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spk00: Good morning, everyone. With me on the call today are Alistair McDonald, our Chief Executive Officer, Jason Meggs, our Chief Financial Officer, Michelle Keefe, our President of Commercial Solutions, and Paul Colvin, our President of Clinical Solutions. In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at investor.cineoshealth.com. Remarks that we make about future expectations, plans, growth, anticipated financial results and prospects, and our expectations regarding the COVID-19 pandemic constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995, and we disclaim any obligation to update them. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. These factors are discussed in the risk factors section of our Form 10-K for the year ended December 31st, 2020. During this call, we will discuss certain non-GAAP financial measures which exclude the effects of events and transactions we consider to be outside of our core operations. These non-GAAP measures should be considered a supplement to, and not a replacement for, measures prepared in accordance with GAAP. For reconciliation of non-GAAP financial measures with the most directly comparable GAAP measures please refer to the appendix of our presentation. I would now like to turn the call over to Alistair MacDonald. Alistair?
spk02: Thanks, Ronnie. Good morning, everyone, and thank you for joining us today. I hope you and your families are safe and in good health. I am excited that our team delivered strong first quarter results, exceeding the midpoint of our guidance across all financial metrics as we continue to execute through the continuing impacts of COVID-19. We had another strong quarter of gross awards across both segments, and our integrated product offerings continued to fuel strong backlog growth. Total reported revenue continued to grow sequentially, and importantly, returned to year-over-year growth. We are enthusiastic that our unique strategy continues to resonate in the market. We continue to deliver on our value creation plan by further penetrating large pharma and enhancing our SMID leadership position, and accelerating our SINEOS 1 and full-service commercial offerings. We believe our global scale, integrated capabilities, and unique product development strategy positions us well in this environment as we continue to gain share and remain focused on high-quality execution. we expect strong year-over-year growth for the balance of 2021, primarily driven by our robust backlog of both COVID-19 treatment and vaccine trials, plus our non-COVID-related projects. As we all know, the CRO space has recently witnessed increased consolidation activity. We believe this is a sign of the underlying strength and attractiveness of our sector and provides a positive backdrop to the future. Now, for other key highlights from the quarter, First, we closed Q1 with solid net new business awards, resulting in book-to-bill ratios of 1.3 times for clinical solutions, 1.23 times for commercial solutions, and 1.28 times in total. This produced a record clinical backlog with year-over-year growth of 22.5%, deployment solutions backlog growth of 7.6%, and a total company trailing 12-month book-to-bill ratio of 1.32 times. Second, we achieved strong profitability gains in the first quarter with 10% year-over-year adjusted EBITDA growth and 70 basis point adjusted EBITDA margin improvement compared to the first quarter of 2020. Third, we achieved a strong start to cash flow for 2021 with net cash provided by operations of $127.1 million, which represents a record for the first quarter. Now getting into the details of our results and operating metrics for each business. During the first quarter, we continued to recover from the impact of COVID-19, with total revenue growth of 6% compared to the fourth quarter of 2020. Clinical solutions revenue grew 8.6% over the fourth quarter, driven by contributions from our acquisitions of Syntaract and Illingworth Research Group, and an acceleration in the startup of new clinical projects, including a continued recovery in reimbursable expenses. Our clinical team also delivered a record quarter of gross awards, further demonstrating the strong demand we are experiencing. We did, however, experience some pipeline reprioritizations that impacted our net book-to-bill ratio, the effects of which were offset by demand from replacement projects and the acceleration of existing projects. Therefore, these changes do not impact our revenue expectations for full year 2021. Our TTM book-to-bill ratio remains strong at 1.39 times, including the impact of acquisitions. Clinical Solutions is well positioned for accelerated revenue growth over the balance of 2021, driven by strong sales, record-ending backlog, and a record pipeline of new opportunities. We also achieved continued success in winning COVID-19-related clinical projects during Q1. although this rapidly evolving therapeutic area represented less than 4% of our backlog at the end of the quarter. Our clinical teams continue to experience gradual improvement in their access to investigative sites, which we believe has stabilized at a point where we are largely able to obtain the level of access needed to ensure all trials are progressing. Currently, over 70% of sites are permitting some level of physical visits, which can vary period to period based upon a site's capacity and the requirements of a given trial. The remainder of our sites are accessible via some level of remote monitoring activity. While sites continue to be cautious amid localized increases in COVID-19 cases, we believe they are well prepared to operate in this environment, and we continue to expect further recovery in our level of physical access as 2021 progresses. We are also experiencing ongoing improvement in the pace of both patient enrollment and startup of new clinical trials. By mid-April, the new patient enrollment rates and new site activations were trending at approximately 