Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2024 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 conference is being recorded. I would now like to turn the call over to Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, you may now begin your conference.

Thank you, operator. Good morning, everyone. Thank you for joining our fourth 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 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 fourth quarter and full year 2024 results. It was great to see many of you in-person at our December Investor Day at Innovation Park headquarters. I hope this helps you appreciate the depth and breadth of our offerings as we showcased product demos and tour some of our industry leading laboratories. In fact, a number of you commented to me afterwards that they left with a deeper understanding of the breadth and depth of our capabilities and how our strategy to improve patient outcomes is being executed. As we closed 2024 we delivered solid full year results with revenue growth of 5.5% at constant currency excluding the COVID revenue step down, adjusted diluted earnings per share growing over 9% and free cash flow of $2.1 billion, which represents growth of 41% versus last year, as well as 104% of adjusted net income. I'm very proud of the results the IQVIA team was able to deliver in an industry that faced significant challenges in 2024. We saw the consequences of the Inflation Reduction Act, which led to delayed customer decision making, reduced discretionary spend and portfolio reprioritizations. Additionally, we had a challenging macro environment that persisted with geopolitical unrest, continued high interest rates and inflation, foreign currency headwinds and questions about the impact of political elections in the U.S. and around the world, all of which created tremendous amount of noise and incremental uncertainty. In fact, very few companies in our broader industry sector achieved positive growth and IQVIA really stood out as an outperformer. More specifically, in the fourth quarter you saw that we had strong operational results. Revenue came in above the high end of our guidance range representing about 4.5% growth excluding…

Thanks, Ari. And good morning everyone. Let's start with revenue. Fourth quarter revenue of $3,958 million grew 2.3% on a reported basis and 3% constant currency. In the quarter COVID-related revenues were approximately $10 million, which is down about $50 million versus the fourth quarter of 2023. Excluding all COVID related work both from this year and from last, constant currency growth was about 4.5%. And as Ari mentioned, acquisitions contributed approximately two points of this growth. Technology & Analytics Solutions revenue for the fourth quarter was $1,658 million which was up 8.3% reported and 9.5% constant currency. R&D Solutions fourth quarter revenue of $2,123 million was down 1.3% reported and 1% constant currency. But excluding all COVID-related work, R&DS revenue grew over 1% at constant currency. And finally, Contract Sales & Medical Solutions’ fourth quarter revenue of $177 million declined 4.8% reported and 3.2% of constant currency. Now for the full year, revenue was $15,405 million, that's up 2.8% reported and 3.4% at constant currencies. COVID-related revenue totaled approximately $110 million for the year. Excluding all COVID-related work from this year and last, constant currency growth and revenue was 5.5% for the year. Full year Technology & Analytics Solutions revenue $6,160 million, that was up 5.1% reported, 5.7% at constant currency and 6.5% excluding all COVID-related work at constant currency. Full year revenue in R&D Solutions was $8,527 million, up 1.6% on a reported basis, 2% of constant currency. Excluding all COVID-related work growth in constant currency in R&DS was over 5%. And finally our full year CSMS revenue was $718 million, down 1.2% reported but up 1.4% at constant currency. As Ari mentioned in his opening remarks, the 2024 growth trajectory in TAS played out as we anticipated with improvements every quarter. We had we experienced a softening…

Thank you. [Operator Instructions] Our first question comes from Shlomo Rosenbaum from Stifel. Please go ahead. Your line is open.

Hi, thank you very much. Ari, I wanted to just ask you to dig back in a little bit more on how the operating environment progressed through the quarter and relative to what you were expecting in 4Q? We had some discussion about reassessing of vendor relationships kind of ending or the expectation it would end in the fourth quarter and some of that reprioritizing work ending. We're still talking about some potential volatility for the next one to two quarters. Is that kind of the way you were expecting it coming into the fourth quarter? Or is there any change into about that? And as part of that, maybe you could talk about is there any change in your expectation in those divided contracts that you discussed last quarter? Thank you.

