Oct 29, 2015
Executives
Ronnie Speight - Vice President, Investor Relations Jamie Macdonald - Chief Executive Officer and Director Greg Rush - Executive Vice President and Chief Financial Officer
Analysts
David Windley - Jefferies LLC Robert Jones - Goldman Sachs Michael Baker - Raymond James John Kreger - William Blair & Company Greg Bolan - Avondale Partners LLC Timothy Cameron Evans - Wells Fargo Securities, LLC Donald Hooker - KeyBanc Capital Markets
Operator
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.
Ronnie Speight
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 archive version of this webcast will be available for replay on our website after 1 o’clock 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 Factors section of our Form 10-K for the year ended December 31, 2014, our Form 10-Q for the quarter ended March 31, 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 a reconciliation of the non-GAAP financial measures with the most directly comparable GAAP measures, please refer to Slides 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?
Jamie Macdonald
Thank you, Ronnie. Good morning and thank you for joining our third quarter 2015 earnings call.
I am pleased to report that we are continuing to execute our strategy, delivering strong results for the third quarter of 2015. We continue to focus on providing high quality service to our customers through our therapeutic alignment, strong execution via 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 3 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 of a substantial foreign-exchange headwind primarily due to the strengthening of the U.S. 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 cancellation 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 grow strong backlog growth during the third quarter, with backlog as of September 30, 2015 at nearly $1.8 billion, up 17% from September 30, 2014. This growth occurs despite accumulative reduction in backlog 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 in 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 operation and our deployment of capital to create shareholder value.
Our utilization of best-in-breed core third-party solutions, such as Medidata, Oracle and SaaS, along with our internal investment 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 comprise 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 stakeholder group. Earlier this month in conjunction with the Society of Clinical Research Sites, hence Annual Global Sites Solution summit, we held our second Site Advocacy Group or SAG.
This SAG focused on streamlining and enhancing the payment process for site so they can maintain their focus on patient enrollment and high-quality clinical research. This work aligns with and support the industry-wide effort announced this month by SCRS to improve the investigative payment process.
Also in conjunction with the SCRS Global 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 technology.
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 now turn it over to Greg Rush, for more detailed comments on our financials. Greg?
Greg Rush
Thank you, Jamie, and good morning everyone. I’d like to start by making some additional comments regarding our financial performance, highlighting some of the key metrics on Slide 3, which are presented with a more detailed view on Slide 4.
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 12 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 of 2014. On a constant currency basis, excluding foreign currency headwind of $10.3 million, our net service revenue grew by 20% year-over-year, reflecting our strength in net new business awards and resulting strong backlog coverage.
On a year-to-data basis, we grew our adjusted net source revenue by 15% from $587 million for 2014 to $673.4 million for 2015. Excluding foreign currency headwind of $31.9 million, our revenue grew by 20% compared to the first nine months of 2014.
Please note this quarterly and year-to-date revenue growth rates, exclude an estimate of $4.5 million of revenue from higher than normal change order activity occurring in each of the second and third quarters of 2014. On Slide 5, you can see the improving diversity of our customer base.
We continue to see revenue from a broad cross section of small, mid-size and large bio-pharmaceutical companies as well as a significant percentage of our net awards originating from existing customers. Slide 6, provides trending of our adjusted gross margin, adjusted income from operations, adjusted SG&A expense 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 on the delivery for our customers. We have also closely managed our SG&A expenses demonstrated by the overall improvement as a 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 $234.7 million for the third quarter of 2015. This gross margin is expanding from 36.6% to 42.6%.
For the first nine months of 2015, direct costs were $397.1 million compared to $379.4 million for 2014. This gross margin is increasing from 35.4% to 41%.
I’d like to point out the third quarter and nine months ended September 30, 2015 includes certain one-time benefits that we do not believe are representative of the ongoing operations. Specifically during the third quarter, we successfully settled $4.9 million of study-related obligations, $3.4 million of which we’ve recorded and expense during the first half of 2015.
Therefore, the year-to-date net impact of this one-time benefits with 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 months ended September 30, 2015, a one-time benefits was approximately $6.6 million. 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 with 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 the third system by end of the year, which will exceed our original goal. In addition, we continue to gain efficiencies with the new system which we have standardized.
