Syneos Health, Inc.

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?

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?

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?