Okay, thank you, Shlomo. Well, no, look, we spoke not that long ago in December in a rally, and we shared there our sentiment with respect to the operating environment. Not much has changed versus what we told you then. That is, it was a difficult operating environment for all the reasons we mentioned then, and I reiterated in my introductory remarks the macro environment consequences of the IRA, a bunch of unexpected large cancellations due to futility reasons we had last year. And then the two large fast burning trials that we had just started that for reasons in the panel of IQVIA were just delayed and because of the nature of these projects they basically pushed back to the back end of 2025. Nothing's changed here. We think the bulk of the cancellations and reprioritizations has occurred. We said then, I repeat now, we're still going to have [indiscernible] of some volatility. And I sitting here, I can't tell you what it's going to be, first quarter or second quarter in December, we were closer to the end of the quarter, so I had more visibility, frankly after one month in a quarter, you can never tell. What are we going to book? What are we going to sell? Which deals are going to come in this quarter, are going to be pushed up to the next quarter, which cancellations may or may not occur this quarter? We have no idea. I'm just always shocked when people are able to predict what their bookings, the net bookings will be in a given quarter. I have no idea. As I stand here one month into the quarter, especially first month of the year, January, not much happens. So yes, I mean, I would say, what is it two-thirds maybe 70%, 75% of the somewhere there, almost two-thirds, 75% of the reprioritization that we know of at large pharma essentially is our own. So there may still be a little bit of fluctuation here in the next quarter or two, but I can't tell for certain what may or may not happen. And with respect to these two trials that were delayed, which was your second question, nothing changed. They're still on. The clients very much want to do them. It causes us to have to maintain some costs, through the year, and that's kind of affecting a little bit our gross margin because we have this shredded cost. But that's okay. We will manage that and we feel good about that. And those will happen. As we said, no change back end of the year.

Thank you.

Our next question comes from Elizabeth Anderson from Evercore ISI. Please go ahead. Your line is open.

Hi, Ari. Hi, Ron. Thanks so much for the question. I was wondering if you could give a little bit more color on two things. I think you've been given some nice pharma color. I was wondering if you could talk a little bit more about the biotech environment, how that's going, how you're sort of seeing RFP flow? Are you seeing any kind of unlocking of some of the funds that were raised last year but not spent? And then also talk a little bit more about what you think the drivers on the real world evidence acceleration are? Thank you.

Okay, all right. So look, the biotech funding, which is a sort of a leading indicator of what is going to happen in terms of the booking environment for that segment, has been strong. Okay. We consistently use the same, stats, and according to those facts, it's over $100 billion for 2024. There's been fluctuation, quarter-in, quarter-out. But that's the number, and that's a huge number. That's a record number ever, if you exclude the two years of 2020 and 2021, which were, I think $130 billion and $120 billion [ph], respectively. But I mean, last year, what was the number last year, guys, for? It was like in the $70 million – $71 million [ph] last year. Okay, so significant growth in funding. Now, as we said before, just because biotech gets funding today doesn't mean that it translates into a clinical trial award the next day. Okay? It takes time and take six months, take a year. But it's a good, strong leading indicator. And we saw funding start to pick up already a year ago. And therefore, we're still, we're starting to see this RFP flow, as I said, was up mid single digit for us across the portfolio, which again, in the current environment is very, very good. And EVP was higher than that. Okay. Higher than the 5%. And yes, so that's about the environment. So I think we feel good about the EBP segment, lots of opportunity and we're chasing all of that.

Our next question comes from Ann Hynes from Mizuho. Please go ahead. Your line is open.

Hi, good morning. Just on cancellations, I know going into Q4, you thought it would be a $1 billion. Did it come into that $1 billion or was it higher? And then I know you said that you successfully renewed all your RFP activity. Can you just talk about pricing on those renewals and how that's playing out from a competitive landscape? Thanks.

