MORRISVILLE, N.C., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Syneos Health (Nasdaq:SYNH), a leading biopharmaceutical solutions organization combining a Contract Research Organization and a Contract Commercial Organization, today reported financial results for the three and nine months ended September 30, 2020.

“We delivered strong sequential revenue growth with profit outperformance in the third quarter. Our differentiated model continues to resonate with customers and our value proposition is further strengthened with our agreement to acquire Synteract,” said Alistair Macdonald, Chief Executive Officer, Syneos Health. “As we look ahead to 2021 and beyond, we’re building a strong foundation for growth, coming off a quarter with record backlog, high market demand and robust pipelines. We’re also particularly proud of our recent selection to the Forbes 2020 list of World’s Best Employers, a testimony to the strength of our collaborative culture and this team’s resilience during the pandemic.”

Third Quarter 2020 Results

Please refer to the "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Measures" included in this press release and accompanying tables for important disclosures about non-GAAP measures and a reconciliation of these measures to the nearest GAAP measures.

For the three months ended September 30, 2020, GAAP revenue decreased 6.6% to $1,099.0 million and decreased 6.8% compared to the adjusted revenue from the same period in the prior year. On a constant currency basis, revenue decreased 7.5% compared to the adjusted revenue from the same period in the prior year. This decrease was driven by revenue declines in both Clinical Solutions and Commercial Solutions, as discussed below. Revenue was less than expected for the three months ended September 30, 2020, due to the decrease in reimbursable out-of-pocket expenses.

For the three months ended September 30, 2020, Clinical Solutions GAAP revenue decreased 4.4% to $829.2 million, and decreased 4.6% compared to the adjusted revenue from the same period in the prior year. On a constant currency basis, revenue decreased 5.4% compared to the adjusted revenue from the same period in the prior year. This decrease was primarily due to the impacts of COVID-19, including the related decline in reimbursable out-of-pocket expenses, and the second quarter divestiture of the Company’s contingent staffing business, partially offset by the positive impact of fluctuations in foreign currency exchange rates. Excluding the impact of reimbursable out-of-pocket expenses and the contingent staffing business divestiture, Clinical Solutions revenue increased 1.0% compared to the same period in the prior year.

For the three months ended September 30, 2020, Commercial Solutions GAAP revenue decreased 12.8% to $269.8 million from the same period in the prior year. On a constant currency basis, revenue decreased 13.2%. This decrease was primarily due to the impacts of COVID-19, including a disproportionate decline in reimbursable out-of-pocket expenses as well as delays in new project starts. Excluding the impact of reimbursable out-of-pocket expenses, Commercial Solutions revenue decreased 6.0% compared to the same period in the prior year.

GAAP net income for the three months ended September 30, 2020 was $63.4 million, resulting in diluted earnings per share of $0.60, compared to GAAP net income of $58.9 million, or diluted earnings per share of $0.56, for the three months ended September 30, 2019. The increases in GAAP net income and diluted earnings per share were primarily due to higher income from operations, and lower interest and tax expense, partially offset by a decrease in other income from foreign exchange rate fluctuations.

Adjusted net income for the three months ended September 30, 2020 was $110.2 million, resulting in adjusted diluted earnings per share of $1.04, compared to adjusted net income of $91.3 million, or adjusted diluted earnings per share of $0.87 for the three months ended September 30, 2019. The increases in adjusted net income and adjusted diluted earnings per share were primarily due to the increase in adjusted EBITDA, discussed below, and lower interest expense.

Adjusted EBITDA for the three months ended September 30, 2020 increased 8.9% to $182.8 million from the prior year period, representing an increase in adjusted EBITDA margin from 14.2% to 16.6%. This increase in adjusted EBITDA margin was driven primarily by the impact of the Company’s cost management strategies, including ForwardBound, and lower reimbursable out-of-pocket expenses. A portion of these cost reductions are due to temporary cost savings measures implemented in response to the uncertainty caused by the COVID-19 pandemic. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

Year-to-Date 2020 Results

For the nine months ended September 30, 2020, GAAP revenue decreased 5.4% to $3,275.8 million and decreased 5.5% compared to the adjusted revenue from the same period in the prior year. On a constant currency basis, revenue decreased 5.4% compared to the adjusted revenue from the same period in the prior year. This decrease was driven by revenue declines in both Clinical Solutions and Commercial Solutions, as discussed below.

