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PRA Health Sciences Inc  (NASDAQ:PRAH)
Q3 2018 Earnings Conference Call
Nov. 01, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to PRA Health Sciences Third Quarter 2018 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. (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 -- Senior Vice President of Legal Affairs

Good morning and thank you for joining us for the PRA Health Sciences third quarter 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, an 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 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 -- Chief Executive Officer

Thank you, Tim. Good morning and thank you for joining the conference call covering our third quarter financial results. I'm 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 flow and our service offerings continue 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 1.28 times. 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 previously disclosed, our backlog does not include our Data Solutions segment. In addition, we are not including pass through our investigator data 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 five clients representing approximately 57% 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 quarter with financial results in more detail.

Mike Bonello -- Chief Financial Officer

Thank you, Colin, and good morning. For the third quarter of 2018, our consolidated revenue 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-size 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 reflects 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 three months ended September 30, 2018, compared to $101.9 million for the three months ended September 30, 2017. The increase in operating cash flow was primarily the result of an increase in our operational performance and 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 information technology and 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 US dollars. Our euro exposure continues to be naturally hedged. We currently have less than 1% of revenue denominated in GBP while 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 they create a timing difference between the amount we are entitled to receive from our customers and the amount of revenue we recognized in our financial statements.

We anticipate that our annual effective income tax rate will be approximately 24%, which incorporates the expected changes from the US Tax Cuts and Jobs Act. Our effective tax rate may differ from this estimate if the geographic distribution of our pre-tax 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 US 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 their 2018 target.

That concludes our prepared remarks and now we'll be happy to take your questions. Operator, you may now open the lines for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Donald Hooker from KeyBanc. Your line is now open.

Donald Hooker -- KeyBanc -- Analyst

So I'll just go right to the data, the Symphony Health acquisition. We all realize that's very seasonal, so big fourth quarter. Maybe for Colin, more qualitatively, can you talk about how that business has performed as part of the Company. Is it too early to expect synergies like call center, I assume there's more revenue synergy 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 -- Chief Executive Officer

Yes, we see a lot of opportunities, working closely with a lot of our therapeutic expertise and the infrastructure that we have built. We tend to take advantage of that and over the next coming months we will be starting to look at planning for that and almost immediately. And we've, as you know, let them get on with the year and as a seasonal business and we had to remain faithful that would pickup toward end of the year, and the absence of sort of like any history we provided some updated clarification toward modeling etc. We typically don't do that, but we have from a number of analysts that would like to see some clarity there. And so we made sure that they understood that we were pretty much tracking where we expect it 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 -- KeyBanc -- Analyst

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 -- Chief Executive Officer

Well, we actually shuffled some staff and -- but with regard to revenue, what we've been noticing is it's been a trend of some of our new opportunities that we have been awarded that we're getting into some more detailed discussions with clients about modification of program and our protocol. And we're seeing a lot of these projects slip a little bit. And so the typical stop time from award to actual immediate start is definitely elongating.

I've got to say 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 -- somebody's add projects that were intended to start, we are sliding a little bit. We were also very careful and cautious about the way we're hiring. So we've seen in 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. Your line is now open.

Ross Muken -- Evercore ISI -- Analyst

So maybe just in terms of the new business environment, you continue to put up very strong book-to-bills, maybe give a little color in terms of some of the environments. 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 in the win rate continues to track.

Colin Shannon -- Chief Executive Officer

Sure. We're seeing pretty much steady across all of the sectors of healthcare and we're not seeing anything that's different, whether it be biotech, mid-size pharma or large pharma. And I think I've mentioned in the past that we're seeing product registration, the traditional project-based business and really growing a lot faster than the strategic solutions part of the business and it's actually, partly that's the reason it's been causing a slight deterioration on our conversion rate, for our backlog conversion, as it's definitely been elongating over the last period of time.

But we're certainly feeling a good economic environment. We're seeing strong robust RFP flow. So we've been feeling pretty strong about things at the moment. And in terms of some of the uncertainty on the major pharma side, there's been a big push here in the US on biosimilars, you had a big CEO change at the largest pharmas. You had Novartis the other day talking about cuts to their R&D programs. You have a bit of a different environment for some of the large guys than we've seen for sometime, albeit not all of them are utilizers of outsource.

