Q3 2023 Science 37 Holdings Inc Earnings Call

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Greetings and welcome to the Science 37 third quarter 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Speaker 1: Greetings and welcome to the Science 37 Third Quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Helper from LifeSci Advisors. Thank you, Steve. You may begin.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Reminder, this conference is being recorded it is now my pleasure to introduce your host Steve Halper from life Science Pfizer's. Thank you Steve you may begin.

Speaker 2: Thank you operator and thank you all for participating in today's call. Joining me are David Coleman, Chief Executive Officer and Mike Zahrenak, Chief Financial Officer. Earlier today, signs 37 released financial results for the quarter-ended September 30th.

Thank you operator, and thank you all for participating in today's call. Joining me are David Coleman, Chief Executive Officer, and Mike <unk>, Chief Financial Officer.

Earlier today signs thirty-seven released financial results for the quarter ended September 30th 20.

Speaker 2: 2023. 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 reformback of 1995.

Twenty-three 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.

Speaker 2: These forward-looking statements are based upon our current estimates of 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.

These forward looking statements are based upon our current estimates of 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.

Speaker 2: We encourage you to review our filings made with the Securities and Exchange Commission for 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.

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 speak only as of today and the company disclaims any obligation to update such statements for new information.

Speaker 2: You are cautioned not to place undue reliance on these forward-looking statements which 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.

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 infer.

Speaker 2: Information about non- GAAP financial measures, reference including a reconciliation of those measures to the most comparable GAAP measures can be found in our SEC filings and in earnings materials available on the investor relations portion of our website at investors.science37.com. I would now like to turn the call over to David Coleman. David.

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 available on the Investor relations portion of our website.

And investors Dod science thirty-seven dot com I would now like to turn the call over to David Colman David.

Speaker 3: Thank you, Steve, and thank you everyone for joining us today for our third quarter 2023 earnings call. I'm pleased to report another quarter of solid revenues with significant progress on profitability and cash management on our path to EBITDA positive and cash flow break even by the end of 2024.

Thank you, Steve and thank you everyone for joining us today for our third quarter 2023 earnings call.

I'm pleased to report another quarter of solid revenues with significant progress on profitability and cash management on our path to EBITDA positive and cash flow break even by the end of 2024.

Speaker 3: Compared to the second quarter, third quarter revenue remained relatively constant as expected, while we achieved significantly higher adjusted gross margins above 40%, gross profit growth of 10%, and adjusted EBITDA improvement of more than 30%, and at the same time cut cash burn in half.

Compared to the second quarter third quarter revenue remained relatively constant as expected, while we achieved significantly higher adjusted gross margins above 40% gross profit growth of 10% and adjusted EBITA improvement of more than 30%.

And at the same time cut.

Cash burn in half.

Speaker 3: These improvements are the result of the plans we put in place as we became laser-focused on our metasite model, including investments in patient recruitment and quality, and the implementation of our near and offshore centers of excellence, and the elimination of expenses that don't support our strategy.

These improvements are the result of the plans we put in place as we became laser focused on our <unk> model, including investments in patient recruitment and quality.

And the implementation of our near and offshore centres of excellence and the elimination of expenses that don't support our strategy.

Speaker 3: Focusing on the investments we've made in patient recruitment in particular, we've been able to significantly accelerate enrollment rates, which has helped us to drive revenue and customer satisfaction.

Focusing on the investments we've made in patient recruitment in particular, we've been able to significantly accelerate enrollment rates, which has helped us to drive revenue and customer satisfaction, where.

Speaker 3: We're crushing enrollment on studies right now across several therapeutic areas, including CNS, respiratory, oncology for diagnostic work, and cardiovascular.

We're crushing enrollment in studies right now across several therapeutic areas, including CNS respiratory oncology for diagnostic work and cardiovascular.

Speaker 3: What's more is that our cost per patient recruited is 75% lower than it was in the first quarter.

What's more is that our cost per patient recruited is 75% lower than it was in the first quarter.

Speaker 3: big part of the reason for our gross margin improvement, which is at its highest level since going public.

Big part of the reason for our gross margin improvement, which is at its highest level since going public.

We've been able to do this by aligning our patient recruitment sources with our customer contracts and gaining more from our existing community of patients and providers and significantly improving our patient conversion rates through ongoing process improvement.