Right. Well, first of all, I never said the word a billion. I said that historically the average quarterly cancellations is about $0.5 billion of quarter-in, quarter-out. I mean, identify anyone to predict what the cancellations would be in a given quarter ever. That's it's a flow, and there were calls where we had $300 million where there were calls where we had $600 million. But on average, that's kind of the number, okay? And if you take a look at the past and so what I said was given the amount of work that large pharma is doing and the scrutiny that they are placing on those programs and the increased level of cancer as we saw through the years, I was suggesting that it wouldn't be surprising the fourth quarter was double that. And basically it was that it wasn't a billion, but it was way above the higher end of what we could have imagined. So it was somewhere around that. Not far from a billion, but not quite a billion. So it was very high. In fact, for the year and I think that's an interesting, I mean, actually I mentioned it in my introductory remarks. If you look at the average cancellations in a given year, let's take the last three years, for example, it's just somewhere close to a couple of billion [ph], a little bit under $2 billion, right, for the year, okay, consistent with what you experienced. This year, it was almost 50% higher, meaning this year, 2024 was 50% higher than that. And despite that, we grew – our backlog grew and that's because we were able on the growth level to book even more business than last year, offsetting – more than offsetting the higher level of cancellation. So on the demand side, things are good. The cancellations were very elevated. I look at the surprises there, it came essentially as we expected. And, as I said, I just don't know where they're going to be next quarter or two, but we are going to navigate that environment. We feel good that the bulk of that is behind us. You asked about the pricing environment of things, right?

Yes.

So I mean, yes, I mean, look in the current environment you would expect and anticipate that pricing is going to be more difficult because, it's tough competition. There are lots of CROs out there. I mean, people tend to forget, there are 4,000 CROs out there, okay. So they don't all participate in every single bid, but it's not unusual that when, EVPs go around and shop their dealer around, they talk to a lot of people. And on the large pharma side as we mentioned, they decided last year to reopen all their partnerships. And thankfully, we won. We re-signed with all these partners and in fact expanded our portfolio. Large pharma wanted to consolidate the spend and we were on the winning side of that exercise, that was very good and it bodes well for the future.

Great. Thanks.

Our next question comes from David Windley from Jefferies. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my questions, and a good segue from the last. Ari, you've talked a fair amount about the push toward FSP. You've talked about, pricing pressures you just kind of highlighted generally. But that pricing pressure also in FSP with these partnership, re-procurements. And then you've also talked about carrying costs for these mega trials. I was actually surprised at the Investor Day that you could expand margin at all. And so, my question is, what are the cost levers that you're pulling to be able to eke-up your margin just a little bit in the face of all those pressures? And then just more simply in the navigation on gross margin versus SG&A and EBITDA, are we seeing some of that business mix shift toward FSP and P&L already like in the fourth quarter? Thank you.

Thank you, Dave. Well, as always you're right on the mark and you are highlighting essentially the tasks that we have day-in and day-out. How do we offset all of those headwinds? Yes, you are absolutely correct. You expressed surprise how we're able to still grow margins. I mean, bear in mind, since the [indiscernible], we've grown our margins. I mean, we had a quarter with over 25%.

Correct.

