IQVIA Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

There are 11 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this call is being recorded.

Operator

Thank you. I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Treasury. Mr. Childs, please begin your conference.

Speaker 1

Thank you, Mike, and good morning, everyone. Thank you for joining our Q1 2023 Earnings Call. With me today are Ari Boosby, Chairman and Chief Executive Officer Ron Brooman, Executive Vice President and Chief Financial Officer Eric Sherbet, Executive Vice President and General Counsel Mike Fedock, Senior Vice President, Financial Planning and Analysis and Gustavo Perron, Senior Director, Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.

Speaker 1

IQVIA dot com. Before we begin, I would like to caution listeners that Certain information discussed by management during this conference call will include forward looking statements. Actual results could differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10 ks and subsequent SEC filings. In addition, We will discuss certain non GAAP financial measures on this call, which should be considered a supplement to and on a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

Speaker 1

I would now like to turn the call over to our Chairman and CEO.

Speaker 2

Thank you very much, Nick, and good morning, everyone. Thank you for joining us today to discuss our first quarter Call. This was another quarter where we delivered again on all our financial targets. Our revenue grew 11% organic, excluding the impact of foreign exchange and COVID related work. The diversification of our short and long cycle businesses allowed us to perform well in the quarter despite The broader macroeconomic dynamics.

Speaker 2

The demand environment for our industry continues to be healthy. Global clinical trial activity remains resilient, and the prospects for our commercial business remain favorable. A few encouraging signs I'd like to share with you this morning. The 15 largest pharmaceutical companies together Spent a record setting $138,000,000,000 on research and development in 2022. According to BioWorld, the Q1 EBP funding was $15,600,000,000 That was up double digit versus prior year and up sequentially versus Q4.

Speaker 2

March was a particularly strong month for EBP funding, despite concerns about the impact from the banking crisis. FDA approvals are off to a strong start in 2023. There were 13 approvals in the Q1. That's up from an average of 9 over the prior 5 years, and that's a positive indicator for our commercial business. There was a significant M and A activity in Q1, which primarily is large pharma acquiring smaller companies, And the industry expects 2023 M and A spend to be one of the largest years in the last decade.

Speaker 2

This highlights the ongoing demand for molecules by Lars Pharma. Internally, our Q1 demand metrics show continued healthy growth. I'll share a couple with you this morning. Net new bookings were $2,600,000,000 That represented a quarterly book to bill of 1.28. As a result, our backlog reached a new record and grew 10.1% versus prior year on a reported basis and 11.3% excluding the impact of foreign exchange.

Speaker 2

Our RFP flow set a new quarterly record. It was up sequentially 15% versus Q4 2022. Operationally, attrition levels have continued to decline and they are now, in fact, Back to pre pandemic levels or slightly below that, site selection was up double digits year over year. This increased productivity helped mitigate the unfavorable impact Of the staff shortages at investigator sites that we spoke about in prior calls, RMBS organic revenue growth At constant currency, excluding COVID related work, was 17% In the quarter, that was well above the upper end of our expectations. Within TAS, we continue to see some client cautiousness related to discretionary spending.

Speaker 2

TAS growth for the quarter was 6% organic at constant currency, excluding COVID related work, and that was within our expectations, but towards the lower end. In summary, industry demand remains healthy despite Some cautiousness in discretionary spending, mostly in the short cycle businesses. The diversification of our businesses allows us to balance the current slow short cycle growth With the resilience of our long cycle businesses, demonstrating that IQVIA is a company that can operate effectively under different macro environments. And with that, as context, let me review the Q1 results. Revenue for the Q1 grew 2.4% on a reported basis, 4.7% at constant currency and compared to last year And excluding COVID related work from both periods, we grew the top line as a company 11% at constant currency 1st quarter adjusted EBITDA increased 4.8%, driven by revenue growth and ongoing cost management discipline.

Speaker 2

1st quarter adjusted diluted EPS of $2.45 declined slightly as expected, driven by the one time step up in interest rates. Excluding interest expense and the UK tax rate headwinds that we discussed in a prior call, our adjusted diluted EPS growth I'd like to share a few highlights of business activity in the quarter. Within TAS, a top 10 pharma awarded IQVIA our first omni channel marketing deal in the Asia Pacific IQVIA's omnichannel marketing program provides client teams with AIML powered insights and recommendations to deliver effective personalized digital engagements with HCPs. In the quarter, IQVIA won an award for our in home patient services offering. This biotech client is launching a new MS treatment and selected IQVIA based on our ability to deliver testing and monitoring to the patients' homes.

