PRA Health Sciences, Inc.
Q3 2018 Earnings Call Transcript

Published: 1 Nov 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to PRA Health Sciences Third Quarter 2018 Earnings Call. [Operator Instructions]. As a reminder, this conference call may be recorded. I would now like to turn the conference over to Senior Vice President of Legal Affairs, Tim McClain. Please go ahead.

[Timothy McClain:]

Good morning, and thank you for joining us for the PRA Health Sciences third quarter of 2018 earnings teleconference. Today, Colin Shannon, our Chief Executive Officer; and Mike Bonello, our Chief Financial Officer, will discuss our third quarter financial results. Following our prepared remarks, we will be available for questions. In addition to our press release and investor supplement with additional financial information is available on the Investor Relations portion of our website. Before we begin, I'd like to remind you that our remarks and responses during this teleconference may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the Risk Factors section of our Form 10-K filed with the SEC on February 28, 2018 -- February 22, 2018. Our risk factors may be updated from time to time in our filings with the SEC. Please note that we assume no obligation to update any forward-looking statements. Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a more helpful and complete understanding of our results and is consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, calculated and presented in accordance with GAAP, are available in the earnings press release and investor supplement included in the Investor Relations portion of our website. I would now like to turn the call over to our CEO, Colin Shannon.

[Colin Shannon:]

Thank you, Tim. Good morning, and thank you for joining the conference call covering our third quarter financial results. I am delighted to report that the third quarter was another strong quarter for PRA, which produced solid revenue growth and double-digit adjusted net income and net new business growth. The industry backdrop remains quite robust in terms of RFP growth, and our service offerings continued to be well received by our clients. Revenue for the quarter was approximately $718 million, which represents an increase of approximately 23% year-over-year at actual foreign exchange rates. Organic revenue growth, which excludes the impact of adoption of ASC 606, reimbursement revenue and our 2017 acquisitions, was approximately 8% year-over-year at actual foreign exchange rates. Adjusted net income for the third quarter was approximately $75 million, an increase of approximately 29% versus the third quarter of 2017. Adjusted net income per diluted share was $1.13, a 28% increase versus the third quarter of 2017. Net new business increased approximately 10% when compared to the third quarter of 2017. We had $657 million of net new business awards, representing a net book-to-bill of 1.28x. Our new business awards and calculation of net book-to-bill ratio excludes the revenue impact of adopting ASC 606, excludes reimbursement revenue and excludes revenue from our Data Solutions segment. The addition of our new awards has resulted in our backlog increasing approximately 4% on a sequential basis and 20% year-over-year, finishing at approximately $4.1 billion. As we've previously disclosed, our backlog does not include our Data Solutions segment. In addition, we are not including pass-through or investigator revenue in backlog. The mix of our new business awards continues to be consistent with previous quarters, with approximately 60% of our new awards coming from the pharmaceutical sector and approximately 40% coming from the biotech sector. In addition, our client base also continues to be well diversified, with our top 5 clients representing approximately 37% of revenue for the quarter, with our largest client representing approximately 9% of revenue. Both metrics exclude the impact of adopting ASC 606. Regarding our Data Solutions segment, I am pleased with the integration and with the segment's third quarter results. As anticipated, we are seeing sales pick up in the last half of the year, and we are tracking well to meet our forecast. In closing, I would like to thank our entire staff and our clients for their continued commitment to PRA Health Sciences. We are delighted with our strong financial results and believe we are well positioned for the remainder of 2018. I would now like to hand over the call to Mike Bonello, our Chief Financial Officer, who will go through our quarterly financial results in more detail.