For the nine months ended September 30, 2020, Clinical Solutions GAAP revenue decreased 2.8% to $2,451.2 million, and decreased 3.0% compared to the adjusted revenue from the same period in the prior year. On a constant currency basis, revenue decreased 2.8% compared to the adjusted revenue from the same period in the prior year. This decrease was primarily due to the impacts of COVID-19, including the related decline in reimbursable out-of-pocket expenses, and the negative impact of fluctuations in foreign currency exchange rates, partially offset by revenue growth during the three months ended March 31, 2020. Excluding the impact of reimbursable out-of-pocket expenses and the contingent staffing business divestiture, Clinical Solutions revenue decreased 1.8% compared to the same period in the prior year.

For the nine months ended September 30, 2020, Commercial Solutions GAAP revenue decreased 12.3% to $824.6 million from the same period in the prior year. On a constant currency basis, revenue decreased 12.4%. This decrease was primarily due to the impacts of COVID-19, including a disproportionate decline in reimbursable out-of-pocket expenses as well as delays in new project starts. Excluding the impact of reimbursable out-of-pocket expenses, Commercial Solutions revenue decreased 8.1% compared to the same period in the prior year.

GAAP net income for the nine months ended September 30, 2020 was $100.9 million, resulting in diluted earnings per share of $0.96, compared to a GAAP net income of $40.2 million, or a diluted earnings per share of $0.38, for the nine months ended September 30, 2019. The increases in GAAP net income and diluted earnings per share were primarily due to higher income from operations and lower interest and tax expense, partially offset by a decrease in other income from foreign exchange rate fluctuations.

Adjusted net income for the nine months ended September 30, 2020 was $242.4 million, resulting in adjusted diluted earnings per share of $2.30, compared to adjusted net income of $230.7 million, or adjusted diluted earnings per share of $2.20 for the nine months ended September 30, 2019. The increases in adjusted net income and adjusted diluted earnings per share were primarily due to lower interest expense, partially offset by a decline in adjusted EBITDA, discussed below.

Adjusted EBITDA for the nine months ended September 30, 2020 decreased 3.9% to $438.8 million from the same period in the prior year, representing an increase in adjusted EBITDA margin from 13.2% to 13.4%. This decrease in adjusted EBITDA was driven primarily by the impacts of COVID-19 on both Clinical Solutions and Commercial Solutions, partially offset by the impact of the Company’s cost management strategies, including ForwardBound, and lower reimbursable out-of-pocket expenses. A portion of these cost reductions are due to temporary cost savings measures implemented in response to the uncertainty caused by the COVID-19 pandemic. Some of these cost savings measures ended in the third quarter, including certain compensation adjustments.

Net New Business Awards and Backlog

Net new business awards were $1,206.3 million and $5,892.1 million for the three and twelve months ended September 30, 2020, representing a book-to-bill ratio of 1.10x and 1.31x, respectively. Clinical Solutions net new business awards were $995.0 million and $4,711.3 million for the three and twelve months ended September 30, 2020, representing a book-to-bill ratio of 1.20x and 1.41x, respectively. Clinical Solutions net new business awards and book-to-bill ratios were negatively impacted by an adjustment to reflect revised expectations for future reimbursable out-of-pocket expenses in light of the impacts from COVID-19. Commercial Solutions net new business awards were $211.3 million and $1,180.8 million for the three and twelve months ended September 30, 2020, representing a book-to-bill ratio of 0.78x and 1.04x, respectively. These net new business awards contributed to an ending backlog of $9,783.0 million as of September 30, 2020, consisting of $9,196.3 million for Clinical Solutions and $586.7 million for the Deployment Solutions offering within Commercial Solutions.

