

And what we found in many cases, they upsize that over time, given some of the advantages that we can bring to bear.

From a speed perspective.

Okay, Great and then if I can sneak one more in.

David your.

Earlier answer around.

I think the Franks question risk versus cost.

I totally understand your point.

<unk> is new. More innovative and less well traveled and so I presume when you talk about. Kind of stepping away from risk that that that's what you mean that the clients are. <unk> DCT gives us somewhat riskier strategy to execute. It should save money I guess. I know that in the early days it it may be. <unk> proven that completely yet. But there is also this issue that some of the <unk> have raised about. As many study visits that needs to take place in order to provide oversight because of the massive number of patients that we're able to bring in as one single site $115 72.

More innovative and less well traveled and so I presume when you talk about.

Kind of stepping away from risk that that that's what you mean that the clients are.

<unk> DCT gives us somewhat riskier strategy to execute.

It should save money I guess.

I know that in the early days it it may be.

<unk> proven that completely yet.

But there is also this issue that some of the <unk> have raised about.

Site level staffing and Linda. Limitations around throughput. At the site and I'm wondering how kind of all of those things factor in. Two inch. Kris the incentive increase the motivation to try to use more remote capabilities. Yes, so one of the things that we pull together in the third quarter, which.

Limitations around throughput.

At the site and I'm wondering how kind of all of those things factor in.

Two inch.

Kris the incentive increase the motivation to try to use more remote capabilities.

Yes, so one of the things that we pull together in the third quarter, which.

We're effectively rolling out as we speak is our new ROI tool and so if you actually take a look at the. The data that we've been able to pull from the trials that we've worked on and sort of. Broader landscape. Sure. There may be cases, where we might be more expensive upfront, but the speed that we're able to achieve in terms of bringing patients in early.

The data that we've been able to pull from the trials that we've worked on and sort of.

Broader landscape.

Sure.

There may be cases, where we might be more expensive upfront, but the speed that we're able to achieve in terms of bringing patients in early.

Well first of all recruiting patients in earlier, so we save them time in the upfront and we also. Save time in the backend in terms of getting to LTI last patient in. A real cost and an opportunity cost savings associated with it. In addition, there are costs that we are able to. Get out of the traditional model in terms of the need for.

Save time in the backend in terms of getting to LTI last patient in.

A real cost and an opportunity cost savings associated with it.

In addition, there are costs that we are able to.

Get out of the traditional model in terms of the need for.

As many study visits that needs to take place in order to provide oversight because of the massive number of patients that we're able to bring in as one single site $115 72.

Now from a quality standpoint. One of the strong feelings about the value proposition is that. Through the entire science III to out of network were operationalized everything through one unified platform with one. Set of procedure. Pete.

One of the strong feelings about the value proposition is that.

Through the entire science III to out of network were operationalized everything through one unified platform with one.

Set of procedure.

Pete.

And standardized set of people that are delivering across the whole thing, which really mitigate the risk of it. Britt network of individual sites that have their own people processes and technology in order to be able to deliver and you're trying to tie all of those together through monitoring so we effectively. Great. More consistent product in that case. And mitigate the amount of oversight required manual oversight that's required in process. Thanks for taking my questions.

Britt network of individual sites that have their own people processes and technology in order to be able to deliver and you're trying to tie all of those together through monitoring so we effectively.

Great.

More consistent product in that case.

And mitigate the amount of oversight required manual oversight that's required in process.

Thanks for taking my questions.

Thanks, David I appreciate you calling in. Thank you and I'm showing no other questions at this time I would like to turn the call back to Mr. David Cohen for closing remarks. I appreciate everybody joining us today, we have no further comments to add and we can close the call. Thank you. This.

Thank you and I'm showing no other questions at this time I would like to turn the call back to Mr. David Cohen for closing remarks.

I appreciate everybody joining us today, we have no further comments to add and we can close the call. Thank you.

This.

Today's conference call. Thank you for participating you may now disconnect.