Speaker 3: We've been able to do this by aligning our patient recruitment sources with our customer contracts, gaining more from our existing community of patients and providers, and significantly improving our patient conversion rates through ongoing process improvement.

Speaker 3: Gross bookings for the third quarter were $17.9 million, which was up more than 50% versus the prior year, but down more than 50% from the previous quarter. A result of similar seasonality trends we've seen in prior years, in addition to continued delays and decision making.

Gross bookings for the third quarter were $17 $9 million, which was up more than 50% versus the prior year, but down more than 50% from the previous quarter. A result of similar seasonality trends we've seen in prior years.

In addition to continued delays in decision making.

Speaker 3: Similar to last year, we expect a much stronger fourth quarter as a result.

Similar to last year, we expect a much stronger fourth quarter as a result.

Speaker 3: As we close out the year, we expect that our third quarter bookings delays will have a modest impact on our 2023 revenue. And we're now expected to achieve between $58 million and $59 million for the...

As we close out the year, we expect that our third quarter bookings delays will have a modest impact on our 2023 revenue and we're now expected to achieve between 58 million and $59 million for the year.

We are adjusting our previous 2023 EBIT guidance from a loss of $35 million to a loss of $32 $5 million.

Speaker 3: We are adjusting our previous 2023 EBITDA guidance from a loss of $35 million to a loss of $32.5 million.

Speaker 3: We're also reiterating our guidance for the second half cash burn of less than $15 million.

We're also reiterating our guidance for the second half cash burn of less than $15 million.

Speaker 3: And we continue to anticipate exiting the year with more than $50 million of cash on hand.

And we continue to anticipate exiting the year with more than $50 million of cash on hand.

Speaker 3: We've continued progress on RFP volume and a growing qualified sales pipeline that was more than 33% higher for the fourth quarter than it was for the third quarter. We expect continued bookings and revenue growth in 2024 with a similar approach to expense and cash management.

With continued progress on RFP volume and a growing qualified sales pipeline that was more than 30%, 33% higher for the fourth quarter than it was for the third quarter. We expect continued bookings and revenue growth in 2024 with a similar approach to expense and cash management.

Speaker 3: We have been consistent in our communication that we expect to exit 4th quarter of 2024, even to positive with ample cash on hand without having to raise additional capital.

And we have been consistent in our communication that we expect to exit the fourth quarter of 'twenty 'twenty four EBIT positive with ample cash on hand without having to raise additional capital.

Speaker 3: With that, I'll turn the call over to Mike Zoranek, our Chief Financial Officer, to provide additional details.

With that I'll turn the call over to Mike ceramic our chief financial officer to provide additional details. Thank.

Speaker 2: Thank you, David, and good morning, everyone. I'll discuss the quarter ended September 30th, 2023, and then we'll provide our outlook for the full year, 2023.

Thank you David and good morning, everyone I'll discuss the quarter ended September 30 of 2023, and then we'll provide our outlook for the full year of 2023.

Speaker 2: The David mentioned third quarter gross bookings were 17.9 million, which was $6 million, or 51% higher than the same period of the prior year.

As David mentioned third quarter gross bookings were $17 9 million, which was $6 million or 51% higher than the same period of the prior year.

Speaker 2: We ended the third quarter with $163.1 million in our backlog, which compared to $170.4 million for the same period of the prior year.

We ended the third quarter with $163 1 million and our backlog, which compared to $170 4 million for the same period of the prior year the.

Speaker 2: The backlog at the end of September 2023 also reflected $8.7 million in cancellations and realization adjustments, which represented approximately 5.1% of the beginning backlogs for the quarter.

The backlog at the end of September 2023, also reflected $8 $7 million in cancellations and realization adjustments, which represented approximately five 1% at the beginning backlog for the quarter.

Speaker 2: Third quarter revenues were 14.9 million, which was 1.3 million or 8% lower than the same period of the prior year, and 0.3 million or 3% lower than the second quarter.

Third quarter revenues were $14 9 million, which was $1 3 million or 8% lower than the same period of the prior year and zero point $3 million or 3% lower than the second quarter.

Speaker 2: Adjusted gross profit for the third quarter was $6.1 million, an increase of $1.5 million, or 32% compared to the same period of the prior year, and up about $500,000, or 10% sequentially, versus the second quarter.

