Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2024 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 Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Thank you, operator. Good morning, everyone. Thank you for joining our first quarter 2024 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 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, Ari Bousbib.

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our first quarter results. We had a strong start to the year. We delivered top and bottom line numbers on or slightly above our expectations. Excluding the impact of foreign exchange and COVID-related work, our revenue grew 6%. We continue to see a favorable demand environment for our industry. On the clinical side, demand from our R&DS clients remain solid. Our backlog reached a new record and grew almost 8% versus prior year. Net new bookings for the quarter were approximately $2.6 billion, representing a quarterly book-to-bill of 1.23. This included a substantial cancellation in the CNS area that is in the public domain, and I'm sure many of you are aware of. Excluding this large cancellation, which is well outside the typical cancellation size we see in a quarter, our first quarter book-to-bill ratio would have been over 1.3, actually closer to [ 1.35 ]. Our quarterly RFP flow was up 6% year-over-year, and that's in value, meaning in dollar terms, and it was driven by mid- to high single-digit growth in all customer segments, again, in dollar terms. Our qualified pipeline grew double digits versus prior year, again, in value in dollar terms. Emerging biotech funding was very strong according to BioWorld, which we use consistently as a source. First quarter EBP funding was $47.1 billion, which is more than triple the funding of Q1 last year. Shifting to TAS, our commercial side of our business, revenue in the quarter grew as expected. With the modest uptick in activity anticipated for later this year, we continue to forecast an improvement in the back half of the year. We continue to see some favorable signs. For example, our pipeline remains strong. In our conversations…

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. First quarter revenue of $3.737 billion, grew 2.3% on a reported basis and 2.9% at constant currency. COVID-related revenues were approximately $45 million, down about $105 million versus first quarter of 2023. Excluding all COVID-related work from both this year and last, constant currency growth was approximately 6%. As already mentioned, acquisitions contributed just over 100 basis points to this growth. Technology & Analytics Solutions revenue for the first quarter was $1.453 billion, up 0.6% reported and 1% at constant currency. Excluding all COVID-related work, constant currency growth in TAS was 3%. R&D Solutions first quarter revenue was $2.095 billion that was up 3.4% reported and 3.8% in constant currency. And excluding all COVID-related work, constant currency growth in R&DS was 8%. Finally, Contract Sales and Medical Solutions, or CSMS, first quarter revenue of $189 million was up 3.8% reported and 7.1% at constant currency. Let's move down the P&L. Adjusted EBITDA was $862 million. That's growth of 1.3%. Our first quarter GAAP net income was $288 million, down 0.3% year-over-year; and GAAP diluted earnings per share were $1.56, up 2% year-over-year. Adjusted net income was $468 million for the quarter, up 1.3% year-over-year, and adjusted diluted EPS grew 3.7% to [ $2.54 ]. Now it's already reviewed, R&D Solutions delivered another strong quarter of bookings. Our backlog at March 31 stood at a record $30.1 billion, which was 7.9% up year-over-year. And next 12 months revenue from backlog increased to $7.7 [ billion ], growing 6.1% year-over-year. Let's turn to the balance sheet. As of March 31, cash and cash equivalents totaled $1.444 billion. Gross debt was $13.536 billion, and the result of those two is net debt of $12.092 million. Our net leverage ratio ended the quarter…

[Operator Instructions] We'll take our first question from Elizabeth Anderson at Evercore ISI. Ms. Anderson, your line is open. You may have yourself muted.

Let's move on to the next one in the queue, operator.

We'll go to Shlomo Rosenbaum at Stifel.

I wanted to ask a little bit about the large cancellation that you called out. You absorbed it into the numbers. Could you give us a little bit more specificity in terms of highlighting what kind of impact would be to revenue or/and also to bookings? Because you're [ rolling ] the revenue due to FX, but you're also absorbing an incremental cancellation that's unusual. And maybe that could help us a little bit with the context over there and then also on the booking side.

Yes. Thank you, Shlomo. Well, look, we don't normally speak to cancellations. As you know, we just provide net new bookings. I might point out, by the way, that we [ haven't ] speak to it, but our gross bookings were the highest -- the second highest in our history before cancellations. Now, the reason we highlighted this cancellation is because, look, a typical cancellation is normally in the $15 million, $20 million kind of range. And this one is very, very large. It's almost -- it's about $0.25 billion, okay? So we have done that in the past whenever we've had an unusual cancellation. This one has been in the news. I think everyone knows what we are talking about. And we wanted to reassure everyone that the underlying business continues to be very strong. With respect to absorbing it, yes. I mean, look, we are a large company. We are, at any given point in time, working on around 2,500 clinical trials. These are staggered and staged through the year, and revenue flows over several years for each one of those trials. So we are large enough, global enough that we can absorb even such a large cancellation. No change to the guidance. And as Ron pointed out and you reminded us in your question, the adjustment is entirely due to FX.

