Syneos Health Inc (SYNH) 2015 Q3 法說會逐字稿

Good morning ladies and gentlemen and welcome to the INC Research Third Quarter 2015 Earnings Call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

I'd like to hand the conference over to Ronnie Speight, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. The purpose of this call is to review the financial results for INC Research's third quarter 2015. With me on the call today are Jamie Macdonald our Chief Executive Officer and Greg Rush our Chief Financial Officer. In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at investor.incresearch.com within the presentations and events section. An archived version of this webcast will be available for replay on our website after 1 pm today.

As outlined in our press release, there will also be a telephone replay of this conference call available for the next seven days. Remarks that we make about future expectations, plans, and prospects for the company constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

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 factor section of our form10-K for the year ended December 31st, 2014. Our form 10-Q for the quarter ended March 31st, 2015 as well as our other SEC filings.

In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we might update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

During this call, we will discuss certain non-GAAP financial measures, which exclude the effect of events we consider to be outside of our core operations. These measures should be considered a supplement to, and not a replacement for, measures prepared in accordance with GAAP.

We believe that providing investors these measures helps investors gain a more complete understanding of our financial results and is consistent with how management views our financial results. For the reconciliation of the non-GAAP financial measures with the most directly-comparable GAAP measure, please refer to slide 17 through 22 in our presentation.

As we will be limiting today's call to one hour, we request that participants limit questions to one each, with an opportunity to ask one follow-up question. I would now like to turn the call over to Jamie Macdonald. Jamie.

Thank you, Ronnie. Good morning and thank you for joining our third quarter 2015 earnings call. I pleased to report that we are continuing to execute our strategy, delivering strong results for this quarter of 2015. We continue to focus on providing high-quality service to our customer through our therapeutic alignment, strong execution by our trusted process, and our strategic focus on sites and patients. I will provide some highlights of our performance for the third quarter using the key metrics outlined on slide three of the presentation before Greg provides you with more details on our financial performance.

We grew our adjusted net service revenue by over 15% compared to the third quarter of 2014. This was net off a substantial foreign exchange headwind, primarily due to the strengthening of the US dollar against the Euro and the British Pound since the third quarter of 2014. We estimate that the impact of foreign exchange on our revenue was approximately $10.3 million in the third quarter 2015, resulting in constant currency revenue growth of approximately 20% year over year for both the third quarter and the 2015 year-to-date period. Our net new business awards for the quarter were $327. 7 million compared to $249.3 million during the third quarter of 2014.

Our net new business awards in the third quarter of 2015 resulted in a net book to bill ratio of 1.4, continuing to be driven by strong new award activity, modest cancellations, and a solid new business pipeline. We believe that this metric is best viewed over the long term, since new business awards will continue to vary from quarter to quarter. Consistent with our strong second quarter, we maintained a robust 1.3 trailing 12 month book to bill ratio as of September 30, 2015.

We are particularly pleased with the strong book to bill ratio given that we are growing adjusted net service revenue by approximately 20% on a constant currency basis. In addition, our net new business awards drove strong back log growth during the third quarter with back log as of September 30, 2015, at nearly $1.8 billion, up 17% from September 30, 2014. This growth occurred despite a cumulative reduction in back log of $48 million since the third quarter of 2014 from the impact of foreign exchange.

From a new business perspective, we continue to expand our sales force and targeted marketing activities to broaden our addressable market. We are very encouraged by the continued strength and demand from our customers across all of our therapeutic areas. Through the end of the third quarter, we have added nearly 50 new customer relationships during 2015. We also continue to win a significant portion of the dollar value of our new awards from existing customers through high-quality delivery, a focus on the customer experience, and providing added value through our therapeutic expertise.

Our success with this approach is evident in the broad-based composition of our new business awards for the third quarter. In addition, we believe that our differentiated approach to technology resonates with our customers and promotes efficiency in both our operations and our deployment of capital to create shareholder value. Our utilization of best-in-breed core third party solutions, such as Medidata, Oracle and SAP, along with our internal investments in developing our near-real-time integration platforms allows us to leverage the expertise and R&D Investments of the industry leaders.

In recognition of our efficient use and adoption of the leading edge technology and analytics within the Medidata clinical cloud platform, we were recently awarded the Medidata Trial of the Future Award.

