Q2 2023 Fortrea Holdings Inc Earnings Call
Speaker 1: You you.
Speaker 2: Good morning, and thank you for standing by. Welcome to the 4-3, second quarter, 2023 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.
Speaker 3: At the same time, the business was nested in a much larger organization with a central lab and diagnostic labs and has not operated as a standalone unit before. Therefore, there was a tremendous effort required to prepare for a successful spin, which was completed quickly in under a year. This fast paced approach to a spin is often referred to as a lift and shift approach, really no substantive business improvements. Over the past 12 months, the people here have been navigating what I've come to call the spin year. During this 12 month period, some customers took a wait and see approach with us before awarding new business. I think some wanted to see who was staying, who was going, or if there'd be some other disruption.
Speaker 3: I'm not aware of the spin costing Fortria any existing customers. The major issue in the spin year was a slowdown in new RFP opportunities probably compounded by a softer biotech environment and lack of larger new customers. We have been referring to the situation as our mix issue publicly.
Speaker 3: Headline book-to-bill numbers were okay and consistent with industry and prior company practices, but the mix of sales, including new business versus renewals, was not sufficient to meet even average industry growth rates for some quarters.
Speaker 3: Jill, our CFO , is going to walk you through the results of what I hope is the last quarter of the spin year.
Speaker 3: It's important to note that we were an independent company for only a minute, literally, so this is detailed reporting about a discontinued segment of the prior parent company including corporate allocations, one-time and new recurring spin costs, and more. Jill, over to you.
Speaker 4: Thank you, Tom, and good morning, everyone.
Speaker 4: Fortria's second quarter results continue to include softness related to this spin year. But we are pleased to have completed the spin and become an independent organization. I want to give my personal thanks to everyone who is involved in making it happen.
Speaker 4: The speed and commitment that they demonstrated to ensure a smooth transition of our services gives me confidence as we head into this new chapter for Fortria.
Speaker 4: It is great to see signs of improvement in both RFP flow and award volume as we move through the third quarter. This will be key to returning the company to industry growth or above and driving margin expansion over time.
Speaker 4: It's also great to see signs of improvement in both RFP flow and award volume as we move through the third quarter. This will be key to returning the company to industry growth or above and driving margin expansion over time. Now let's turn to results.
Speaker 4: Revenues were $793 million in the second quarter, essentially flat versus the same period last year.
Speaker 4: Clinical services revenues of $726.1 million grew 0.4% year on year driven by higher pass-through revenues partially offset by lower service fee revenues.
Speaker 4: The lower service fee revenues were in part due to a previously disclosed prior year FSP contract loss and a one-time client adjustment, as well as the mix and quantity of new business wins during this past spin year.
Speaker 4: Enabling services revenues decreased 4.2% year on year as patient access revenues were impacted by lower call center activity.
Speaker 4: partially accessed by growth in our end point business.
Speaker 4: Revenues for the six months ended June 30th, 2023, were $1.56 billion, a decrease of 0.9% year-on-year.
Speaker 4: Note that currency was not a material impact to our results in the second quarter.
Speaker 4: Before I move to our cost space, please remember that this quarter is unusual as these expenses are based on our results when we were a division of our former parent company and include a combination of both actual costs as well as former parent company allocations under the Carve Accounting methodology.
Speaker 4: DREC costs increase 5.7% year on year, primarily due to higher pass-through expenses, partially upset by lower temporary labor and bonus-related expenses along with other cost efficiencies.
Speaker 4: S-GNA was higher by 13.5%, due to an increase in indirect labor, credit-less provisions, and an unanticipated adjustment to our year-to-date expenses of $5.4 million, partially upset by a decrease in bonus-related compensation expense.
Speaker 4: Net interest expense for the quarter was $0.7 million.
Speaker 4: We expect full-year interest expense to total approximately $70 million in 2023, incorporating the change in market expectations for further rate increases in the second half of 2023. We expect full-year interest expense to total approximately $70 million in 2023.
