Syneos Health Reports First Quarter 2021 Results
Source:

Syneos Health

April 29, 2021

Highlights

  • Revenue of $1,208.7 million for the three months ended March 31, 2021, representing a sequential increase of 6.0% compared to the three months ended December 31, 2020, and a year-over-year increase of 3.9% compared to the three months ended March 31, 2020.
  • Net new business awards of $1,548.8 million and $5,880.1 million for the three and twelve months ended March 31, 2021, representing book-to-bill ratios of 1.28x and 1.32x, respectively.
    • Clinical Solutions segment net new business awards of $1,215.5 million and $4,720.1 million for the three and twelve months ended March 31, 2021, representing book-to-bill ratios of 1.30x and 1.39x, respectively, and year-over-year backlog growth of 22.5% as of March 31, 2021.
    • Commercial Solutions segment net new business awards of $333.3 million and $1,160.0 million for the three and twelve months ended March 31, 2021, representing book-to-bill ratios of 1.23x and 1.09x, respectively, and year-over-year Deployment Solutions backlog growth of 7.6%.
  • GAAP net income of $38.7 million for the three months ended March 31, 2021, representing growth of 15.3% compared to the three months ended March 31, 2020.
  • Adjusted EBITDA of $151.1 million for the three months ended March 31, 2021, representing growth of 10.0% compared to the three months ended March 31, 2020.
  • GAAP diluted earnings per share of $0.37 for the three months ended March 31, 2021, representing growth of 15.6% compared to the three months ended March 31, 2020.
  • Adjusted diluted earnings per share of $0.79 for the three months ended March 31, 2021, representing growth of 16.2% compared to the three months ended March 31, 2020.
  • Full year 2021 guidance; revenue of $5,125 million to $5,325 million, GAAP net income of $212.3 million to $236.8 million, adjusted EBITDA of $745.0 million to $785.0 million, GAAP diluted earnings per share of $2.01 to $2.23, and adjusted diluted earnings per share of $4.17 to $4.42.

MORRISVILLE, N.C. – April 29, 2021 — Syneos Health (Nasdaq:SYNH), the only fully integrated biopharmaceutical solutions organization, today reported financial results for the three months ended March 31, 2021.

“We delivered strong first quarter results and returned to year-over-year growth. Our integrated product development model, purpose-built to drive greater success for customers, continues to fuel robust backlog growth while delivering on the key drivers of our Value Creation Plan,” said Alistair Macdonald, Chief Executive Officer, Syneos Health. “We continued to invest in our Decentralized Solutions capabilities during the first quarter, further strengthening our Dynamic Assembly network with new partnerships in order to bring clinical trials closer to the patient. We remain confident in the long-term strength of our business given our market positioning and record backlog level, which we expect to fuel strong growth and profitability for the full year 2021.”

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.

First Quarter 2021 Results

For the three months ended March 31, 2021, revenue increased 3.9% to $1,208.7 million compared to the same period in the prior year. On a constant currency basis, revenue increased 2.9%. This increase was driven by revenue growth in Clinical Solutions partially offset by a revenue decline in Commercial Solutions, as discussed below. Prior period segment results have been recast to reflect the move of Regulatory and Operations Consulting from Commercial Solutions to Clinical Solutions.

For the three months ended March 31, 2021, Clinical Solutions revenue increased 6.3% to $938.0 million compared to the same period in the prior year. On a constant currency basis, revenue increased 5.2%. This increase was primarily due to the positive impacts from the Synteract and Illingworth Research Group acquisitions along with increased project start up activity, partially offset by the divestiture of the Company’s contingent staffing business in the second quarter of 2020 and a slower recovery in reimbursable out-of-pocket expenses. Acquisitions contributed approximately 575 basis points to revenue growth, while the divestiture of contingent staffing resulted in an approximate 140 basis point headwind to revenue growth.