The diversity of our customer base continues to improve with our top five customers representing only 33% of our revenue in the third quarter, down from 36% for the third quarter of 2014. Similarly, our top five customers comprised 34% of our revenue on a year-to-date basis, down from 37% for the same period in 2014. We continue our strong presence in CNS oncology, and other areas where clinical trials are particularly complex. These areas represented approximately 69% of our backlog as of September 30, 2015, compared to 68% as of June 30, 2015.

We believe our continued strong position in these areas demonstrates the effectiveness of our therapeutically aligned project teams, enhanced by the rigor of our trusted process. Clinical research sites are pivotal to the clinical development process and INC Research continues to push forward on multiple fronts to maximize our collaborations with this critical stake-holder group.

Earlier this month, in conjunction with the Society of Clinical Research Sites 10th Annual Global Site Solution Summit, we held our second site advocacy group, or SAG. This SAG focused on streamlining and enhancing the payment process for sites, so they can maintain their focus on patient enrollment and high-quality clinical research.

This work aligns with and supports the industry-wide effort announced this month by SCRS to improve the investigator payment process. Also in conjunction with the SCRS Global SCRS Summit, INC launched its Catalyst Community, a new model for site collaboration. The Catalyst Community will harness the input and insights from leading clinical research sites across the globe to improve clinical development and further develop best practices in clinical research, utilizing the latest interactive and collaborative technologies.

In support of our global delivery for our customers, we continue to expand our total employee base to over 6,200 staff during the third quarter, compared to approximately 6,100 staff at the end of the second quarter 2015, and 5,500 staff at the end of the third quarter 2014.

Let me know turn it over to Greg Rush for more detailed comments on our financials. Greg.

Thank you, Jamie and good morning everyone. I would like to start by making some additional comments regarding our financial performance, highlighting some of the key measures from slide three, which are presented with a more detailed view on slide four. As a reminder, we are presenting our results on an adjusted, or non-GAAP basis.

As Jamie mentioned, we had a strong quarter, nine months, and trailing twelve months related to net awards and book to bill, which is helping to support our strong financial performance. We grew our adjusted net service revenue on a year over year basis by 15% to $234.5 million during the third quarter of 2015 from $203.3 million for the third quarter at 2014.

On a constant currency basis, excluding foreign currency head wind of $10.3 million; our net service revenue grew by 20% year over year, reflecting our strength in net new business awards and the resulting strong backlog coverage.

On a year-to-date basis, grew our adjusted net service revenue by 15% from $587 million for 2014 to $673.4 million for 2015. Excluding a foreign currency head wind of $31.9 million, our revenue grew by 20% compared to the first nine months of 2014. Please note, these quarterly and year-to-date revenue growth rates exclude an estimated $4.5 million in revenue from higher-than-normal change or activity occurring in each of the second and third quarters of 2014.

On slide five, you can see the improving diversity of our customer base. We continue to see revenue from a broad cross section of small, mid-sized and large biopharmaceutical companies as well as a significant percentage of our net awards originating from existing customers.

Slide six provides trending of our adjusted growth margin, adjusted income from operations, adjusted SG&A spent as a percentage of revenue, and adjusted EBITDA margin since the first quarter of 2014.

Although there is normal quarterly variation, these charts highlight an ongoing margin improvement, effective management of pricing and expenses, and execution and delivery for our customers.

We have also closely managed of SG&A expenses, demonstrated by the overall improvement into percentage of revenue in 2015 compared to the same quarters in 2014.

Turning to direct cost, our direct cost increased 5% from $128.8 million for the third quarter of 2014 to $134; $7 million for the third quarter of 2015, with gross margin expanding from 36.6% to 42.6%. For the first nine months of 2015, direct cost were $397.1 million compared to $379.4 million for 2014 with gross margin increasing from 35.4% to 41%.

I'd like to point out that both the third quarter and nine month ended September 30, 2015, includes certain one-time benefits that we do not believe are representative of ongoing operations. Specifically, during the third quarter we successfully settled $4.9 million of study-related obligations, $3.4 million of which were recorded as an expense during the first half of 2015. Therefore, the year-to-date net impact of these one-time benefits was only approximately $1.5 million, including the $5.1 million of items we highlighted from the first quarter of 2015.