Speaker 2

These differentiated capabilities ease the burden for patients with limited mobility. Moving to the real world part of our TAS business. IQVIA was awarded a major post authorization safety study to assess the impact and outcomes of prescribing a certain asthma drug to pregnant women with severe asthma. We won this large contract We are the top 10 pharma clients due to the breadth of our capabilities, including our relevant experience in safety trials, our strong data and analytics capabilities and increased delivery efficiency with faster patient enrollment. Also in the quarter, we were awarded a large global intervention study with a top 10 pharma to identify high risk Cardiovascular patients by measuring the prevalence of high sensitivity C reactive protein.

Speaker 2

This protein is produced by the liver in response to inflammation in the body. Elevator levels of this protein in the blood are associated with an increased risk of cardiovascular disease, including heart attack and stroke. IQVIA was selected based on our ability to connect lab and clinical capabilities with therapeutic and real world expertise in a cost This study will have a significant impact on the future management of cardiovascular patients. Moving to R and Ds. Continued strong momentum with our EUR 2,600,000,000 of net new bookings in the quarter, translating into a book to bill of 128 in the quarter, which brings our LTM book to bill to 135.

Speaker 2

A few highlights in the quarter. Oncology continues to be our largest therapeutic area and in the quarter, A high profile cutting edge biotech company entered into a strategic partnership with IQVIA. This is a big deal. In fact, we were already awarded our first trial, which is for a novel bispecific antibody With potential development opportunities across several tumor types, bispecific antibodies are designed to bind 2 Different target molecules simultaneously. This project will leverage our end to end clinical trial solution, including protocol design, Specialized medical and regulatory expertise, biomarker development and our integrated clinical operations, analytics and technology.

Speaker 2

We really are the only company with the ability to bring together these capabilities, which in turn help the client optimize trial design and reduce Time to market. Importantly, going forward, this partnership creates multiple opportunities within this client's large oncology portfolio. We continue to have strong success with our clinical FSP trials business With several recent notable wins, including a significant preferred provider award with a major pharma. This was a competitive win against 2 incumbents, and it further diversifies our portfolio of FSP clients and increases our share in that segment. We continue to deploy innovations in our clinical technology suite.

Speaker 2

Most recently, we introduced a new cloud based platform within our research site network that will streamline document workflows and allow real time collaboration among study teams. We already deployed this new technology to approximately 15% of IQVIA network sites across 28 countries, and we expect to deploy to 40% of our sites in the next 12 months. The goal of deploying this technology at the site is to increase site productivity, which frees up more time for site support, Compliance reviews and continuous monitoring of patient safety and study quality, all of which are very important, especially in an environment where we experienced staff shortages at the site. Finally, a couple of nice accolades For our global IQVIA team, first, I am proud to share that our lab business received the prestigious Singaporean President's Certificate of Commendation, which is awarded to organizations that had a significant impact in the fight against COVID-nineteen. In fact, 5 of our employees in Singapore received the Public Service Medal Award for their outstanding contributions to manage The impact of the pandemic.

Speaker 2

This is a nice recognition of the unique role we play in supporting public health. 2nd, Our Scotland based lab business recently achieved a global GreenLab Certification for its commitment to practicing sustainable science. This certification is recognized by the United Nations' Race TO 0 Global Campaign as the international gold standard for lab sustainability best practices towards a 0 carbon future. I will now turn it over to Ron for more details on our financial performance.

Speaker 3

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. 1st quarter revenue of $3,652,000,000 grew 2.4% on a reported basis and 4.7% at constant currency. In the quarter, COVID related revenues were Approximately $150,000,000 which was down about $230,000,000 versus the Q1 of 2022. In our base business, that is excluding all COVID related work from both this year and last, organic growth at constant currency was 11%.