[Michael Bonello:]

Thank you, Colin, and good morning. For the third quarter of 2018, our consolidated revenues grew 23.3% at actual foreign exchange rates and 24% on a constant currency basis. We reported revenue of $717.6 million in the third quarter of 2018 compared to $582 million in the third quarter of 2017. Revenue, excluding the impact of the adoption of ASC 606, reimbursement revenue and the acquisition of Symphony Health, increased 7.7% at actual foreign exchange rates and 8.2% on a constant currency basis. Revenue by segment was $657 million for the Clinical Research segment and $60.6 million for the Data Solutions segment for the third quarter of 2018. Regarding revenue concentration for the third quarter of 2018, we derived 54% of our revenue from large pharmaceutical companies, 12% from small to mid-sized pharmaceutical companies, 17% from large biotechnology companies and 17% from all other biotechnology companies. These concentration metrics exclude our Data Solutions segment, the adoption of 606 and reimbursement revenue. Total direct costs were $371.4 million in the third quarter of 2018 compared to $326.9 million in the third quarter of 2017. The increase in direct costs was primarily related to an increase in our labor-related costs in our Clinical Research segment and $29.4 million of incremental direct costs from our Data Solutions segment, which were not included in our third quarter 2017 results. Most of the increase in labor-related costs reflect hiring to handle our new business. Unit labor increases were generally in line with our expectations. The increase in direct costs also included a favorable foreign currency effect of $6.1 million. Excluding the impact of the adoption of ASC 606 and reimbursement revenue, total direct costs were 64.8% of revenue in the third quarter of 2018 compared to 66.1% in the third quarter of 2017. The decrease in direct costs as a percentage of service revenue is primarily due to favorable currency exchange rate fluctuations and an increase in utilization of our staff. SG&A expenses were $92.6 million or 16.2% of revenue, excluding the impact of the adoption of ASC 606 and reimbursement revenue for the third quarter of 2018 compared to 16% for the third quarter of 2017. The slight increase in SG&A expenses as a percentage of service revenue is primarily related to an increase in stock-based compensation during the current year. The increase in stock-based compensation expense is primarily related to the initiation of our annual grant program and the adoption of our employee stock purchase plan. During the third quarter of 2018, we incurred transaction-related expenses of $43.8 million. These costs consisted of $42.6 million related to an increase in the estimated fair value of the contingent consideration associated with our Symphony Health acquisition, $0.8 million of stock-based compensation expense related to the release of the remaining portion of the transfer restriction on vested options and $0.5 million of expenses incurred in connection with our August 2018 secondary offering. During the third quarter of 2017, we incurred transaction-related expenses of $11.7 million. Adjusted net income, which excludes certain items whose fluctuation from period-to-period does not necessarily correspond to changes in our operating results, increased 29.3% to $74.8 million in the third quarter of 2018. Adjusted net income per diluted share grew 28.4% to $1.13 per share in the third quarter of 2018 compared to $0.88 per share in the third quarter of 2017. Cash provided by operations was $111.4 million for the 3 months ended September 30, 2018, compared to $101.9 million for the 3 months ended September 30, 2017. The increase in operating cash flow was primarily the result of an increase in our operational performance and the optimization of our working capital. Our net days sales outstanding was 18 days at September 30, 2018. Capital expenditures were $13.6 million in the third quarter of 2018 compared to $17.3 million in the third quarter of 2017. Our capital expenditures continue to reflect our investment in the information technology and the expansion of our infrastructure to support our growth. Our cash balance was $127.5 million at the end of the third quarter, of which $48.2 million was held by our foreign subsidiaries. Net debt outstanding, defined as total debt less cash and cash equivalents, at September 30, 2018, was $1.1 billion compared to $1.2 billion at September 30, 2017. During the third quarter of 2018, we made additional voluntary principal payments of $102.8 million. Regarding currency concentration at September 30, 2018, excluding the impact of the adoption of ASC 606 and reimbursement revenue, 84% of our revenues and 63% of our total expenses were denominated in U.S. dollars. Our euro exposure continues to be naturally hedged. We currently have less than 1% of revenue denominated in GBP of 6% of our expenses are denominated in GBP. We continue to work on ways of reducing our GBP exposure. As discussed in our press release, we are updating our 2018 guidance. We are maintaining our estimated revenue of between $2.87 billion and $2.92 billion, representing as-reported growth of 47% to 50%, constant currency growth of 18% to 20%, excluding the impact of adopting 606 and reimbursement revenue and constant currency organic growth of 10% to 12%, excluding the impact of adopting 606 and reimbursement revenue. We are updating our expected GAAP net income per diluted share to between $2.21 and $2.26 per share and are updating our adjusted net income per diluted share to between $4.22 and $4.27 per share. I want to remind everyone that beginning in 2018, we implemented the guidance of ASC 606. The adoption of ASC 606 requires the inclusion of reimbursable out-of-pocket costs and investigator fees in the calculation of revenue and may create a timing difference between the amount we entitled to receive from our customers and the amount of revenue we recognize in our financial statements. We anticipate that our annual effective income tax rate will be approximately 24%, which incorporates the expected changes from the U.S. Tax Cuts and Jobs Act. Our effective tax rate may differ from this estimate if the geographic distribution of our pretax earnings changes from what we have estimated or if there are changes in the interpretation, analysis or if additional guidance is issued related to the U.S. Tax Cuts and Jobs Act. Our updated guidance assumes a Euro exchange rate of $1.17 and a British pound exchange rate of $1.33. All other foreign exchange rates are as of September 30, 2018. Finally, I'd like to take a moment to provide a little more color on the Data Solutions business. As Colin mentioned, our integration plans continue to progress, and we remain optimistic about the potential for this business. Included in our guidance is approximately $250 million of revenue for 2018. And given the amount of revenue in hand at September 30, we are confident that the Data Solutions segment will hit our 2018 target. That concludes our prepared remarks, and now we'd be happy to take your questions.