The impact on the nine month ended September 30, 2015, of one-time benefits was approximately $6.6 million. The impact on gross margin was approximately 210 basis points and 100 basis points for the three and nine months ended September 30, 2015, respectively. We also continue to improve our margins through strong execution by our operational teams, our disciplined approach to cost management and our ability to leverage the therapeutic management overhead as we expand our revenue base. We also continue to see the benefit of the improved utilization of our facilities, which remains at approximately 80%.

We have already eliminated two of our five clinical trial management systems and may eliminate a third system by the end of the year, which would exceed our original goal. In addition, we continue to gain efficiencies with the new system on which we have standardized. I'd like to again point out that we will continue to ask staff to support our growing business, which may have a slight negative impact on gross margin levels as we move through the fourth quarter and into 2016.

Lastly, the impact of foreign exchange reduced our direct cost by a greater percentage than our revenue and therefore positively impacted our gross margin percentage by approximately 175 basis points for the third quarter and 155 basis points year-to-date. We currently expect our adjusted gross margin for the full year 2015 to range from 40% to 41% with the fourth quarter ranging from 39% to 40.5%.

Due to the fixed nature of many of our cost in the short term, we continue to expect our gross margin to vary from quarter to quarter. SG&A expenses increased from $37.6 million in the third quarter of 2014 to $39.5 million in the third quarter of 2015, a decline from 18.5% to 16.8% of net service revenue over the same period.

On the year-to-date basis our SG&A expenses have increased from $102.6 million to $111.5 million, while declining from 17.5% to 16.6% of net service revenue. We continue to be pleased with our discipline around SG&A expenses as we have grown our SG&A cost at less than 60% of the rate of our revenue on a year over year basis during both the quarter and nine months ended September 30, 2015.

As expected, we did see a slight sequential increase in SG&A expenses during the third quarter as a result of increased staffing to support our growth and our higher costs associated with being a public company.

We also expect to see a sequential increase in SG&A expenses during the fourth quarter due to a continued increased in public company-related costs and an increase in certain sales and marketing related costs that are seasonal in nature, and our expectation that bad debt expense will return to normalized levels. Accordingly, we currently expect SG&A as a percentage of revenue to be between approximately 17.5% and 18.5% during the fourth quarter and range between 16.75% and 17.5% for the full year.

Our strong revenue growth, operational execution, and ability to leverage our SG&A infrastructure resulted in adjusted income from operations increasing 74% from $32.1 million for the third quarter of 2014, to $56 million for the third quarter of 2015, with the associated operating margin increasing from 15.8% to 23.9%.

On a year-to-date basis, adjusted income from operations increased from $88.3 million in 2014, to $151.2 million in 2015 with the related margin improving from 15% to 22.5%. Adjusted EBITDA grew by 64% to $60.3 million for the third quarter of 2015 from $36.8 million for the third quarter of 2014.

Adjusted EBITDA margins improved to 25.7% for the third quarter of 2015 from 18.1% for the same period in 2014. For the first nine months of 2015, adjusted EBITDA increased by 57% to $164.8 million up from $104.9 million in 2014. Over the same year-to-date periods adjusted EBITDA margin increased from 17.9% to 24.5%.

As mentioned previously, gross margin for the third quarter and nine months were positively impacted by the settlement of certain one-time benefits. When coupled with the $1.1 million on non-returning items impacting SG&A expenses in the first quarter, these items also positively impacted operating and EBITDA margins by approximately 150 basis points and 115 basis points during the three and nine months ended September 30, 2015, respectively.

Foreign exchange positively impacted our adjusted EBITDA by approximately $1.4 million for the third quarter and $2 million for the year-to-date period. Foreign exchange positively impacted our adjusted EBITDA margin percentage by approximately 165 basis points for the third quarter and 140 basis points for the year-to-date period.

Adjusted net income increased to $33.9 million for the third quarter of 2015 from $12.1 million for the third quarter of 2014, and increased to $88.8 million from $29.4 million on a year-to-date basis. Adjusted diluted earnings per share was 58 cents and $1.46 for the third quarter and nine months ended September 30, 2015, respectively, compared to 23 cents and 56 cents for the third quarter and year-to-date periods in 2014, respectively.