Adjusted gross profit for the third quarter was $6 1 million, an increase of $1 5 million or 32% compared to the same period of the prior year and up about $500000 or 10% sequentially.

Since the second quarter.

Speaker 2: We were particularly pleased with our adjusted gross margin for the fourth quarter. This was 40.8%, which was up 12.5% of points from the same period last year, and up 4.8% of points from the second quarter of 2023.

We were particularly pleased with our adjusted gross margin for the fourth quarter. This was 48%, which was up 12.5 percentage points from the same period last year and up four eight percentage points from the second quarter of 2023.

Speaker 2: Similar to the second quarter, much of this gross margin improvement was the result of our patient recruitment efforts, and to a lesser extent, continued improvements in utilization rates across the organization.

Similar to the second quarter much of this gross margin improvement was the result of our patient recruitment efforts and to a lesser extent continued improvements in utilization rates across the organization.

Speaker 2: Moving over to SG&A, selling general and administrative expenses excluding $3.7 million of stock-based compensation and depreciation.

Moving over to SG&A, selling general and administrative expenses, excluding $3 $7 million of stock based compensation and depreciation.

Speaker 2: We're 11.7 million in the third quarter. This was down 7.5 million or more than 39% compared to the same period last year. And down 1.4 million or approximately 11% sequentially. Mo...

$11 7 million in the third quarter. This was down $7 5 million or more than 39% compared to the same period last year and down $1.4 million or approximately 11% sequentially.

Most of the decline.

Speaker 2: in the S-GNA compared with the second quarter relates to incentive compensation accruals adjusted for the third quarter actual bookings performance. And to a lesser extent, a full quarter's worth of cost reduction realization from our April restructuring activity.

In the SG&A compared with the second quarter relates to incentive compensation accruals adjusted for the third quarter actual bookings performance and to a lesser extent a full quarters worth of cost reduction realization from our April restructuring activities.

Speaker 2: Adjusted EBITDA, which we calculate by adding back depreciation, amortization, taxes, interest, other income, stock-based compensation, and other non-cash charges, was a loss of $5.2 million in the third quarter, representing $9.4 million, or a 64% improvement compared to the same period of the prior year, and a $2.3 million, or a 30.9% sequential improvement compared to the second quarter.

Adjusted EBITDA, which we calculate by adding back depreciation amortization taxes interest other income stock based compensation and other noncash charges was a loss of $5 $2 million in the third quarter, representing $9 4 million or 64% improvement compared to the same period of the prior year and a $2 3 million.

39% sequential improvement compared to the second quarter.

Speaker 2: This is our best quarterly adjusted EBITDA performance since becoming a public company two years ago. Over this period, we've been able to reduce our cost basis, which we define as the difference between revenue and adjusted EBITDA, by more than 50%.

This is our best quarterly adjusted EBITDA performance since becoming a public company two years ago.

Over this period, we've been able to reduce our cost basis, which we define as the difference between revenue and adjusted EBITDA by more than 50%.

Yes.

Speaker 2: Consistent with the factors we cited on our second quarter earnings call US Gap required us to record a non-cash impairment charge of 5.5 million related to our long-lived assets in the third quarter

Consistent with the factors we cited on our second quarter earnings call U S. GAAP required us to record a noncash impairment charge of $5 5 million related to our long lived assets in the third quarter among.

Speaker 2: Among other things, this continues to be a result of our market capitalization, which was less than book value in cash for a sustained period of time.

Among other things. This continues to be a result of our market capitalization, which was less than book and book value and cash for a sustained period of time.

Speaker 2: On a US GAAP net loss basis, third quarter represented a 13.9 million loss versus a US GAAP net loss of 23.5 million in the third quarter a year ago, which represents almost a 29% improvement year over year.

On a U S. GAAP net loss basis third quarter represented a $13 9 million loss versus a U S. GAAP net loss of $23 5 million in the third quarter, a year ago, which represents almost 29% improvement year over year.

Speaker 2: The adjusted net loss for the third quarter was 5.4 million.

The adjusted net loss for the third quarter was $5 4 million.

Speaker 2: Compared to an adjusted net loss of 19.5 million in the same period last year, which represents a 72% improvement over the prior year.

Compared to an adjusted net loss of $19 5 million in the same period last year, which represents a 72% improvement over the prior year.

Now I'll turn it into cash.

