Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2022 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. [Operator instructions] As a reminder, this call is being recorded. 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.

Thank you. Good morning, everyone. Thank you for joining our fourth quarter 2022 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, 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 Perrone, 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 Web site at ir.iqvia.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. The 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-K 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 not 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. I would now like to turn the call over to our Chairman and CEO.

Thank you, Nick, and good morning, everyone. Thanks for joining us today to discuss our fourth quarter and full-year results. As we close 2022, we are very proud of what we've achieved at IQVIA. It was a record year for our R&DS business, we achieved bookings of $10.8 billion, which was the highest ever, our backlog stands now at a record $27.2 billion, and the business added over 275 new customers in the year. We improved access to critical research; we've expanded our decentralized clinical trial capabilities by launching the first self-collection safety lab panel for U.S. clinical trial participants in collaboration with Tasso. Our DCT program achieved GDPR validation in Europe, marking the first time a DCT offering received this data privacy validation. And our connected devices business added 50 new customers, including wins with two top-10 pharma companies. We made significant advancements as well in our real world business. We increased the number of active data sources by more than 30% across more than 50 countries, and we enhanced access to real world data for European and U.S. regulators through our partnerships with European Medicines Agency and the Real-World Alliance. We expanded our digital marketing capabilities with the acquisition of Lasso Marketing, which offers a technology purpose-built for healthcare marketers to execute digital campaigns. We deployed capital of $3.7 billion during the year. This included $1.3 billion in acquisitions, $1.2 billion in share repurchase, $700 million in CapEx, and repayment of $510 million of debt. At the same time, we were able to reduce our net leverage ratio to 3.45 times adjusted EBITDA. 2022 also marked the end of our Vision 22 three-year strategic plan. No one could have predicted the volatile macro environment we would have to operate in during this period. Despite the many headwinds we…

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Fourth quarter revenue of $739 million grew 2.8% on a reported basis and 7% at constant currency. In the quarter, COVID-related revenues were approximately $190 million which was down about $150 million versus the fourth quarter of 2021. In our base business, that is excluding all COVID-related work from both this year and last, organic growth at constant currency was 10%. Technology & Analytics Solutions revenue for the fourth quarter was $1,499 million, up 0.2% reported and 4.7% at constant currency. Excluding all COVID-related work, organic growth at constant currency in TAS was 7%. R&D Solutions fourth quarter revenue of $2,058 million was up 5.9% reported and 9.3% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 14%. Finally, Contract Sales & Medical Solutions or CSMS fourth quarter revenue of $182 million declined 7.1% reported, but grew 2% at constant currency. Excluding all COVID-related work, organic growth at constant currency in CSMS was also 2%. For the full-year, revenue was $14,410 million growing at 3.9% on a reported basis and 7.8% at constant currency. COVID-related revenues totaled approximately $1 billion for the year. In our base business, again that's excluding all COVID-related work, organic growth at constant currency was 13%. For the full-year, Technology & Analytics Solutions revenue $5,746 million, up 3.8% reported and 8.7% at constant currency. Excluding all COVID-related work, organic growth at constant currency in TAS was 10% for the year. Full-year revenue in R&D Solutions was $7,921 million growing 4.8% reported and 7.7% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 17%. Full-year CSMS revenue was $743 million which was down 5.2% reported, but grew 2.7% at constant currency. Excluding all COVID-related…

[Operator Instructions] Your first question comes from the line of Dan Leonard with Credit Suisse. Your line is open.

Thank you. So, I'll just start off, Ari, you mentioned continued confidence in the 2025 goals. You're guiding 5% to 7% of revenue growth in '23. I think the CAGR through '25 was a double-digit number. So, could you bridge from the 2023 result to the acceleration anticipated thereafter? Thank you.

