Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. 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 third 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 Peroni, 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 on the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com. Before we begin, I'd 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 third quarter results. IQVIA delivered another quarter of strong operational results. Revenue came in above the high end of our guidance range, representing about 6.5% growth, excluding the impact of foreign exchange and COVID-related work. And we also delivered 14% growth in adjusted diluted EPS. As we expected, the environment for our short-cycle businesses continues to improve as our clients are launching new drugs and executing on critical commercial programs. In fact, as revenue growth accelerated in Q3 to over 8% year-over-year, with growth in all subsegments. This reaffirms the second half growth trajectory that we had anticipated for TAS since the beginning of the year. And we now expect TAS growth for the year at the high end of our mid-single-digit range. On the clinical side, the near-term market environment continues to be choppy as we've been discussing in prior earnings calls. None of this is new, but as you know, we've been facing aggressive competitive pricing and tougher negotiations. Additionally, the trend that started over 1.5 years ago with large pharma re-prioritizing their program portfolios as a result of the IRA has been continuing, and this has been leading to a higher-than-normal level of cancellations, and we expect this to be the case again in the fourth quarter. On the EBP side, funding levels this year have improved. But as you know, it does take time for this funding to translate into actual RFP flows and even more time to translate into awards. Our bookings in the quarter included a substantial cancellation due to drug futility that impacted our quarterly net new business by approximately $350 million for that 1 trial. The reported net book-to-bill was 1.06x, but excluding the specific cancellation,…

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Third quarter revenue of $3.896 billion grew 4.3% on a reported basis and 4.2% at constant currency. In the quarter, COVID-related revenues were approximately $20 million, down from about $100 million in the third quarter of 2023. Now excluding all COVID-related work from both this year and last, constant currency growth was about 6.5%, of which just under 5% was organic. The majority of the acquisition contribution was in the TAS segment as is typical. Technology & Analytics Solutions revenue was $1.554 billion, up 8.6% reported and 8.2% at constant currency. R&D Solutions revenue of $2.162 billion was up 1.9% recorded and an even 2% at constant currency. Excluding all COVID-related work, growth at constant currency in R&DS was about 6%. Lastly, Contract Sales and Medical Solutions or CSMS revenue of $180 million declined 1.6% reported and 1.1% at constant currency. Year-to-date revenue was $11.447 billion, up 3% on a reported basis and 3.5% at constant currency. Excluding all COVID-related work, growth at constant currency was 6% year-to-date. Technology & Analytics Solutions revenue was $4.502 billion year-to-date, up 3.9% reported and 4.3% constant currency, excluding all COVID-related work, growth at constant currency and TAS was 5% Now as a reminder, our Q1 2023 was last quarter were TAS revenue had a meaningful contribution from COVID-related work. R&D Solutions year-to-date revenue of $6.404 billion with up 2.6% at actual FX rate and 3% at constant currency. Excluding all COVID-related work, growth at constant currency in R&DS was 7%. Lastly, Contract Sales and Medical Solutions year-to-date revenue of $541 million was flat on a reported basis and up 3% at constant currencies. Let's move down to P&L. Adjusted EBITDA was $939 million for the third quarter, which was growth of 5.7%,…

[Operator Instructions] Your first question comes from the line of Ann with Mizuho.

Any thoughts on preliminary 2025? I know the industry is going through a tough time now. But do you think you could still grow in that kind of high single-digit range given the backdrop?

Well, thank you, Ann. We don't usually give guidance for the following year at the time of the third quarter earnings release, but we do plan to at least give some indication of the '25, we look like at our investor meeting on this December 10th. And as always, to give you more precise guidance for the year, concurrent with the full year earnings release. Now having said that, look, I'm going to depart from what everybody else in the room is telling to do, and I'm going to tell you that what -- and I'll do that because the environment is so shaky and obviously, you're wondering what's going to happen in '25. So look, if you look at '24, we grew -- we will have grown the company about mid-single digits, okay? After all the short-term challenges that we signaled are absorbed. And my expectation is that it will be similar in '25. That's really a high-level expectation. We haven't finished our planning process, as you can imagine. But if you look at the segments TAS, as predicted, rebounded in the second half, and that is a short-cycle business. So I think things are coming back as expected, and we anticipate this will continue. So if TAS grows this year at constant currency, again, around 6% or so, then I think I'm expecting that the same will be true at least in '25. And then for RDS, which will continue to deal with these short-term cancellations in Q4 and probably the early part of '25, we are projecting a 5-ish percent growth, 5% plus growth for RDS for this year. I'm going to assume at this early stage, a little bit similar. That's what's guiding my observation that I think company-wide would be around those levels as well in '25. Again, that's just as a placeholder, I invite you to join us on December 10th, where our planning will be more advanced, and we'll share more about that. And certainly, our full year detailed guidance when we reach full year earnings.