150% of pre-COVID levels. We expect the strength in site activations and enrollment, along with our COVID vaccine trials, to increase our backlog conversion and accelerate year-over-year clinical solutions revenue growth for the balance of this year. As customers continue to search for innovative ways to drive efficiency and bring trials closer to the patient, we are continuing to invest in our decentralized clinical trial solutions. Our recently announced partnerships with Science37 and Medible will offer customers a seamless and integrated technology platform to streamline work orchestration, real-world evidence generation, and data harmonization. These approaches will improve data capture, patient access to trials, and the patient experience Both Science 37 and Medival are now part of our dynamic assembly network. When combined with the home health and mobile research nursing capabilities at Villingworth Research Group, we are able to advance our best-in-class decentralized clinical trial model, decreasing patient and site burden, and often allowing patients to remain in their homes and with their primary care physicians. Decentralized solutions also furthers our DE&I mission to engage more diverse, representative patient populations, and increased access for patients who previously could not participate in clinical research. Turning now to commercial solutions, we continue to see sequential growth in our core business with the pace of recovery overcoming our typical first quarter seasonal trend. This growth was more than offset by the divestiture of our medication adherence business, resulting in a decline in total revenue of 1.9% compared to the fourth quarter, Our commercial team once again had a strong quarter of net awards with year-over-year growth of 10.6%, increasing our TTM book-to-bill ratio to 1.09 times. Importantly, our full-service commercial gross awards increased by nearly 60% compared to the first quarter of 2020, demonstrating that our integrated delivery model is increasingly penetrating the market and appealing to customers of all sizes. This awards performance drove deployment solutions backlog growth of 7.6% compared to the first quarter of 2020. Our cutting-edge customer engagement capability, Kinetic, is being deployed to support the education and awareness of many COVID-19 therapies with emergency use authorization, pioneering the frontiers of commercial best practices. Our unique ability to integrate expertise across medical, regulatory, communications, consulting, and Kinetic has enabled the delivery of customized education to service the specific needs of the EUA environment. This is a further demonstration of the leadership position we have established and the innovative approaches we provide to customers as they navigate the evolving commercial market. We continue to leverage our innovative kinetic capabilities to optimize HCP engagement through a combination of face-to-face and virtual field team activities, which help enable very strong first-quarter editions of field representatives. Our communications business also continues to see increased demand for strategic integrated programs, and our consulting practices are experiencing double-digit year-over-year growth. This comprehensive suite of capabilities is fueling growth in our full-service commercial portfolio. We expect these dynamics, coupled with strong battle of growth and demanding deployment solutions, to drive sequential and accelerating year-over-year commercial solutions growth as we progress through 2021. Our unique Cineos One product development offering also continues to resonate strongly in the market, particularly with our small to mid-sized customers. The awards influenced by Cineos One today have primarily been for the clinical component of product development, but we are seeing an increase in contribution to commercial awards. We expect the first Cineos One portfolio asset to begin commercialization in the second half of this year, followed by additional assets in the coming years, providing an incremental pipeline for future commercial awards and revenue. We are also seeing early signs of success in the collaboration between Cineos One and Synterex, further supporting earlier stage work for these customers. Before I turn the call over to Jason, I again want to offer my sincere thanks to the entire Cineos Health community for their ongoing resilience, focus, and collaboration. They continue to help build a superior culture with each other, and they continue to deliver the best execution for our customers and their patients under challenging circumstances. Jason will now provide additional comments on our financial performance and guidance. Jason?
spk11: Thank you, Alistair, and good morning, everyone. Our total revenue for the quarter of 2021 was $1.21 billion, up 3.9% and 2.9% in constant currency compared to the first quarter of 2020. Note that as outlined on slides 5 and 11 of our earnings presentation, our comments today reflect a recast of our regulatory and operational consulting practices from the commercial solution segment to the clinical solution segment. Moving the practices to the clinical solution segment more appropriately aligns the services to better serve our customers. Our clinical solutions revenue for the first quarter was $938 million, up 6.3% or 5.2% in constant currency compared to the first quarter of 2020. These increases include a contribution of 575 basis points from acquisitions and increased project startup activity. This growth was partially offset by a headwind of 140 basis points from the 2020 divestiture of our contingent staffing business and 130 basis point headwind from the solar recovery and reimbursable expenses. Our first quarter commercial solutions revenue was $270.8 million, down 3.6% or 4.2% in cost of currency compared to the first quarter of 2020. This decline in commercial revenue includes a 420 basis point headwind from reimbursable expenses, driven by the impacts of COVID-19 and a 245 