Diluted weighted average shares outstanding were $58.8 million for the three months ended September 30, 2015, which includes an impact of $2.4 million shares from equity-based employee awards. At September 30, 2015, the outstanding share count was 56.5 million.

Slide seven provides some key metrics demonstrating our strong cash flow and leverage position. Our cash flow from operations was $45.8 million for the third quarter of 2015 as compared to $36.9 million for the third quarter of 2014. Cash flow from operations for the first nine months of 2015 was $141.1 million, an increase of $23.8 million or 20% over the first nine months of 2014.

These increases were driven by our growth and revenue and the margin improvement highlighted previously, coupled with ongoing working capital management. We ended the third quarter 2015 with $136.1 million in unrestricted cash.

On slide seven, we continue to report overall strong performance in our net DSO of a negative 1.7 days, which includes the impact of customer deposits and other prepayments. While we are pleased with this performance, over time we expect that our DSO will return to more normalized level in the low teens.

Slide eight summarizes key metrics related to our backlog. On the rollforward of our backlog, note that the net impact of foreign exchange during the first nine months of 2015 was a reduction of $29 million. The cumulative impact of foreign exchange since September 30, 2014, has been a reduction of $48 million. We believe one of the most important leading indicators of future revenue growth is backlog coverage, which is presented in the bar chart in the bottom left quadrant of slide eight.

As you can see, we are maintaining a favorable position with 99% coverage of the current year's total revenue forecast as of the end of the third quarter, up from 96% as of the end of the second quarter. This is consistent with the coverage percentages for the same period as of September 30, 2014, and 2013.

Lastly, on slide eight, you can see our backlog burn rate 14% for the third quarter. We believe our healthy burn rate is driven strong operational execution coupled with our conservative and disciplined approach to recording awards in backlog.

On slide nine we are providing our revised guidance for key financial measure for the full year 2015. This revised guidance takes into account a number of factors, including our strong year-to-date performance, expectations for the fourth quarter, our refinancing and share repurchase transactions executed this year, current foreign currency exchange rates, and our expected tax rate.

We expect our net service revenue for the full year 2015 to be between $910 million and $914 million, representing a growth rate of approximately 14%. This takes into account a foreign currency headwind estimated at approximately $37 million, a negative impact to our growth rate of approximately 465 basis points. Accordingly, our constant currency growth rate is expected to be between 18% and 19%. We are forecasting adjusted EBITDA range from $214 million to $220 million, growing at approximately 47% to 51%.

We expect our adjusted net income to range from $115 million to $118.5 million, growing at approximately 158% to 165%, which results in adjusted diluted earnings per share of $1.91 to $1.97. Lastly, we expect to earn $1.84 to $1.93 per share on a GAAP basis. Included in our revised GAAP earnings per share guidance is an estimated 6 cents per share impact from stock-based compensation.

This completes our prepared remarks and we would be happy to answer any questions.

(Operator Instructions)

Our first question comes from the line of David Windley with Jefferies. Your line is open.

Hi. Good morning. Thanks for taking the questions. Jamie, I wondered if you could comment on - from a business development standpoint - your, say, progress or success regarding landing, say, the next new, big client. I know the repeat business is still a high number, 90%. I guess, what should we be watching to see that you're kind of breaking in to that next new.

I mean as you know, we diversified our customer base pretty well, so we happily don't have to talk about any individual customers, which, to be honest, that's a position we're quite happy to be in because we like treating customers equally. At the same time, we have brought in new customers, not necessarily at initial volumes that would put them into, sort of, top five in terms of backlog or revenue for maybe next year, but certainly a strong base to build from and that's what we've done in the past with customers that are now pretty prominent in our top five or top 10, so the strategy continues.

I think the message around therapeutics and process resonates with, particularly customers that have maybe have not worked with us before and we're happy to start to take a small position with those customers and then build from it, so the strategy remains the same, I think it seems to be doing a nice job. We're getting in front of customers in non-selling situations, they see the value of the scientific and therapeutic input we're bringing and other things are resonating as well in that process that we've talked about as well.

Particularly, technology platform is becoming important and the work we're doing with Oracle, Medidata and SAS is resonating and then obviously our activities from a site to patient standpoint, really better understanding feasibility, site id, enrollment rates, and; therefore, delivering first patent to last patent in on time resonates with existing customers and is a key tip of the spear for new customers as well.