For the three months ended March 31, 2021, Commercial Solutions revenue decreased 3.6% to $270.8 million from the same period in the prior year. On a constant currency basis, revenue decreased 4.2%. This decrease was primarily due to a disproportionate decline in reimbursable out-of-pocket expenses, driven by the impacts of COVID-19, as well as the divestiture of the Company’s medication adherence business in November 2020, partially offset by an increase in consulting services revenue. The decline in reimbursable out-of-pocket expenses and the divestiture of medication adherence resulted in an approximate 420 basis point and 245 basis point headwind to revenue growth, respectively.

GAAP net income for the three months ended March 31, 2021 increased 15.3% to $38.7 million, resulting in diluted earnings per share of $0.37, compared to GAAP net income of $33.6 million, or diluted earnings per share of $0.32, for the three months ended March 31, 2020. The increases in GAAP net income and diluted earnings per share were primarily due to higher gross margin partially offset by higher selling, general and administrative expenses and lower other income.

Adjusted net income for the three months ended March 31, 2021 increased 16.2% to $83.1 million, resulting in adjusted diluted earnings per share of $0.79, compared to adjusted net income of $71.5 million, or adjusted diluted earnings per share of $0.68 for the three months ended March 31, 2020. 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 March 31, 2021 increased 10.0% to $151.1 million from the same period in the prior year. The increase in adjusted EBITDA was driven primarily by ForwardBound, including operating leverage, partially offset by the negative impact of fluctuations in foreign currency exchange rates.

Net New Business Awards and Backlog

Net new business awards were $1,548.8 million and $5,880.1 million for the three and twelve months ended March 31, 2021, representing book-to-bill ratios of 1.28x and 1.32x, respectively. Clinical Solutions net new business awards were $1,215.5 million and $4,720.1 million for the three and twelve months ended March 31, 2021, representing a book-to-bill ratio of 1.30x and 1.39x, respectively. Commercial Solutions net new business awards were $333.3 million and $1,160.0 million for the three and twelve months ended March 31, 2021, representing book-to-bill ratios of 1.23x and 1.09x, respectively. These net new business awards contributed to an ending backlog of $11,218.0 million as of March 31, 2021, consisting of $10,509.9 million for Clinical Solutions and $708.1 million for the Deployment Solutions offering within Commercial Solutions.

Liquidity and Capital Management Update

Cash flows provided by operating activities were $127.1 million during the three months ended March 31, 2021.

During the three months ended March 31, 2021, the Company made $41.8 million and $64.1 million of voluntary prepayments against its Term Loan A and Term Loan B, respectively that were applied to future mandatory principal payments due. The Company is not required to make a mandatory payment against the principal balance of Term Loan A until October 2022 and Term Loan B until maturity in August 2024. The Company also amended its accounts receivable financing agreement to increase the amount it can borrow from $300.0 million to $365.0 million, and drew down the additional $65.0 million to partially fund the Term Loan A and Term Loan B voluntary prepayments.

During the three months ended March 31, 2021, the Company repurchased $44.5 million of common stock and has $255.5 million of remaining share repurchase authorization available through December 31, 2022.

Full Year 2021 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 Operations 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. The severity and duration of the COVID-19 pandemic are outside of the Company’s control and, given the uncertain nature of the pandemic, 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 non-GAAP effective tax rate of approximately 24.0% for the year ending December 31, 2021. 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 first quarter of 2021. The Company’s full year 2021 guidance is outlined below:

   FY 2021 
Low High 
(in millions, except per share data)
Revenue$5,125.0$5,325.0
GAAP Net Income212.3236.8
GAAP Diluted EPS2.012.23
Adjusted EBITDA745.0785.0
Adjusted Diluted EPS$4.17$4.42

 

Webcast and Conference Call Details

Syneos Health will host a conference call at 8:00 a.m. ET on April 29, 2021, to discuss its first quarter 2021 financial results. The live webcast will be available in listen-only mode in the Events section of the Company’s Investor Relations website at investor.syneoshealth.com. To participate via phone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call.

An archived replay of the conference call is expected to be available online at investor.syneoshealth.com after 1:00 p.m. ET on April 29, 2021.

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