basis point headwind from the divestiture of our medication adherence business. This decline was partially offset by growth in our consulting business. Adjusted EBITDA increased 10% to $151.1 million, representing an adjusted EBITDA margin of 12.5%, an increase of 70 basis points compared to the first quarter of 2020. The increase in adjusted EBITDA margin for the first quarter was primarily the result of favorable revenue mix and our forward bound program, partially offset by the impact of foreign exchange. Adjusted dilute EPS of 79 cents for the first quarter increased by 16.2% year over year, primarily driven by the increase in adjusted EBITDA and lower interest expense. Our operations generated $127.1 million in cashflow for the first quarter, significant improvement from utilizing $38.6 million in the first quarter of 2020. DSO for the quarter improved to 39.2 days. Further, our capital expenditures for the first quarter were $11.2 million, and we expect $65 to $75 million for the full year. We ended the quarter with $264.4 million of unrestricted cash and total debt outstanding of $2.92 billion, resulting in net leverage of 4.1 times. We remain committed to achieving our net leverage target of three to 3.5 times by the end of this year. During the quarter, we repaid $41.8 million of our term loan A and $64.1 million of our term loan B, partially funded by the $65 million expansion of our AR securitization facility. We also repurchased $44.5 million of our outstanding shares. Our non-GAAP effective tax rate for the first quarter was 24%. consistent with our expectations for the full year 2021. Turning now to our 2021 guidance. This guidance contemplates our current view of the estimated impact of COVID-19 on our business, recognizing that factors related to COVID-19 are outside of the company's control. We continue to expect full year 2021 revenue in the range of $5.13 billion to $5.33 billion, representing growth of 16.1% to 20.6%. This growth includes an estimated contribution from acquisitions of 540 to 580 basis points and a headwind from our 2020 divestitures of approximately 110 basis points. We continue to expect total adjusted EBITDA in the range of $745 million to $785 million. This represents an adjusted EBITDA margin of 14.5 to 14.7%, up 30 basis points from 2020 up to midpoint. Lastly, we are increasing our expected adjusted diluted EPS to a range of $4.17 to $4.42, or year-over-year growth of 22.3% to 29.6%, primarily to reflect the impact of our first quarter share repurchases and our expectation of lower interest expense. Our guidance incorporates interest expense of $87 million to $89 million, a non-GAAP effective tax rate of 24%, and an estimated diluted share count of 105.9 million shares. Further, we continue to expect our net cash outlay for income taxes to range from $50 million to $60 million. I also want to provide you with some commentary for the second quarter given our current expectations. As Alistair highlighted, we expect year-over-year growth to accelerate in both businesses as we begin to lap the 2020 impacts of the pandemic. We expect second quarter revenue of $1.25 billion to $1.29 billion and total adjusted EBITDA of $167 million to $177 million. This reflects as reported revenue growth of 23.3% to 27.3% compared to the second quarter of 2020. This revenue growth includes an estimated contribution from acquisitions of approximately 605 basis points and a headwind from our 2020 divestitures of approximately 130 basis points. This growth also includes an expected tailwind of approximately 150 basis points due to growth in reimbursable expenses. This completes our prepared remarks, and we'd be happy to answer any questions. Operator?
spk04: Ladies and gentlemen, if you'd like to ask a question, please press star, then 1. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from Robert Jones with Goldman Sachs. Your line is open.
spk08: Great, good morning. Thanks for taking the question. Yeah, I wanted to go back to the pipeline reprioritizations, Alistair, that you mentioned in the prepared remarks. I know you guys don't give gross bookings, but, you know, looking at the math, it does look like these reprioritizations or cancellations, you know, obviously drove the net bookings, you know, lower than expected. So just anything more you could give there with this, you know, a large change within one client? Was it from several? Any commonalities in therapeutic areas? Just wanted to try to get a better understanding of the impact in the quarter between gross and net bookings. Yeah, sure. And morning, Bob.
spk02: Yeah, it's a couple of customers on the larger side. One in oncology where they're reprioritized. Well, I think some of them are a delay in the delivery of their of that program. So it actually just pushes a couple of projects out of our awards window. So rather than starting within the next 12 months, they're pushing further back, so we have to take them out due to our bookings policy. So they'll come back in at a later stage in 2021 as awards. And another one, I don't remember the therapeutic area on the other one, but they're not related. I think they're just as customers re-review kind of their overall spend and approvals on what they're bringing to market some of it's gone backwards to the right but some of it you know it's just been replaced by other projects that because of that replacement you build in a little bit of time lag so it actually pushes it out a couple of months so nothing there really um that concerns us it's not a trend that we're seeing it's just a couple of customers doing it quite sizable though one of them So, you know, I think we would have been a record probably book to bills if these hadn't happened. So, you know, it's a very strong environment. I think 1.3 times pretty good book to bill anyway. And, you know, on top of that, we would have had extra juice in the tank. So, you know, unfortunate for us that that happens, but that's the nature of our business, right?