Thanks, thank you for that. The second question, my follow up then, you touched on, in regard to not talking about any particular plan, I presume the presentation on slide five of top five rather than breaking out Otsuka, Astellas, et cetera is a reflection that you no longer have a 10% client, is that correct? And then I'm going to sneak in a part b on this one, could you talk about in that small to mid-size biopharma slice of the pie, the 41%, how much of that would be exposed to, say, pre-revenue biotech, you know slice it however you like, but the folks that would be more influenced by the availability of capital through the equity capital markets?

This is Greg. No, we do not have any 10% customers and that's why we reflected that. They both have dropped slightly below 10% and that's more of a reflection of us growing the other customer base than anything. With regard to the biotech, I think there's a couple of things that we'll address on that and one, and I don't want to get into the habit of answering this question every quarter, so I'll do it this quarter and I can't promise I'll do it in the future, but roughly that, those customers are 10% of last of our backlog, so we don't believe we're really exposed to that.

Secondly, we do think, and we take a very conservative position on what we put into our backlog, so even the ones that are pre-revenue, we do require them to be funded to go into our backlog and we have a very proactive look at, even after they go into backlog, the credit, et cetera, so that you see our bad debt is very, very low, so we believe once they're in the backlog it's fairly reasonable that that work will continue and we're pretty proactive. Our therapeutic expertise also allows us to do a pretty good job of screening which customers we do business in the backlog it's fairly reasonable that work will continue and we're pretty - our therapeutic expertise also allows us to do a pretty good job of screening which customers we do business with but we don't like cancellations.

Yes. I'd say the answer to that would be, I think we're still seeing, I know there's been a lot of press and discussion around bio-tech funding but our views remain the same. That good molecules where the etiology is clear and the mechanism of action is well understood, that potentially brings significant benefit against existing standard of care are still going to get funded. And that's not changed. Now whether they get funded by the public markets or in co-developmental or partnership with larger Pharma, that's still going to happen.

Very good, thank you.

Thank you. Our next question comes from the line of Robert Jones with Goldman Sachs, your line is open.

Great, thanks for the questions. Greg, just looking at the EBITDA margins you know if I back out the one timers, your year to date it looks like you�re about 23.4%. As we look forward and think about next quarter and into next year are there any known head winds that you guys could identify or that you see on the horizon. Maybe it's, maybe it's increased head count.

Maybe it's something else that could you know; that could limit the margin expansion that you guys have enjoyed, maybe get you back closer to you know that 20% target or other items that you're still feeling comfortable. You have the ability to help you continue to expand these margins as we move forward?

I think I will answer it this way, I don't want to get into 2016 guidance at this stage. But you every quarter is going to vary a little bit but over the long term, we like where our margins are today, we're actually ahead of schedule. You know we talked about over the last 12 months so we feel good about where we've arrived. I do think that -- I think Windley mentioned it earlier about the next big customer�We are very focused in on continuing to take market share.

So over the next, call it twelve months, I would expect us to continue to expand margins but through our cost initiatives but then to reinvest those savings in sales and marketing activities that continue to drive growth in market share. So I would not say margin contraction but I would not necessarily see us moving margins up significantly from where we're at today, just because we're going to take those cost savings initiatives and reinvest over the next, mid-term.

Okay. No that makes sense and I guess just as a follow up you know given the strong bookings that you guys touched on this a little bit on the prepared remarks. But you know we've see other CROs get kind of caught in these windows where it becomes difficult to time hiring you know with the realization of revenue from work awarded. You know how should, we think about that for you guys as you obviously need to you know have enough heads out there to support the work that you've been winning.

Yes I think we've got a pretty robust process. I mean we've discussed this a number of times. I think the way that we phase backlog and unitize backlog really down to the individual therapeutic and functional group at the task level allows us to be pretty precise in terms of resource allocation and hiring. The recruiting engine's working pretty well I mean the market's pretty active. There are some positions that are a little stickier to fill. But I think our overall reputation is good and therefore we're seeing a decent candidate flow a we've streamlined some of our interviewing processes.