Ross Muken -- Evercore ISI -- Analyst

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 is a kind of innovation coming at biotech for pharma, they're still trying to figure out, in some cases they are operating strategy for the new environment and with some regime changes you sometimes get new opportunities. How are you thinking about some of that translating into maybe places where you can come in and maybe help them to a greater degree and be more active in the dialog, where maybe someone wasn't outsourcing to the same degree previously.

Colin Shannon -- Chief Executive Officer

A lot of these relationships are and many, many months prior to anything happening and when change happens and created relationships, it is 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 colleagues at the large pharma companies, having discussions about the development pipeline.

So, we're always in communication. And of course with wind of change, that always creates the opportunity for getting into new clients and of course we always look to see what we can do take advantage of that opportunity. And we never know what's going there and we try many things, but we have obviously multiple ways of delivering our growth and we don't rely on any individual client. We are very well diversified and that's particularly why we feel very good about the 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. Your line is now open.

David Windley -- Jefferies -- Analyst

Colin, on your comments around some elongation, I understand the point about more growth on full service and appreciate the detail around kind of what sounds like consultative activities with some of your clients. Your conversion rate has dropped each of the last two quarters by a little bit more than is normal. Would you view your comments 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 -- Chief Executive Officer

Actually, no. Obviously with new clients, Dave, we -- and the most important thing is we have a -- help our client get the best operational program to deliver the trial, whether it be optimization of the protocol or input from our therapeutic and operational folks. We want to help them get -- (inaudible) done as quickly as possible, but at the same (inaudible) if there's any input we need to have discussions and that's part of the process.

And 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 that it is more about consultative period before it really really starts. So, (inaudible) noticed in every single account, there's certainly been a few. (inaudible) new clients or certain therapeutic areas, but it's a mix of different things. And at the moment, I can't really spot a trend, but we will certainly continue to look at it and it might help us with our modeling for next year as well.

David Windley -- Jefferies -- Analyst

So moving to put a finer point on it, conversion rates dropped maybe 100 basis points in a couple of quarters, a little bit more and PRA has had I think because of the conservatism in the way you've 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 described 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? I think this is important relative to where the clinical revenue expectation falls out for the next quarter.

Colin Shannon -- Chief Executive Officer

I think you'll see a little bit of pickup in Q4 but it's certainly more we're looking to ramping up in 2019. We've been saying that we've been really getting through our 2018. We had adjustments beginning of the year where we had (inaudible) pathway because of a couple of larger cancellations. And we've got a lot of studies that are going to start up and think that's part of the process where it's a little bit unpredictable, Dave, is that in any of these situations, there can be a delay in getting things moving.

We are here to assist the client. Sometimes they want more information. We do an awful lot more rebids in whatever done before to help them understand the pricing theses and the different scenarios that we are proposing to them. And so, we're just seeing a little bit of slide there, but we're definitely obviously looking to see the conversion get back to our normality and it'll be probably sometime in 2019 before we see it really get -- when a lot of these studies are in full flow again, that's when it gets back to that much stronger position.

David Windley -- Jefferies -- Analyst

Yeah, last question quickly. And you are 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 hoped 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 -- Chief Executive Officer

A lot of it is just helping us internally to do things better and get better information to our clients quicker. So, all of our process is here 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 you know, technology is a great help, as you know and we are one of the biggest advocates of 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 derive from the amount of data we use and the way that we've constructed in years over time. And the internal things that we've been doing, yes, eventually the clients will see some better assistance and more visibility on 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 have been under way. So, we're not really going to see the true benefit until next year, but it has certainly started this year. So we are excited for 2019.

Operator

Our next question comes from the line of Jack Meehan with Barclays. Your line is now open.

Jack Meehan -- Barclays -- Analyst

I want to focus on the gross margins just because that was very -- I was positively surprised on in the quarter. Maybe just starting with Symphony specifically, just wondering if you can 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 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 on to that platform.

Colin Shannon -- Chief Executive Officer

Well, firstly, it's a pretty fixed cost business. And as we pointed out in the first half of the year, it's a lot slower (inaudible) starts picking up in Q3 and it's big strongest quarter is Q4 and obviously then once it covers the fixed costs, the margin start to perform back stronger. And we do see opportunities to leverage into a lot of our current 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 and assessing various opportunities using (inaudible) data and various things like that that we've not really participated that strongly in the past. So all in all, we liked the fact that we've got to where we've got with that asset and we see a lot of potential for the future. And of course, I don't want to overlook the fact that we were strong in our margins within our clinical operations.