Speaker 2: We ended the quarter with approximately $56 million in cash and cash equivalents. In the third quarter, our cash burn, which is the difference between balance sheet cash and cash equivalents from June 30th to September 30th, was approximately $8.6 million, which represents a sequential improvement of approximately $8.8 million versus the second quarter. In other words, we effectively cut our cash burn in half on a sequential basis.

We ended the quarter with approximately $56 million in cash and cash equivalents in the third quarter, our cash burn, which is the difference between balance sheet cash and cash equivalents from June 30th to September 30th was approximately $8 $6 million, which represents a sequential improvement of approximately $8 8 million versus the second quarter.

In other words, we effectively cut our cash burn in half on a sequential basis.

Speaker 2: Now, let's turn to the outlook for 2023. As David noted previously, we are providing updated full year 2023 revenue guidance of $58 million to $59 million.

Now, let's turn to the outlook for 2023 as David noted previously we are providing updated full year 2023 revenue guidance of 58 million to $59 million.

Speaker 2: Our previous commentary around fourth quarter gross margins was in the mid 30% range. We now expect gross margins to come in in the mid to upper 30% range. This reflects margin expansion relative to historical results and previous expectations.

Our previous commentary around fourth quarter gross margins was in the mid 30% range. We now expect gross margins to come in and in the mid to upper 30% range. This reflects margin expansion relative to historical results in previous expectations.

Speaker 2: However, we do not expect to repeat our record high third quarter results for adjusted gross margin due in part to higher expected pass-through revenues related to several studies in the fourth quarter.

However, we do not expect to repeat our record high third quarter.

Results for adjusted gross margin due in part to higher expected pass through revenues related to several studies in the fourth quarter.

Speaker 2: As we previously stated, at our current size and scale, a single project or two can have a material impact to our results.

As we've previously stated at our current size and scale of a single project or two can have a material impact to our results.

In addition, we expect an increase in SG&A from the third quarter to the fourth quarter.

Speaker 2: In addition, we expect an increase in SGA from the third quarter to the fourth quarter, in part due to expected increases in incentive compensation accruals, and to still outperform our previous adjusted EBITDA guidance of negative 35 million. Instead, we are now forecasting 32.5 million adjusted EBITDA loss, an improvement of approximately 2.5 million versus our previous.

In part due to expected increases in incentive compensation accruals and to still outperform our previous adjusted EBITDA guidance of negative $35 million instead.

Instead, we are now forecasting $32 5 million adjusted EBITDA loss improvement of approximately $2 $5 million versus our previous guidance.

Speaker 2: Moving over to cash flow, consistent with our guidance on the second quarter earnings call. We remain on track to achieve a second half, 2023 cash burn of less than $15 million. And we expect to exit the year with more than $50 million of cash on hand.

Moving over to cash flow consistent with our guidance on our second quarter earnings call. We remain on track to achieve.

Second half 'twenty twenty-three cash burn of less than $15 million and we expect to exit the year with more than $50 million of cash on hand.

While we will provide initial 2024 guidance when we report the fourth quarter 2023 earnings given our backlog visibility our continued progression on RFP volume.

Speaker 2: Well, we will provide initial 2024 guidance when we report the fourth quarter 2023 earnings, given our backlog visibility, our continued progression on RFP volume, and our growing quarterly.

Our growing quarterly.

Speaker 2: Qualified phased sales pipeline, which is more than 33% higher for the fourth quarter than it was at the same point in the third quarter We do expect revenue growth in 2024 We are targeting full year 2024 adjusted gross margins of 40% or more as we continue to realize efficiencies on the patient recruitment front the value from our technology investments and increases in utilization rates delivering a higher gross profit with continued leverage on SG&A

<unk> phase sales pipeline, which is more than 33% higher for the fourth quarter than it was at the same point in the third quarter, we do expect revenue growth in 2024.

We are targeting full year 2024, adjusted gross margins of 40% or more as we continue to realize efficiencies on the patient recruitment front the value from our technology investments and increases in utilization rates delivering a higher gross profit with continued leverage on SG&A.

Speaker 2: In summary, we are encouraged by our third quarter 2023 results and remain optimistic as we continue towards a path to profitability. At this point, I'd like to turn the call back over to David for closing comments.

In summary, we are encouraged by our third quarter 2023 results and remain optimistic as we continue towards the path to profitability.