spk08: No, no, it makes sense. I guess maybe just one follow-up, just because you mentioned the announcements of the partnerships with Science 37 and Medible. It seems like some of your peers have done similar partnerships with those players. Some of the other competitors have taken more of an internal investment approach. So I guess the question really is just how differentiated are these decentralized offerings in the marketplace from each other? And it seems like there's clearly a
spk02: a quickening of the pace to have these offerings and i'm just curious any comments on what you're hearing from your sponsors as far as being able to provide these capabilities yeah sure well i think i mean we've worked with both of these organizations for a while so you know we've got good experience of both and you know some of the smaller ones i think as customers are driven by covid to look at more innovative offerings we're able to bring them through You know, they are fairly similar in their overall offerings. We have customers who come and say, we like Metabol, so, you know, we'd like you to work with them. We have customers who come and say, we like Science 37, so we'd like you to work with them. So having the ability to offer both flavors is important for us under the dynamic assembly model. You know, that partnership model that has served us in good stead continues to do so. So, you know, they're different flavors of the same theme. You've got to think of it. It's like... It's a bit different, but, you know, it's like the old days, using metadata, Oracle, or, you know, something else. So I think that pressure to decentralize, to open more channels to a trial so you can get to a patient at home, what we're doing is coupling them up with Illingworth and enabling ourselves to actually take the decentralization all the way to the patient's home, which I think is helping us differentiate and helping us differentiate with Medible and helping us differentiate with Science37.
spk08: Got it. Makes sense. Thanks, Alistair. Okay, Bob.
spk04: Our next question comes from David Wendley with Jefferies. Your line is open.
spk10: Morning. Thanks for taking me next because I wanted to follow up on Bob's last question. Good segue. On Alistair, on the DCT environment, two parts to the question here. First, on the Medible Science 37 comments, it's my understanding that maybe Medible is a little bit more maybe tech software-driven, Science 37, maybe a little bit more tech-enabled service-driven. If you don't mind, drill down a little bit further on the difference in offering, if there is any. I know you said they were pretty much the same. I'll let you answer that one, and then I've got to have a follow-up. Thanks. Okay.
spk02: Well, I'm going to ask Paul to give you a bit more flavor for that because he knows the detail of the service capabilities. So, Paul, a couple of differences, if you will.
spk09: Yeah, no, I think, Alistair, you've hit that pretty well. And, Dave, I think your comment is pretty accurate. I think when I look at that from a telemedicine perspective, Science 37 obviously has had more experience in that front, has a broader capability experience. Medible and Science 37 both have capabilities to provide, you know, eCOA, ePRO opportunities. When I think about, you know, why those partnerships really are key for us, I think having the Illingworth Group in that home health care model, what it really does is we have partners and clients that have, you know, different needs. different partners they work with. So having both Science 37, having Medible, having with Dynamic Assembly the ability to pull the best in class technologies in and combine that with the home healthcare, we think gives us really that full offering and ability to create something new and different. So when I look at those, I think both can work in specific situations. It depends on how the client is building that. It just gives us the ultimate flexibility. And I think what we can bring to them with our home health care is, you know, also a great testing ground as they think around new technologies and how those will evolve over time.
spk10: So if I could, the other and perhaps broader strategic question that I had in follow-up to that is, you have acquired Illingworth. So as I think about the different capabilities needed to bring a decentralized trial to life, That home health element, clearly a very valuable one. What's the distinction between what you think you want to acquire and control versus things that you're more willing to plug and play in a dynamic assembly? Is it as simple as if it's software and tech, you don't want to own it, and if it's services, you do? But I'd love to understand what your distinction is there.
spk02: Yeah, it's kind of down that split, Dave. So, you know, if it's more service-oriented, we feel like we're well-positioned to own that. You know, Illinworth came with some tech, and I think as we've matured as a business, we actually have more of our own tech than we have historically. So at the moment, we're plugging and playing technology and looking to own more of the service side. But that can transition as we get more tech that comes in with some of these service companies. So we like the space. We like the innovation it brings. So, you know, we'll continue to look.
spk10: Last quick one. You mentioned full-service commercial really maybe more under the auspices of Cineos One as being something that you think launches in the second half. Would you mind fleshing out a little bit the prospects for your full-service commercial launches today? in the next six to 12 months?
spk02: Yeah, I think the comment we made in the preparer remarks is really driven by work that Michelle's team is winning almost independent of Cineos One. I think the Cineos One behavior and the Cineos One mindset of delivering a package that is integrated, a full-service launch that's connected to clinical, while the commercial teams are picking that up and running with it themselves. So we're seeing a lot more full-service commercials of its own rights. you know, kind of disconnect a little bit from what we would class as a Cineos One Award, which is clinical and commercial all committed together. So, you know, I think we are definitely seeing a rise in that. Certainly small to mid customers are bringing that in. I think we're sort of 60% increase in the amount of business that's coming through that channel. So starting to resonate pretty strongly with that customer size. Michelle, any ads for Dave?
spk05: Hi, David. Yeah, just two things. You heard us talk about our Cineos One win in Q2 of 2020. That is going to start flowing through commercial the end of this year and be heavy into 2022. And one of our first clinical partnerships from Cineos One also was starting to commercialize heavily in the back half of 2021. I think that's just additional. So, you know, those are wins we have line of sight to that we're going to start seeing the revenue flow through commercial as well.
spk10: Okay, thank you. Thanks for the extra question. All right. Thanks, Dave.