Speaker 4: The effective tax rate was 26.9% for the quarter. We expect the full year 2023 adjusted effective tax rate to be between 27 to 30%, which is higher than our full year 2022 effective tax rate of 18.6%.
Speaker 4: The expected increase in the tax rate is due to anticipated reductions in domestic earnings, which in turn lead to increased domestic taxation of our foreign earnings, as well as the loss of certain deductions we received as part of our former parent company.
Speaker 4: Now that we are a standalone company, we expect to revisit our tech structure to ensure it is optimized for the future.
Speaker 4: Adjusted EBITDA for the quarter of $72.5 million decreased 37.1% year-over-year compared to adjusted EBITDA of $115.3 million in the prior year period.
Speaker 4: Year-to-date adjusted EBITDA with $129.6 million, which decreased 31.8% year-over-year, compared to with just the EBITDA of $190.1 million in the prior year-to-date period.
Speaker 4: Adjusted even a margin for the second quarter was 9.1% compared to 14.5% in the prior year period.
Speaker 4: Adjusted EBITDA margin in the quarter was negatively impacted by the lower servicity revenues, as well as higher pass-through revenues.
Speaker 4: Year-to-date adjusted EBITDA margin was 8.3% compared to 12.1% in the prior year period.
Speaker 4: In the second quarter of 2023, adjusted net income of $46.3 million decreased 46.2% compared to adjusted net income of $86.1 million in the prior year period.
Speaker 4: Adjusted net income for both basic and deluded share for the quarter was 52 cents compared to 97 cents in the prior year period.
Speaker 4: In the first half of 2023, adjusted net income of $86.6 million decreased 38.3% compared to adjusted net income of $140.3 million in the prior year-to-date period.
Speaker 4: Adjusted net income per both basic and deluded share for the first half of 2023 was 98 cents compared to a dollar and 58 cents in the prior year period.
Speaker 4: In terms of our margin efforts, we recognize that our current margins are not consistent with industry norms.
Speaker 4: It is important to remember that our priority over the last year was to successfully spend at pace and to ensure business continuity.
Speaker 4: Now that the spin is complete, we are actively assessing our cost space, both for direct cost as well as S-GNA, and have begun to form our margin optimization plan.
Speaker 4: With one month of actual expenses available, we are continuing our S-GNA benchmarking and exploring technology productivity initiatives.
Speaker 4: We are identifying improvements through sourcing and procurement and are finalizing our TSA exit strategies to replace them with more fit for purpose infrastructure.
Speaker 4: We are prioritizing margin improvement efforts and continue to expect to move towards peer margin levels over time.
Speaker 4: Turning to customer concentration, our top 10 customers represented nearly half of our year-to-date revenue.
Speaker 4: Next, I'll provide an update on cash and liquidity.
Speaker 4: In the first half of the year, we generated $154.2 million in cash flow from operating activities.
Speaker 4: Net accounts receivable was $1.01 billion at June 30th, 2023, 0.7% lower than at December 31st, 2022.
Speaker 4: During the quarter, we entered into an accounts receivable purchase program with the ability to sell up to $80 million of our receivables to accelerate cash collection.
Speaker 4: Prior to the spin, the company sold $17.5 million of accounts receivable, which drove the decrease in the accounts receivable between December 31st, 20th.
Speaker 4: and June 30th, 2023.
Speaker 4: Day's failed outstanding was 86 days at June 30th, 2023.
Speaker 4: We have initiated projects to improve our DSO profile. Due to the nature of our contract, which provides services over extended periods of time, there is a lag to see and change is reflected in our performance.
Speaker 4: In addition to these actions, we are focused on other opportunities to reduce this measure over time.
Speaker 4: For the six months ended June 30th, 2023, free cash flow was $128.4 million. The improvement versus the prior year was primarily due to a lower incentive payout this year.
Speaker 4: Turning now to our debt. During the quarter, we issued $570 million of senior notes due in 2030, and we entered into a $450 million revolving credit facility, a five-year, $500 million term loan A facility, and a seven-year, $570 million term loan B facility.