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

Speaker 3: Thank you, Mike. We remain focused on our strategy and the actions we are taking to execute our goals. We're pleased with the financial results of the third quarter and we look forward to a strong end of the year from our commercial team.

Thank you Mike we remain focused on our strategy and the actions we are taking to execute our goals. We're pleased with the financial results of the third quarter and we look forward to a strong end of the year from our commercial team we're.

Speaker 3: We're on track to reach our financial goal of adjusted EBITDA.

We're on track to reach our financial goal of adjusted EBITDA.

Speaker 3: and cash low positive by the fourth quarter of 2024 without having to raise additional capital. And with that, I'll tell you.

And cash flow positive by the fourth quarter of 2024 without having to raise additional capital.

And with that I'll open it up for questions.

Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your mind is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment please, while we pull for questions.

Thank you we will now be conducting a question and answer session.

We'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for question.

Yes.

Our first question comes from Charles <unk> from Cowen <unk> Company. Charles Please proceed.

Speaker 1: Our first question comes from Charles Reeve from Cowan & Company. Charles, please proceed. Yeah, thanks for

Yeah, Thanks for taking the questions.

Speaker 4: Wanted to ask quickly on the bookings for the quarter, on the cancellations, I know last quarter a good chunk of it was COVID related. I think we're expecting about 8 million in backlog from COVID still that could be canceled. In the current quarter on the 8.7, how much of that was COVID related?

Wanted to ask quickly on the bookings for the quarter on the cancellations I know last quarter a good chunk of it was COVID-19 related I think we're expecting about $8 million in backlog from COVID-19 still that could be cancelled in.

In the current quarter on the 8.7, how much of that was COVID-19 related.

About $1 million. So if you take a look at what we presented last quarter, our watchlist shrank in proportion to the adjustments that we had in the quarter.

Speaker 3: about a million. So if you take a look at what we presented last quarter, our watch list shrank in proportion to the adjustments that we had in the quarter. It now comprises about $7 million in COVID risk mitigation work and about $17 million for studies that may reach your endpoint early or be reprioritized. So as we've done in the past, we've anticipated this already and adjusted our backlog and guidance accordingly.

And now comprises about $7 million in Covid risk mitigation work and about $17 million for studies that may reach your endpoint.

Early or be re prioritized.

As we've done in the past we've anticipated this already.

And adjusted our <unk>.

Backlog in guidance accordingly.

Speaker 4: That's helpful. And then secondly, Dave, you talked about seasonality and I understand that, but the drop in, the sequential looks a little bit bigger than that would have expected. Anything else, you kind of mentioned delays and decision making. If you could kind of go into sort of what the conversations are having are like, what you're hearing from sponsors, that might be causing some of these delays. And um...

Okay. That's helpful. And then secondly, David you talked about seasonality and I understand that but the drop in the sequential looks a little bit bigger than I would've expected.

Oh, So you kind of mentioned delays in decision making.

If you could kind of go into sort of what the conversations are happening are like.

You know what what you're hearing from sponsors.

That might be causing some of these delays and.

Speaker 4: And sort of what, you know, how are you thinking about the fourth quarter? You expect a strong fourth quarter, but maybe you can give us some signs of what you're seeing that gives you confidence that we'll see.

And sort of what how how are you thinking about the fourth quarter, you expect a strong fourth quarter, but maybe you can give us some signs of what youre seeing that gives you confidence that that will we'll see those thanks.

Speaker 3: Well, our deal sizes do continue to be very large, and as such, the decision-making is at a higher level within the organizations, and the time to make those decisions continue to increase. And so we had some bookings we expected in the third quarter that ended up getting pushed off into the fourth quarter. And.

Well our deal sizes do you continue to be very large and as such that the decision making is at a higher level within the organizations and the time to make those decisions continue to incur.

The increase in so.

We had some bookings we expected in the third quarter that ended up getting pushed off into the fourth quarter and.

Yeah, we.

Speaker 3: will continue to push hard from a commercial standpoint to try to close things within the quarter. But when you're starting to talk about larger deals like we're

We'll continue to push hard from a commercial standpoint to try to close things within the quarter, but when you're starting to talk about larger deals like we are.