Speaker 3

Technology and Analytics Solutions revenue was $1,444,000,000 up 0 point 3% reported and 2.9% at constant currency. Excluding all COVID related work, organic growth At constant currency in TAS was 6%. R and D Solutions revenue of $2,026,000,000 was up 4.8% reported and 6.5% at constant currency and excluding all COVID related work organic growth Constant currency and R and Ds was 17%. Finally, Contract Sales and Medical Solutions or CSMS Revenue of $182,000,000 declined 6.7% reported and 1% at constant currency. And excluding all COVID related work, the organic growth decline at constant currency was also 1% in CSMS.

Speaker 3

To move down the P and L, adjusted EBITDA was $851,000,000 for the Q1. That's growth of 4.8%. GAAP net income was $289,000,000 and GAAP diluted earnings per share was $1.53 Adjusted net income was $462,000,000 and adjusted earnings per share diluted was $2.45 Now as Ari highlighted, R and D Solutions continues its strong momentum. This graph shows the growth of our backlog over the past 3 years, which Demonstrates the sustained growth of our clinical business. Our backlog at March 31 stood at a record $27,900,000,000 Which was up over 40% over the last 3 years and growing 10% year over year.

Speaker 3

Okay. Reviewing the balance sheet, at March 31, cash and cash equivalents totaled $1,494,000,000 Gross debt was $13,176,000,000 and that resulted in net debt of $11,682,000,000 Our net leverage ratio ended the quarter at 3.4 times trailing 12 month adjusted EBITDA. 1st quarter cash flow from operations was strong at $417,000,000 and CapEx was $164,000,000 resulting in free cash flow of $253,000,000 In the quarter, we repurchased $129,000,000 of our shares And that leaves us with slightly over $1,200,000,000 remaining under the current program. Okay, let's go now to guidance. Guidance for the full year 2023 remains unchanged.

Speaker 3

We continue to expect revenue, Excluding COVID related work to grow organically at constant currency between 9% and 11%. This revenue guidance continues to assume about 100 basis points of contribution from acquisitions and approximately $600,000,000 of COVID related revenue step down versus 2022. We're also reaffirming our guidance on adjusted EBITDA of $3,625,000,000 to $3,695,000,000 And that represents year over year growth of 8.3% to 10.4%. Lastly, we're reaffirming our guidance On adjusted diluted EPS of $10.26 to $10.56 And this adjusted diluted earnings per Our guidance includes a year over year impact of the step up in interest rates and the increase in the UK corporate tax rate. Together, these non operational items impact the year over year growth rate by approximately 10 percentage points.

Speaker 3

Excluding these items, adjusted diluted earnings per share is expected to grow 11% to 14%. Let's move to our Q2 guidance. In Q2, we expect revenue to be between $3,675,000,000 and $3,750,100,000 That's growth of 3.7% to 5.8% on a constant currency basis And 3.8% to 5.9% on a reported basis. Adjusted EBITDA is Expected to be between $850,000,000 $875,000,000 which would be up 6.3% to 9.4%. And adjusted diluted EPS is expected to be between $2.30 $2.44 declining 5.7% to flat on a year over year basis.

Speaker 3

And keep in mind that the second quarter is the toughest compare for interest expense Because we had a very favorable $1,000,000,000 swap roll off on March 31, and it was also a year ago that rates started rising. So Excluding the step up of an interest expense and the increased UK tax rate, we expect adjusted diluted EPS to grow between 8% 13% in the 2nd quarter. Now all of our guidance assumes that foreign currency rates as of April 25 continue for the balance of the year. So to summarize, Q1 was another solid quarter of financial performance. We delivered revenue growth of 11% organic, Excluding the impact of foreign exchange and COVID related work, underlying demand in the industry and in our business remains healthy with Our RFP is accelerating in Q1, up 15% sequentially versus Q4 2022.

Speaker 3

Quarterly net new bookings were $2,600,000,000 and our industry leading backlog reached a new record of $27,900,000,000 representing growth of over 10% year over year. We've been navigating well through the choppy macro environment and delivering on our numbers. Despite some of the cautious weakness we've observed in the short cycle discretionary spend, thanks to the resilience in the rest of the portfolio, which is mostly long cycle and thus less affected by macro turbulence. Therefore, We are reaffirming our full year guidance of 9% to 11% organic revenue growth at constant currency excluding COVID related work And 11% to 14% adjusted EPS growth excluding non operational items. And with that, Let me hand it back over to the operator for Q and A.