Yes, thank you very much, Dan. Look, when we say we are on the same trajectory we were on when we set our '25 goals, we -- it continues to be true operationally. Obviously, we assumed foreign currency rates that were different. I think we lost -- I don't know the exact number any longer, but we probably lost $500 million in revenue just in 2022, so -- to FX. So, look, I don't know about revenue; it'll be close. Maybe not 20, but it'll be close. On EBITDA and on earnings per share, we're very confident that we will achieve those goals. Again, the -- what we are facing, first of all, you're seeing the EBTIDA is certainly, clearly on that trajectory unchanged despite everything else. And EPS is just as we said in our introductory remarks, a one-time step up that hopefully won't replicate. If anything, I think the world expects rates to either stabilize or start declining afterwards, in '24 and '25, so that would be even a tailwind. But certainly the step-up is one-time. And after that, we fully expect the resume very strong double-digit as we experienced. I remind you we delivered over 16% compound earnings per share rate of growth rate over the year 2022 period -- three-year period. Thank you.

Thanks.

Your next question is from the line of Eric Coldwell with Baird. Your line is open.

Thank you. Good morning. So, I wanted to hit on R&DS bookings first. Difficult to ask the question in a way that's easy to answer, but I'd like you to step back and think about your fourth quarter strong bookings, your '22 bookings. Do you have a sense how much was, if you will, normal opportunities versus, say, competitive takeaways, rescue wins, or incremental share capture that you might have gained through higher hit rates through the year? Just trying to get a sense of where the market was versus what IQV did additionally on top of that, if that makes sense.

Yes. Yes, well, it's really hard because we don't have the perspective of time and clear data from competitors yet. And we will know a little bit more after we read your report on how CROs did when everyone has reported. So, I'm looking forward to that read. But look, we've been on a momentum certainly since the merger to gain market share. And I think it's clear that we have been gaining market share. We know we are gaining market share because we are displacing competitors. I don't think rescue studies played a role. Of course, we have the anecdotal here and there, but not more or less than in history. And things happen, and the study doesn't go well with a certain approach. And at some point in time, the sponsor decides that they want to switch CROs, it's a very difficult and cumbersome exercise, and no one wants to do that, but it does happen. I don't think it's happened more than in the past, unless you're including rescue studies that were at the beginning and that for a reason or another the sponsor decided to switch CROs. And that I would include in the category of market share gains. The market continues to be strong. The underlying demand, all the indicators that we see, and we kept repeating it ad nauseam during 2022 despite everyone else being on the other side and suggesting that the world was falling apart because of biotech funding levels returning to what I considered to be very strong levels, but nevertheless, lower levels than they were during the pandemic. We haven't seen any delays in decision-making, we haven't seen any signs that demand was slowing down. Quite the opposite, I mentioned that our RFP flow is very strong. I can give you even more -- I've got some more data here on the, if you'd like, the -- our --

Yes. The answer would always be yes, multi-core data.

So, I kind of -- I get that. Yes, the -- again, overall RFP flow was very strong. We said 13% for the full-year, and over 20% in the fourth quarter, so, if anything, accelerating. Our qualified pipeline at the end of the year was up over 20%, and that is really the pipeline that we consider real. The awards, by the way, which is kind of an early indicator of what will happen in the future; awards, I remind you, we stopped at -- we have essentially one, but we have not yet contracted for and not booked for. The awards were up -- actually, the absolute number in Q4 was the highest ever, and it was up 9% year-over-year. So, we mentioned the book-to-bill ratio, the backlog, which itself is up just under 10% year-over-year, and 11.6% excluding FX. So, I don't know what else to share. We've got our solid numbers here that support healthy demand for clinical trial services. And then, on top of that you can add our market share gains, and I think that explains it. Thank you, Eric.

And Ron, if I could just have one quick technical item here, can you confirm that there are no share repurchases built into the guidance? And I know you talked about the $2 billion capital deployment and the split between debt and M&A. But is there any current thinking on taking some advantage of that authorization that you have on the repurchase side?

I can confirm that there is no share repurchase baked into our guidance. We're right now assuming $2 billion of capital deployment split evenly between M&A and debt reduction. Well, might we repurchase some shares during the year? Sure, that that's our assumption going in, and the guidance that we gave is that we're not. And we'll devote the capital to debt reduction instead. But that could always change with circumstances.

Okay, thank you.