I would like to again point out that we will continue to add 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 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% 40.5%. Due to the fixed nature of many of our costs 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, while declining from 18.5%, 16.8% of net service revenue over the same period. On a year-to-date basis, our SG&A expenses have increased from $102.6 million to $111.5 million, while declining from 17.5%, 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 increase in public company related cost and 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 in a 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 operation increasing 74% from $32.1 million for the third quarter of 2014 to $56 million for the third quarter of 2015, 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 a 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 in nine months were positively impacted by settlement of certain one-time benefits. When coupled with the $1.1 million of nonrecurring 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 increase to $88.8 million from $29.4 million on a year-to-date basis. Adjusted diluted earnings per share was $0.58 and $1.46 for the third quarter and nine months ended September 30, 2015 respectively, compared to $0.23 and $0.56 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 count was 56.5 million.
Slide 7 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 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 in 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 7, 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 pre-payments.
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 8 summarizes key metrics related to our backlog.
On the roll forward 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 8. 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 8, you can see our backlog burn rate of 14% for the third quarter.
We believe our healthy burn rate is driven by strong operational execution, coupled with our conservative and disciplined approach to recording awards and backlog. On Slide 9, we’re providing our revised guidance for key financial metrics 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 165 basis points. Accordingly, our constant currency growth rate is expected to be between 18% and 19%.
We are forecasting adjusted EBITDA to 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%.
This results in adjusted diluted earnings per share of $1.91 to $1.97. Lastly, we expect to earn a $1.84 to $1.93 per share on a GAAP basis.
Included in our revised GAAP earnings-per-share guidance is an estimated $0.06 per share impact from stock-based compensation. This completes our prepared remarks and we’d be happy to answer any questions.
Operator
[Operator Instructions] Our first question comes from the line of David Windley with Jefferies. Your line is open.
David Windley
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%.
So, what should we be watching to see that that you’re kind of breaking into that next new?
Jamie Macdonald
Yes. I mean, as you know we’ve 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 we 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 who 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 the teams are doing a nice job.
We’re getting in front of customers in non-science situations. They see the value of the scientific and therapeutic input we’re bringing and other things that 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 SaaS is resonating, and then obviously our activities from a sites and patients standpoint really better understanding feasibility, site ID, enrollment rates, and therefore, delivering first patient or last patient in on-time.
It resonates with the existing customers and it’s a key tip of the spear for new customers as well.
David Windley
Excellent. Thank you for that.
The second question, my follow-up then, you touched on it - in regard to not talking about any particular client, I presume the presentation on Slide 5, the - 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 slice that however you like, but the folks that would be more influenced by the availability of capital through the equity capital markets?
Greg Rush
This is Greg. No, we do not have any 10% customers and that’s how we reflected that.
And they dropped slightly below 10%. That’s more reflection on us growing the other customer base and anything.
With regard to the biotech, I think there is a couple of things that we’ll address on that, one, I don’t think it’s having to be management question every quarter, so I’ll do it this quarter, and I can comment - I’ll do it in the future. But roughly that’s these customers are 10% or less of our backlog, so we know we were early 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 our pre-revenue, we do - require them to be funded to go into our backlog. And we have a very proactive forecast [ph], even after they go into backlog and with credits et cetera.
So as you can see our bad debt is very, very low. So we believe once they’re in the backlog it’s fairly reasonable that work will continue.
And we’re pretty - our therapeutic expertise also allows us to do pretty good job of screening which customers we do business with, but we don’t like cancellations.
Jamie Macdonald
Yes, let me add to that would be, I think we’re still seeing. I know there’s been a lot of press and discussion around biotech funding.
But our view is to 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-development or partnership with larger pharma that’s still going to happen.
David Windley
Very good. Thank you.
Operator
Thank you. Our next question comes from the line of Robert Jones with Goldman Sachs.
Your line is open.
Robert Jones
Great. Thanks for the questions.
Greg, I guess, looking at the EBITDA margins, if I back up the one-timers, your year-to-date looks like you’re about 23.4%. As we look forward, and think about next quarter and into next year are there any known headwinds that, you guys could identify or that you see on the horizon, maybe it’s - maybe it’s increased headcount, maybe it’s something else that could limit the margin expansion that you guys have enjoyed, maybe get you back closer to that 20% target or are there items that you’re still feeling comfortable, have the ability help you continue to expand these margins as we move forward?