Speaker 4: Our blended interest rate for debt at June 30, 2023 was 8%.
Speaker 4: Our blended interest rate for debt at June 30, 2023 was 8%. We ended the quarter with a net leverage ratio of four times.
Speaker 4: As noted previously, our near-term capital allocation priorities are first, infrastructure investments for timely exit of the transition service agreement.
Speaker 4: Second, targeted therapeutic and technology in Beckham with to drive organic growth and then debt repayment. Longer term as our net leverage improves, we will consider selective tuck-in acquisitions. Next, I will review our GoFord approach to backlog recognition.
Speaker 4: As part of becoming a standalone company, the company reviewed and modified its backlog composition and recognition policies to facilitate period to period reporting going forward.
Speaker 4: As a result of this review, we have decided to make modifications in the following areas.
Speaker 4: Restating the backlog to remove projects where we no longer have current revenue, as well as incorporating all known changes in scope from customers or other uncertainties. This was partially upset by adding in backlog where revenue is still being earned, but no backlog was represented.
Speaker 4: We have decided to remove the Annabeling Services backlog from our calculation, given the different operating profile of these businesses.
Speaker 4: Going forward, our backlog and book to bill reporting will be for our clinical services business only.
Speaker 4: And finally, we revised our FSP Net New Business Awards Recognition Policy.
Speaker 4: For new awards, we will recognize the first two years of the award, and for renewals, we will recognize only the first year of the award at the time of contract signature.
Speaker 4: This more appropriately reflects the nature of FSP awards, in particular the phase revenue ramp that comes with a new award.
Speaker 4: It is important to note that outside of the first adjustment I referenced to remove uncertain positions, the revenue opportunity of the enabling services backlog and our remaining FSP backlog fully exists.
Speaker 4: With these adjustments, we are effectively aligning the scope of our backlog to provide a view of our pipeline that is more tailored for our standalone business.
Speaker 4: Backlog at the end of the quarter under our new methodology was approximately 7 billion dollars.
Speaker 4: The total reduction of $1.27 billion year over year was driven by the changes I described.
Speaker 4: Starting with this quarter, we will use this new methodology for reporting backlogs.
Speaker 4: Because of these changes, we cannot actually restate the backlog history to incorporate all of the changes noted above. Therefore, we are not disclosing net new business awards or book to bill for this quarter. We will rebuild our trailing book to bill metric from the third quarter onwards. We are not disclosing net new business awards or book to bill for this quarter onwards.
Speaker 4: In this final pre-spin quarter, we continue to see some softness in net new awards. So with the spin behind us, we are pleased to see positive momentum in RFP Flow and new awards in the third quarter.
Speaker 4: Moving now to our updated guidance for 2023, we expect full year 2023 total revenue in the range of $3.03 billion to $3.1 billion compared to 2022 total revenue of $3.1 billion. $3.03 billion.
Speaker 4: We expect 2023 adjusted EBITDA in the range of $255 million to $285 million, compared to adjusted EBITDA of $405.1 million in 2022.
Speaker 4: Our target for net leverage ratio continues to be two and a half to three times over the medium term.
Speaker 4: Our guidance assumes foreign exchange rates in effect as of June 30, 2023.
Speaker 4: This guidance assumes a full year 2023 effective tax rate of 27 to 30 percent and weighted average shares outstanding for 2023 on both a basic and diluted basis at the current level of shares and does not reflect the potential impact of currency fluctuations.
Speaker 4: In terms of the second half phasing, we expect fourth quarter performance to be slightly better than the third quarter as we begin to see the impact of some of our initial actions on aligning our cost structure to our revenue profile. We will share more details on our near-term and longer-term margin improvement initiatives with our third quarter earnings announcement in November .