We got a little bit more work to do on just that time to fill and getting offers in people's hands. But I think we have a compelling employment opportunity or positions for people who want to join INC. So yes it takes effort but we, we've been doing it. We've added a significant number of resource over the last two years and continue to be very active in the markets for job types that we need.

Yes Bob about the only other comment I would add on that is you certainly if you look back at my prepared remarks in Q2 we -- hiring is definitely a little bit more challenging than it was say 12 months ago. But we like our position because you know with our therapeutic model it one helps us retain our existing staff pretty well so we don't have to hire as much so to speak to replace lost heads. So that helps us.

And with new heads I think we have a compelling model that attracts people so you, our job is as employers is to make sure that we offer great benefits and a rewarding place to work and we think we do a pretty good job at that.

Got it, Thanks so much.

Thank you.

Thank you. Our next question comes from the line of Michael Baker with Raymond James. Your line is open.

Yes thanks a lot. Jamie clearly you have benefitted from a focus of your organization and what we're starting to see is obviously as pharma speaks with payers more emphasis around outcomes I was wondering what your thought process is in terms of you know looking into post commercialization services and whether that would be an area of interest down the road for you.

At this stage I mean as you say Michael we're pretty glad to be focused just on clinical trials. I think there's plenty of opportunity to be more efficient and more effective in that space. We see more interest on the, on the payer side. I think we've said this recently. I think pharmaceutical development nowadays is really about producing products that you've got to satisfy three stakeholder groups. It's got to be products that patients want to use, physicians have to want to prescribe and payers have to want to reimburse.

Ah so we realize that product development is becoming increasingly a sort of collaborative effort, if you want to call it that, with a commercial endpoint in mind. But it, it's not something that we're getting a lot of inbound requests from our customers. We're dealing with the development people. It's really still in the hands of the commercial and medical affairs groups that are, that are focused on reimbursement.

We have some capabilities and skills on the reimbursement side and we do utilize those, if we don't have the expertise in-house then we can collaborate with others outside. I don't think it's going to change our strategy in the short term of remaining focused on clinical development.

Thanks for the color.

Thank you our next question comes from the line of John Kreger with William Blair. Your line is open.

Hi. Thanks very much, Jamie or Greg could you guys talk maybe about if you look at your wins in the last quarter or two and contrast it to your revenue mix. Are you seeing any interesting shifts in mix, client type or maybe even sort of contract structures between traditional full service and functional carve-outs.

The short answer is no but Greg and I will think a little more bit on that, I think the mix -- I don't think we've seen any unusual trends. We've got some nice incumbency positions on some new molecules at early stage which I think we've said all along we value as important. As those molecules progress we would hope to take on the later phase work.

Some of these molecules also have applicability in multiple indications. Not just in the same therapeutic area but potentially cross into other therapeutic areas.

So some of these oncological molecules have application in autoimmune and inflammation as well so we, the therapeutic guys do a really nice job of understanding what business is potentially good. Not just on a single proposal level potentially but giving us incumbency with that customer. And also for I think we've mentioned this in the past getting a position in novel molecules with new mechanisms, it gives us that the, that expertise as follow-on molecules come from different customers. So we we've got pretty good strategy we've not done anything to alter it and we've not really seen anything new or different in quarter 3 relative to what we've seen in recent quarters.

Great thank you and Jamie maybe just -- I know you hit just a little bit in your prepared remarks but you are apparently having more success than your peers at the present in terms of new business momentum, can you just talk about the one or two key differentiators that appear to be resonating with clients?

It's sort of the same I mean therapeutics is increasingly important and it, it's not just understanding the protocol. It's really understanding the care environment, the investigator network and really the pathway to bring patients into those studies and the nuances that come with development in particular therapeutic areas, I think the process side of our operation resonates we are seeing improvements in delivery and cycle times but still work to be done. We, we're not delivering every project on time until we get to that stage we're going to continue to work on it.

I think the two that may be a little more evident now that we haven't necessarily always put on the front of the list would be technology. I think we continue to work to try to find efficiency in linking sources of data and streamlining processes and trying to take some of the manual effort out. That's helping us on, hopefully lowering cost at a per-patient and per study level.

The other piece for us is our relationship with investigative sites and even outreach and novel methods to bring patients into the consent process and hopefully into randomized trails.