Greg Rush
I think I’ll answer this. I don’t want to get into 2016 guidance at this stage.
But every quarter is going to vary a little bit. But over the long-term we like where our margins are today and we’re actually ahead of our schedule.
We talked about it the last 12 months that we talked about where we’ve arrived. I do think that - I think Windley has 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 12 month, I would expect us to continue to expand margins through our cost initiatives, but then to reinvest the savings and tell the marketing activities to continue to drive growth in market share.
So, I would now say, margin contraction. But I would necessarily see us moving margins up significantly from where we’re at today just because of the type of cost saving initiatives and reinvest over the mid-term.
Robert Jones
Okay. Now, that makes sense.
And I guess, just as a follow-up given the strong bookings and you guys touched on this a little bit in the prepared remarks. But we’ve seen other CROs get kind of caught in these windows, where it become as difficult a time hiring with the realization of revenue from work awarded.
How should we think about that for you guys as you obviously need to have enough heads out there to support the work that you’ve been winning?
Jamie Macdonald
Yes, it’s going to be robust process. I mean, we’ve discussed this a number of times.
I think the way that we’ve faced backlog and unitize backlog, really don’t do the individual therapeutic and functional group at the task level, allows us to be pretty precise in terms of resource allocation and hiring. But the recruiting engine is working pretty well.
I mean, the market is 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.
We’ve streamlined some of our interviewing processes. We got a little bit more work to do on just that time to fill and then 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’ve been doing it.
We’ve added a significant number of resources over the last two years and continue to be very active in the markets for job types that we need.
Greg Rush
Bob, the only other comment I would add on that is, certainly, if you look back at my prepared remarks in Q2, we’ve been hiring indefinitely, a little bit more challenging that was 12 months ago. But we like our position, because with our therapeutic model, one, helps us to 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 compelling model that attracts people.
So, our job as employers is to make sure that we offer great benefits and a rewarding place to work and we think we’re doing pretty good job at that.
Robert Jones
Got it. Thanks so much.
Jamie Macdonald
Thank you.
Operator
Thank you. Our next question comes from the line of Michael Baker with Raymond James, your line is open.
Michael Baker
Yes, thanks a lot. Jamie, clearly you benefited from 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 looking into post-commercialization services and whether that would be an area of interest down the road for you?
Jamie Macdonald
At this stage, I mean, as I said, Michael, we’re pretty glad to be focused just on clinical trials. I think there is plenty of opportunity to be more efficient and more effective in that space.
We see more interest on the payer side. I think we’ve said this recently.
I think pharmaceutical development nowadays is really about producing products that you’re got to satisfy three stakeholder groups. It’s going to be products that patients want to use; physicians have to, want to prescribe; and payers have to want to reimburse.
So we realized that product development is becoming increasingly as a collaborative effort, if you want to call it that, with a commercial endpoint in mind. But it’s not something that we’re getting a lot of inbound request 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 focused on the investment.
We have some capabilities and skills on the reinvestment side and we do utilize those, if we don’t have the expertise and has some we - we can collaborate with others outside. I don’t think it’s going to change our strategy in the short-term of remaining focus on clinical development.
Michael Baker
Thanks for the color.
Operator
Thank you. Our next question comes from the line of John Kreger with William Blair.
Your line is open.
John Kreger
Hi. Thanks very much.
Jamie or Greg, could you guys talk maybe about, if you look at your wins in the last quarter too and contrasted 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 cutouts?
Jamie Macdonald
The short answer is no, but Greg and I take a little bit more in that. I think the mix, I don’t think we’ve seen any unusual trends.
We go some nice incompetency 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’d hope 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 across into other therapeutic areas, so some of these oncological molecules have application in autoimmune and inflammation as well. So 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 incompetency with that customer.
And also for I think we mentioned this in the past, getting a position in novel molecules with new mechanisms, gives us that expertise as follow-on molecules come from different customers. So we’ve got a pretty good strategy.
We’ve not done anything to alter it and we’ve not really seen anything new or different in quarter three relative to what we’ve seen in recent quarters.