Your next question comes from the line of Shlomo with Stifle.

Ari, I know it's one question, but I just want to get a lot more detail, if you can, on the trial delays because I can't talked about 2 trial issues also, they were talking about financial re-prioritization and stuff like that with some of their clients. You're talking about some kind of logistical issues. Can you give us a little bit more detail? Are these logistics physical logistics? What else could be involved in that? Does it have anything to do with the financials and what kind of confidence do you have that the projects will really ramp into the second half of '25? And if you kind of flush that out as much as possible would appreciate it.

Yes. So look, I mean, what other competitors are experiencing is absolutely coincidental that 2 trials are out, and we have 2 trials. I understand why you're asking the question. Just again to step back and look at what's happening. We've got a general environment where, as I stated in my introductory remarks, large pharma has been reprioritizing their programs is nothing new here, and that has led that a direct consequence of the IRA. That has led to an elevated a number of cancellations. That affects the industry. That's the market environment. And frankly, even in that environment, we normally should be expected given our scale and performance and momentum, we should be expected to continue to deliver. And that's what we did for the first 3 quarters of the year. Separately and unfortunately, at the same time, we have had to deal with a very large cancellation that has nothing to do with reprioritization has to do with futility. And that obviously is affecting our short-term impact. Now in a normal environment, we would have been able to absorb that and move on. But because it's such a tough environment, and we're dealing with a general heightened level of cancellations, we've not been able to absorb that. Again, separately and unfortunately, concurrently, to clients, this is totally independent of anyone else of any reprioritization of any financial considerations of anything else, have had for their own reasons, we know what the reasons are. I cannot share them with you. We are subject to very strict NDAs for reasons. It has absolutely nothing to do with the drug, with us, with financials, we just can't tell you what the reasons are. I regret that. But those trials will resume, they happen to be fast burning, and they have tend to be very large. We are confident that they will resume in '25. Now I know it's a lot to absorb. And when you look at the whole picture, that's a lot of different things. I regret it as much as you, but that's the reality we're facing with. The choppy environment will navigate that on a normal circumstances, but we've had to deal with 2 discrete events unrelated really to the environment.

Your next question comes from the line of Anne with JPMorgan.

I was hoping perhaps you could help us understand just maybe the timing of some of these dynamics of the cancellations, how much notice do you get in advance? And when we think about the delays for kind of pushing to the back half of next year, did they impact any other projects for 2025, or does that become incremental to 2025?

Okay. On cancellations, typically, Look, it depends, okay? All these -- there's 2 types of cancellations. And I'm going to roughly say that in this past year, what we are seeing is that about half is due to the reprioritization and about half is the normal drug futility based on results. How does it happen with the reprioritization, it's a process that our clients are going through? And they've been going through this for 1.5 years, and I believe we are peaking at this point. It has an end. This process has an end. I see this ending at the end of this year. That's my prediction. It's 1 month's prediction. But I think that we're going to still see elevated cancellations in the fourth quarter. We don't -- we -- now IQVIA does not give quarterly numbers for cancelation [Indiscernible], I've said before, normally, it's about $0.5 billion, and it can vary plus or minus $200 million either side. It's by definition, it's not a constant number. It cannot be the same number every quarter, okay? So there are quarters where it's 300. The -- as quarter whether it's 250, they are post 600, 700, the average is around 500. And I think that we are seeing -- I wouldn't be -- I'm not surprised to so see quarters where we have doubled that number because of these reprioritizations, okay? So that's what we're dealing with. The traditional cancellations other than reprioritization, the traditional cancellations that are due to data it usually takes time because you've got a piece of data that's not favorable. As you know, there are independent panels investigated panels that review that data, the discussions with the FDA. It's a long process. And even in order to reach the decision to cancel, it takes time. When that happens, it also takes time to unwind the trial. If the trial is ongoing as opposed to the trials that are canceled because of reprioritization, which are things that are simply taken out of backlog, programs are canceled because they are in the middle in flight because of results, it takes time to unwind. It could take 2 or 3 quarters because we have to deal with patients that are -- that have been dosed, that are on the treatment, et cetera. So there are serious reasons. And often, it leads to additional bookings of extra work in order to facilitate that disengagement. So that's -- again, it's a complex unwinding process. But I hope that helps answer your question. Ron?