Speaker 4: In closing, this was for TRIA's last quarter reporting as a division of its former parent company. We are navigating the impact from the spin-related uncertainty and are focused on winning new business to drive future top-line growth. We are excited about being an independent company. The strong momentum we are seeing in RFP flow and the margin expansion opportunities ahead of us.
Speaker 4: to our customers. We are well positioned to unleash our full potential and establish Fortrea as the top choice clinical resource organization for pharmaceutical, biotech, and medical device companies. And with that, I will turn it back to Tom for some additional remarks prior to moving to Q&A.
Speaker 3: Thanks, Jill. I joined LabCore in January of 2023 to become Portria CEO and Chairman of the Board when it was spun out. For those of you who don't know me, earlier in for the spin, with the target of having that team and board in place by May, we achieve that. Carefully selecting people internally and externally.
Speaker 3: We have assembled a great management team in board, both with appropriate qualifications and experience to guide us. We appreciate the positive response to this team since our investor day.
Speaker 3: Our management team was revealed in early May, and the new members started taking over business and functional areas in the last few weeks of the quarter. Some actually at the end of the quarter. For instance, Jill's role became official at the end of Q2. Q2.
Speaker 3: Having spent the prior 10 months leading the internal spinout team of the parent, and doing double duty during the road show, now she's 100% focused on Fortria.
Speaker 3: Two of our key operating executives have been running similar organizations to what they run today, which kept delivery of services for customers on track. The others, many of the others are new.
Speaker 3: Let me be plain spoken here. I and the management team are not satisfied with the second quarter and first half results.
Speaker 3: I'm gonna pause here.
Speaker 3: I don't believe the first half results represent the potential performance of this organization as an independent company.
Speaker 3: We are clear-eyed about both opportunities and issues.
Speaker 3: We have already started on changes in improvement.
Speaker 3: Improvements. We will discuss some, but not all of those changes today.
Speaker 3: As leaders, we must place the spin year firmly in the rearview mirror. The new management team and I will transform Fortrida from an operating unit of a larger enterprise into a successful independent clinical services organization, accountable for its own future.
Speaker 3: I've assessed our strengths and weaknesses and worked with the four TREA leaders
Speaker 3: The strong team, too, have assessed their respective units and are putting new programs in place.
Speaker 3: We have begun transforming the business.
Speaker 3: Now here's my assessment. Fortria today is a capable CRO that has the scale and management to bring innovation and consistent global delivery to an R&D industry that needs and relies on both.
Speaker 3: Clinical research is complex, and this team is good at it.
Speaker 3: Fortria is a Goldilocks sized organization, not too big, not too small, where customers will find management knowledgeable and readily accessible.
Speaker 3: We have the scale and skills to grow attractively and importantly, organically from here.
Speaker 3: We have the scale and skills to grow attractively and importantly, organically from here. There are a lot of positives to this business.
Speaker 3: Let's remember the roots of this business are in co-vents, one of the longest tenured successful CROs.
Speaker 3: We have global reach in 19,000 professionals.
Speaker 3: There is medical and scientific breadth and depth on par with the best of our industry.
Speaker 3: We punch above our weight on ecology the largest therapeutic area for trials.
Speaker 3: We have a great, diversified customer base with long-term relationships in some cases more than a decade.
Speaker 3: We service both large and small biopharma effectively.
Speaker 3: There are years of experience along with technology tools for working with the LabCore data, and we can bring that to the explosion of clinical data sources now available.
Speaker 3: We have many great executives and a talented workforce throughout the world.
Speaker 3: Our first order of business has been to reignite our new business engine.
Speaker 3: We now have weekly sales calls that involve me and our other business presidents to review and target opportunities.
Speaker 3: We have increased our executive involvement in the sales process, improving the process, targeting a mix, and making sure we apply the advantages of our size, experience, relationships, and our differentiated offerings.
Speaker 3: Another positive RFP flow is improving at a level for attractive growth, importantly with the right mix.
Speaker 3: Our wind rates are improving and our customers large to smaller, engaging us, conversations as to how we can help them transform and streamline how they do clinical development.