Operator

Thank you. We'll pause for a moment to compile the Q and A roster. Your first question comes from the line of Shlomo Rosenbaum at Stifel. Your line is open.

Speaker 4

Hi. Thank you very much for taking my questions. Ari, can you talk a little bit about the nature of the backlog burn? You had very strong Bookings, you got strong book to bill. But the amount of revenue expected to or backlog to convert to revenue, it seems Kind of consistent for this quarter to last quarter or is there any is there a change of mix over there?

Speaker 4

Is that a rounding item? Or is there Something else that might be going on over there?

Speaker 2

Yes. Thank you, Simon. No, look, we had very strong Bookings, it was one of our highest bookings quarter. And there's wouldn't read anything. It's not the first time, by the way, that Q1 next 12 months revenue from bookings is Essentially flat to Q4 next 12 months bookings.

Speaker 2

I can't detect any seasonality to that, but it's not the first time it happened. So I wouldn't read anything into it at all. It's just a question of mix, months of pass throughs that are Taken into the quarter and or delayed and we're reverting to more regular Mix of projects with, as you know, an increasing share in oncology, which typically A burn a little slower. That might have a little bit at the margins of an impact, but I wouldn't read anything into it.

Speaker 4

Okay. Thank you.

Speaker 1

Thanks, Laurent.

Operator

Thank you. Your next question comes from the line of Anne Samuel at JPMorgan. Your line is open.

Speaker 5

Hi. Thank you so much for taking the question. I was hoping maybe you could speak to some of the dynamics within the TAS business. In the 4th Quarter of the analytics and consulting business was impacted, but some of that maybe seemed like it was unique to December purchasing patterns. So how much of this is Carryover from what you saw in the Q4 and then what's driving your confidence that it's going to come back in the remainder of the year so that you can hit your guidance?

Speaker 2

Thank you, Anne. It's a good question. Look, TAS growth in the Q1 Was within the range we expected. You are correct that the guidance we gave on an organic constant currency ex COVID basis For the year, I think our guidance is 7% to 9%, and therefore, 6% clearly is right under that. But we did Tell you that we did fully expect Q1 to be just under that.

Speaker 2

So our expectations were more in the 6 7% to 8% for the Q1, and we expected a slower start, as you suggest, due to the cautiousness We saw in December, in customers' discretionary spending, and so we assumed this was going to spill over, as you suggest, Into the Q1, that's why we assumed a slower start in the year for this business. The reason why it's a little lower than our long term growth Expectation is due to the analytics and consulting business piece of TAS. That is about, I want to say, just under 25% of the total business in TAS. And as we said many times before, it's the shortest cycle and contains the most discretionary spend Activity of the entire TAS portfolio. So what we are seeing is not cancellations of projects, Not decisions to not conduct the projects.

Speaker 2

For the most part, these are projects that need to be done. Pricing and market access studies, as an example, have to be done at And market access studies as an example have to be done at some point, but the discretionary Aspect applies to timing for the most part, okay? No one does projects that they don't need to do. These are products that need to be done, but they don't need to be done right this second. And we are seeing customers delaying Decisions and pushing things to the right.

Speaker 2

That is what gives us confidence that in the latter part of the year, those projects will have to be done. So that's why we maintain our 7% to 9% organic constant currency ex COVID guidance for the year. Now we expect that cautiousness to continue into the 2nd quarter And we are assuming growth so far in line with the Q1. Again, we're not seeing any customers Walking away from projects or canceling anything, it's just consistent with what we saw at the end of Q4 delaying a project. We do expect the situation to improve in the second half because the pipelines are stronger and the customers eventually need to actually spend on those projects.

Speaker 5

That's extremely helpful color. Thank you so much.

Speaker 2

Thank you.

Operator

Your next question comes from the line of David Windley at Jefferies. Your line is open.

Speaker 6

Thanks for taking my question. Good morning. Ari, I wondered if you could talk in the R and D Business, as you highlight, strong bookings, I guess, seasonally different from the 4th quarter. The thing that we're seeing, I guess, in our data review is that a lot of studies similar to what you're describing in TAS in consulting That a lot of studies are kind of sitting in a limbo point and not moving forward into 1st patient in and kind of more productive revenue stages of the trial. And I wondered if you have some insights into that and if any of your tools can help to move those forward Or is it kind of a funding and financial issue that is keeping them from moving forward?