Speaker 2: participating in today, it does have that net effect of, you know, sometimes delays in the decision-making. And one thing to add to that, as we mentioned in the prepared remarks, to sort of amplify sort of where we sit right now, one, if you look at the quarterly phase

Participating in today.

It does have that net effective.

Sometimes delays in decision, making and one thing to add to that as we mentioned in the prepared remarks.

To sort of amplify sort of where we sit right now one if you look at the quarterly phased qualified sales pipe.

Speaker 2: Qualified sales pipe at this point in Q4. It's about 33% higher than it was. It's the same point in time in Q3. So that gives us some increased level of visibility as we look to close out Q4 strong and up from a bookings perspective. Yeah, that's helpful. Thanks, so.

At this point in Q4, it's about 33% higher than it was at the same point in time in Q3, so that gives us some increased level of visibility as we look to close out Q4 strong and up from a bookings perspective.

Yeah. Okay. That's helpful. Thanks, I appreciate it thanks guys.

Charles Thanks Charles.

Okay.

Yes.

Yeah.

Speaker 1: Our next question comes from Matt Hewitt from Craig Hallam. Matt, please proceed.

Our next question comes from Matt Hewitt from Craig Hallum, Matt. Please proceed.

Speaker 5: Good morning, thank you for taking the questions. First up on the gross margins, obviously congratulations, very strong improvement there both year-on-year and sequentially, and it sounds like that's sustainable. Maybe a little bit of a step back here in Q4, but as we start to look at fiscal 24 and even further out, are these changes that you've made from a recruitment standpoint not only sustainable, but are they repeatable into other segments of the market?

Good morning, Thank you for taking the questions maybe first step on the gross margins obviously congratulations.

Strong improvement there both year on year and sequentially and it sounds like that's sustainable maybe a little bit of a step back here in Q4, but as we start to look at fiscal 'twenty four and even further out are these changes that you've made from a recruitment standpoint, not only sustainable but are they repeatable into other segments of the.

The market.

Speaker 5: I sure understand the, are they repeatable in other segments of the market part of that? Can you clarify? Well, so you mentioned you called out CNS, respiratory, I mean, are there some other areas that you could roll those recruitment efforts out in expand, obviously the market opportunity there?

I'm not sure I understand the are they repeatable in other segments of the market part of that can you clarify.

So you mentioned you called out CNS respiratory card or I mean are there. Some other areas that you could roll those recruitment efforts out in and expand obviously the market opportunity there yeah.

Speaker 3: Yeah, I don't think there's therapeutic specific in terms of the performance and our ability to gain the margins that we have. We do expect some higher than higher pass through expenses in the fourth quarter, which is going to have a little bit of a dip from the 40.8 that we were able to recognize in the third quarter.

Yeah, I don't think the therapeutic specific in terms of the performance and our ability to gain the margins that we have and we do expect some higher than higher pass through expenses in the fourth quarter, which is going to have a little bit of a dip from the 48 that we were able to recognize in the third quarter, but we do expect.

Speaker 3: But we do expect as we go into 2024 to be at or above that 40% range throughout the year. And that's driven by our ability to execute the patient recruitment as we have been. It's driven by our additional technology improvements that we've been able to make. And it's driven by our increased utilization rates that we've been able to achieve as well.

As we go into 2024 to be at or above that 40%.

Range throughout the year and.

That's driven by our ability to execute the patient recruitment as we have been it's driven by our additional technology improvements that we've been able to make and it's driven by our increased utilization rates that we've been able to.

Achieve as well.

Speaker 3: So yes, we do expect that to improve as we move forward into the future. And frankly, as a tech-enabled site, we expect long-term for that to be in the mid-40s.

So yes got to expect that to improve as we move forward into the future and frankly as a as a tech enabled site, we expect long term for that to be in the mid forty's.

Speaker 5: That's great. And then maybe one separate question. So we're now a couple quarters removed from when the FDA draft guidance came out encouraging decentralized trials. Obviously, pharma, the industry doesn't move on a dime, but now we're a couple quarters removed. What, what has changed or what do you see changing as a result of that draft guidance? Is that something that we should be excited about as we look to fiscal 24? Thank you.

That's that's great and then maybe one separate question. So we're now a couple of quarters removed from when the FDA draft guidance came out encouraging decentralized trials.

<unk> pharma the industry doesn't move on a dime, but now we're a couple of quarters removed what what is changed or what do you see changing as a result of that draft guidance is that something that we should be excited about as we look to fiscal 'twenty four thank you.

