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. [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, Mike, and good morning, everyone. Thank you for joining our first quarter 2023 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 Param, 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.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. 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 very much, Nick, and good morning, everyone. Thank you for joining us today to discuss our first quarter results. 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. 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 billion on research and development in 2022. According to BioWorld, the Q1 EBT [ph] funding was $15.6 billion. That was up double digit versus prior year and up sequentially versus Q4. March was a particularly strong month for EBT 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 first quarter. 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&A activity in Q1, which primarily is large pharma acquiring smaller companies and the industry expects 2023 M&A spend to be one of the largest years in the last decade. This highlights the ongoing demand for molecules by large pharma. Internally, our Q1 demand metrics show continued healthy growth. I'll share a couple with you this morning. Net new bookings were $2.6 billion. 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%,…

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. First quarter revenue of $3.652 billion grew 2.4% on a reported basis and 4.7% at constant currencies. In the quarter, COVID-related revenues were approximately $150 million, which was down about $230 million versus the first quarter 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%. Technology & Analytics Solutions revenue was $1.444 billion, up 0.3% reported and 2.9% at constant currency. Excluding all COVID-related work, organic growth at constant currency in TAS was 6%. R&D Solutions revenue of $2.026 billion [ph] was up 4.8% reported and 6.5% at constant currency and excluding all COVID-related work, organic growth at constant currency in R&DS was 17%. Finally, Contract Sales and Medical Solutions or CSMS revenue of $182 million 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. Let's move down to P&L. Adjusted EBITDA was $851 million for the first quarter, that's growth of 4.8%. GAAP net income was $289 million, and GAAP diluted earnings per share was $1.53. Adjusted net income was $462 million in adjusted earnings per share diluted was $2.45. So as already highlighted, R&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 $27.9 billion which was up over 40% over the last 3 years and growing 10% year-over-year. Reviewing the balance sheet. At March 31, cash and cash equivalents totaled $1.494 billion. Gross debt was $13.176 billion, and that resulted in net debt of $11.682 billion. Our…

Thank you [Operator Instructions] Your first question comes from the line of Shlomo Rosenbaum at Stifel. Your line is open.

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

Yes. Thank you, Shlomo. No. Look, we had very strong bookings. It was one of our highest bookings quarter and I 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, 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 or delayed. And we're reverting to more regular mix of projects with, as you know, an increasing share in oncology, which typically burn a little slower. That might have a little bit at the margins of an impact. But I wouldn't read anything into it.

Okay. Thank you.

Thanks, Shlomo.

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

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

Yes. Thank you, Anne. It's a good question. Look, TAS growth in the first quarter 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. So our expectations were more in the 6% to 7%, 6% to 8% for the first quarter and we expected a slower start as you suggest, due to the cautiousness we saw in December in customers' discretionary spending and so we assume this was going to spill over, as you suggest, into the Q1, and that's why we assume 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. 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 some point. But the discretionary aspect applies to timing for the most part, okay? No one has a project 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. 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 excluding guidance for the year. Now we expect that cautiousness to continue into the second quarter. And we're assuming growth so far in line with the first quarter. 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.

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

Thank you.

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

Thanks for taking my question. Good morning. Ari, I wondered if you could talk in the R&DS business. As you highlight, strong bookings, I guess, seasonally different from the fourth 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 first 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 them move those forward? Or is it kind of a funding and financial issue that is keeping them from moving forward? I'd be curious your views there.

Okay. Well Dave, 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. And no one is - first of all, on the funding question, I don't know how many times I'm going to repeat it. I've been doing this for five quarters in a row. We are not seeing any funding issue. In my introductory remarks, I share some of the statistics. Actually everything is up on the funding front. So we are not seeing any delays, any unusual cancellations, any postponing of decision-making within our portfolio. It could be that others are saying 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 '22 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 up 8%. It's actually over 8% year-over-year, and it's almost $15 billion with, again, a record qualified pipeline. The total pipeline is over $25 billion. Also mid [ph] more than 5% growth year-over-year, $2.6 billion 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 1.28 is extremely strong in the current environment. And I think from what I've seen, the highest of any of our peers. Our backlog is up more than 10% year-over-year. That's on a reported basis. Excluding FX, it's up 11.3%. So again, what I'm trying to share some metrics with you here, if we look at by segment, again, it's across the board, large mid EBP. I've got a lot of numbers here, but everything is - honestly, everything is green here. Nick, do you have any other color to add to this?

Yes. I 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 - and not seeing the dynamics that you're asking about.

Yes. 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 site.

Right. 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, are introducing rapidly more technology at the site in order to free up personnel time and increase our productivity.

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, Danaher, et cetera.

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 III stuff. We're not affected by the primate issue, zero. And even in 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 in oncology, 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&DS front, not say 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 peak of the attrition a year ago, so we had more than 20% attrition, which is horrendous and we're now back to - I said pre-pandemic levels, actually well below that, which is barely over 10%, which is amazing and very good. And that enables us to do a lot more work, a lot faster. Thank you, David.

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

Thanks, good morning. I want to hit on reimbursables on a couple of fronts. First off, on revenue was such a big COVID comp this quarter, I would have expected less reimbursable revenue, it looks like it actually grew quite a bit faster than 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. Is there something underlying or outside of COVID exposure that's driving the reimbursables higher? Or is it just company-specific contract timing?