Speaker 3: We are at the table.
Speaker 3: As a result, July 2023 has been the best first month of a quarter for new business wins since 2021.
Speaker 3: To shape our vision and strategy for the future, I've been meeting with research and development leaders throughout the spring and early summer, listening to what they need and exchanging ideas.
Speaker 3: we are wrapping our Fortria strategies around what the industry needs. Customers are excited to work with a company that wants to innovate and improve things.
Speaker 3: And we have some nice wins as new management has taken over. Let me give you a few examples of the many successes we've seen.
Speaker 3: We're able to break in with a large, important Asia-Pacific headquartered sponsor to support them in the global development of one of their key oncology assets.
Speaker 3: We had a nice phase 3 win in psoriatic arthritis with one of our small biotech partners because we had completed enrollment ahead of schedule on their phase 2 study.
Speaker 3: We also put together a new preferred partnership that resulted in a nice first award with a mid-tier company in the Medesthetic Press Cancer.
Speaker 3: We're also focusing more on CNS, an area where we've been under penetrated. We want a very interesting and complex early Alzheimer's study for the large pharma company where deep scientific expertise is a prerequisite.
Speaker 3: Our new team's pushing harder on early engagement too, and it's bearing fruit. We've been awarded multiple clinical studies recently that started with initial regulatory strategies or consulting work. We're also seeing pull through in later phases.
Speaker 3: We were awarded several contracts and post-approval patient access this year based on our clinical development work.
Speaker 3: These contracts span several therapeutic areas, including oncology and anti-infectives.
Speaker 3: Our medical device and diagnostic business, which is a leader, has a pipeline of RFPs that continues to grow. In Q2, we saw our highest proposal volume in the last 12 months for this unit.
Speaker 3: and it grew about 40% compared to the first quarter of the year.
Speaker 3: We're also focused on leveraging technology.
Speaker 3: and data analytics, machine learning and AI, and will bring that lens to us.
Speaker 3: Internally, we have pointed a new leader and created the dedicated data sciences team to update our data strategy and keep in tune with that explosion of EMR, genomic, and other focus clinical data providers.
Speaker 3: We have a great leader for industry leading site augmentation strategies making rapid progress, and the team is delivering quantifiable acceleration and startups for new projects.
Speaker 3: We're pursuing investments in enabling services.
Speaker 3: We're also in the process of hiring more Baghdad talent therapeutic areas we're under and a trade-it-in.
Speaker 3: These anecdotes illustrate the progress we're making to deliver value for customers, which will strengthen our growth and financial performance. I'm proud of the progress we've made in a few short weeks since we've been an independent entity. It's a testament to our people around the world and their drive to create a better experience for customers.
Speaker 3: However, we know you would not think of us as good managers if I didn't address the financials specifically.
Speaker 3: We will get our financial house in order.
Speaker 3: We'll get our financial house in order. I have seen other CROs.
Speaker 3: and there's nothing in pricing or operations-wise that's unusual or concerning here.
Speaker 3: This is a disciplined operations organization that can deliver programs with quality.
Speaker 3: However, we do need to invest more in supporting technology, and this spin and the exit from the parent will allow us to completely revise our software suite.
Speaker 3: There's also an opportunity for greater productivity while reducing technology costs.
Speaker 3: We also see procurement facility savings and will align operations costs with revenues more effectively.
Speaker 3: Regarding SG&A, while our numbers as part of the parent have historically looked good on the surface, frankly it all depends on how indirect costs are allocated, which is different for different companies.
Speaker 3: Starting SG&A, while our numbers as part of the parent have historically looked good on the surface, frankly it all depends on how indirect costs are allocated, which is different for different companies. As Jill discussed,
Speaker 3: We see addressing SG&A as well as programmatically exiting the TSAs of the parent on time as key activities that will improve our cost structure and aim to make our margins on par with industry leaders over coming years.
Speaker 3: I want to emphasize the most important thing right now is that this company does great work for customers.