And I think we continue to spend a lot of time across our therapeutic teams and at a leadership level focused on matching the right protocol with the right physician and the right patient. And that, that's a recipe for delivering trials on time and getting to definitive results.

Great thanks and one last one Greg given that comment about hiring becoming maybe a little more challenging. Are you seeing any uptake in wage trends or turnover as a result?

Ah no not that meaningful, you I think the comment is more that this is a robust market for all of the CROs. All the CROs have done well they're growing. I think the job that we have as an industry is to continue to attract talent and bring new people in and train them and I think all of us are addressing that challenge in different ways and our therapeutic model I think helps us slightly as a competitive advantage because people like to do day in, day out what they were trained in school and what their passion is. So-

Yes I think the other thing that certainly the senior team has talked about is so I don't know if you want to call it wage balancing but within certain job functions you obviously have varying degrees of seniority and varying salary levels. So everybody likes to talk about CRAs you can look at increasing your top line salary for your senior more experienced CRAs. They're generally a little more efficient, more effective.

But at the same time you augment your total pool by bringing in you need people that are new to that CRA rule not necessarily inexperienced 'cause we expect them to have appropriate life science and good clinical practice experience. But if you bring them in and train them appropriately you can do some wage balancing across different resource pools. So yes maybe a little bit of pressure at the top end for the most experienced people but at the same time giving people opportunity to build a career on the research side and balance overall cost.

Great thank you very much.

Thank you. Our next question comes from the line of Greg Bolan with Avondale Partners. Your line is open.

Hey guys thanks for taking the question. So just to follow on I think it was to Dave's question earlier so if you think about your win rate today against some of your other peers specifically in the tier 1 area could you maybe give us a sense as to I'm assuming it's up quite a bit. And could you maybe give us a sense as to where your win rate is highest potentially as opposed by therapeutic area I'm assuming it's probably going to be in the CNS, in the oncology area.

But I guess more importantly going forward where are you really going to be attacking from a therapeutic standpoint versus some of your peers. Where do you think that there is maybe some holes that you guys can even expand your win rate even further in RFP bake offs thanks.

Let me take first stab at that. One I think one of the things that we've constantly said that we're trying to grow our market share and way of doing that is meaning what I would call the addressable market in terms of customers, and so I think we've added roughly fifty new customers this year. We did a little over fifty last year. So when you think about and why we are growing our awards maybe faster than competition I think it's really taking market share.

Not necessarily and having new customers that wouldn't allow us to bid on that worth because we've established that relationship, I would say that's probably more of the driver of our net awards and book to bill than it is increasing our win rate. Our win rate is varies every quarter but you know over the last nine months this reasonably consistent to where it was last year and maybe slightly higher. But you where the question you asked secondly is where we need to continue to improve? I would answer the same way I did the first part.

We need to continue to expand our customer base. If we continue to do that and get more and more exposure to ah, to those customers we've proven that they like our work. They like out therapeutic focus. We do good high quality work and we get a high repeat business from them and that will allow us to continue to take market share.

Yes Greg I think, two Gregs. I think Greg summarized it well for you Greg. I think we look at opportunities as they come in. Obviously depending on the existing relationship with that particular customer for customers that we've worked with in the past, hit rate, strike rate's very good. If it's a new customer we're obviously likely to have to provide some compelling reason for them to choose INC over existing customers or if it's what I've called a more transactional competitive position.

We really need to be in there offering some level of insight they don't have themselves as a customer and they're not getting from others that are in that process and that's why we rely on the therapeutics to give insight into the development environment standard of care country selection, enrollment rates overall timelines. It's not really about sort of cost or price in a lot of these instances although there are some customers that are price sensitive and it is becomes of more than commodity play and we do probably less well in that sort of commodity environment.

That makes sense and thanks guys and congrats on very good results.

Thanks Greg appreciate it.

(Operator Instructions)

Our next question comes from the line of Tim Evans with Wells Fargo. Your line is open.

Hi thank you, one thing that stands out to me since your IPO is that your book-to bills have been somewhat less volatile than they were in the pre IPO period. Is that just happenstance or have you kind of done something to you know sharpen the pencil with the sales organization there? That's the first part of the question. The second part of the question would just be, as you look into Q4 can you comment on the RFP flow and your bookings here one month into the end of the quarter? Thanks.