spk04: Our next question comes from Erin Wright with Credit Suisse. Your line is open.
spk03: Can you give us an update on the general market dynamics that you're seeing in terms of the site accessibility, RFP flow, study startup, enrollment? timelines that you're seeing, and what does your guidance assume now in terms of returning to that more normalized environment from a COVID perspective?
spk02: You sneaked about eight questions in there, Erin, but well, here we go, right? So demand environment's strong, good. I think we have record RFPs in clinical and commercials, very strong for this time of the year. You know, there's a seasonal effect in commercial, but very strong flow this time of the year, and I think some of that is... being fueled by EAU requests and RFPs that are coming through for Michelle's team. Site accessibility, we're about 75% where we can get, about 70%, sorry, where we can get fully on site and that continues to improve slowly. And then the difference I think we've seen in the last quarter is we're able to connect with pretty much every single site. I mean, there are a couple of holdouts, right? But we're able to connect remotely with just about everybody. So we're able to keep all the sites moving forward, et cetera. So that's improving. Site startup is about 150% of where we were pre-COVID. In fact, I just saw that head of startup just came into the office for the first time in 14 months. But they are pretty much flat out right now. And that's a combination between COVID trials coming through, but standard trials coming through and starting up and going through activations. So that's a good sign for us as we drive more revenue in the future. You know, it's more activity right at the start of our process. And then enrollment is picking up as well. So we're seeing good engagement and enrollment. We're about 150%. Some of that is skewed by a couple of larger COVID vaccine trials that are running through. So you get a bit of a skew from the enrollment of those and the pace of those. So, yeah, good signs. I mean, obviously, our thoughts go out to some of the bigger countries that are really in the teeth of COVID now, India, Brazil, et cetera, where we're seeing a little bit of a delay in some of those sites. But that tends to be dampened down a bit by the fact that the rest of the world seems to be in recovery, and vaccines are starting to have a really meaningful impact in some of the bigger markets.
spk03: Okay, good. That's helpful. And then I'm probably reading way too much into this, but I guess, can you speak to the rationale behind the resegmentation of the regulatory and consulting business? Has there been any sort of changes to the commitment in terms of the, you know, full commercial offering? I mean, clearly you're still talking about the end to insinuous one offering here and the strategy still seems to be there, but has there been any, you know, change in commitment? I mean, the business has changed since the inventive transactions.
spk02: Yeah, absolutely. Yeah, the business has changed and evolved a lot since that transaction. So in the consulting group that sits within commercial, we moved pretty much the whole of Kynapse into that from day one. It actually is as the regulatory and QA consulting pieces of that outfit have grown in strength. Their work is actually on the clinical side. So to make that connection a lot stronger operationally. We've actually taken those two groups and moved them into clinical development services, our CDS group, so that they're more aligned with our actual kind of day-to-day regulatory and day-to-day startup activities, because that's who they work with constantly. So it seemed a bit of a reach to leave them over in the commercial side when 100% of their work's in clinical.
spk03: Okay, great. Thank you.
spk02: Thanks, Erin.
spk04: Our next question comes from Patrick Donnelly, City. Your line is open.
spk13: Just one on the commercial side, following up on an earlier question. Can you just talk through, you know, the trends you're seeing there, how much COVID works in there, and what's the visibility in that segment relative to the past few quarters? How are you feeling about the go forward there?
spk02: Well, I'll start now, hundreds, Michelle. I think we feel very good about the go-forward, to be honest. We're seeing a lot of engagement around Kinetic, seeing a lot of engagement around full-service commercial. You know, that's launch and mature products. I think we want a good slug of COVID work in Q1 that is going to go, you know, will burn relatively quickly. Well, a lot of Michelle's work burns relatively quickly anyway, but you know, a good bit of COVID work. I think 22 projects, 23 projects, something like that, COVID-related in commercial, and that demand seems to be pushing up as, you know, more products come through to market. So, yeah, we feel good about it. We feel confident about it. I think we had a record number of new reps in the quarter go into the field. So, you know, that's a pretty good sign of that business is robust and there's good demand. But Michelle, anything I missed?
spk05: Yeah, I'd add two things. I think one thing is our kinetic-enabled hybrid representatives are really starting to create some great momentum in the marketplace. I think that's a big differentiator in regards to the new way that I would say field-based teams are working, which is fully virtual, having the ability to work fully virtual in person and utilizing digital strategies to communicate with customers based on the channels that they're interested in. And so that is absolutely driving significant interest from our customer base. So I think that's the first thing. And the second thing I would say is our project-based businesses, which tend to be more in consulting, you heard us make the comment that You know, we're in double-digit growth in consulting and communications, healthcare communications becoming critically important. So those are growing and we're seeing some really nice growth in those areas. And then your comment about COVID-19, it's really just another therapy. It's just another area of expertise that we've built because of the unique product development platform that we have. You know, we're so good now at integrating capabilities, customized for whatever our customers are interested in doing, that we're seeing a lot of integrated offerings around some of these COVID treatments that currently either have emergency use authorization or about to have emergency use authorization. And that's kind of a place in the middle that customers haven't traditionally had to communicate the information about, right? You know, EUA has become very common in the last year in this. environment. And so really understanding from a regulatory perspective and a compliance perspective, along with the need to communicate this information to customers in a very specific way and a very, you know, in the channels that we need to get it out to. I mean, just think about how many HCPs across the world need to have this kind of information. Our unique ability to manage that with Kinetic as well, our digital capabilities has been you know, we're starting to get a lot of traction there as well. So we feel really good about where we're going as a commercial division. Yeah, that's helpful. Thanks.