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 this volatility and depends on the mix of what you executed. 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 you know , I religiously do that before the call, your first flash note and you asked why we only reported our 606, our book-to-bill at 1.28. And by the way, I asked the same question to the team when they gave me the first draft and I agree with the rationale. As you've seen in recent quarters, essentially the numbers have 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 -- when there is a big discrepancy and it is a 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, which is not going to do that. The change to 606 standard that happened more than 5 years ago and none of our competitors actually disclosed that level of granularity or report any extra reimbursable expenses book-to-bill. But again, I wouldn't read and you might more here in the quarter, Nick or Ron, any commentary or color on Eric's question.

Yes. Look, we did have a little bit higher revenue from pass-throughs in the quarter. But as Ari said, I wouldn't read too much into the quarter-to-quarter and over a longer time period, you're analysis is correct with COVID work rolling off, there should be a decline in pass-through revenues. And yes, it's exactly on the book-to-bill. We just -- 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 on the 605 versus 606 when there's a significant difference to talk about, and there wasn't this quarter.

Yes. And Eric, the - just on the past because again, we -- I mentioned we did execute faster this past quarter on our NDS backlog. It's true we built - we accelerated. That's a - this is why we recognize more revenue. And as a result, there were more pass-through during the first quarter. 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.

Can I have one follow-up?

Normally, no, but it's you. Go ahead. Thank you.

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

No, we didn't give an explicit DSO number. In fact, we don't typically give a 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 first quarter, it's typically a weak quarter for cash flow because most of our incentive comp -- annual incentive comp is paid in the first quarter. Yes, there's some tax impacts too. Incentive comp is probably the biggest. It was strong. We were happy with our cash flow and not quite as strong as last year, but last year was an unusually strong first quarter for cash flow.

Yes. So if we improved it's flattish, right?

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.

Thanks very much. Appreciate it.

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

I just wanted to clarify your comment in response to one of Dave's questions earlier about the NHP situation. And I 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 that 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 exposure over the next...

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

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

Okay, great. Thank you.

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

Thanks very much. I think it sounds like I need to get on Eric's distribution list. 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. I'm trying to reconcile what you were talking about interest [ph] question. On my calculation, it looks like the backlog burn stepped down a little bit from the fourth quarter from 8% to 7.4%. My assumption was there's a little bit less sequentially in terms of reimbursables. So I just wanted to verify that. But then thinking about how you're expecting the backlog burn to play out as you have less COVID work, et cetera, which is faster burning, do you think is it reasonable to think stable off of this 7.4% Or would it sort of trend down over the course of the year? Thanks.

Look, I wouldn't put a lot of emphasis on quarter-to-quarter backlog burn as you calculate it there. It's not something that we pay a lot of attention to internally. I can tell you, you'll get variations like in the fourth quarter, 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, 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 trial. 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.

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

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

Hi. This is Lucas on for Charles. I 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 TAS and how they performed in 1Q, more specifically real-world evidence and technology platforms?

Look, our real world and 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 Ari 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. And so you 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. That's why we saw a little bit of a slowdown in the underlying core growth rate in the TAS business.

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

This is Will Chaff on for Derik. I know in the prepared remarks, you flagged that there has been a pickup of biotech M&A, which obviously is helping the funding environment. But I'm wondering what you're seeing in terms of the larger of the acquirer than reducing the R&D spend at the target. Is there any impact to you from that? Yes, if you could just explore those dynamics, that would be great.

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

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

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

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

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

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

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

Hi, guys. Thanks for the question. I know you said you just talked about it in terms of total dollar volume. I was just wondering if you could comment on the contribution in terms of pricing and R&DS to the dollars this year? And then secondly, just in terms of the pacing of TAS revenue over the back half of the year. Are you 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.

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

Yes, I didn't hear your first question there, I'm sorry.

Sure. It was just in terms of the contribution of sort of increases in pricing that could have contributed to the first quarter revenue results on a year-over-year basis?

Nothing was negligible.

Yes. I mean I wouldn't say if anything large, Elizabeth. I mean, again, you got to remember, trials are kind of vary from 3 to 5 years, it takes a while for all the pricing to pick up. We don't get that all and get it all upfront. So the pricing leads in over the course of the trials. Okay. And we will take one more question, please.

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

Thank you. Just sort of a two-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.

Yes. Thank you, Justin. On the first question, Nick, you have any...

You said the growth on real world - nothing different.

Remains strong.

Remains very strong, same. Nothing - really nothing changed on the real-world side. On the -- it really, really varies. There are clients who like to start even before FDA approval, sometimes well before when the early results are strong, 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 approval. Sometimes it's a little later. Again, it depends, by the way, it depends on the market. Some clients may decide to introduce a drug in Europe or in some markets in Europe before others, et cetera, and it has to do with when the approvals in specific geographies occur. So it really varies. There's no [indiscernible] lead time. And that's why, again, quarter-on-quarter is discretionary. It's going to have to be done, but you can delay when you do it.

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 R&DS, 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 [indiscernible].

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 the next few days to answer any further questions. But the - on your question about market share, there's no way around it. I've said it before, and we again did this quarter. We have a high book-to-bill ratio around on the largest base revenue, you can assume that there is a gain share that's ongoing. The specific segments, 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. 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. So that's the color I can give you on share. Thank you.

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

Thank you, everyone, for joining us today, and we look forward to speaking to you again on our second quarter earnings call. Myself and the team will be available the rest of the day to take any other follow-up questions you might have. Thanks, everyone.

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