COVID-19 Update

Update on Operations

Physical access to investigative sites steadily improved during the third quarter, with approximately 70% of investigative sites now permitting some level of physical site visits. However, capacity constraints remain at some of these sites, which we are mitigating through remote monitoring activities. In addition, another 20% of investigative sites continue to allow only some level of remote monitoring. 10% of investigative sites remained completely inaccessible as of September 30, 2020. The pace of both patient enrollment and the startup of new clinical trials also continue to improve, with new patient enrollment having recovered to about 75% of pre-COVID levels and new site activations trending at approximately 115% of pre-COVID levels, during October.

Within Commercial Solutions, the Deployment Solutions field teams have continued a gradual return to in-person visits to their healthcare providers (“HCP”s) where possible – currently in about 55% of territories. Field teams have continued to experience limitations on their abilities to physically visit HCPs in other territories, as well as delays and cancellations of existing projects, and travel restrictions.

The Company effectively implemented its planned cost management strategies while ensuring all measures were being appropriately balanced with the continued commitment to maintain excellent delivery quality and quickly re-accelerate work activities for the benefit of its customers.

Liquidity and Capital Management Update

The Company remains confident in its liquidity position, which includes cash on hand of $248.9 million as of September 30, 2020, and access to its revolving credit facility.

During the three months ended September 30, 2020, the Company made $40.0 million and $35.0 million of voluntary prepayments against Term Loan A and Term Loan B, respectively, and repaid the outstanding $150.0 million balance on the Revolver. The Term Loan A prepayments were applied to the mandatory principal payments due October 2020 and January 2021, and a partial principal payment for April 2021. Additionally, during the three months ended September 30, 2020, the Company made $19.4 million of mandatory principal payments towards Term Loan A. As a result of previous voluntary prepayments, the Company is not required to make a mandatory payment against the Term Loan B principal balance until maturity in August 2024. In addition, during the third quarter, the Company borrowed an additional $25.0 million on its accounts receivable financing agreement.

During the three months ended September 30, 2020, the Company repurchased $30.0 million of common stock. As of September 30, 2020, the Company had remaining repurchase authorization of $106.3 million, which is available through the end of 2020. The Company will continue to evaluate the utilization of its share repurchase program as market and economic conditions evolve.

Full Year 2020 Business Outlook

The Company's guidance takes into account a number of factors, including existing backlog, current sales pipeline, trends in cancellations and delays, and the Company’s ForwardBound initiative, which includes expansion of the Syneos Operating Network, process optimization, and automation initiatives. In addition, the guidance presented below represents the Company’s best efforts to estimate the impact of COVID-19 on its business. These include reductions in patient enrollment rates, and a reduction in the number of onsite monitoring and Commercial field sales visits, compared to our prior expectations. The severity and duration of the COVID-19 pandemic are outside of the Company’s control and, given their uncertain nature, could cause the Company’s future operating results to be different from our current expectations, particularly if the impact of the pandemic worsens. Furthermore, the guidance presented below is based on current foreign currency exchange rates, current interest rates, and the Company's expected FY 2020 non-GAAP effective tax rate of approximately 24.0%. The guidance is based upon the Company's estimated number of weighted average diluted shares outstanding, and does not take into account any share repurchases beyond the third quarter of 2020.

Full Year 2021 Business Outlook

For the full year 2021, the Company expects revenue of $4,900 million to $5,100 million.

This outlook excludes the acquisition of Synteract. This outlook further assumes that the COVID-19 recovery continues to progress based upon revised expectations, including decreased restrictions on site access in 2021, and patient enrollment rates returning to pre-COVID levels, along with a sustained increase in the use of remote monitoring and field team visits.

Important disclosures in this earnings release about and reconciliations of historical and forward-looking non-GAAP measures, to the nearest corresponding GAAP measures are provided below under "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Measures.”

About Syneos Health

Syneos Health^® (Nasdaq:SYNH) is the only fully integrated biopharmaceutical solutions organization. The Company, including a Contract Research Organization (CRO) and Contract Commercial Organization (CCO), is purpose-built to accelerate customer performance to address modern market realities. Syneos Health brings together approximately 24,000 clinical and commercial minds with the ability to support customers in more than 110 countries. The Company shares insights, uses the latest technologies, and applies advanced business practices to speed its customers’ delivery of important therapies to patients. To learn more about how Syneos Health is shortening the distance from lab to life^® visit syneoshealth.com.