spk13: And then maybe just, Alistair, on the improved backlog. Pat, you still there? Sorry, yeah. Is that just around the pent-up clinical trial demand coming back? And what's your line of sight into how quickly that plays out? Sounds like you're pretty confident in accelerating growth into 2Q. So just around the improved backlog burn there.
spk02: Yeah, yeah, yeah. So some of it, I mean, if you remember Q4, it seems so long ago, we had a 1.5 plus bulk to bill. I can't remember the exact number, 1.55, something like that. So throwing a 1.3 on top of that in Q1 feels good to me. Those projects that we've won starting to get into startup from the Q4 awards in Q2, plus you've got revenue that's still unlocking from the work that was pushed backwards out of 2020. So you've got that work coming back. You've got demand coming out of the market that we're taking share on. We've got new recruits coming through, so we're able to burn that revenue off pretty well. So, yeah, I'm very confident where we're sitting, looking at what we've got in terms of backlog and the coverage that we have through to the end of the year. We're off to a good start. We beat where we thought we were going to be. and very optimistic about the rest of the year and out into 2022. Great.
spk11: Yeah, Patrick, just to add on your first question there relative to commercial on visibility, we talked about the 7.6% backlog growth in deployment solutions, and the overall commercial backlog, which we don't disclose but we track internally, is higher than that. And as we look at The balance of the year, given we only take 12 months of bookings into our backlog, it really does give us good visibility naturally to be stronger when we get to June. But, you know, right now I feel good about where that's at. And on the consulting, or I'm sorry, the clinical burn rate, we'll see that tick up, you know, into the mid-nines, you know, percent. in quarter two, quarter three, a little below mid nines in quarter two, and then back up closer to 10 in quarter four based on what we see just for modeling purposes.
spk13: Understood. Thanks, guys.
spk04: Our next question comes from John Krieger with William Blair. Your line is open.
spk07: Thanks much. Great to hear you guys talk about an expectation that revenue growth will accelerate. I know you've got some puts and takes there with acquisitions and divestitures. Can you give us a sense by the second half of the year, maybe by the fourth quarter, what do you think sort of a normalized organic growth should be relative to your plan in clinical and commercial?
spk11: Hey, John. It's Jason here. So, yeah, I mean, we do have a lot of moving pieces, as you say. I mean, if you – and that includes reimbursable expenses, right, as we still work through the COVID recovery. If you just kind of strip everything out, you know, both businesses year over year, excluding reimbursable expenses, were growing in the first quarter, you know, in sort of mid-single digits. And then as you look to, you know, quarter two – you start to see the clinical business really rebound strongly, given the year-over-year compare, as well as all the things Alistair outlined relative to study startup metrics and everything being really strong in our COVID trials, particularly the vaccination trials really ramping. The commercial business is going to get up in the second quarter into – closer to double digits, you know, in quarter two, and then both businesses will be in sort of mid-double digits in the second half, if you think about by quarter, is sort of the way it works out. So clinical recovers quickly, or more quickly, and then, you know, into the mid-double digits organically, and then, you know, commercial is more double digits, and then up into the mid-double sort of pacing.
spk07: Very helpful, thanks. And Jason, Can you just give us what the COVID revenue contribution was in the first quarter and in both segments and maybe a rough sense about COVID awards relative to the total that you reported?
spk11: Yeah, so on the award side, you know, we talked about it being less than 4% of our total backlog. And on the award side, it was less than 2%, I think, in quarter one. So not a a big component. We haven't really talked about the actual COVID revenue. What we have said is that it's not material yet. Last year, it was less than $25 million in total for us. And, you know, I would say as it ramps in quarter one, it's probably not far off of that full year number of last year, but really starting to ramp in the second quarter and beyond.
spk07: Great, thanks. And maybe just one last quick one. Alistair, you gave a pretty remarkable stat that your startup metrics are running something like 150% of pre-COVID normal. Is that just, you know, really asking the staff to sprint as fast as they can or has something changed structurally that you think you can maintain?
spk02: No, I think we can maintain it. We've enhanced processes. We've been building out our offshore capabilities through Forward Bound. There's a lot more horsepower in that team. They're more automated. They're more streamlined. So, yeah, definitely we can sustain it and grow it, actually. So we're continuing to recruit in that area and having good success, bringing people in with good experience. So, you know, we've built a good culture, and I think people want to be a part of it.