Speaker 6

Be curious your views there.

Speaker 2

Okay. Well, Debbie, good morning and thanks for the question. I want to use the opportunity to state as clearly and definitively as I can. We simply are not I repeat, we are not seeing any of what you suggest. No one is first of all, on the funding question, I don't know how many times I'm going to repeat it.

Speaker 2

I've been doing this for 5 quarters in a row. We are not seeing any funding issues. In my introductory remarks, I shared some of the statistics that actually everything is up On the funding front, so we are not seeing any delays, any unusual cancellations, And any postponing of decision making within our portfolio, it could be that others are seeing that, we just are not seeing it. Once again, the overall RFP flow is at a record high. It's up 15% sequentially versus Q4 of 'twenty two.

Speaker 2

Both the Mid and the EBP segments are up strong double digits. I said before, it's up 15% the qualified pipeline, which is again an even earlier indicator is up almost 8%, it's actually over 8% year over year and it's almost $15,000,000,000 with again a record qualified pipeline. The total pipeline is over €25,000,000,000 also meet more than 5% growth year over year, $2,600,000,000 of net bookings in the quarter, It's more than the entire backlog of some of our smaller competitors out there. Our book to bill 128 is Extremely strong in the current environment, and I think from what I've seen the highest of any of our peers. Backlog is up more than 10% year over year.

Speaker 2

That's on a reported basis, excluding FX, it's up 11.3%. So I again, I'm trying to share some metrics with you here. If we look at by segment, again, it's across the board, large, mid, EVP, I've got a lot of numbers here, but Dave, everything is honestly, everything is green here. Nick, you have any other color to add to this? Yes, I

Speaker 1

guess, Dave, I think the only thing I would say there is, we saw your question Sort of earlier this week and talked to the team and we're not seeing any sort of slowdown in terms of clients not wanting to start trials. I mean as soon as they're Signing and pushing and getting ready, they are pushing trials forward. So we're not seeing any delays, Clients trying to slow down starts. We are seeing same trials move forward And not seeing the dynamics that you're asking about.

Speaker 2

Yes.

Speaker 3

And Dave, if there's any slowness anywhere, it's just in some of the execution because of the Labor issues at some of the sites. That would be the one place where we could burn faster and the industry could burn faster if there weren't the labor issues at the sites. Right.

Speaker 2

And as I mentioned in my introductory remarks, we have been able to offset some of that unfavorable impact of stock shortages that Ron just Brought up and we talked about before because site selection has been accelerating. I mentioned it was up double digits year over year And that increased productivity helped us in the quarter and we expect we'll continue to do so the rest of the year. We also I mentioned also in my introductory remarks, I'm introducing rapidly more technology at the site in order to free up Personnel time and increased productivity.

Speaker 3

Thank you.

Speaker 6

Yes, very, very fulsome answer. If I could just add to that, I mean, there's been a lot of companies this week that have attributed Weakness to I mean there are a lot of other companies seeing dramatic slowdowns. Maybe you could talk about how Your positioning or your stage of the pipeline is different that also protects you from what they are seeing, Thermo, Danner, Dortorius, etcetera.

Speaker 2

Yes. I mean, the answer is in your question. We have a very Strong momentum. We operate the vast majority of what we do is in the sweet spot of the clinical trial process. It's Phase 3 stuff.

Speaker 2

We're not affected by the primate issue 0.0. And even if the primate issue continues for the next 3 years, you wouldn't see it at all In our numbers, we've already looked at that. And we continue to gain share. I know I gave examples on the FSP segment. It's true across the board.

Speaker 2

In We just are winning in the marketplace. We displaced incumbents in a number of occasions with large clients. I think I don't see any really no issues whatsoever on the R and D front, Save for the execution and operational issues we have encountered, I mentioned that the attrition levels are coming down. I mean, I said before that the The peak of the attrition, a year ago or so, we had more than 20% attrition, which is horrendous. And we're now back I said pre pandemic levels actually will be below that, which is barely over 10%, which is amazing, and very good.

Speaker 2

And that enables us to do a lot more work A lot faster. Thank you, David.

Operator

Yes. Thank you. Your next question comes from the line of Eric Coldwell At Baird, your line is open. Thanks. Good morning.

