Syneos Health : Q3 2022 Financial Results Presentation – Marketscreener.com




Syneos Health, Inc. (Nasdaq: SYNH)
Q3 2022 Financial Results
November 4, 2022
Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, including the future impact of the COVID-19 pandemic, inflation, the war between Russia and Ukraine and other macroeconomic trends on our business, financial results and financial condition, expected interest rates, anticipated financial results for the full year 2022, our sales pipeline, existing backlog and expectations of net awards, including expectations regarding lower net new business awards, delays in backlog conversion, and customer delays in its FSP business within Clinical Solutions, expected non-GAAP tax rate, trends in reimbursable out-of-pocket expenses, benefits of recent acquisitions, and plans for capital deployment. Actual results might differ materially from those explicit or implicit in the forward- looking statements. Important factors that could cause actual results to differ materially include, but are not limited to: risks associated with the COVID-19 pandemic; the Company’s potential failure to generate a large number of new business awards and the risk of delay, termination, reduction in scope, or failure to go to contract of our business awards; the Company’s potential failure to convert backlog to revenue; fluctuations in the Company’s operating results and effective income tax rate; the impact of potentially underpricing the Company’s contracts, overrunning our cost estimates, or failing to receive approval for or experiencing delays with documentation of change orders; cyber-security and other risks associated with the Company’s information systems infrastructure; changes and costs of compliance with regulations related to data privacy; concentration of the Company’s customers or therapeutic areas; the risks associated with doing business internationally, including risks related to the war in Ukraine; challenges by tax authorities of the Company’s intercompany transfer pricing policies; the Company’s potential failure to successfully increase its market share, grow its business, and execute its growth strategies; the Company’s ability to effectively upgrade its information systems; the Company’s failure to perform its services in accordance with contractual requirements, regulatory standards, and ethical considerations; risks related to the management of clinical trials; the need to hire, develop, and retain key personnel; the impact of unfavorable economic conditions, including the uncertain international economic environment, changes in foreign currency exchange rates; effective income tax rate fluctuations; the Company’s ability to protect its intellectual property; risks related to the Company’s acquisition strategy, including its ability to realize synergies; the Company’s relationships with customers who are in competition with each other; any failure to realize the full value of the Company’s goodwill and intangible assets; risks related to restructuring; the Company’s compliance with anti-corruption and anti-bribery laws; the Company’s dependence on third parties; potential employment liability; impacts from increasing focus on environmental sustainability and social initiatives; the Company’s ability to utilize net operating loss carryforwards and other tax attributes; downgrades of the Company’s credit ratings; competition in the biopharmaceutical services industry; outsourcing trends and changes in aggregate spending and research and development budgets; the impact of, including changes in, government regulations and healthcare reform; intense competition faced by our customers from lower cost generic products and other competing products; the Company’s ability to keep pace with rapid technological change; the cost of and the Company’s ability to service its substantial indebtedness; other risks related to ownership of the Company’s common stock; and other risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as updated by the Company’s other SEC filings, copies of which are available free of charge on the Company’s website at investor.syneoshealth.com. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), this presentation contains certain non-GAAP financial measures, including adjusted net income (including adjusted diluted earnings per share), EBITDA, adjusted EBITDA, adjusted EBITDA margin, revenue excluding reimbursable expenses, and non-GAAP effective tax rate. We also include in this presentation non-GAAP financial measures to illustrate our cash flow and leverage profile, including net debt, net leverage, and free cash flow. We also present revenue growth in constant currency. Constant currency revenue growth is defined as revenue restated at the comparative period’s foreign currency exchange rates measured against the comparative period’s revenue. Revenue growth excluding reimbursable expenses on a constant currency basis is defined as revenue minus reimbursable out-of- pocket expenses, restated at comparative period’s foreign currency exchange rates measured against the comparative period’s revenue minus reimbursable expenses. A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s financial performance that excludes or includes amounts from the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets, or statements of cash flows of the Company.
The Company defines adjusted net income (including adjusted diluted earnings per share) as net income (including diluted earnings per share) excluding restructuring and other costs; transaction, integration-related, and other expenses; share-based compensation expense; loss on extinguishment of debt; and other income (expense), net. After giving effect to these items, the Company has also included an adjustment to its income tax rate to reflect the expected long- term income tax rate.
EBITDA represents earnings before interest, taxes, depreciation and amortization. The Company defines adjusted EBITDA as EBITDA, further adjusted to exclude expenses and transactions that the Company believes are not representative of its core operations, namely: restructuring and other costs; transaction, integration-related, and other expenses; share-based compensation expense; other income (expense), net; and loss on extinguishment of debt. The Company presents EBITDA and adjusted EBITDA because it believes they are useful metrics for investors as they are commonly used by investors, analysts and debt holders to measure the Company’s ability to fund capital expenditures and meet working capital requirements.