spk07: Sounds good. Thank you.
spk02: Thanks, John.
spk04: Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open.
spk06: Hi, guys. Good morning. My first question, how are you thinking about the pacing of reimbursable revenues over the course of the year? Obviously, there's some COVID work that has different profiles, but any thoughts there you could provide would be helpful.
spk11: Yeah. Hey, Elizabeth. Jason here. So it's kind of a I guess, really, as COVID continues to peel back in quarter two, as we have said in the past, and we get, you know, these patients enrolled and investigators back engaged in these trials that Alistair mentioned accelerating and the COVID, you know, standing up, at least on the clinical side, we'll see, you know, strong growth in the indirects as well, sort of in line with with what I was saying earlier, and then, you know, on the organic side, and then you add in the acquisitions, which doesn't really change the trend that much. On the commercial side, it's going to be strong as well, rebounding pretty quickly in quarter two, and then, you know, accelerating in quarter three and four, given the easier comp from 2020. So, You know, it's recovering in quarter two and then continuing to move up a bit, but not significantly. It's just the comps get easier when you think about year over year.
spk06: That makes sense. And do you have any updated comments on the competitive environment? Obviously, a number of your peers are involved in sort of strategic action, so I didn't know what you were seeing on that side. And then... In conjunction, have you come across any clients that have concerns about your relative scale versus some of these larger peers?
spk02: Thanks. It has been an interesting few months, that's for sure. We haven't had any customers who are worried about our scale. I think what we did when we did the INC Inventive merger put us to a point where we have all the scale that we probably need in the clinical arena. So we haven't seen anything like that from customers. We work with some of the biggest companies out there, biggest pharma companies out there, and they're not worried about our scale at all. So that's all good. What we are seeing is obviously a bit of hesitancy that you get when there's a bit of disruption. We're seeing opportunities to recruit people and to win work. So it's a good environment. There's lots of work out there. But no, we don't see any issues with our scale.
spk04: Perfect. Thanks. Our next question comes from Donald Hooker with KeyBank Capital Markets. Your line is open.
spk12: Hey, great. Good morning. So you guys have a very interesting sort of list of technology partners that you work with. This came up a couple times in the Q&A here. I'm just wondering, do you get any economics or any kind of direct economics or anything from them as a channel partner? Or is it more sort of a convenience factor for the client that's harder to quantify? I would think you have so much size and scale that you could be, maybe leverage something there.
spk02: Yeah, I mean, we've got some obviously big spend channels that come through Cineos. So there is some rebate structure in some of the partners where there is big volume. Um, but not all of them, uh, because you know, we're able, we, we plug some in re really. So, but yeah, and, and, you know, there's some good efficiencies there as well. So, um, you know, when we're bidding out, uh, a certain, you know, set of partners, we have all the language ready to go. They understand how they plug in and, and through startups. So there's some efficiencies that we can capture there as well and pass through to the customer. So, yeah, you know, there's some economics in some of the models.
spk09: And, Alistair, if I can add on, though, I think, too, it really is, you know, having the size and scale we do, it's the steering committees we can put together and how we continue to drive innovation together. So, I mean, from a productivity and process perspective with those large-scale partnerships, I think it just is more around the innovation and productivity we can drive for the clients, and that's a big part of why we want those partnerships.
spk12: Great. And then as a quick follow-up, maybe also in the large pharma space center, that's part of the vision for Cineos to get bigger in the top 20. I know in your appendix you had the percentage of revenue from large pharma ticking down a bit year over year, but I guess the other components are probably growing so fast it's hard to look at that as any indication of anything. But can you give us any sense of kind of conversations with the large pharma going forward?
spk02: Yeah, I think the large pharma capabilities that we have and the penetration we've had has been good. We're still, I think that tick down is in our situation, but I think it's related to a big program that we finished, I guess at the end, I'm guessing it kind of in the middle of Q2 last year. So, you know, you've got, I mean, we've got plenty of large pharma working startups, so it will, As we lap that, that will correct itself. But, Jason, any thoughts on that?
spk11: Yeah, I mean, we haven't published the stat this quarter, Don, but we have talked about it in the past. I think we talked a little bit about it yesterday. But we're in this period of winning the work from, you know, our large pharma strategic accounts, and it's gone into backlog, where backlog growth in that area has been quite significant at one point. I think we talked about it being north of 25%. And now that's starting to pull through. Revenue is just not completely there yet, given COVID pushed some of that out in 2020 and into 2021, in addition to the dynamics that Alistair just mentioned. So it's just a timing thing until that backlog really starts to pull through into the revenue line.
spk12: Super. Thank you so much.
spk04: As a reminder, to ask a question, please press star, then 1. Our next question comes from Dan Brennan with UBS. Your line is open.