Operator

I want to hit on reimbursables on a couple of fronts. First off on revenue, With such a big COVID comp this quarter, I would have expected less reimbursable revenue. It looks like it actually grew quite a bit faster Then service revenue, so what is the dynamic there? We're seeing mixed bag all over the industry in terms of the pass through volatility. With that big COVID headwind, I would have expected less, you did more.

Operator

Is there something underlying or outside of COVID Exposure that's driving the reimbursables higher or is it just company specific contract timing?

Speaker 2

Okay. Well, look, on a full year basis, we're expecting actually, obviously, less reimbursable expenses Because of the disappearance of the COVID work, which was, as you suggest, very high pass through expenses For those COVID vaccine trials, I wouldn't read much in the quarter because there's volatility and depends on the mix of which So I don't I'm not to be honest, the book to bill is more or less similar to we I think you I read your note, Fadi, as I religiously do that before the call, your first flash note and you ask why We only reported our 606, our book to bill at 128. And by the way, I asked Same question to the team when they gave me the 1st draft, and I agree with their rationale. As you've seen in recent quarters, Essentially, the numbers are tended to converge, which is essentially what we expected to happen. We will give you The breakdown or the ex reimbursable expenses book to bill, When we think there is a big discrepancy and it is significant and helps give you understanding of what happened in the quarter in terms of bookings, But if it's very close as it was last quarter as it is this quarter, we're just not going to do that.

Speaker 2

The change to 606 standard happened more than 5 years ago, and none of our competitors actually disclosed that level of granularity or report any Ex reimbursable expenses are book to bill. But again, I wouldn't read any more here in the quarter. But Nick or Ron, any Commentary or color on Eric's question?

Speaker 3

Yes. Look, we did have a little bit higher revenue from pass throughs In the quarter, but as Ari says, I wouldn't read too much into the quarter to quarter. And over a longer time period, Your analysis is correct with COVID work rolling off, there should be a decline in pass through revenues. And yes, exactly on the book to bill, we could We're what 5 years in, 6, 7 years in now since the change in the accounting and We'll only talk to on the book to bill, the services versus pass through book to bill or the 605 versus 606 When there's a significant difference to talk about and there wasn't this quarter.

Speaker 2

Yes. And Eric, the just on the pass throughs, again, we I mentioned we did execute Faster this past quarter on our NDS backlog. It's true we burnt we accelerated. That's we that's this is why we recognize more revenue, and as a result, there was more pass through During the Q1, I don't know that it's going I don't think you'll see the same in the next few quarters based on the modeling I saw. Thank you.

Operator

If I yes, could I have one follow-up?

Speaker 2

Normally, no, but it's you. So

Speaker 1

Go ahead.

Speaker 7

Thank you.

Operator

I just wanted to hit on cash flow and expectations for the year and We're juggling 3 overlapping reports here. So I'm sorry if I missed this. Did you mention what the DSO was in the quarter?

Speaker 3

No, we didn't give an explicit DSO number. In fact, we don't typically give any DSO number. You guys can back calculate. We were happy with the cash flow in the quarter. One thing I would want to remind everyone is in the Q1, it's typically a weak quarter for cash flow because most of our incentive comp, Annual incentive comp is paid in the Q1.

Speaker 3

Taxing as well. Yes, there's some tax impacts too. Incentive comp is probably the biggest, but

Speaker 2

That was very strong. Yes, it was strong.

Speaker 3

We were happy with our cash flow and not quite as strong as last Last year was an unusually strong Q1 for cash flow.

Speaker 8

Okay.

Speaker 2

Yes. So then if we look at Lucerne, yes, so it's improving, it's flattish, right?

Speaker 3

DSOs on a quarter to quarter basis is fairly flattish. On a year over year basis, it's up a little bit And a lot of that has to do with the burning through the COVID related advances that we got. So it was fully expected.

Operator

Got it. Thanks very much. I appreciate it.

Speaker 2

Thanks, Yaron.

Operator

Your next question comes from the line of Max Smock at William Blair.

Speaker 8

Your line is now open.

Speaker 7

I just wanted to clarify your comment in response to one of Dave's questions earlier about the NHP situation. And Just wanted to clarify, you said that you would not see any impact from the NHP shortage even if it continues for the next 3 years. Just wondering, At some point, wouldn't it limit the number of drugs getting into later stage trials here? Just would be great to hear more about the work you've done internally to kind of evaluate your potential

Speaker 2

Yes. Again, in theory, yes, but we don't expect that to happen. I mean, there'll be Eventually, other models and they will become available. I mean, I don't we're not worried about this at all.