Shlomo, just one thing, I would jump in there. I think you're asking about revenue, too. And obviously, because with an ongoing trial, it does have some impact to our revenue in the current year. But we're absorbing that in our normal numbers. And this is a series of trials, actually a program that would play out over many years. So there isn't an outsized impact in this year.

We'll take our next question from Max Smock at William Blair.

Maybe just following up on [ RFP flows ] that you saw in the quarter. You mentioned up mid- to high single digits across all customer groups. I think last quarter, you had called out up double digits across all customer groups. So I just wanted to get a sense for whether what you saw in terms of RFP flows going into this quarter was in line with your expectations? And then, any thoughts on how we should think about book-to-bill, moving forward?

Again, I wouldn't read a lot in the variation quarter-to-quarter. Just as an example, the RFP flow last year was flat versus the [ '22 ] number. So we think this is very good. It's consistent with our expectations. The large segment, the large pharma was up more in the high single digits in terms of RFP flow. EBP was a little bit higher than that at kind of mid-single growth, depends on the therapies. We had a lot of bookings, infectious diseases and internal medicine, which drove a lot of the growth there. The [ awards ] grew well into the teens. So we often look at awards. We report contracted bookings. As you know, some of our peers report awards, which is at an earlier stage in the in the process. And maybe just to reassure you that we haven't come down from what we said at the last quarter as a leading indicator, if you will, awards were up in the double digits and that was driven by large full-service trials, strong EBP as well. We look at the qualified pipeline, and the qualified pipeline is up double digits, actually very strong double digits. And it's up again at a record high. So nothing here that has changed versus our expectations.

We'll go next to Anne Samuel at JPMorgan.

In the TAS business, you talked about strength in the pipeline and some positive signs and maybe some more positive conversations there. As you're moving through the year, are you seeing your pipeline convert kind of at the same rate that you had initially expected? And with the macro maybe slightly more stable, can you just maybe speak to any potential areas of upside as things are starting to loosen up there?

Yes. Well, I mean, I wouldn't talk about upside here so far. And then the macro is not really stabilizing, unless you call stabilizing [ the fact ] that we now know there won't be a rate cut anytime soon. So look, the TAS business is exactly performing exactly as we expected it, same type of performance that we telegraphed in our prior guidance, same growth rate that we anticipated when you exclude COVID and the currency impact. And we continue to see -- again, based on our pipeline, based on budgets [ firming ] up, based on the conversation with clients; continue to expect upside towards the back of the year, second half of the year and more in the back of the year. Large pharma companies, as you know, have introduced significant cost reduction programs. And that has driven a lot more cautiousness and scrutiny in the budgets than in prior years. And we've discussed, this is driven by the overall macro environment, maybe some concerns related to IRA long term and preservation of margins. As you know, our client base generally is doing fairly well and is reporting very good numbers. So we think that also is an encouraging sign. And usually, our clients have more propensity to spend when they -- when they are out, we are out. And we see that they are doing well. So all of those signs are encouraging. I could give you a little bit of color on the business in TAS, just for a perspective. The data business continues to perform exactly as expected. No surprises, they are flattish to up the low single digits. The real-world business, which we signaled in the prior quarter earnings call, was slowing down, has actually gone from being a very strong double-digit growth performer to mid-single digits to then negative growth in the fourth quarter, has rebounded somewhat and is now flattish. So we see that we think that we bottom out there. And the tech business continues to perform as expected, good and strong. And the analytics and consulting business, which is our shortest cycle business, ebbs and flows in the quarter. It had started to do a little better last quarter. This quarter, it went backwards, and that's why we didn't perform even better than our expectations in TAS. So all in all, real-world doing better than we thought. And analytics and consulting doing a little less than we thought, but that's kind of to be expected. It has more variability by definition. And we still have a strong pipeline there. So we think that, that will continue to improve quarter-over-quarter. And that's what gives us confidence that the back end of the year on TAS, we will be good. Again, upside, I don't know. I can't promise that.