[Operator:]

[Operator Instructions]. And our first question comes from the line of Donald Hooker from KeyBanc.

[Donald Hooker:]

So I'll just go right to the data, the Symphony Health acquisition. We all realize that that's very seasonal. So a big fourth quarter. Maybe for Colin, more qualitatively, can you talk about kind of how that business has performed as part of the company? Is it too early to expect synergies, like cost -- I assume there's more revenues energy potential in 2019 and '20 and maybe some cost synergies. Maybe can you talk about kind of the potential for synergies going forward?

[Colin Shannon:]

Yes, we see a lot of opportunities, working closely with a lot of our therapeutic expertise and the infrastructure that we have built. We intend to take advantage of that, and over the next coming months, we'll be starting to look at planning for that almost immediately. We've, as you know, let them get on with the year and as a seasonal business, and we had to remain faithful that they would pick up towards the end the year. In the absence of like any history, we provided some updated clarification to our modeling, et cetera. We typically don't do that, but we have some -- a number of analysts that would like to see some clarity there. And so we make sure that they understood that we were pretty much tracking where we expected to be for the rest of the year. So yes, of course, we are excited for the future, and we do see a lot of opportunity to create more opportunities for additional sales using our own teams.

[Donald Hooker:]

Okay. And then, maybe my next question, I'll switch to the CRO side of the business with regards to staffing. I suspect there were some cancellations from earlier this year that are now playing into your revenues. Can you talk about your -- I see the gross margins are up in that segment, can you talk about kind of where you are from a staffing utilization perspective going forward? Are you able to reallocate staff from some of those larger cancellations, is that helpful? And maybe just some commentary there.

[Colin Shannon:]

Well, from earlier on, we actually shuffled some staff and -- but with regard to revenue, what we've been noticing is that there has a trend of some of our new opportunities that have been awarded, that we are getting into some more detailed discussions with clients about just the modification of the program and our protocol, and we're seeing a lot of these projects slip a little bit. And so the typical start time from award to actual immediate start is definitely elongating. I've got to say though the staff -- that the team and organization did a great job managing the staffing of that, not getting too far ahead and managing it very carefully. And so we got the benefit of why some of these projects that were intended to start were sliding a little bit. We were also very careful and cautious about the way we were hiring. So we are seeing a very nice position, and as these projects move forward, we're hiring aggressively again.