Speaker 3

Yes. In the 3 years just related to the length of time it takes to get from the discovery work into Phase II and Phase III trials. And There's a long delay between that. So yes, of course, theoretically, if there's a protracted issue, it affects everybody in the industry. We don't expect that to happen.

Speaker 7

Okay, great. Thank you.

Operator

Your next question comes from the line of Sandy Draper at Guggenheim Securities. Your line is now

Speaker 3

open. Thanks very much. I think it sounds like I need to get on Eric's distribution list, so I can get his quick flash notes. I can't process fast enough to do that. So my question, Ari, or maybe Ron, is on the backlog burn.

Speaker 3

I'm trying to reconcile what you were talking about and answer his question. On my calculation, it looked like the backlog burn Debt down a little bit from the 4th quarter from 8% to 7.4%. My assumption was there's a little bit less Sequentially in terms of reimbursables, so I was wanting to verify that. But then thinking about how you're expecting the backlog burn to play out As you have less COVID work, etcetera, which is faster, Bernie, do you think is it reasonable to think stable after this 7.4% or would it Sort of trend down over the course of the year? Thanks.

Speaker 3

Look, I wouldn't put a lot of Of emphasis on quarter to quarter backlog burn as you calculate it It's not something that we pay a lot of attention to internally, I can tell you. You'll get variations like in the Q4, we had very strong pass through bookings, which pushes up the backlog some, but then Those tend to burn later in the trial, and you'll see impacts like that affect any one quarter's like particularly the next quarter's burn rate. So overall, as Ari made the point, We tend to work on more complicated trials. In oncology trials, in particular, tend to be longer slower burn trials. So we may Have slower burn on average than some of the others in the industry based upon our particular mix of projects, but That's more a macro long term consideration than it is a quarter to quarter sort of variation driver.

Speaker 3

Okay, great. That's helpful. Thanks, Ron.

Operator

Your next question comes from the line of Charles Rhyee with TD Cowen. Your line is now open.

Speaker 7

Hi, this is Lucas on for Charles. Want to dig into the TAS segment. You guys talked about consulting and analytics seeing some softness in 1Q. You guys also called out some wins in real world evidence. Can you talk more about the Performance of the other offerings within TASK and how they performed in 1Q, more specifically real world evidence and technology platforms?

Speaker 3

Look, our real world in technology, we tend to talk about them together because they're the faster growers And continued to be very solid growers in the quarter. As Barry pointed out, it was the analytics and consulting Business that really slowed down in the quarter because a lot of that is shorter cycle business And can be delayed. We've always talked about information being a slower grower. So you know about that. So It kind of piece it together, the difference versus prior quarters really relates to the analytics and consulting business, Some of that shorter cycle business being delayed, it's really as simple as that.

Speaker 3

That's why we saw a little bit Of a slowdown in the underlying core growth rate in the TAS business. Next question?

Operator

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

Speaker 9

open. Hi, this is Wolf Shanoff on for Derek. Thanks for taking our questions. So I know in the prepared remarks you flagged that there's been a pickup of Biotech M and A, which obviously is helping the funding environment. But I'm wondering what you're seeing in terms of the larger of the acquirer then reducing the R and saying the R and D spend at the target.

Speaker 9

Is there any impact to you from that? Yes, if you could just explore those dynamics, that would be great. Thank you.

Speaker 2

Yes, thank you. Just to clarify, the M and A spend has nothing to do with funding. It's not included in the funding numbers. So these are 2 different and independent points. The Heightened M and A activity is a plus, obviously, and is a tailwind for us.

Speaker 2

As you know, we've got large clients that are buying molecules for which work needs to be done. So this is generally a Favorable trend for us. Thank you. Next question please.

Operator

Your next question comes from the line of Dan Leonard at Credit Suisse. Your line is now open.

Speaker 7

Thank you. I was just hoping you could revisit that comment you made that RFPs These grew 15% sequentially. I assume that's a volume number. And is there any difference between RFP volume trends and value trends? Thank you.

Speaker 2

Thank you. No, your assumption is incorrect. The growth numbers we mentioned are in dollars.