We'll move to our next question from David Windley at Jefferies.

I wanted to transition you to R&DS. You highlighted in your prepared remarks about some of the business wins, you highlighted some FSP deals. I also heard you say though that your RFP flow was strong on the full-service side. So given that you've talked in the past about how that FSP does present some margin headwinds, I thought maybe you could update us on the state of play between those 2 models and maybe we've reached some kind of equilibrium there. So just your thoughts on FSP versus [ FSO ].

Yes. I mean, look as a percentage of our total R&DS revenue, [ FSP ] comprised about 15%. So now, if you -- that's in totality. If you look only at the services portion of the business, meaning excluding pass-throughs, which, as you know in FSP, there typically is no pass-throughs; so that percentage is a little higher and continues, it's a little less somewhere between 20% and 25%, I would say. And it continues to grow a point or 2 every year. So of course, it has an impact on margins because FSP margins -- FSP [ contracts ] come at lower margins. But again, we are a large global company, and that just puts more pressure on us to continue to operate with more efficiency, find new areas of productivity, contain costs and offset those margins, those mix -- those unfavorable mix impacts on margins with cost reductions, and we continue to work well on our usual playbook, which is to grow our EBITDA faster than our revenue and consequently increase margins.

We'll go next to Jailendra Singh at Truist Securities.

I wanted to follow up on the Salesforce partnership comments. Just curious, if you can share any initial reaction from your OCE customers post that announcement? Or is it still early? Also just curious, like what were the conversations leading up to the partnership? Trying to understand what drove the decision to partner with Salesforce, given what IQVIA has seen, what [ HCPs ] prefer for engagement in terms of digital marketing, et cetera.

Thank you. Well, look, as you know, we've carved out a nice position in the global CRM market for Life Sciences, we came from behind much later in the game. I guess we entered the market more than 10 years after the large dominant incumbent in this market. And today, we have a footprint of over 400 clients and about 100,000 seats in the business, which is quite impressive in a few short years. Now what happened here is that a dominant competitor has announced a re-platforming of their product from Salesforce to their own in-house platform. Now OCE is based on a Salesforce platform. It's the result of a strategic partnership that has been in the market for over 5 years. And we and Salesforce want to ensure that we continue to have the best product in the market. And we've agreed that it is time to develop the next-generation product. We also agreed that it should be based on Salesforce's new Life Science Cloud, which is much more advanced. And as it will be based on the current OCE application to be re-platformed. Now it takes time to do that. It makes sense for Salesforce to take the lead in developing this next-generation application, and it will be based on IQVIA [ IP ]. Our existing customers understand all of that. They will continue to be supported for at least the next 5 years, and they are very happy. I can even say yesterday, we won a very significant award on OCE with a large, well-known client, pharma client, and we actually displaced the large dominant player in the space, which have been the incumbent for a long time. So our clients are reacting very favorably. They understand the need for the next-generation transition, and we are going to shepherd that process together with Salesforce. When the product is ready the next 2 years or so, we will go to market jointly with Salesforce with this new product platform, and we will help transition customers who wish to do so when they are ready to do so. Strong and positive reaction from the customer base.

We'll go next to Ann Hynes at Mizuho Securities.

Ari, wondering what surprised you on the upside most in the quarter and maybe on the downside? And just following up on the last FSP question, thank you for that clarity, you gave us about its 20% to 25% ex pass-throughs. What do you think the max would be over time?

What was the first part?

What surprised to you on the...

I hate to be boring. I had zero surprises this quarter. I mean, for lack of better words, I think this was a boring quarter. It was exact -- it came in exactly as we thought. Look, the nature of business is pretty predictable. The large cancellation was kind of -- it's based on -- really on the results and on the assessment of the environment by the clients. It's always been very well reported. And so it usually takes time to unwind the study. And so we knew it was coming. So those -- we know the exact timing when all of this would be finalized, but [ it was ] in the quarter. But other than that, frankly, no surprises [ up at the helm ]. Everything came in pretty much on expectations. There always are moving parts, but this was one of the most boring quarters I've seen, nothing -- no drop. That's the way we like it, by the way. In terms of your FSP question, it ebbs and flows. I remember my first contacts with this business now almost 8 years ago, I was told FSP is going to be replacing full service, clients are shifting to FSP. And indeed, there was, very similar to today, an effort by some of the large pharma companies, many of them, to bring project management in-house and to essentially shift to these types of models. So I think it's a pendulum. It swings back and forth. In a highly specialized studies, it's very hard for a client not to do full service because they don't always have all the competencies in-house. Again, I think we're seeing similar trends as we saw 8 years ago. What we're seeing also might be -- to add a little bit more to this, we're seeing a trend towards what we call hybrid models, where the client starts out with one thing, an FSP program. And as we progress in defining the parameters of the study, we end up taking on more of the tasks. And it's kind of in between full service. And it's not fully outsourced. But in that, they [ aren't ]100% FSP either. They're parts of the program that we continue to manage. So it's really more integration with the client, and it becomes more of a closer partnership. So I don't see this as a long-term permanent trend to the point where, theoretically, it will become 100% FSP. I don't see that happening. Plus remember, FSP is virtually nonexistent for EBP or midsized pharma.