[Operator:]

And our next question comes from the line of Ross Muken with Evercore ISI.

[Ross Muken:]

So maybe, just in terms of the new business environment and then, you continue to put up very strong book-to-bill. So maybe, give a little color in terms of some of the environment. I know the mix of business on the revenue side was consistent, but as we think about where some of the new awards are coming from, the mix and sort of full service versus FSP, anything you can give us in terms of some color or flavor on sequentially any changes or differences or just in general, how you think the sort of level of RFP activity and the win rate continues to track?

[Colin Shannon:]

Sure. Well, we're seeing pretty much steady across all of the sectors of health care, and we're not seeing anything that's different, whether it would be biotech, mid-sized pharma, large pharma. I think I've mentioned in the past that we're seeing product registration with traditional project-based business really growing a lot faster than the strategic solutions part of the business. It's actually partly that's the reason that's been causing slight deterioration on our conversion rate from our backlog conversion, it's definitely been elongating over the last period of time. But we're certainly feeling a good economic environment. We're seeing a strong robust RFP flow. So we're feeling pretty strong about things at the moment.

[Ross Muken:]

And in terms of some of the uncertainty on the just major pharma side, there's been a big push here in the U.S. on biosimilars, you had a big CEO change at the largest pharma as you had Novartis the other day talking about cuts to their R&D programs. A bit of a different environment for some of the large guys than we've seen for some time, although -- albeit not all of them are utilizers of outsourced. I guess, how do you think about some of these changes as being also maybe opportunities, just given the fact, it looks like at the margin, while there's a kind of innovation coming out of biotech for pharma, they are still trying to figure out in some cases their operating strategy for the new environment and with some regime changes, you sometimes get new opportunities. So how you're thinking about some of that translating into may be places where you can come in and maybe help them to a greater degree and be more active in a dialogue, where maybe someone wasn't outsourcing to the same degree previously?

[Colin Shannon:]

A lot of these relationships start many, many months prior to anything happening. And when change happens with no [indiscernible] and created relationships, it's still very difficult to break in. But of course, we have an active business development team and a lot of our therapeutic experts who are constantly in discussion with their colleagues at the large pharma companies, having discussions about the development pipeline. So we're always in communication. Of course, with enough change that always creates that opportunity for getting into new clients. And of course, we always look to see what we can do to, sort of, take advantage of that opportunity. We never know what's going there. We've tried many things. But we have obviously multiple ways of delivering our growth, and we don't rely in any individual client and we're very well diversified. And that's particularly why we feel very good about state of our business because of the diversification of our client mix.

[Operator:]

And our next question comes from the line of David Windley with Jefferies.

[David Windley:]

Colin, on your comments around some elongation, I understand the point about more growth on full service, and your -- appreciate the detail around the kind of what sounds like consultative activity with some of your clients. Your conversion rate has dropped each of the last 2 quarters by a little bit more than is normal. Would you view your comment as being mostly related to what you have seen in the very recent past? Or are you thinking that this still has some potential impact on the coming quarters as well?

[Colin Shannon:]

Actually, no. I mean, obviously with new clients, Dave, we -- the most important thing is we have aid and help our clients get the best operational program to deliver the trial, whether it be optimization of our protocol or input from our therapeutic and operational folks, we want to help them that they've done as quickly as possible. But saying that, if there's any input, we need to have discussions and that's part of the process. We have not changed the way that we record and take our -- and record our new business awards. It's just that we're finding that as more of our consultative period before it really, really starts. So -- but not noticed in every single account but there's certainly been a few. I've looked for a pattern to see if it's just new clients are certain therapeutic areas, but it's a mix of different things, and at the moment, I can't really spot a trend. But we'll certainly continue to look at it and it might help us with our modeling for next year as well.