Your next question is from the line of Anne Samuel with JPMorgan. Your line is open. Anne Samuel with JPMorgan, your line is open.

Okay, next question, please.

Your next question is from Justin Bowers with Deutsche Bank. Your line is open.

Hi, good morning, everyone. Just pivoting from RDS, Ari, you talked a lot about some strong momentum in commercial managed services. Just want to -- wondering if you could expand about some of the strength there, and also is that isolated just in TAS or is that also in the CTMS business?

You mean CSMS, right, the Contract Sales --?

Sorry, the CSMS?

Yes.

Yes, that's what I --

No, I mean, CSMS is a relatively slow grower, so I mean I would put that aside. The TAS growth has been consistent. We're pleased, obviously, to see that it continued to grow. You saw that excluding the COVID step down, and we had a fair -- I would say a large share of COVID work during the pandemic, so that's stepping down. And excluding that, we had growth of 7% in Q4, and 10% for the full-year. Quarter-to-quarter it could vary. I think the first-half was more or less around 10% growth, third quarter was 12%, we had the -- activity that was -- that came in earlier than we thought. And the fourth quarter was 7%, so, overall, very good growth in Q4. We guided 7% to 9% for next year. Again, this is consistent -- again excluding COVID acquisitions and FX, this is consistent with the underlying operating momentum that we've had in TAS, and that we've guided to, which is a high single-digit. So, the real -- the fast growers in this business are technology and real-world, and that's where I mentioned a few very significant achievements and a few significant awards with clients. Both considered to be strong drivers of growth as we continue to find innovative ways to utilize real-world evidence for clients and deploy more of our technology solutions. The piece of the business that it perhaps more exposed to the economic whims and budget expansions or restrictions by clients is the more discretionary spend, like the analytics and the consulting work. We saw, usually at the end, almost -- just to share a little bit more color, we usually have at the end of the year an acceleration in this business, and we didn't see that in December. And the reason for that is, historically, clients like to spend more towards the end of the year, and they do kind of last-minute purchases, and they kind of utilize their budgets, if you will. And we didn't see that so much this year. And I -- again, I don't know whether people are kind of being more cautious or anything, but -- and mostly, again, it was in the consulting area and analytics, which tends to be short cycle, short-term, and more discretionary. But the underlying growth is driven by real-world and technology, both of which are longer-term decisions and are not so subject to cyclical economic changes. And then, of course, the last piece is the data business, which is flat and continues flat to low single digits, one-ish percent, and that continues where it is. And when you do the math, basically that's what yields your high single-digit growth for the segment. Thank you for your question.

Your next question is from the line of Jack Meehan with Nephron. Your line is open.

Thank you. Good morning. Ari, so, I know you sound bullish around the funding trend that you've seen over the last year. Wanted to ask about funding in a different way, just what were you seeing in terms of cancellations around your end? Was there anything notable about that relative to the last couple of years?

Nothing.

Short and sweet. Yes, has there been any rumbling around restructuring at any of your important clients? I guess just like how are you building just sort of a macro into your outlook for the R&D segment this year?

Okay, and once again in terms of demand, no signs that we can see that our clients are somehow delaying, canceling, postponing clinical trial development work that was planned before. So, we don't see anything, no unusual cancellation activity, no unusual postponements, nothing. We've been saying this essentially for 12 months exactly. In terms of factoring the macro environment, if you want to expand your question, then that's a different discussion. We've got -- we are a large, powerful ship navigating extremely stormy waters. The engine continues to be very strong, that's the demand, and certainly our operating momentum in our organization. But the winds in the form of interest expense, in the form of wage inflation, in the form of wars in foreign theaters that affect our ability to do work in certain sides, in the form of continued COVID issues in China which are expected to delay our return to normal operating mode in clinical sites; all of those and more are these winds that I'm -- winds and stormy waters that I'm referring to that are macro factors. Some of which we can do something about. For example, wage inflation we are addressing by trying to manage our workforce more tightly, by increasing and accelerating our productivity initiatives, by looking at maintaining and accelerating our cost cutting discipline. And we've launched that effect that towards the end of last year, a new program to again bring forward many field overhead rationalizations and economies of scope and outsourcing and offshoring decisions that were scheduled to occur over the '22 to '25 planning period and we are accelerating all of that into 2023. So, as Ron mentioned, the benefits of those will begin showing towards the latter part of the year, but the work is ongoing. So, that's how we are trying to address those macro factors that are not -- that are somehow that we can offset with action on our side. With respect to interest, shortest one-time step-up in the interest expense, we're kind of limited in what we can do. But we certainly, as you saw started reducing our debt levels, and we entered into swaps. We're trying to address that in capital markets, we will probably towards the end of the year retire another $1 billion of debt, the tranche that would normally turnout in 2024. We'll do that in the latter part of the year. And for now, as Eric remind us we do not have any share repurchase plan this year, because we're diverting our cash flow now, if our cash flow is very strong and circumstances were to change, obviously, we will adjust those decisions. But that's what we're doing to address the macro factor. Thank you very much.