Again, this was our teams really focusing on productivity and managing the staffing appropriately and assessing when these studies were going to start, making sure that we are getting staff on board at the right time and not too early. Obviously, we're always higher, slightly ahead of the curve, but it was managed very carefully and I think they have just done a great job in managing that.

Jack Meehan -- Barclays -- Analyst

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

Colin Shannon -- Chief Executive Officer

There's a few things we have been looking at overseas and contemplating, and we're not quite ready yet to do anything, but we've got some -- we're certainly assessing a number of opportunities and we've been searching and looking for (inaudible) and 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 it, solidifying any type of deal.

Jack Meehan -- Barclays -- Analyst

And just as my follow-up, I was curious as you fold it, I hear the commentary on the clinical research side in terms of the amount of hiring, it's certainly understandable there's another quarter of backlog growth of over 20%. As I pool 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 -- Chief Executive Officer

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

Operator

Our next question comes from the line of Daniel Brennan with UBS. Your line is now open.

Daniel Brennan -- UBS -- Analyst

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 the step up in growth that's 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.

Mike Bonello -- Chief Financial Officer

I don't know how clear we could be, we told you what that total year revenue could be. I guess I've given more color than I've ever given before, it's quite (inaudible).

Daniel Brennan -- UBS -- Analyst

It's quite a big step up, that's all. Maybe stepping back big picture on 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 -- Chief Executive Officer

Well, we really needed that data. We become fairly reliant on data as part of our whole clinical process. It was one of the major reasons why we felt that we needed to acquire the source of data so that we can actually continue using the data. And if you look at our history, we started using the data 10 years ago and we became very relying on it.

We went initially looking to acquire the data company, but when IMS and Quintiles got together, we realized that and we had to look after a source and we've been using up -- as a backup source was going to be Symphony and we realized that 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 our capability of using the data that we did.

So we've always been advocates for the data. We have got our offering set up and we've not created any fancy tools or anything, we use it as part of our and -- integrated processes within our Company and it becomes 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 it to context. And so we've been working hard applying that and it's certainly been helpful in growing the Company. I don't see any major changes that we will be likely doing because of the acquisition, it's just allowing us to continue what we've been doing in the past.

Daniel Brennan -- UBS -- Analyst

And then maybe if you wouldn't mind, one other, just on a big picture on the environment. A question we get is just how robust the overall biotech environment is? it seems like the science is as robust today's it's been for the while, but is 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 a 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 bookings that you're seeing in the types of customers, is there a lot of kind of more speculative companies in there or you feel it's a very sound robust kind of type of biotech companies that's going to funded?

Mike Bonello -- Chief Financial Officer

Well, when we get RFPs, we got to carefully assess whether we can actually conduct a trial and get it completed. And we don't just take any study and if you're mentioning that maybe some biotechs don't have strong possibilities of that achieving the trial. There's no point in us undertaking it because you then are 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 will look at the operational delivery and important thing is -- and we want to be able to help the client at least get the information to proceed whether it's successful or not, and if we don't feel we can do that, then we would not bet on it, on that particular trial.

Operator

Our next question comes from the line of Derik De Bruin with Bank of America. Your line is now open.

Bank of America -- -- Analyst

Hi, this is Juan (ph) on behalf of Derek. 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 costs, where the opportunities are and how much runway you might have there?

Mike Bonello -- Chief Financial Officer

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 are incurring. We still have one area of improvement that's actually still in cutting an awful lot of external labor hours that we're spending and that we will be working on over the next year. And then we will 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 our tools to help perform the work at a much faster way.

Bank of America -- -- Analyst

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

Mike Bonello -- Chief Financial Officer

Well, when looked at the business and acquired, I mentioned that I saw it being the growth with normalized typically in line with our current business. We felt that it would manage and track along that and that was organic. We did see the opportunity of maybe adding with maybe some acquisitions to help boost it 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

Our next question comes from the line of John Gregor with William Blair. Your line is now open.

John Gregor -- William Blair -- Analyst

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 still feel like Symphony can be kind of a mid-teens grower, if I'm remembering that right?

Mike Bonello -- Chief Financial Officer

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

John Gregor -- William Blair -- Analyst

And then it's sort of similar, if you think to 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 -- Chief Executive Officer

We're still trying to assess the strategic solutions part and we want to see how we can continue to expand there. Our goal when we acquired that business was to try and add one new client a year and that's obviously quite difficult to do because we're in a lot of the big pharma (inaudible) already, but we continue to look to expand that business. So that's one element that may just bring it down to sub-high teens, low-double.