John Kreger
Great. Thank you.
And Jamie, maybe just I know you had this is a little bit in your prepared remarks, but you are currently having more success than your peers at 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?
Jamie Macdonald
It’s sort of the same, I mean therapeutics is increasingly important and it’s not just understanding the protocol, it’s really understanding the care environment investigator network and really the pathway to bring patients into those study. And the new one is to come with development in particular therapeutic areas.
I think the process side of our operations resonates we are seeing improvements in delivery on cycle times, but still what to be done, we’re not delivering every project on-time, and so we get to that stage, we’re going to continue to work on it. I think the two that are maybe a little more evident now, that we haven’t necessarily always put on the front of the list, will be technology, I think we continue to work to try to find efficiency and linking sources of data in streamlining processes and I’m trying to take some of the manual effort out.
That’s helping us on hopefully lowering costs at a per patient and per study level. The other piece for us is our relationship with investigator sites, and even outreach and novel methods to bring patients into the consent process and hopefully into randomize trials, and I think we continue this one a lot of time across our therapeutic teams and at a leadership level focused on matching the right protocol with the right position and the right patient.
And that’s a recipe for delivering trials on-time and getting to definitive results.
John Kreger
Great. Thanks.
And, one last one, Greg, given that comment about hiring becoming maybe a little bit more challenging, are you seeing any uptick in wage trends or turnover is a result?
Greg Rush
No. Not meaningful, I think the comment is more, this is a robust market for all of the CROs, all the CROs who’ve done well, they’re growing.
I think the job that we have is in industries to continue to attract talent and bring new people and trained them. And I think all of us progressing that challenge in different ways.
And our therapeutic model, I think, helps us slightly as competitive advantage, because people like - going to do day-in day-out, they were trained in school what their passion is, so…
Jamie Macdonald
Yes. I think the other thing, certainly the senior team here has talked about is sort of - I don’t know if you want to call it wage balancing, that within certain job functions you obviously have varying degrees of seniority and then 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 new people that are new to that CRA role, not necessarily inexperienced, because 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 the overall cost.
John Kreger
Great. Thank you very much.
Operator
Thank you. Our next question comes from the line of Greg Bolan with Avondale Partners.
Your line is open.
Greg Bolan
Hey, guys. Thanks for taking the question.
So just a 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? I mean, potentially as opposed by therapeutic area, I’m assuming there’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 may be some holes that you guys can even expand your win-rate even further in RFP bakeoffs?
Thanks.
Greg Rush
Let me take a first step at that. One, I think one of the things that we’ve constantly understood that we’re trying to grow our market share.
And one way we’re doing that is, I mean, what I would call the addressable market in terms of customers. And so, I think we’ve added roughly 50 new customers this year.
We did a little over 50 last year. And so, when you think about why we are growing or work maybe faster than the competition, I think it’s really taking market share, not necessarily - and having new customers that would then allow us to bid on that work, because we’ve established that relationship.
I would say that’s probably more of the driver of our net awards and book-to-bills, than it is increasing our win-rate. Our win-rate is - it varies every quarter, but over the last nine months this recently consists of what it was last year and maybe slightly higher.
But where - the question you asked secondly is where we need to continue to improve. I would answer it 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 those customers, we’ve proven that they like our work, they like our therapeutic focus.
We do a good high-quality work and we get a high, high repeat business from them and that will allow us to continue to take market share.
Jamie Macdonald
Yes, Greg, I think - two Gregs. I think Greg summarized it well for you, Greg.
I think we look at opportunities that they come in obviously depending on the existing relationship with that particular customer for customers that we’ve worked within the past and the strike rate is 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 a what I would call a more transactional competitive position, we really need to be in there offering some level of insight that they don’t have themselves as a customer and they’re not getting from others that are in that process.
And that’s where we rely on the therapeutics to give insight into the development environment, the standard of care, country selection, enrollment rates, overall timelines. It’s not really about sort of cost of price in lot of these instances, although there are some customers that are price-sensitive and it becomes more about commodity play.
And we did probably less well in that sort of commodity environment.
Greg Bolan
That makes sense. Thanks guys and congrats on very good results.
Jamie Macdonald
Thanks. I appreciate it.