We'll take our next question from Michael Ryskin at Bank of America.

This is John Kim on for Mike. I appreciate the FSP comment there. I'll just ask a quick one. On that swing pendulum comment, do you expect that percentage to go down at some point? And in terms of the RFP flows, that sounds great, solid, solid flows. But is there anything that may hinder or delay that turning into sales in the second half?

Okay, thank you. Well, on the FSP comment, I don't know when these things will -- this is a long-cycle business. I remind you that it takes an average 4, 5 years to execute a contract. So we have a very large book of business. I think in our backlog, what is the proportion of that FSP backlog? Is it also about 15%?

Yes.

Yes, so our backlog is over $30 billion, and about like somewhere worth $4 billion -- $4.5 billion of that is FSP. So you see the vast majority of the revenue we're going to deliver over the next 4 or 5 years is going to continue to be full-service programs, and it's not about to influence one way or the other. It's a slow-moving business. It takes a lot to move the needle one way or the other. We've been continuously on an upward momentum, and that's the way we like it. So no, I don't see that happening. And then certainly the same similar type of commentary on your question about affecting the second half, it is just too short horizon to have an impact. These swings will have an impact [ 4 ] years from now.

We'll go next to Charles Rhyee at TD Cowen.

Ari, you mentioned earlier about winning an [ EBP ] client that's going to do 2 simultaneous studies in oncology. And I'm curious whether decision to do 2 trials at once could be a function of terms in the IRA that kind of benefit companies to do -- the [ local ] trials that want sort of to maximize revenue before potential negotiating on pricing with Medicare. I'm curious if that could be part of the reason. And in general, I guess, as you think about the structure of IRA, do you foresee more companies engaging in multiple trials at the start? And how do you think that could be benefiting for IQVIA in the future?

Yes. Well, I mean that's a clever thought here why it was 2 [ material ] studies, but it happens to be not the case over here. But -- I see what you're thinking about, but that's not the case here. These are 2 different -- it's addressing 2 different diseases with different -- I think it's different molecules. Again, we can give you in post call some more color on this, but I don't think it's because of the IRA. Look, what is true is that clients are, with respect to the IRA, trying to accelerate timelines because one of the possible impacts of the IRA is that it will reduce the period of time during which protection will apply -- intellectual property protection will apply. And as a result, you want to maximize the revenues then, that, if anything -- and again, that's probably the context for your question, if anything, that kind of induce clients to launch several programs simultaneously. So in this particular case, we're replacing an incumbent, and I think one of them is a rescue study, if I am correct. So that's the context there.

We'll go next to Tejas Savant at Morgan Stanley.

Ari, I have a few questions here on R&D Solutions. First, just broadly on the pricing environment, are you starting to see more pricing discipline from your peers versus what you saw in the back half of '23? Second, on the cancellation in [ CNS ], given the faster burn nature of that work, is there any implication from that for the phasing of R&D revenue through the remainder of '24? And then last on AI enablement. You highlighted that as a driver of some of your EBP wins in the quarter, which I thought was quite interesting. Could you just share some color on why it's translating into share gain for you? And what is it you can do with AI that your peers aren't offering yet?