Speaker 3: and it does and it will continue to as the highest priority.
Speaker 3: We have the right team to do this. The new management team is now in charge.
Speaker 3: We're disciplined about both servicing customers and running a business. We're willing to change. We're hungry. This is a seven day a week, 24 hour day job. I'm bringing forward advances that will transform millions of lives and save many more.
Speaker 3: Let me say to the people of Fortria, I've been impressed by you and I'm proud to be working with you.
Speaker 3: We're excited to play our part and driven by our mission of bringing life-changing treatments to the patients faster. Thank you.
Speaker 5: And I'm back to you for question and answer. Thanks, Tom. Would that still now open the call for your questions? Michelle?
Speaker 2: As the reminder to ask a question, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again.
Speaker 2: Please limit to one question and one follow-up, so everyone has an opportunity to ask a question.
Speaker 2: Please stand by while we compile the Q&A roster.
Speaker 2: The first question comes from David Windley with Jefferies. Your line is open. being communicated with our campus57.
Speaker 6: Hi, good morning. Tom, thanks for the transparency in your comments. I wanted to focus on.
Speaker 6: cost structure with kind of two-part question, then I'll drop out. So first
Speaker 6: just to better understand.
Speaker 6: The costs that are weighing on the business now versus the comparable period, and maybe part of the answer might be, it's not totally comparable, but like to understand, in the cost that the business is bearing year over year, that are depressing, large, and then...
Speaker 6: in terms of addressing your forward costs, you commented both at the investor day and also this morning about bonus structure and kind of labor compensation. And I've...
Speaker 3: I'd like to hear your thoughts on how you navigate that and maintain retention at levels that you need to maintain. Thank you. Yeah, I will say Dave, good morning by the way. I've learned a lot about CARB accounting in the last few weeks and the differences here.
Speaker 3: Jill, do you want to, it's a huge question, Dave asked. Do you want to try to give a sense of some of that, and then we'll come back to the retention issue? Yeah, Dave, it's a great question. The first six months, well, obviously, the looking back over the prior year period, that car methodology is different.
Speaker 4: from the actual allocations. We have one month of actuals now, and as you can imagine, we're still trying to work through and understand what are the ongoing costs versus what are still some of the lingering things related to the spin. So we wanted to be very thoughtful as we provided guidance until we've had the opportunity to fully understand and determine-
Speaker 4: the same as the actuals, obviously they come through, but as we go forward with now our own quarters, we'll try to be very clear about calling out the differences between those periods.
Speaker 3: I think what I'd add to that is...
Speaker 3: You know, we do understand now, seeing July , what our cost structure is. And, you know, to some degree, until you see those costs, you don't understand them. Those of you who've been with us on this journey know that we've were, we wanted to wait and give you guidance until after we saw them. That turns out to have been the right.
Speaker 3: of where this organization will land in this unusual year after the spin.
Speaker 3: That being said, as we go forward here, I think you asked the second question, Dave, about retention, and we are building into a management plan the ability for employees to earn a bonus.
Speaker 3: So now that management plan is going to be aggressive and you know, we're going to strive hard to outperform but we are building some of those things into the go-forward plan. So right now our attrition is at normal rates. People are excited to be here. I think we're going to make this a great place for them to work.
Speaker 3: and we're going to compensate them appropriately. Maybe from their operation. Oh, great Dave, you're still on.
Speaker 6: No, I am. Yeah, but I asked enough, so I'll yield. Thank you.
You sure? Okay, thanks, David.
Please stand by for the next question.
The next question comes from Elizabeth Anderson with Evercore. Your line is open.
Hi guys, thanks so much for the question. I guess it's sort of just related to what David was just asking. Do you feel like you're fully staffed at sort of a hundred percent capacity, particularly in the customer facing roles and even sort of the back office roles would also be helpful? And then I guess I heard what you said and thank you for all the detail around sort of the IT...