[David Windley:]

Right, so moving to the final point on it. Our conversion rates dropped to maybe 100 basis points in a couple of quarters, a little bit more. And CRA has had -- I think because of the conservatism in the way you booked bookings relative to revenue versus backlog, that your conversion rate stayed in kind of the 15% range for several years in a row. Are some of the specific situations that you're thinking of as you describe this -- have you gotten through the consultative part, where now those studies are ready to go in a way that we should think about kind of a normalization or maybe even a reversal of what we've seen in the last couple of quarters, in the fourth quarter or in the first part of 2019, if I'm -- I think this is important relative to where the clinical revenue expectation falls out for the next quarter.

[Colin Shannon:]

I think you'll see a little bit of pickup in Q4 and -- but it's certainly more that we're looking to ramping up in 2019, and we've been saying that we've been really getting through our 2018. We had adjustments beginning of the year, where we had to change pathway because of a couple of larger cancellations. And we've got a lot of studies that are going to start up. And I think that's part of the process. There's a little bit unpredictable wave is that in any of these situations it can be a delay in getting things moving. We adhere to assist the client, sometimes they want more information. We did an awful lot more rebids than we've ever done before to help them understand the pricing pieces and the different scenarios that we're proposing to them. So we're just seeing a little bit of slide there. But we're definitely, obviously, looking to see the conversion get back to normality and it would be probably sometime in 2019 before we see it really get to -- and when a lot of these studies are in full flow again, that when it gets backed up by stronger position.

[David Windley:]

Last question, quickly. In your -- more qualitatively, in your selling in the marketplace and your investments in technology, I think there were some things maybe internally, but some things that were hopes to deliver some efficiency for you in the second half of '18. Externally, how are you feeling your approach, your technology investments and capabilities are resonating with clients and has that changed at all in 2018?

[Colin Shannon:]

A lot of it is just helping us internally to do things better and get better information to our clients quicker. And so all of our processes here are to help understand the patient journey and how we can help get patients into trials quicker and then work closely with our clients to optimize the clinical trials. And technology is a great help as you know, and we are one of the biggest advocates have been using data and have done for 10 years, we are very much a strong believer in that. So we continue to focus on helping our clients, get the maximum value derived from the amount of data we use and the way that we have constructed and used that over time. And the internal things that we've been doing, yes, there are things where client will see some better assistance and more visibility and dashboard type of activity that will give them better information and it streamlines a lot of our processes, and the actual implementation is actually only a bit underway. So we're not really going to see the true benefits until next year, but it's certainly started this year. So we are excited for 2019.

[Operator:]

And our next question comes from the line of Jack Meehan with Barclays.

[Jack Meehan:]

I wanted to focus on the gross margins because that was the area I was positively surprised on in the quarter. Maybe just starting with Symphony, specifically. Just wondering if you could give us an update in terms of the way you're thinking about the ability to leverage growth there, and what the potential is in terms of expansion as -- in that product set. And similarly to that, what are you seeing in terms of the deal landscape in terms of other things you can leverage onto that platform?

[Colin Shannon:]

Well, firstly, I mean, it's a pretty fixed cost business, and as we've pointed out in the first half of the year, it's a lot slower, it's very seasonal, it starts picking up in Q3 and its stronger quarter is Q4. And obviously, then once you've covered your fixed cost, the margins start to perform stronger. We do see opportunities to leverage into a lot of our clients, where we can actually go through and provide new opportunities to support the Symphony Group. And we're starting to get closer collaboration as part of the integration process, and we see a lot of really good opportunities. We see other potentials of moving into new markets as well, and we're looking at and assessing various opportunities using real-world data and various things like that, that we've not really participated that strongly in, in the past. So all in all, we're right the fact that we've got to where we got with that asset, and we see a lot of potential for the future. And of course, I do want to overlook the fact that we were strong in our margins within our clinical operations. Again, this was our team's really focusing on productivity and managing the staffing appropriately, assessing when the studies are going to start and making sure that we are getting staff onboard at the right time and not too early. I mean obviously, while it was higher slightly ahead of the curve, but it was managed very carefully, and I think they've just done a great job in managing that.

[Jack Meehan:]

And then, just any thoughts in terms of the deal environment and just your aspirations to continue adding to that business?