We're seeing strong product registration, (inaudible) business and we continue to explore that and of course we've added new partnerships, which you know 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, we've got very, very strong backlog and things are looking very positive.

Although we're seeing some elongation in the start-up time, we're not seeing anything disappear. It's not like the studies are -- they are not durable after we have discussions. It's all about finding the optimal way to conduct the trial rather than actually leading to it shouldn't be done at all. So we're working through these processes and we are seeing some changes there, but maybe just a factor that we've added on an awful lot of new clients and we're helping them through that process.

John Gregor -- William Blair -- Analyst

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 -- Chief Executive Officer

We see some market opportunities that we might want to take advantage of and they could potentially be tuck-in acquisitions like that would ever get those the capability to take advantage of some of our data solutions. And so, that's certainly something that we would consider like high value and we are looking to expand our capability in some markets as well and a lot of that can be done organically.

We're still building out some areas in Asia and we 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 just see that as more organic growth. Regarding technology, we are continuing to add functionality and streamlining our internal resources. So I think that will continue to enhance so that they can become actually even more client oriented and we may at some point in the future be able to actually get visibility of (inaudible) clients so that they can get the right benefits from them. We work a long way to go there, you've asked in a couple of years. 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) Our next question comes from the line of Erin Wright with Credit Suisse. Your line is now open.

Erin Wright -- Credit Suisse -- Analyst

When it comes to the broader RFP environment that you're seeing out there, any sort of changes in terms of insourcing or outsourcing trends that you're seeing. We saw news from Bayer, 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 -- Chief Executive Officer

I think the nice thing about our flexible service offering with both with our strategic solutions division and our product registration, we are able to offer flexible solution to the clients that we can really what we want to understand, what that objectives are, and then we're able to actually talk to them about a flexible approach to meet their needs, so that they don't have to do all outsourcing, but they can do modifications and we work with them to get them some options.

It does take a lot longer cycle times to agree these types of options because a lot of thought process internally, so -- and we recognize this has a long-cycle time and some of these discussions happen basing your levels over a very long period of time and it can typically take anywhere from a year or onwards to actually conclude a decision. So, it's hard for me to say that as a shift in trend because there was lots of variations all the time and our job here is to figure out how best to meet and serve the clients' needs and so we continually support and look for our clients to advise us what direction we want to move in and we look to see how best to help them.

Erin Wright -- Credit Suisse -- Analyst

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

Colin Shannon -- Chief Executive Officer

In the past I've always said it's behaving rationally, but there's a question I always asked to my BD team before the call and they have said that this being a few occasions in the last quarter where they saw some silly pricing done. So I'm hoping that's not trend because these longer-term trials, the last thing you want to do is (inaudible) pricing and then it causes the whole industry initiative, so I'm hoping either one-offs and I don't have a lot of fact to bid on that, it's just anecdotal from my sales team, so since you asked the question, I just thought I'll share with you some of the thoughts.

Operator

Our next question comes from the line of Sandy Draper with SunTrust. Your line is now open.

Sandy Draper -- SunTrust -- Analyst

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

Colin Shannon -- Chief Executive Officer

You're absolutely correct, Sandy. We've more or less left them alone, but we in some areas started getting much more closer collaboration. The IT functions are working very closely -- data people and helping each other and support the new solutions and there's good synergies there, and learnings 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 and we've been trying to be relatively hands off, but we do see that there's opportunities and as we flush out really for the 2019 plan, we will be looking to optimize these opportunities that we're seeing and we do actually see some low hanging fruit that we can go after, so we are we're actually quite optimistic about the beginning of next year.

Operator

Thank you. 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 -- Chief Executive Officer

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 great rest of the day. Thank you very much.

Operator

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

Duration: 49 minutes

Call participants:

Timothy McClain -- Senior Vice President of Legal Affairs

Colin Shannon -- Chief Executive Officer

Mike Bonello -- Chief Financial Officer

Donald Hooker -- KeyBanc -- Analyst

Ross Muken -- Evercore ISI -- Analyst

David Windley -- Jefferies -- Analyst

Jack Meehan -- Barclays -- Analyst

Daniel Brennan -- UBS -- Analyst

Bank of America -- -- Analyst

John Gregor -- William Blair -- Analyst

Erin Wright -- Credit Suisse -- Analyst

Sandy Draper -- SunTrust -- Analyst

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