Thank you.

Your next question is from the line of Luke Sergott with Barclays. Your line is open.

Hey guys, thanks. Can you one clean-up here on the COVID, can you give us a sense of the how you're expecting that the roll-off in 1Q between the two segment between TAS and RDS, just from a modeling perspective?

Yes, Jack, it's I think I'd said overall of the $600 million COVID step-down year-over-year, about 40% of it would be in Q1, though, will be fairly substantial impacts in both of the segments there. And I would say about a third of the impact would be in TAS, [Jack] [Ph], and about two-thirds in R&D, that's kind of how you should think about it by quarter and for the full-year, it's above that roughly.

All right, great. Thanks. It's really helpful. And lastly, here on front on the free cash flow. So, I mean, I understand a ton of moving parts here on for the year. But can you give us a sense of what you're targeting for '23 and as a percentage of EBITDA conversion?

We always talked about it as a percentage of adjusted net income. And we target typically between 80% and 90% free cash flow adjusted net income, that's where we were for the full-year 2022. And look the only thing I would caution on that is in any given year, it could vary from that because cash flow is based on point-to-point of the balance sheet. It's not like, an accrual concept or anything like that. So, of course, you could be higher or lower, we were substantially higher than that in 2021. And we're right in the range in 2022. And I would say just as a kind of a target you should think of as being in the 80% to 90% of adjusted net income range, but recognizing that we could deviate from that in any given year.

All right, thank you.

Your next question is from the line of Sandy Draper with Guggenheim. Your line is open.

Thanks very much. Question for you, Ari to sort of engage in your crystal ball a little bit longer-term because I know you're talking certainly a lot more of the biopharma CEOs and than I am, when I look back at sort of what I heard at JPMorgan, Davos, just other things around, how pharma is looking at the next three to five even 10 years, especially with the Inflation Reduction Act, I hear sort of conflicting messages from about are people going to invest more, hey, we want to get away from or be more diversified and not so concentrated in one or two blockbuster drugs and so we want to get more drugs out there. We are going to and so there is more trials we're going to pull back, I just love to hear what you're hearing or what you're thinking about what your customers are looking at not really, from the economic perspective about the current macro environment, but with how their portfolios are, how concentrated they are and few really big drugs, and what the Inflation Reduction Act means. Would love to hear your thoughts on that? Thanks.

Yes, thank you. Yes, I mean look, the Inflation Reduction Act of just similar to, what they decided to name it. It's very is influx right now, there's a lot of work to be done in finalizing the details of the legislation; we actually spend a lot of time with our clients trying to explain to them what's in it. Not that we understand it entirely, because many of the provisions, first of all, haven't been detailed enough or specific enough. And we don't know how it's going to work. And a lot of it is still subject to negotiations. Many of the provisions anyway, won't kick in until later in the decade, and again, some parts of the inflations are undefined, many of the rules and regulations are still under discussion. So, generally, the statements from pharma CEOs, when I speak to them about this is that, it's harmful to innovation and to patients because anytime you start curbing the economics or you try to start a curbing the economics for drug development, even if it's long-term and even if it's the effect, if any, before any other administration changes these things, it'll be seen 15 years from now, it could at least conceptually, the pharma companies to decide, well, it's not as attractive, so I'm going to drop this program or that program, when I factor in different types of pricing and so on, so forth, or reimbursements. But again this is not how pharma works. Despite the [indiscernible] pharma is motivated by healing people. And the R&D, all of the R&D Heads at Pharma companies that I know and my colleagues speak to day in and day out, their motivation, what makes them come to work every day is they are going to come up with a…

Got it. Thanks, Ari.