Operator
[Operator Instructions] Our next question comes from the line of Tim Evans with Wells Fargo. Your line is open.
Timothy Cameron Evans
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 sharpen the pencil with the sales organization there, that’s first part of the question. Second part for 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 quarter?
Thanks.
Jamie Macdonald
On quarter four, the answer is no. So we live in the world of Reg FD, so we sort of not going to be in a position to talk about sort of current quarter unless there was anything that was major that we felt would be different to what we have altered in guidance.
In terms of - I think we’ve got into good rhythm in cadence. I think sort of Greg’s team on the finance side along with Neil and ops realized that, we did get measured on sort of consistent performance.
So we plan to head the quarter pretty thoroughly. And so as we entered into quarter three, we have pretty good line of site and what we thought, we’re going to close.
And we keep the focus up, so maybe historically we were less sort of concern, because I think as we’ve always done in the past, if I’m going to study in the last week of September versus the first and second week in October, the study doesn’t start in the earlier, I don’t get first patient in any earlier, drugs not available any earlier. So it doesn’t affect revenue but we do realize that it is important to get some consistency in performance.
So we just ensure that there is a good communication across finance, ops and sales, and that we manage that process. At some point, we likely to get a late cancellation in the quarter that make SAG process more challenging.
At this point cancellation rates has been fairly low, but we also look at risk in our portfolio. So we do keep an eye on studies that we think maybe subject to delay our cancellation and we factor that into particularly facing the backlog.
And then obviously we, as Greg as always said, we are fairly prudent and conservative on how we treat particularly new awards around timing, funding, contingent studies and other risk factors.
Timothy Cameron Evans
Got you. All right.
Thank you very much.
Operator
Thank you. Our next question comes from the line of Donald Hooker with KeyBanc.
Your line is open.
Donald Hooker
Hey, good morning. Congratulations on another good quarter.
And so my - you guys called out sort of we’re 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.
And I was curious, if there is a way for us on the outside to think about on a relative basis, if there is a way to sort of how you think about yourself ranking-wise versus other CROs and your aggressiveness using EDC and other risk-based monitoring or other sort of methods using technology to kind of improve your margins. How do you kind of characterize yourself kind of versus other CROs, if there is a way to rank that?
Greg Rush
Perhaps, we’re more focused on ourselves than the competition. So, I wouldn’t want to get into a ranking against the CROs.
What I would tell you is that, our approach to technology is to leverage our event [ph] suppliers, R&D investments. We work very closely with them to help - talk to them about the roadmap, what were initially going.
And it’s a mutual beneficial thing. And they’re trying to sell more and more of their products to the industry and we want to help guide them as what the industry need.
And so, by partnering with this technology companies, we believe we’re able to leverage their R&D investment in order to meet our customers’ needs versus of having to build our own R&D investments. And quite honestly, I think they have great resources.
I think R&D - software engineer graduate from school probably would like to go to work for an Oracle, or Medidata, or SaaS, great career opportunity and we think that they have the best and brightest talent and we like their investments.
Jamie Macdonald
Yes. I mean, technology is important and taking sort of manual effort and data transposition out of the processes, it’s going to provide some benefit to development.
But in the end of the day, in terms of delivering successful development you 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 use of 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 enroll 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 risk-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 margin.
Donald Hooker
Okay. So it sounds like technology is important, but from sort of summarizing what you said, that the therapeutic focus, although that the other - the science behind and maybe ranks it a little bit higher in your sort of win rate.
If that’s - if this is a fair summary and…
Greg Rush
[Yes, it’s a bit] [ph] higher.
Jamie Macdonald
Yes, that’s a good sort of summary. I think technology augments the expertise we have on the scientific side.
And then, you got to align technology to process as well. If you got a race car, put an inexperienced driver, you’re probably going to end up in a bad place.
I think you got to put the right people and the right data and technology in the hands of people who can use it.
Donald Hooker
That’s a great analogy. Okay.
All right, those are my questions. Thank you very much.
Operator
[Operator Instructions] And I’m showing no further questions. I’d like to turn the call back to Jamie Macdonald for closing remarks.
Jamie Macdonald
Thank you. Thank you, ladies and gentlemen, for your attendance today, 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.
Operator
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.