Speaker 3: Yeah, thanks, Matt. We expect that to continue to have momentum for us. As I've said on previous earnings calls, if you look at the draft guidance, the way that it has been written, you know, it.

Yes, Thanks, Matt.

Expect that to continue to have momentum for us as.

As I've said on previous earnings calls if you look at the draft guidance the way that it has been written.

Hey.

Speaker 3: It validates the model in terms of what we're trying to do, and it validates the data that's being provided, which is super important in the past that's been a question, I think, from an economic buyer perspective. If you look at the SOPs that...

It validates the model in terms of what we're trying to do.

And it validates the data that's being provided which is super important in the past that's been a.

Question, I think from a economic buyer perspective.

If you look at the S O piece of that.

Speaker 3: It requires in order to be able to execute, it reads like a science 37 operations manual. So we're super pleased about it in regards to the sentiment behind it. We have definitely had sponsor customers.

It requires in order to be able to execute it reads like a science 37 operations manual so we're super pleased about it.

In regards to the sentiment behind it we have definitely had sponsor.

Speaker 3: slash customer conversations that have circled back to that guidance and referenced the fact that it's there, which gives them confidence to be able to execute a metasite with them.

Slash customer conversations that have circle back to that guidance and referenced the fact that it's there which gives them confidence to be able to execute.

Meta site with them with.

Speaker 3: with confidence. And so, you know, we just believe that's going to continue to increase as we go forward into 2024 and beyond. The.

With confidence and so we just believe that's going to continue to increase as we go forward into 2024 and beyond.

That's great. Thank you.

Thanks, a lot Matt Thanks, Matt.

Yeah.

Speaker 1: Our next question comes from Max Smock with William Blair. Max, please proceed.

Our next question comes from Max Smock with William Blair Max. Please proceed.

Speaker 6: Hi, good morning. It's Christine Raines on for MaxMoc. Thanks for taking our questions.

Hi, good morning, its Christine range for Max Smock.

Thanks for taking our questions.

Speaker 6: I was curious, while I appreciate you're not prepared to give full year 2024 guidance and we're definitely happy to hear you say top line growth is expected for next year, but hoping you can give more color on a broad range for top line expectations.

I was curious while I appreciate you're not prepared to give full year 2020 for guidance and we're definitely happy to hear you say topline growth expected for next year, but hoping you can give more color on a broad range for topline expectations for next year.

Speaker 3: Well, we'll provide more detailed guidance when we come to the next quarter's earnings call. What we can tell you as we, you know, throughout the year, the RFP volume increased for us, we can tell you that between the third quarter and fourth quarter qualified.

Well, we'll provide more detailed guidance when we come to the next quarter's earnings call. What we can tell you as we go.

Throughout the year, the RFP volume increase for us and we can tell you that.

Between the third quarter and fourth quarter.

Qualified.

Speaker 3: Pipeline increased for us over 33%, and so that.

Pipeline increased for us over 33% and so that.

Speaker 3: foreshadows a good future for us in terms of bookings growth, which ultimately will have an improvement in revenue as we increase throughout 2024. I don't know if you have any more color to add on to that, Mike. No, I think that you said it well.

Foreshadows a good future for us in terms of.

Bookings growth, which ultimately will have an improvement in revenue as we increase throughout 2020 for I don't know if you had any more color to add on to that Mike I think you said it well okay.

Great. Thanks, and then I was hoping you can talk about relative bookings and cancellations.

Speaker 6: And then I'm also hoping you can talk about relative bookings and cancellations by customer size and development.

By customer size and development phase on the border.

Yeah.

Yeah.

Speaker 3: I don't know if we have any specifics that we can share on that. I do think that what we've shared is some of the COVID risk mitigation work that we had pointed out as an area of risk. As we said earlier, that's about $7 million of our COVID-19 response to COVID-19.

I don't know if you have any specifics that we can share on that.

I do think that what we've shared some of the COVID-19 risk mitigation work that.

We had pointed out as an area of risk.

As we said earlier that was that's about $7 million of our.

Speaker 3: studies at risk, most of those are within large pharma. The remainder that we've discussed is a cross-section, I think, across most, you know, all different customer types in therapeutic care.