[Colin Shannon:]

There's a few things we have been looking at overseas and contemplating. We're not quite ready yet to do anything, but we've got some -- we're certainly assessing the number of opportunities and we've been searching and looking for -- in fact all year. We're doing a lot more focus on it now, and we've identified a few areas where we'd like to maybe proceed on. But we are a long way from solidifying any type of deal.

[Jack Meehan:]

Great. And just as my follow-up, I was curious as you folded, I hear the commentary on the Clinical Research side in terms of the amount of hiring, it's certainly understandable your -- it's another quarter of backlog growth of over 20%. If I pull that together with the commentary on the Data Solutions side, do you think that we can have a year of gross margin expansion as we look into 2019?

[Colin Shannon:]

Well, we've always said that we look to always expand our margins slightly with target around 50 basis points a year as I've given, and we look for efficiencies. Sometimes, we may overachieve that when we get step function changes with new systems and tools that maybe help us. A lot of the times, like it helps us just manage clients bidding appropriately. So just the fact that you're making synergies internally doesn't mean that we retain all. And we've got to balance it out with making sure that we meet the market pricing and the environment.

[Operator:]

And our next question comes from the line of Daniel Brennan with UBS.

[Daniel Brennan:]

So, Colin and Mike, I was wondering if you just go back to Symphony, if you don't mind, just in terms of the outlook for the fourth quarter, I know you said it's seasonal. But could you provide some more color there in terms of step up in growth that anticipated maybe some of the visibility that you have or just any color on the normal seasonality that kind of gets you to that number?

[Colin Shannon:]

I don't know how clear we could be. We told you what the total year revenue could be. I mean, I've given more color than I've ever given before. It's quite one above it in fact.

[Daniel Brennan:]

Okay. Right, it just implied a big step-up, that's all. Okay. Maybe stepping back basics around Symphony, if you don't mind, could you just discuss kind of as we look ahead beyond 2018 in terms of the opportunity to integrate Symphony into your kind of clinical offering and would we expect to get more visibility possibly around kind of an enhanced offering and/or the ability to really use Symphony to differentiate further your clinical offering to take even more share?

[Colin Shannon:]

Yes, well, we really needed the data. We've become very reliant on data as part of our whole clinical process. That was one of the major reasons why we felt that we needed to acquire this source of data, so that we could actually continue using the data. If you look our history, we started using the data 10 years ago and we became very reliant on it. We weren't initially looking to acquire a data company, but when I and Mason Quinto got together, we realized that we had to look after a source, and we've been using as a backup source, it was going to be Symphony. And we realized we could get all the data we need and it made a lot of sense for us to acquire before anybody else did and to offer capability of using the data the way we did. So we've always been big advocates of the data. We've got our offerings there out. We've not created any fancy tools or anything, we used it as part of our integrated processes within our company and it's become established in our culture that we based on evidence and we make decisions based on evidence, and we use supporting data to make sure that we understand the data appropriately and put into context. So we've been working hard at applying that and it's certainly been helpful in growing the company. I don't see any major changes that we'll be lately doing that -- because of the acquisition, it's just allowing us to continue what we've been doing in the past.

[Daniel Brennan:]

Okay, great. And then maybe, just if one -- my one other, just on the big picture on the environment. The question we get is, just how robust the overall biotech environment is? It seems like the science is as robust today as it's been in a while, but there's also a concern maybe there's -- maybe some more speculative biotech companies that are getting funded such that if we get any kind of economic pullback that is there more kind of risk with some of those weaker biotech funding kind of slipping. So I guess, it's a high-level way of saying, is it possible to quantify just the robustness of the science, the types of booking that you're seeing, the types of customers. Is there a lot of kind of more speculative companies in there? Or do you feel it's a very sound robust kind of type of biotech company that's going to be funded?