Your next question is from the line of Elizabeth Anderson with Evercore ISI. Your line is open.

Hi, guys. Thanks so much for the question. I was wondering if you could comment on sort of the degree of pricing that you're sort of getting on new contracts and that are going into bookings and also sort of the degree of wage inflation you're currently experiencing as your labor force. Thank you.

Okay, I will take the second part of the question first, yes, we are experiencing significant wage inflation, the skill sets that we are looking for are scarce and in high demand, we're looking for people who have healthcare expertise, who have data science expertise, who have software development expertise, or a combination of all three, and that these skills are in very high demand. Secondly, frankly, we are a hunting ground for competitors of all kinds in the healthcare sector, in the tech sector, and in the data science sector. And as a result, we are compelled to raise our compensation programs, and that causes inflation. So, you have the general inflation out there, plus reasons there are specific idiosyncratic to our business and to our company. Now, I mentioned before that, despite that, you can see that we are growing our margins. So, we are addressing it, and that's true, essentially cost management programs meaning, we do more work in lower cost areas, et cetera. Now, I get into the first part of your question, which is pricing, are we able to offset those costs increases with pricing generally, in the commercial sector for shorter cycle businesses? Theoretically, yes, and we are when we can, but it's always a negotiation with clients. And it's a competitive market out there, you got a lot of smaller competitors who are fighting for the slice of the pie. And often, we got to defend against that. And so, our pricing flexibility is limited, it does exist in theory on the commercial side. In R&D, as in for clinical trials, yes, of course, rates have to reflect what the labor cost is. And again, that's also subject to negotiation. But we do transfer at least a portion of those wage raises to our clients in the form of rates that are applied to determine pricing for a clinical trial. But I remind you that the clinical trial business is a long-term, long cycle business, meaning that what we booked today, which may reflect some level of price increase, won't be realized into revenues until the next, the one to four or five years. So, what we are delivering in revenue today, and tomorrow was sold several years ago at different, under different labor cost assumptions. So, there is a delay, if you will, in the clinical trial business, because of the long cycle nature of the business. There are contracts where we have escalation clauses for inflation, but they never envisioned the type of inflation that we are facing in some of the markets. So, that's the picture on pricing. Thank you very much, Elizabeth.

That's very helpful. Thank you, sir.

Thank you.

One more question.

Your final question comes from the line of Charles Rhyee with Cowen. Your line is open.

Great, thanks for taking the question. Maybe Ron, just I might have missed it, but when you talk about the impact EPS from these buckets, can you kind of break down for us the relative contribution between the higher tax rate, interest expense, et cetera, that makes up sort of that delta on EPS growth and then if you think about for this year, yes, for the EPS?

Yes, well look the U.K. corporate tax rate increase, added about a percentage point to our overall effective tax rate. So, you start with that, but most of the impact year-over-year is coming from interest expense. So, we were, I think slightly over $400 million in interest expense in 2022. We told you about $615 million in 2023. So, you can do the math on that, then with 190 -- roughly 190 million shares and figure out what the impact is, it's principally coming out of that and that's why we excluded those two items and showed you that absent those are EPS growth rate underlying operational was still very strong double-digit.

And that assumes the debt pay down assumptions and going into swap agreements or is that, if you do those things through the course of the year, okay?

Yes, all of that is baked into our assumptions.

All right, great.

Thank you.

I will now turn the call back over to Mr. Childs.

Okay. Thank you everyone for joining us today. We look forward to speaking to you again on our next earnings call. Myself and the team will be available the rest of the day for any follow-up questions you might have.

This concludes today's conference call. You may now disconnect.