A, you would also, I think, asked about delays and whether the delays at incremental work in 2025, don't forget, these are multiyear trials. So if '24 work gets pushed into '25, sure, we pick it up there, but '25 work gets pushed into '26. So I wouldn't think of these as being incremental to 2025.

Right. That's correct. However, the sequential growth will be affected, right? So just because of the compares and --

Exactly. And we'll give you more information on the sequential growth that we expect as we go forward during our normal guidance process.

Your next question comes from the line of Luke Barclays.

A couple of cleanups here to start. On the M&A, you guys did $228 million, I think, in the quarter. Any update there on like the financial profile and is all this in TAS and kind of how we think about that business growing so we can -- from more perspective in the next year?

Yes. Thank you. Well, yes, you're correct. As has been typically the case, the majority of our acquisition contribution is in TAS. But I would point out that in the quarter, TAS had a very strong step-up in organic growth. In fact, more than 3x sequentially. The company-wide organic growth was just under 5%, excluding acquisitions. So acquisition contributed to just over 1.5 points to our about 6.5 points of growth at constant currency, excluding COVID. Now if you do the math, you'll see that the organic growth in TAS was also mid-single-digits, which, again, is over 3x what it was in the prior quarter. So strong in TAS across the board organically. Since you asked about acquisitions, I just want to step back and reiterate what I've said many times before, and that is that acquisitions are an important part of our growth algorithm, always has been the case, and hopefully, will continue to be the case. In fact, we always aimed at least 2 points of incremental growth from acquisitions. But if you look at our numbers, you'll see that historically, we've never been able to do 2 points plus of growth. It's been more between 1 and 1.5 points. And this year, hopefully, 1.5% of contribution from acquisitions. Now bear in mind, we do a very large number of tiny, tiny deals, okay? You have the list here in front of you, Ron?

Just to give an example -- a couple of examples this year in the -- in a TAS area, we did an acquisition of a commercial engagement company, H3O, that has $1 million of annual revenue, we did a real-world platform B2i, that had slightly over $1 million of revenue. So when you look at the total number of acquisitions we do, it looks like a really big number, but there are any number of very small acquisition.

That's typical. If you look at our list of actual acquisitions with all these little fancy names and they are important, okay, these are little deals that we -- we do this because we believe we are pretty good at buying good companies with potential growth. And typically, after we integrate them within a year or 2 of ownership, they do very well. So again, the vast majority of this deal has very little revenue. Now sometimes, we have to pay up a lot. I mean there are -- there's a handful of acquisitions we've done in the past -- in the recent past that we've paid 10x revenue for. I've seeing over the DMD, for example, like a couple of years, which facilitate our entry into the digital space. We paid almost 10x revenue for that company. So if you will, the acquisition number, the dollar paid for the acquisitions and the revenue contributions are not connected. For example, year-to-date, what's the [indiscernible] acquisitions year-to-date as of Q3 --

$649 million.

Okay. We spent $649 million year-to-date on acquisitions at the -- as of the end of the third quarter. Almost half of that was 1 acquisition, a company called Micra, which is a small specialized CRO in med devices. It's actually an RDS acquisition, and we bought that in the third quarter, sometime in August, if I remember, and that was almost half of the spend. And we paid almost 5x revenue for that. So obviously, it's a big number in terms of the spend, but the revenue contribution this year of that acquisition is de minimis, okay? Because again, we paid almost 5x. We bought that in -- it has maybe one month of revenue in the quarter, and that's what it was. So again, very important acquisition as part of our strategy. Thanks for asking the question. By the way, I would remind you the best deal we ever did was the acquisition of the 40% minority we didn't yet own from our joint venture with Quest in our central lab. That was the largest deal that we did. And we paid $760 million for that. It came with exactly zero revenue because we already consolidated revenue, right? But it was a great deal nonetheless. So again, I hope that helps give context to our acquisition strategy.