The Company defines revenue excluding reimbursable expenses as revenue minus reimbursable out-of-pocket expenses.
Each of the non-GAAP measures noted above are used by management and the Board to evaluate the Company’s core operating results because they exclude certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business. Adjusted net income (including adjusted diluted earnings per share) and adjusted EBITDA are used by management and the Board to assess the performance of the Company’s business.
Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. Also, other companies might calculate these measures differently. Investors are encouraged to review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures included on slide 6 and in the Appendix of this presentation. In addition, segment operating metrics such as backlog, net new business awards and book-to-bill ratio are not necessarily indicative of
future financial results and are subject to change due to cancellations, changes in scope or delays.
2
GAAP Financial Results
Three Months ended September 30,
Nine Months ended September 30,
$M (except per share data)
2022
2021
% Change
2022
2021
% Change
Revenue
$ 1,336.2
$ 1,348.2
(0.9%)
$ 4,033.2
$ 3,839.6
5.0%
Gross profit
318.4
316.3
0.7%
936.1
869.9
7.6%
Gross profit margin
23.8%
23.5%
+30 bps
23.2%
22.7%
+50 bps
Selling, general, and administrative
130.4
139.5
(6.6%)
409.6
421.5
(2.8%)
SG&A as a % of revenue
9.8%
10.3%
-50 bps
10.2%
11.0%
-80 bps
Income from operations
117.8
113.4
4.0%
308.3
258.1
19.5%
Operating margin
8.8%
8.4%
+40 bps
7.6%
6.7%
+90 bps
Net income
87.0
78.2
11.3%
211.0
158.9
32.8%
Net income margin
6.5%
5.8%
+70 bps
5.2%
4.1%
+110 bps
Earnings per share
$ 0.84
$ 0.75
12.0%
$ 2.04
$ 1.51
35.1%
Note: Due to rounding of specific line items, line item amounts might not sum to subtotals.
3
Non-GAAP Financial Results
Three Months ended September 30,
Nine Months ended September 30,
$M (except per share data)
2022
2021
% Change
2022
2021
% Change
Clinical Solutions revenue
1
$ 1,003.3
$ 1,040.1
(3.5%)
$ 3,047.3
$ 2,972.6
2.5%
Commercial Solutions revenue
2
$ 333.0
$ 308.2
8.0%
$ 985.9
$ 867.0
13.7%
3
$ 1,336.2
$ 1,348.2
(0.9%)
$ 4,033.2
$ 3,839.6
5.0%
Revenue
Adjusted EBITDA
210.0
202.6
3.7%
591.7
528.4
12.0%
Adjusted EBITDA margin
4
15.7%
15.0%
+70 bps
14.7%
13.8%
+90 bps
Adjusted diluted EPS
$ 1.23
$ 1.22
0.8%
$ 3.49
$ 2.98
17.1%
Note: Segment and total revenue presented on a GAAP basis. 2021 segment revenue has been recast to conform to insignificant changes to management reporting in 2022.
4
For a reconciliation of the presented financial measures, please reference slides 13 – 16 in the Appendix of this presentation.
Segment Operating Metrics
Clinical Solutions
Commercial Solutions
As of September 30,
As of September 30,
$M (except ratios)
2022
2021
% Change
2022
2021
% Change
Including reimbursable out-of-pocket expenses:
TTM net new business awards
2
$
2,729.7
$
5,333.3
(48.8%)
$
1,399.9
$
1,320.0
6.1%
TTM book-to-bill ratio
2
0.67x
1.39x
1.07x
1.16x
Ending backlog, Clinical Solutions
$
9,746.7
$
11,284.7
(13.6%)
Ending backlog, Deployment Solutions
$
784.0
$
732.8
7.0%
Excluding reimbursable out-of-pocket expenses:
TTM net new business awards
$
2,776.1
$
3,603.7
(23.0%)
$
1,203.5
$
1,162.1
3.6%
TTM book-to-bill ratio
0.98x
1.41x
1.07x
1.16x
Ending backlog, Clinical Solutions
$
6,439.9
$
6,604.4
(2.5%)
Ending backlog, Deployment Solutions
$
616.0
$
578.9
6.4%
Note: For historical trending of the presented segment operational measures, please reference slides 10 – 11 in the Appendix of this presentation
1.
2021 segment backlog and net new business awards have been recast to conform to insignificant changes to management reporting in 2022.
2.
Clinical Solutions net new business awards and book-to-bill ratios including reimbursable out-of-pocket expenses for the trailing twelve months were impacted by the adjustment 5
made to Clinical Solutions backlog in the fourth quarter of 2021 to reflect the Company’s expectation of reduced reimbursable expenses going forward.
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Syneos Health Inc. published this content on 04 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 November 2022 10:21:01 UTC.

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