[Colin Shannon:]

Well, when we get RFPs, we've got to carefully assess whether we can actually conduct a trial and get it completed. We don't just take any study. If you're mentioning that maybe some biotechs don't have strong possibilities of achieving a trial, there's no point as undertaking it because you're then disappointing a client. So part of the data analytics we use is really assessing how the trial can be conducted, we look at the science, we'll look at the operational delivery. And the important thing is we want to be able to help the client at least the information to proceed whether it's successful or not. If we don't feel we can do that, then we would not bid on a particular trial.

[Operator:]

And our next question comes from the line of Derik De Bruin with Bank of America.

[Juan Avendano:]

This is Juan on behalf of Derik. In the last couple of quarters, it seems like margins may have also benefited from the company focusing more on internal systems. Can you tell us more about the specifics on some of the things that you've been doing to reduce cost, where the opportunities are and how much runway you may have there?

[Colin Shannon:]

Well, a lot of our systems are helping alleviate a lot of manual labor. And so we're looking to really use the systems to avoid the extra manual labor that we're incurring. We still have one area of improvement that's actually still incurring an awful lot of extra labor hours that we're spending and that we'll be working on over the next year. And then, we'll be in a lot stronger situation. So while we still see a lot of opportunity to streamline our processes more and reduce the lines and doing manual work and helping using -- choose to help form that they work in a much faster way.

[Juan Avendano:]

And then, on the Data Solutions business. Now that Symphony -- now that the Symphony acquisition has annualized. Can you remind us what your organic revenue growth expectations are for this standalone business on a normalized long-term basis?

[Colin Shannon:]

Well, when we looked at the business and acquired, I mentioned that I saw being the growth with normalized typically in line with our current business. We felt that it would minus and track along that and that was organic. We did see the opportunity of maybe adding with maybe some acquisitions to help this [indiscernible] a little bit. But we certainly feel that it can match or even beat our current growth and that was how we modeled it when we actually acquired the company.

[Operator:]

And our next question comes from the line of John Kreger with William Blair.

[John Kreger:]

Colin, just to follow up on that. I think your organic revenue growth in your core clinical business back when you bought Symphony was sort of mid-teens. So do you feel like -- still feel like Symphony can be kind of a mid-teens grower, if I'm remembering that right?

[Colin Shannon:]

We certainly feel it could be double digits, for sure. I think that's way that I was alluding to, John, absolutely correct.

[John Kreger:]

Excellent, okay. And then, it sort of similar if you think to the -- your clinical business, organic growth has slowed a bit given the roll forward of some of the cancellations earlier in the year. As you think about the next couple of years, are you comfortable that, that business can sort of settle out in the low double digits?

[Colin Shannon:]

Well, what we're still trying to assess is the strategic solutions part and they are -- we want to see how we can continue to expand there. I mean, our goal when we acquired that business was to trying out 1 new client a year. But that's obviously quite difficult to do because we're in a lot of the big pharma camps already. But we continue to look to expand that business. But we just -- so that's one element that might just bring it down to sort of high teens, low double. We're seeing strong product registration in our business and we continue to explore that. And of course, we have provided new partnerships, which -- that's not even kicked in yet and we're looking forward to starting to see the effects of that happening. So for the next couple of years, I mean we've got very, very strong backlog, things are looking very positive. We're seeing some elongation in this start up time, we're not seeing anything disappear. It's not like basically studies are -- they're not doable after we have discussion. It's all about finding the optimal way to conduct a trial rather than actually leading to it shouldn't be done at all. So we're continuing these processes and we're seeing some changes there. But maybe just the fact that we've added on an awful lot of new clients and we're helping them through that process.

[John Kreger:]

Great. And then, just one last one. If you think about the next couple of years, what would your investment priorities be, either in terms of CapEx or just spending that would be flowing through the P&L?