spk14: Great. Thanks. Thanks for taking the questions and congrats. I know there's been a couple of questions on COVID. I'm just wondering, could you help us think through implicit in your 21 guides? Is it possible to think about like how much COVID benefit is baked into the revenue stream in 21? And obviously you're not going to guide for 22, but I'm just wondering how we think about kind of the tale of opportunity as we get beyond 21.
spk02: Yeah. Well, let me give you my thoughts at the moment around this. So, you know, I think yesterday and I think today, again, there's a record number of COVID cases in the world. So, you know, what we've contemplated in guidance is the impact that COVID's having both as a tailwind from projects and revenue coming through and as a potential headwind, you know, if we have a big resurgence in markets around the world. So, You know, when we're putting the guidance together at the moment, you've got a bit of a double-edged sword from COVID. So we're just trying to make sure that we capture all that and think that through. You know, we've got big offshore service centers, some of them in India, some of them in Argentina, et cetera. So we've got to contemplate the impact that it can have as a headwind as well as a potential tailwind in kind of the revenue stream. So Jason, any thoughts?
spk11: Yeah, I mean, I guess, Dan, in terms of the revenue in 2021 and the guide and the burn rate and how we've thought about it on the clinical side, I don't think it's changed much from what we had said previously in terms of, you know, things are still working their way through the system, largely stable. But, you know, sort of mid-year, summer is, you know, where we think we're back to a more normal operation. In terms of quantification, again, around the amount, you know, I think the backlog information that we gave is a reasonable proxy to think about the percentage of your revenue. And then, you know, in the pipeline and, you know, what we're continuing to see, you know, we're continuing to have plenty of opportunities. Matter of fact, I saw a COVID win this morning. So, you know, we continue to have that flowing through.
spk14: Great. Thank you. And I was hopping between calls, but I think there was a question asked related to the M&A environment, but I was hoping maybe, is there a view that you have towards the opportunity to maybe accelerate new business wins? Are you seeing any impact on that? I don't know if that same question was asked, but I was just interested to kind of see what you guys are thinking about and what you're planning for. Thanks.
spk02: Yeah, I mean, customers worry about CROs that are going through big integrations that they've not got any experience in doing before, so... you know, they're tough. I can attest to how difficult integrations can be at large scale. So customers naturally get concerned about that. And I don't think it discounts people, but it sets a little, you know, thought process going in customers' minds of how stable those organizations are going to be, turnover concerns, anxiety of staff, et cetera, et cetera. So, yeah, I think it opens a door for us, maybe gives us a slight edge, but you know, we've been through the other side of that. And, you know, we'll do what we can to win work off of those companies.
spk14: Excellent. Great. Thank you, guys. Thank you.
spk04: Our next question comes from Luke Sergis with Barclays. Your line is open.
spk01: Thanks. Hey, guys. One quick one for me. Thanks for squeezing me in. So this is pertaining mostly to booking. So as I think about uh, sinuous one and the complete offering that you guys have. Can you give us an update on that? Um, and you know, there's the size of the, the backlog that you've developed there. Cause I think about the COVID work and, and all the things that are coming out of biotech that it seems that you'd be well positioned there. And then just overall from a bookings trajectory, you know, given the strong recovery and, and all the commentary that you've given with that, I would, um, Just wondering, you know, how big the cancellations were so that the, you know, I would have thought that the bookings would have been up more steeply in the quarter, and maybe it's just because there's not as much COVID work or just any type of color there so I can get some idea on that, on those businesses.
spk02: Yeah, I think, yeah, so the last bit, I think on the bookings, you know, the reprioritizations, you can say it, that we took out of bookings and took as cancellations in Q1. Some of those will come back later in the year or early 22 as we get back within the one-year start window that we are very disciplined around. So I think that is the difference. I mean, I'm pretty confident we would have had without that the same kind of level of bookings that we had in Q4 on a book-to-bill basis. So yeah, I don't see anything wrong with the demand environment. I think on the Cineos One side, continue to see traction with the small to mid customers. Not specifically around COVID. I don't think that makes much difference because people are moving very quickly on their own through emergency use authorization. So, you know, the speed that CineOS 1 brings to regular drug development doesn't apply so much to the COVID side. You know, so I don't think that creates much of a tailwind for CineOS 1.
spk01: Okay, that's helpful. All right, that's all for me. Thank you. Thank you.
spk04: There are no further questions. I'd like to turn the call back over to Alistair McDonald for any closing remarks.
spk02: Thank you. Again, sincere thanks to the entire Cineos team for all they continue to do to manage through challenging circumstances, particularly those currently battling the virus in India, Brazil, and other places. We remain very confident in our market positioning, and I look forward to strong growth and profitability in 2021 as the recovery from COVID-19 continues. So thank you very much for your attendance today and for your interest and investment in our organization. Please be safe, have a great day, and be good. Thank you.
spk04: Ladies and gentlemen, this does conclude the conference. You may now disconnect. Everyone, have a great day.
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