...adjusted EBITDA margins. In those days you might recall we were more in the 20% kind of range. So we expanded margins. Now in the early years we sell margins a lot more. Now obviously it's harder, but that is what we do here. We try our best to grow our margins, and try to grow our profits faster than our revenue, that's our operating mode here. How do we do that? Yes, you're right. The mix influences can influence the gross margin. I don't think that that was the case in Q4. I think we see, you could see on gross margin was a little interesting in Q4, but I don't think it is a reflection of the higher FSP mix. The higher FSP mix is in the bookings. It's going to take time, okay? It's not yet in the P&L to be precise and answer your question. It's more quarter-in quarter-out, if you look at Q3, for example, of last year, we had gross margin expansion. So it's really the given mix of revenue that you recognize in a quarter, plus obviously the TAS business also influences that. For example, within TAS, I can tell you that real world is a little lower margin than the rest, right? It's lower margin than data, lower margin and analytics and lower margin than tech. And in the fourth quarter, real world was very strong, really strong. I mentioned it was back to double-digits, and so that, of course, affects the mix. And then I'll remind you that from the fourth quarter, we had these high level of stranded costs on those two mega trials that also affected gross margin. But we pulled the usual levers. And you've been covering us for a while, you know what we do. We constantly evaluate how to optimize the average labor rate across all of our geographies. We constantly explore opportunities to increase our economies of scope that is restructure, flatten the organization. We constantly lever IT infrastructure, and for the past year we've accelerated the deployment of AI tools within our own processes. I mentioned before that the next big thing, certainly operationally within our own workflows is to leverage AI tools as much as can be. And we start to see some impact of that, and we plan to continue use and deployment of those. And that these are the levers that help us mitigate all the cost pressures that you just highlighted. So it's a day-in, day-out deep in the trenches, strong operational discipline, and a relentless focus on continuing to optimize our costs.

Good for you for that. Thank you very much. It was very helpful.

Our next question comes from Charles Rhyee from TD Cowen. Please go ahead. Your line is open.

Yes. Thanks for taking the question. Hey, Ari, just wanted to go back maybe then to the TAS segment; I think earlier you just mentioned, and obviously real world evidence had something like you said double-digit growth in the quarter. Maybe can you give us a sense for sort of the trends you're seeing across between both RWE [ph], analytics and consulting and maybe technology platforms? And give us a sense for within the 2025 outlook, how you see those kind of separate parts of it, kind of the outlook for each of those relative as we think about the mix going forward?

Yes. Well, thank you for the question. Yes. I mean, look, the TAS business should be – should have been and should remain a very resilient business with very consistent type of growth. So info, as you know, is a low single-digit, right? It's about a 1% grower that did not change through the period. That's a very sticky subscription based repetitive business. The analytics and consulting is where we had seen a dramatic impact of the cautionary spending trends we saw end of 2023 and early 2024 because some of that – the significant part of that is discretionary spend and that essentially got shut down. So we had negative orders in analytics and consulting earlier in the year. And as we evolved through year, it went back towards these mid-single-digit kind of mark towards the end of the core year. And then the higher growth businesses, which had been higher growth, real world and tech, basically for the full year essentially went back to high single digits and in the quarter back into double-digits. So that's what we saw. Now because we anticipated this, why did this happen and why were we confident in the recovery is because a lot of the work in real world tech and also some in analytics and consulting are must do activities for our clients when our clients get the drug approved. And as you know, in 2023 was a record year. I think we had 55 approvals in 2023, by the way, 2024 was also good. I think it was about 50 approvals. These are very high numbers. If you look back historically, these approvals typically within six to nine months, you got to launch the project. And that's where we come in. This is where our services play. It's in launching the drug, promoting the drug, commercializing the drug, pricing the drug, et cetera, et cetera. supporting the efficacy demonstrations and safety demonstrations and supporting pricing for the drugs. All of that is also included in our analytics business and in our real-world business. And so those needed to be done and clients delayed that, but eventually they had to do it. And that's what we saw a strong return of the business in the second.

Great, thank you. Appreciate it.

Our next question comes from Jack Meehan from Nephron Research. Please go ahead. Your line is open.

Thank you, and good morning. And a couple of questions for Ron. Just on the income statement. First was the gross margins in the fourth quarter? Was wondering if you could just walk us through the dynamics there. So, they were down a little over 100 bps year-over-year, but you had lower pass throughs. So, was this the trapped cost related to those two trials or just any other color would be great?