Studies that that risk most of those are with in large pharma and the remainder that we discussed is a cross section I think across most.

You know all different customer types and therapeutic areas.

And as David said earlier in the prepared remarks.

Speaker 2: And as David said earlier in the prepared remarks, the the level of projects on the watch list list has decreased. He talked about the going from 8 million on the coven mitigation down to 7 million.

The level of projects.

Projects on the watch less list has decreased.

He talked about going from $8 million on the Covid mitigation down to $7 million.

Speaker 2: And then the 25 million going down to about 17 million on the other stuff. So you know, we're continuing to to monitor that and

And then the $25 million going down to about $17 million on the other stuff. So.

We're continuing to monitor that and.

Speaker 3: know as we discussed previously you know a single study or two can have a material impact on the results yeah but it's going in the right direction in the right direction for sure

As we discussed previously a single study or two can have a material impact on the results.

Yeah, but it's going in the right direction in the right direction for sure.

Great. Thanks for taking our questions.

Thank you.

Speaker 1: Our next question comes from Frank Tuckanen from Lake Street. Frank, please proceed.

Our next question comes from Frank Kekkonen from Lake Street, Frank. Please proceed.

Speaker 7: Hey, good morning. This is Nelson Cox on for Frank. Just quickly, a lot of my questions have been answered here. So thank you. But I want to just ask, broadly speaking, any pockets of particular strength or weakness to point out in relation to your customers as we move into 2024 or anything that you can just point to and just I'd be helpful.

Hey, Good morning. This is Nelson Cox on for Frank just quickly a lot of my questions have been answered here. So thank you, but I want to just ask broadly speaking any pockets of particular strength or weakness to point out in relation to your customers as we move into 2024 or anything that you can just point to and just that'd be helpful.

Yeah.

Speaker 3: I would say, I take it back to our value proposition, you know, we made a strategic

Well I would say I take it back to our value proposition and you know we made a strategic.

Speaker 3: Shift about this time last year to focus on the metastite. It's a tech enabled clinical trial site in order to

Shift about this time last year to focus.

On the meta site, it's a tech enabled clinical.

Clinical trial site in order to be able to.

Speaker 3: take advantage of a larger market, be super focused in terms of our ability to deliver. I think we're starting to see some traction on that. And frankly, it's a bigger market if you look at what's being spent.

Yeah take advantage of a larger market.

B Super focused in terms of our ability to deliver I think we're starting to see some traction on that and frankly, it's a bigger market and you look at what's being spent.

Speaker 3: U.S. sites alone is about $9 billion versus DCT alone, which is about $3 billion. If you take into account Europe , that's another $17 billion. So I think we've leapt to a much larger market opportunity, and I think we're being recognized now as a site, which is ultimately the value proposition that we've put in place and is resonating with our sponsors.

U S sites alone, it's about $9 billion versus DCT alone, which is about three $3 billion.

If you take into account Europe, that's another set that $17 billion. So I think we've left to a much larger market opportunity.

And I think we're being recognized now as.

Our site, which is ultimately the value proposition that we put in place and is resonating with our sponsors and.

Speaker 3: We just became members of the Society for Chemical Research Sites, which is a testament to the direction that we've gone.

We just became members of the.

Society for clinical research sites, I think which is a testament to the direction that we've gone and.

Speaker 3: Acceptance of this model as being something a bit different from a traditional clinical trial site, but can offer speed and access to patients that no other site can actually provide, which makes us a great complement to a traditional site network.

Acceptance of this model is being something.

Bit different from a traditional clinical trial site, but can offer speed and access to patients that no. Other site can actually provide which makes us a great complement to traditional site network.

Got it thank you.

Thanks, a lot for the question Nelson.

Yeah.

Okay.

Operator.

I'm going to assume that there is no.

Speaker 3: I'm going to assume that there's no further questions and thank everybody for your time.

Further questions.

And thank.

Thank you everybody for your time.

This concludes our question and answer session I would like to turn the floor back over to David for closing comments.

Speaker 1: This concludes our question and answer session. I would like to turn the floor back over to David for closing comments.

Speaker 3: Okay, I'd just like to thank everybody for joining us today. Thanks for the questions today and appreciate another good quarter.

Okay I'd just like to thank everybody for joining us today, thanks for the questions today and.

I appreciate it another good quarter.

Speaker 8: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Yes.

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