Okay. The three questions are totally independent. So first on pricing. Look, there's no change in pricing here. There continues to be pressure from clients, and price negotiations are always tough. We mentioned before that we're having maybe more pressure than we had before on pricing from large pharma clients as they're working on their savings initiatives, but it's not that different than history, maybe a little more than usual. But I think nothing -- with respect to competitors, I can't speak to what they do, I just have no idea, I don't want to know. But look, comes to reason that smaller competitors which have failed largely and have led to them being acquired, are struggling to book business and as a result, could put pressure on pricing. But nothing there that I can signal that's unusual versus what we spoke about in the past. Your second question was on cancellation. We spoke before, we address that. No, look, it's a very large cancellation. And yes, it has an impact on revenues over the next few years, including in this year. But we said earlier that we are a large company, and we are absorbing it in our guidance. It's fine. So yes, if you will, it would have been better if we hadn't -- if the program hasn't canceled. But it's okay, we're not changing the guidance for that. Our only guidance adjustment, again, is 100% related to foreign currency. With respect to your third question on AI, look, AI has -- not saying anything shocking here, AI has a massive amount of opportunity, in general, and I would say, perhaps more limited than people think in health care because data, the ingredients, if you will, are not readily available publicly. You can search for medical literature for diagnostics, you could look for jurisprudence for legal opinions. But frankly, to identify patients that are best suited for trials, sites that need to be identified for maximum effectiveness and fastest enrollment, that's really, really tough to get information. And if you ask those questions to a chatbot, you are not going to get the answers. However, once you are within our environment, then that's a lot more possible. And so if you think about it, the entire premise of what we set out to do when we merged Quintiles and IMS 8 years ago, was precisely to leverage massive amounts of data and analytics and technology to accelerate clinical development timelines, particularly applicable to oncology, rare disease and difficult-to-enroll patients. With the [ advance ] of AI, that set of initiatives becomes even easier. And we've been at it for a while, this is not new to us. But some of the new tools, as you can imagine, are put to good use within our environment, and some of the wins we've had are the direct results of those capabilities.

Our next question comes from Luke Sergott at Barclays.

I just kind of want to get a better sense of how to think about the TAS recovery and more on discretionary in the commercial side, so -- and how it relates to drug approvals and things like that. So we only had 10 approvals in this quarter versus 15 last quarter, but we're already starting to see a strong start to April. I'm just trying to get a sense of when pharma starts engaging you guys for work and when you start seeing those bookings and then ultimately when it starts flowing through, I know it's different for particular regions, but as the approvals start coming in and accelerating, how to think about the growth in the discretionary pieces that have been slower?

Look, I wish I had a crystal ball here, and I've been wrong before on predicting a comeback, if you will, of the TAS business. So I'll be cautious in my commentary. You're right to point to the approvals. I mean, the number of approvals, as you know, in last year, I think there were 55 approvals last year. And that's -- that was I think a record year. It was certainly a very high level, almost 50% more than the prior year and the highest level since, I think, must be '17 or '18. Now the new launches and the spend associated with these new launches usually is up significantly for the 5 years that follow these approvals. So we do expect the TAS business to be strong. The wild card is when those launches occur, what clients decide to do. The -- about 50% of the new [ launch ] spend usually occurs within the first 2 years. So again, it happens over the following 5 years and usually the first 2 years. I mean, yes, quarter-to-quarter, it was only 10 this quarter. But we think in general, just with the approvals of last year, we should see a rebound coming in. And that's one of the reasons we are somewhat confident that the TAS business will be rebounding more strongly, and the real uptick will come next year. But we see -- given that it has bottomed out here, and we think it has reached the bottom, and we anticipate an improvement in the balance of the year. The pipeline is higher than it has ever been, frankly. And we scrub this pipeline continuously, we continue to see improvement in customer sentiment. In Q1, the tone is better, there are more opportunities that have surfaced. This increased optimism for the outlook in '24. What happened in the second half of last year in conversations with clients is the budgets became -- we are aware of what clients can spend because they [indiscernible] budget, but the budget got trimmed sometime towards the end of the year, and there was quite a bit of [ uncertainty ] as people were negotiating internally. We feel there is more clarity now on budgets, and that helps a lot with confidence for awards in the balance of the year. Also decisions, we measure decision timeline, and that -- those timelines have started to come down and get reduced, which is a favorable sign.

All right. So I guess there's like basically between -- obviously, there's going to be a big difference there in timing, but like safe to assume between like 6 and 12 months lag post an approval of when you actually start working on the launch with the drug company and the commercialization efforts?

That's correct.

Yes. That does conclude our Q&A at this time. Mr. Joseph, I'll turn the call back over to you.

Thank you for taking the time to join us today, and we look forward to speaking with you again in our second quarter 2024 earnings call. The team will be available the rest of the day to take any follow-up questions that you'll have. Thank you.

This concludes today's conference call. Again, thank you for your participation. You may now disconnect.