I assume it's not like a one-year margin journey. So if you can just kind of lay out how you kind of broadly think about the time span, obviously appreciating what you guys just said about having one month of financial and, you know, sort of still digging through all of that. Thanks so much. Joe, can I track some of our competitors? I think we publicly said there are a couple of competitors who have a business mix to trust. My staff did
we've already started associated with both how we're more successful in the marketplace.
but also how we get the cost structure in line over the longer term.
Does that help, Elizabeth? Yep, that's very helpful. Thank you so much. Appreciate it. Bye-bye.
Please stand by for the next question.
The next question comes from KC would ring with JP Morgan. Your line is open.
Hi, thanks for taking my questions and yeah, I'll give you a two-parter as well. So I think going back to the analyst day, I think you noted that there were some customers that had been waiting until the spin closed, until they would kind of book business with you. So curious if that's something you're expecting, if that's upside to the guide or not. And then also at the analyst day, you know, you kind of spoke about how your smaller scale compared to the other larger scale.
You talked about less layers that a customer needs to go through. Can you just elaborate on that? Thank you.
Yeah, thank you very much. In all candor, it's not as if we have a queue of opportunities waiting. I think the way this industry works in general, we saw some opportunities during the course of the year and people deferred or went to others because they were a little concerned. They didn't know who leadership was.
I think the interesting thing is this quarter, over the last few months, the organization has worked hard to try to really make sure we're getting exposure to opportunities and really work on how we collaborate as a team and how we bring our differentiation forward in terms of winning business.
And we're seeing some success out of that. So as I mentioned, July was the best first month of a quarter since 2021, and one of the better ones of last several years for sure, even with COVID considered. So we think that that pipeline is now shaping up with some work on it. It's shaping up for us to achieve attractive growth.
With respect to our Goldilocks size, yeah, I mean the other guys have gotten some have gotten pretty big So our management is accessible I'd say if customers are listening, you know When I when I mark Marius who's our CEO of clinical services when we get involved with a customer They get our mobile phone numbers, you know, we get involved in their product
So we're happy to engage as a management team from top to bottom, make sure we own the product with them. I think we have a great proposition in data sciences. We've actually moved, it's been this explosion of third-party providers. We're going to leverage our experience with the lab core data to really be able to do.
stacks of data providers to bring clinical information to clinical research. We're going to invest in some very strategic technology choices that overlay. We've already got one very interesting tool that's used by our customers to try to understand their projects and we're going to invest behind that further.
We continue to look at process automation and other tools. We have some great talent here. We have over 700 medical doctors in this organization and very much on par with the largest. And so we're going to make sure that that is fully leveraged in coming months. We're changing how we interact and deal with medical docs. So just
without going into the whole sales pitch, I think it's pretty, our customers are responding really well to the essentially the dusty jewels and new jewels that are here to bring to these opportunities.
sales pitch, I think it's pretty, our customers are responding really well to the essentially the dusty jewels and new jewels that are here to bring to these opportunities. Great. Thank you very much.
Thank you. Please stand by for the next question. The next question will come from Max Smock with William Blair. Your line is open.
Hi, good morning. Thanks for taking our questions. There's a two-parter here for me as well. Just at a higher level, one of the things you talked about at the analyst day was your expectation for the CRO market to grow by roughly 3 to 5% in 2024. Just wondering if there's been any change there over the last couple months and what your thoughts are in terms of the timeline for that market growth stepping back up to 6 to 9%.
the loss in the second half of 2023 or is that out of the story here at this point? Thank you.
I'll give Jill a little airtime on the FSP in a minute. We see the market the same way. We haven't had any data that contradicts or changes our view that it's basically very much as you described, Max, that the CRO market's a little bit slower this year, coming probably off the frostiness of COVID.
And then we see out somewhere 2024, 2025, that we're expecting a return to normalcy of that higher single digit growth rate by that combination of outsourcing and R&D growth. Again, we use third parties for this though. So
The only thing that we do here really with it is we say, is that what it feels like? Luckily for us, because we are medium-sized, 19,000 people being medium-sized, zero.