Speaker 1

Yes. So all of the growth numbers that we've given Dan on the call are all dollar based. It's not a volume discussion.

Speaker 3

And that's how we tend to track it because that's what's important. Yes.

Speaker 7

Thank you.

Operator

Your next question comes from the line of Elizabeth Anderson at Evercore ISI. Your line is now open.

Speaker 5

Hi guys. Thanks so much for

Speaker 10

the question. I know you said you just talked about it in terms of total dollar volumes. I was just wondering if you could comment on the contribution in terms of Pricing and R and D to the dollars this year. And then secondly, just in terms of the Pacing of CAS revenue over the back half of the year, you're still thinking we should see that continue to accelerate be sort of in that like sort of mid to high single digit type range? Thank you.

Speaker 8

Yes.

Speaker 2

The comment on TAS is just correct. That's our expectation currently based on the pipeline. What was the first question? I'm sorry.

Speaker 8

Yes,

Speaker 1

I didn't hear your first question other than that. I'm

Speaker 10

sorry. Sure. It was just in terms of the contribution of sort of increases in Pricing that could have contributed to the Q1 revenue results on a year over year basis?

Speaker 2

It was nothing that's negligible. Yes.

Speaker 8

I mean,

Speaker 1

I wouldn't say it's anything large, Elizabeth. I mean, again, you got to remember trials are Can you hear from 3 to 5 years, it takes a while for all the pricing to pick up? We don't get that all up

Speaker 3

We'll get

Speaker 1

it all upfront. So the pricing has leads in over the course of the trials.

Speaker 10

Got it. Thank you.

Speaker 1

Okay. And we will take one more question, please.

Operator

Thank you. Your final question comes from the line of Justin Bowers at Deutsche Bank. Please go ahead.

Speaker 8

Hey, Thank you and good morning. Just sort of a 2 parter, one with RWE, are you seeing any change in the velocity of demand there for that business, hearing in the marketplace that IRA might be a bit of a tailwind for that. And then Can you also sort of educate us a little bit on the lead time between when market access and pricing studies are done and with respect to FDA approvals? Thank you.

Speaker 2

Yes. Thank you, Justin. On the first question, Nick Tavernier.

Speaker 1

Is it the growth on real world evidence? It's nothing different.

Speaker 8

Yes. No. Yes. No. Yes.

Speaker 3

No. Yes. Remains strong. Remains very strong.

Speaker 2

Same, same. Nothing really nothing changed on the real world side.

Speaker 8

On

Speaker 2

the retail, it really, really varies. There are clients who like To start even before the approval, sometimes well before when the early results are strong, The data is good in the trial. They get they want to get prepared and we do those studies early. Sometimes it's around the time of the FDA approval, sometimes it's a little later. Again, it depends.

Speaker 2

By the way, it depends on the market. Sometimes it may decide to introduce a drug In Europe or in some markets in Europe before others, etcetera, and it has to do with when the approvals in specific geographies So it really varies. There's no second time. And that's why, again, Quarter on quarter is discretionary. It's going to have to be done, but you could delay when you do it.

Speaker 8

Yes, I appreciate it. And just on RWE, just some of the things we're picking up in the field is that Sponsors are leaning into those more or are thinking about leaning into those more As it relates to the IR legislation. And if I may, just on RDS, just a quick follow-up there. Are you guys on the market share gains that you're making there, is there any specific area or is it are you seeing it across the board in both full service and FSP?

Speaker 2

Okay. Justin, thank you for your four questions. And I'm just going to answer briefly the last one, and then I suggest that the team will be available here the rest of the day and next 2 days to answer any further questions, but on your questions about market share, there's no way around it. I've said it before, and we again did it this quarter, We have the highest book to bill ratio around on the largest base of revenue. You can Assume that there is a gain share that's ongoing, the specific segment I mentioned in my introductory remarks, In oncology, we know we are growing a lot faster and we are gaining share, that's by therapeutic area.

Speaker 2

And then in terms of the segments, Again, it's across the board, but it was particularly significant this past quarter in FSP as well.

Operator

At this time, there are no further questions. Mr. Child, I turn the call back over to you.

Speaker 1

Thank you, everyone, for joining us today,

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Earnings Conference Call
IQVIA Q1 2023
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