Your next question comes from the line of Justin with Deutsche Bank.

Looking forward to seeing the lab at the innovation center in December. Ari, just sticking with the M&A. I think at the -- in capital deployment at the beginning of the year, you guys talked about $2 billion deployment. I think when you put together the M&A and the buyback, you're still tracking below $1 billion. So assume nothing gets done in the fourth quarter, would it be fair to assume like sort of like $3 billion of dry powder for 2025? And then just related to the comments around pricing pressure. I think earlier, you've said it's been mostly concentrated to FSP. Are you seeing that spill over all into FSO?

Okay. Well, thank you, Justin. This a great question. On the capital deployment, as you know, we signaled between $2 billion and $3 billion as a long-term goal annually spread between acquisitions and share repurchase. And as you correctly pointed out, so far this year, we saw the numbers so far, we spent $649 million on acquisitions and just $200 million on share repurchase. And frankly, that's because we were looking at bigger acquisitions that we were unable to do either for pricing or other reasons. Acquisitions, as you know, are binary, you do them, or you don't do them. Now based on what I know today, I don't think that we're going to spend a lot more on acquisitions before the end of the year. Maybe, again, I'm speculating between another $50 million to $100 million at the most. And therefore, you correct to point out, that leaves us with a lot of dry powder. My intention before the earnings release was to massively buy shares in the fourth quarter. And today, my intention is even to more massively buy share at the end of the quarter. My general counsel specifically said, on his head here, but I am telling you that we are very excited, and we are going to buy a lot of shares. We have $2.2 billion plus share buyback authorization. And the share price is screaming buy, and that's where we're going to spend our capital. Then you had a question on pricing. Pricing is tough across the board, has been commercial and RDS, obviously, it's not that it's more on FSP than on FSO, it's just that FSP was stronger this year. FSP is perhaps, correct me if I'm wrong, over here, it's about 15% of revenue roughly.

Yes, correct.

And -- but it's been increasing in terms of our bookings and inching towards 20%, right? So eventually, it will be about 20%. But again, we might win again other FSOs. So I think it will be always between 15% and 20%. And FSP has, as you know, lower margins. So that depresses our -- it's a headwind to our margins because of mix. Every time we do more FSP, pricing is tough across the board, okay? One, because, as I mentioned before, this year, clients, most large pharma companies, put us through a sort of a rebid process, invited every CRO under the song, and as I mentioned in my introductory remarks, we did very well there. Essentially in every single one of these bid processes we were reselected for our existing strategic partnerships, and we expanded with half a dozen strategic partners and expanded the scope of what we are going to be preferred suppliers for, including especially for Central Lab. So we think that the future is very bright on R&DS. And again, pricing, very tough. That's 1 reason. The other reason is that we have, as you know, the industry has kind of sort of split between 3 large CROs and then another set of second-tier who have had, let's say, more trouble in the recent past and who are desperate to win business. And when you're desperate, the place you go to is price. And so all of that, even though they never selected, they end up creating somewhat of a more pricing pressure. And clients, of course, are going to be delighted to use them for that purpose. So these are the reasons. It doesn't look like it's improving. It's going to continue to be tough. But again, we are confident that we will continue to win and do well in the long term.

Your next question comes from the line of David with Jefferies.

I wanted to start with just a clarification. I think based on the book-to-bill that you're reporting this morning, you added about $140 million of new wins bookings above revenue. Your backlog is growing about $500 million. Is the difference there just FX? So that's clarification. And then are you thinking about taking the timing issues, the cancellations, et cetera, the pricing pressure that you just commented on, how should we think about your ability to manage cost structure and continue to kind of hold margin or deliver margin as you have in the past in this environment?