Well, the first thing I would caution is, when you're looking at gross margins, you're looking at reported and not adjusted. So, if you're trying to tie the gross margins and SG&A on our income statement back to our adjusted EBITDA, there's a difference right there because those are reported, not adjusted numbers. But having said that, Ari did already give you some insight into that. We have stranded costs associated with those trials that got delayed. Certain of our businesses that had strong growth like the real-world business tend to be lower margin businesses for us. So there's a mix impact in there certainly. But again, anytime you're looking at the reported numbers, remember that things like restructuring or other adjustments that get added back can affect the percentages that you're calculating straight off the income statement.

Got it. Okay, that makes sense. And one for Ari just on the policy front, we're in a couple weeks, into the new administration here. Just any thoughts on, how just implications, for pharma, biotech customers. And then second, one question we get is just any exposure to NIH funding or anything related to that would be great. Thank you.

I mean the short answer to that question is zero. Zero impact, zero NIH, nothing. The longer answer is, I think overall it's going to be a more business friendly environment. That's clear. The new administration apparently from what we've gathered is maybe open to adjust some of the aspects of the IRA looking into differences between small and large molecules and a number of adjustments and we are in dialogue at the appropriate levels. There could be, some reforms have been discussed on the PDM side, on reimbursement side and so on. But I mean again all of that is net positive for us frankly. And yes, I mean we don't. I think there's a strong possibility the new administration will embrace life sciences innovation sector more positively relative to other competing economies like China or other or Europe and support more ongoing investments of U.S. based research, manufacturing, et cetera. I think there are a lot of positives here and I don't see, any of the noise around the specific nominations affecting us at all. Frankly, I think that's just basically noise, what we see and our dialogue so far has been actually very constructive and very positive. We're very pleased with the nominations at Head of the FDA and Head of NHS. All of those are very, very good, good relationships and they all support strong evidence-based science, which is exactly the business we're in. The M&A environment will be more favorable. I think all of that are net positives.

That all sounds good. Thank you.

Our next question comes from Michael Ryskin from Bank of America. Please go ahead. Your line is open.

Great. Thanks for taking a question. Ari, I want to go back to something you touched on earlier. You made some comments in the prepared remarks in terms of pharma reprioritization, sort of working through it. Still expect maybe a couple quarters of some volatility going forward, but thinking you're mostly through it. I think you said something about 70% to 75% of the rate prioritization is done. Just wondering sort of how you're arriving at that number. Just put a blindly. I mean we've had some announcements just in the last 24 hours and we just seems like there's still, you never know, companies could come back and decide they're going to do more and a second cut in the third cut and the fourth cut. So just what are the conversations you're having with the pharma companies? Especially, your top 20…

Yes, thank you. Thanks for the question. When I said earlier, two thirds, 70%, maybe 75%. So I saw Kerry put his head in his hands because he told me for don't give them a number because someone is going to tell you 71%, maybe he's 65%, maybe it's 76%. So look, we're trying to give you a sense. Okay, how do I know? Because we speak to our clients, okay, Day in and day out and we know what they're looking at. So if they're done, they're done. It's not like they're going to go back. Okay. So we know that there are still a few large programs that are kind of where they haven't made a decision. And that's where I say, maybe a quarter to a third of those, more to go. But that's an estimate. Again, I repeat, I have no idea what gets, what is even called. All will get booked. I just don't know. Okay, I'm basing myself on conversations that we have with clients at every level. We know what their pipe is, we know what the programs that they have are, we know what they're prioritizing and they tell us what they are looking at. In fact, in many cases we help them review these programs and reanalyze them. So that's how we know. But it's all best based on these analysis. And that's my best guess for now. I mean, I would caution you always not to focus on a given quarter. Okay, I mean, I see, someone reports that. You've heard me before. I'm going on another tangent here. But, why about this obsessive focus on what's the, what are the bookings in a quarter, what's the book-to-bill that infamous number, what is it? And then you derive implications for…

That's helpful. Thank you.

Okay. All right. Should we have another question or. We're done here. We're done. Okay, fine. Kerry?

Thank you, guys. Thanks for taking the time to join us today and we look forward to speaking with you again on our first quarter of 2025 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.