So on Quarter 4 the answer is no. So we live in the world of Reg. FD so we're sort of not going to be in a position to talk about this current quarter. Unless there was anything that was major that we felt would be different to what we've offered in guidance.

In terms of I think we've got into a good rhythm and cadence I think so with Greg's team on the finance side along with Neil and Ops realize that we do get measured on sort of consistent performance so we plan out the quarter pretty thoroughly.

So as we entered into quarter three we had pretty good line of sight on what we thought we were going to close. And we keep the focus up so maybe historically we were less sort of concerned 'cause I think as we've always said in the past, if I win a study in the last week of September versus the first and second week in October, the study doesn't start any earlier. I don't get first patient in any earlier and their drug's not available any earlier.

Ah so it doesn't affect revenue but we do realize that it's important to get some consistency in performance so we just ensure that there is good communication across Finance, Ops and Sales and that we manage that process. At some point we're likely to get a late cancellation in the quarter that makes that process more challenging.

At this point cancellation rates have been fairly low but we also look at risk in our portfolio. So we do keep an eye on studies that we think may be subject to delay or cancellation and we factor that into particularly phasing of backlog and then obviously we, as Greg has always said we're fairly prudent and conservative on on how we treat particularly new awards around time being funded, contingent studies and other risk factors.

Gotcha, all right thank you very much.

Thank you our next question comes from the line of Donald Hooker with Key Bank. Your line is open.

Hey good morning congratulations on another good quarter. And so my, you guys called out a sort of were breaking down some of the secrets to your recipe a little bit during the call and one of the areas you called out was technology. Am and I was curious if there was way for us on the outside to think about on a relative basis.

If there's a way to sort of how you think about yourself ranking wise versus other CROs and your aggressiveness using you know, you know EDC and other you know risk -based monitoring or other sort of method using technology to kind of improve your margins. How would you, how do you kind of characterize yourself kind of versus other CROs? If there's a way to rank that.

You know part as we were more focused on ourselves than the competition so wouldn't want to get into a ranking against other CROs. What I will tell you is that our approach to technology is to leverage our advanced suppliers, R&D investments. We work very closely to them to help talk to them about the roadmap where the industry is going and it's a mutually beneficial thing and they're trying to sell more and more of their product to the industry and we want to help guide them as to what the industry needs.

And so by partnering with those technology companies we believe we are able to leverage their R&D investments to meet our customers needs versus us having to build our own R&D investment and, quite honestly, I think they have great resources, you know R&D graduate - software engineers graduating from school probably would like to go to work for an Oracle or a Medidata or a SAS, great career opportunity and we think that they have the best and brightest talent and we like their investments.

Yes. I mean technology is important and taking, sort of manual effort and data transposition out of the process is going to provide some benefit to development, but at the end of the day, in terms of delivering successful development you've got to put the right protocol in the hands of the right physicians who have protocol eligible patients.

That moves the needle more than anything else relative to efficiency and; therefore, you saw analytics, good data sources to make sure that we're going to have, operationally, efficient protocols that are scientifically and medically robust is a big part of working with customers and then using the data that we have access to find the right countries and the right physicians to successfully unroll studies.

That's where we see a lot of the effort going between ourselves and a number of our customers and some of our technology and data partners. Yes. We're doing rick-based monitoring. We're doing strategic data monitoring. It's successful only in an environment where you can enroll patients into the right protocol, so it's important that those other things that drive efficiency and help margins.

OK, so it sounds like technology is important, from - sort of summarizing what you said, the therapeutic focus, the other - the science behind it maybe ranks a little bit higher than your, sort of, win rate if that - is that a fair summary?

Yes. That's a good, sort of, summary. I think technology augments the expertise we have on the scientific side and you've got to align technology to process, as well. If you've got a racecar, but an inexperienced driver, you're probably going to end up in a bad place. I think you've got to put the right people and the right data and technology in the hands of people that can use it.

That's a great analogy. Okay, that's my question. Thank you very much.

(Operator Instructions)

And I'm showing no further questions. I'd like to turn the call back to Jamie Macdonald for closing remarks.

Thank you. Thank you ladies and gentlemen for your attendance today and for your interest and investment in our company. We look forward to reporting back to you on our next call with further progress made during the fourth quarter of 2015. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.