Dave, first of all, the first observation in your math, I think, is correct. I don't have the numbers in front of me, but based on what I heard, I think you're absolutely on the mark with the math on the bookings and the backlog. Your question on the cost management is an excellent one, and you probably are inferring from what we said correctly that we have to deal with significant cost headwinds for the following reasons. These delays, as you can imagine, we have already started up those 2 mega trials, okay? They were in start-up phase. And therefore, we stood up the resources and the infrastructure, the teams and everything that's required to perform and deliver on those trials. Now they are interrupted. So it's almost like -- but they are going to resume in '25. I think one of them in second quarter and then the rest basically second half and ramp up in the second half. Now we are not going to let these resources go and do what we just did to ramp up the resources. So that already is a cost that we have to bear. Now obviously, we're going to redeploy some of that against some of the other opportunities, FSP and so on. But nevertheless, there is no question that we are going to be living here over the next 2, 3 quarters, with an extra bucket of costs associated with this. And these are huge trials, okay? And that is going to affect our margins. Now again, we haven't finished our planning process. We have a lot of other levers. We are working constantly on costs. And we -- I mean, you saw, obviously, we hadn't yet been affected by this issue so far, but you saw that so far this year, we've done pretty well. And we've actually in the fourth quarter, achieved record margins, I think, 24.1% is the highest operating margins, that we have achieved since the company was created in '16, correct. So we've done well, 30 bps of expansion this quarter. But again, in the next 2, 3 quarters, we will have to see. And we'll share more details on December 10th and certainly on [Indiscernible] with the full year earnings release. But David, you're exactly on the mark.

Your next question comes from the line of Elizabeth with Evercore ISI.

Maybe 1 high-level question and 1 number's question. Can you tell me where we are in this sort of strategic partnership? Obviously, that's been an area of strength for you guys. But sort of, are we just through this brand? Are we sort of still beginning? Is that not the right way to think about it? And then on the number's side, can you -- what do you think the interest expense is going to be for 2024 in your updated guidance?

Thank you, Elizabeth. Yes, I mean, the strategic partnerships we did very well this year. Listen, we've been working with these clients for a long time. As you know, we expanded the number of logos that we have preferred partnerships with. And so this year -- and I think it's part of the overall reaction to the IRA and the overall focus on cost management, you know that most large pharma companies announced massive cost reduction programs, and so they opened up, they reopened all of their vendor relationships. I believe that we are largely through all of that. And I think that we are ready to move forward. Most of the large ones essentially have been completed. So that's for your first question. And second question --

Interest expense, talking about this year, Elizabeth round number, $625 million or so, give or take, around that number, which is not terribly different than what we were telling you before.

Got it. And do you want to comment on '25 right now or not on that.

'25 interest, I mean obviously, it depends to an extent on what the Fed and the ECB do with interest rates, but flattish for next year -- we're anticipating, but we'll update as we go along.

Your next question comes from the line of Michael with Leerink Partners.

I know we don't have formal '25 guidance, so it might be trading a little lightly here. But relative to R&DS and the 5% rough give or take, expectation at this point in time. What are the conditions have to look like relative from a macro basis, cancellation rates, et cetera, to make sure that number is still feasible. Is that predicated on those 2 mega trials re-ramping with the second half? And what are the most important puts and takes you're focused on that could change versus what the current trend is of general market choppiness?

Yes. I mean, look, I wish I had a crystal ball, but I can only tell you what we see now. I believe that by the end of the year, this program reprioritizations will come to an end. We know that because we are in close conversations with our clients. And look, that's the business our clients are in, is to do research and innovate. They have been at this for 1.5 years, started, I think, in the -- just in the kind of middle of last year. I think this is -- we basically know what's been reprioritized and canceled. We know what will be canceled by the end of the year basically. Now there could be other trials that have drug futility issues that can always happen, but that's kind of in a normal range of things, and we anticipate that. In that mid-single-digit type of high-level expectations that we have as of now for '25 for R&DS, that's based on what we know today that has been canceled, the large -- you know that we had this $350 million program canceled in the quarter that we took in. We also had, in the first quarter, launched a $250 million program cancellation. And we know that these 2 programs mega trends have been delayed. And then we factored in everything else. Again, most of the trials are much smaller than that, and we work on hundreds and over 2,000 of them. So it's going to be the normal course of things. These big ones move the needle. If you look at R&DS growth this year, we had 7% in the first quarter. What did we have? First quarter was ex-COVID constant currency --

8%.

Right, 8% first quarter. Then we had 6% and 6% in -- on, again, a constant currency ex-COVID basis. And then we're going to have 1% in the fourth quarter. So similar to what I said last year about TAS, it might be like a mirror image in '25, okay, with things going the other way. Just because of the cancellations, the short-term impact of that and the delay is the short-term impact of that. So that's our best I can describe what we expect for '25 at this point based on what we know.

There are no further questions at this time. Mr. Joseph. I turn the call back over to you.

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

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