[Colin Shannon:]

We see some market opportunities that we might want to take advantage of. And there could potentially be tuck-in acquisitions like that would give us the capability to take advantage of some of our data solutions. And so that's certainly something that we would consider like a high value. We're looking to expand our capabilities in markets as well and a lot of that can be done organically. We're still building out some areas in Asia, and we're still see a lot of room to expand that significantly and we're working through that just now. I don't see that as being acquisitions, I do see that as more organic growth. And the gap in technology, we're continuing to add functionality in streamlining our internal resources. So I think that we'll continue to enhance the sort of -- so that can become actually even more client oriented, and we might, at some point in the future, be able to actually give visibility to our clients so that they can get the -- derive the benefits from them. We look a long way to go there, you've asked me a couple of years out. And looking forward, we want to do something that will help our clients really do clinical trials better and faster than they're currently doing.

[Operator:]

[Operator Instructions]. And our next question comes from the line of Erin Wright with Crédit Suisse.

[Erin Wright:]

When it comes to the broader RFP environment that you're seeing out there, I guess, any sort of changes in terms of in sourcing or outsourcing trends that you're seeing? We saw news from there for instance, that they're potentially outsourcing more. Just curious kind of what you're noting in terms of the broader trends from an outsourcing demand standpoint.

[Colin Shannon:]

I think the nice thing about our flexible service offering with both with our strategic solutions division and our product registration, we're able to offer a flexible solution to the clients that we can really what -- we want to understand what our objectives are. And then, we're able to actually talk to them about a flexible approach that meets their needs. So they don't have to do all outsourcing, but it can be modifications. I mean, what then to give them some options. It does take a lot longer cycle time to agree these type of options because there is a lot of thought process internally. So -- and we've recognized this as a long cycle time and some of these discussions happen at very senior levels over a very long period of time. And it can typically take anywhere from year or onwards to actually conclude a decision. So that -- so it's hard for me to say that there is a shift of trend because there's a lot of variations all of the time, and our job here is to figure out how best to meet and serve the client's needs. And so we continually support and look for our clients to advise us what direction they want to move in and we look to see how best to help them.

[Erin Wright:]

Okay, great. And then, are you seeing any sort of changes in a broader pricing environment or the competitive landscape behaving fairly rationally?

[Colin Shannon:]

In the past, I've always said that it's behaving rationally. But as a question I always ask to my BD team before this call, and they have said that there's been a few occasions in the last quarter where they saw some silly pricing done. So I'm hoping that's not a trend because these longer-term trials, the last thing you want to do is to get them to pricing and then it caused the whole industry an issue. So I'm hoping these are oneoffs, and I don't have a lot of fact of data on that. It just anecdotal from my sales team. So just a question, I just thought I'd share with you some of that thoughts.

[Operator:]

And our next question comes from the line of Sandy Draper with SunTrust.

[Alexander Draper:]

Most of my questions have been asked, and I've got on a little late. So, Colin, I don't know if you addressed this around. Symphony, if I remember correctly, you guys were pretty much, because the earnout, leaving them alone. I just wanted to get an update have you done any type of cross-selling, cross-training sales people trying to leverage that? Or is it literally they've got access to your capital, but you've completely leaving there alone for this year and then you can start doing integrated sales and trying to benefit the -- get the revenue synergies. Just wanted an update on how that -- what's going on there?

[Colin Shannon:]

You're absolutely right, Sandy. We're more or less left them alone, but we, in some areas, started getting much more closer collaboration. The IT functions are working very closely with our data people and helping each other and support the new solutions and there's good synergies there and learning from each other. And regarding on the sales process, we have a lot of talented people in our group that are working closely with them and just supporting them when they need. We've been trying to be relatively hands-off, but we do see that there's opportunities. And as we flesh out really for the 2019 plan, we'll be looking to how to optimize these opportunities that we're seeing. And we do actually see some low-hanging fruit that we can go after. So we're actually quite optimistic about the beginning of next year.

[Operator:]

And I show no further questions at this time. I would like to turn the call back over to CEO, Colin Shannon, for closing remarks.

[Colin Shannon:]

Well, thank you, everyone, for participating in our call today. If you have any other additional questions, please feel free to contact us. We hope you have a great rest of the day. Thank you very much.

[Operator:]

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