Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Second 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 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.

Ari Bousbib:

Thank you, Kerri, and good morning, everyone. Thanks for joining us today to discuss our second quarter results. IQVIA delivered another quarter of strong operational results with 5% revenue growth, excluding the impact of foreign exchange and COVID related work, and 8.6% growth in adjusted diluted earnings per share. The fundamentals of the industry remain healthy, which supports our confidence in the outlook for our business. On the commercial side, things are starting to gradually improve, and while customers continue to exercise budgetary cautiousness, we see faster decisions and more focus on carrying out mission critical projects such as those associated with launching new drugs. As you recall, new FDA approvals for 2023 were 55, which was the second largest year since 2017. And in fact, year-to-date approvals are at 21, which is in line with the average for the last five years. In the quarter, TAS came in a little better than our expectations, consistent with the improving leading indicators that we cited earlier this year. Both Consulting and Analytics and real world revenue improved sequentially in the second quarter. We said TAS revenue growth for 2024 was going to be the mirror image of 2023. And in fact, TAS revenue growth was about 3% in the first quarter and it was 4% in the second quarter, excluding COVID and foreign exchange. At constant currency and based on looking -- on forward-looking indicators, we remain confident in our full year forecast for TAS. This implies 6% to 7% growth for the balance of the year, resulting in full year mid-single digit growth, again consistent with the target we established for TAS at the beginning of the year. On the clinical side, while we continue to see the trend we have observed over the past year with large pharma reprioritizing their portfolios of programs and reallocating money to the most attractive ones in response largely to the IRA, demand from our large pharma clients in R&DS remains solid. We are also encouraged by the continued acceleration of EBP funding. In fact, BioWorld reports emerging biotech funding for the second quarter was $22.9 billion, which is up 32% versus the prior year. For the first half, biotech funding is about $70 billion, essentially equal to the entire year of 2023. Obviously, it does take time for funding to translate into RFP flows, but certainly, it bodes well for mid-long term prospects in our EBP segment. In the quarter, R&DS recorded good net new bookings of approximately $2.7 billion, representing a book-to-bill of 127. Backlog reached a new record of $30.6 billion, which is growth of 7.7% versus prior year. And in fact, that's actually 8.1% when you remove the impact of foreign exchange. And of course, all of our usual forward-looking indicators RFP flows, overall pipeline, and qualified pipeline are up. Turning now to the results for the quarter. Revenue for the second quarter grew 2.3% on a reported basis and 3.5% at constant currency. Compared to last year and excluding COVID-related work from both periods, we grew the top line 5% at constant currency, including approximately 1.5% from acquisitions. Second quarter adjusted EBITDA increased 2.7%, driven by revenue growth and ongoing cost management discipline. Second quarter adjusted diluted EPS of $2.64 increased 8.66% year-over-year. Now I'd like to spend a bit of time on highlighting some of our business activities. Starting with us, IQVIA contracted with the Top 20 client to expand the implementation of our commercial technology ecosystem. IQVIA's AI/ML offerings, including analytics and OCE integrate seamlessly into the clients' technology infrastructure and allow our client to manage their data more effectively and to optimize their customer engagement. In the quarter, IQVIA won a multi-year contract with the top five clients to increase the effectiveness of the digital communication strategy. Here, our innovative solution enables targeted audience selection and custom content delivery. In our first quarter call, we shared a preview of a large deal awarded in April for our current OCE offering. This is a multi-year global implementation for a major division of a top five pharma client with 1,000 users, and it's displacing the incumbent. As you know, IQVIA has a rich history of developing AI for healthcare. For the last 10 years, we've invested heavily in artificial intelligence and machine learning algorithms that support our clients from clinical development through commercialization. Our AI offerings are specifically engineered to meet the demanding standards of precision, speed, privacy, and trust that are required in healthcare, whether it's in-patient support services or analytics or pharmacovigilance, our proprietary AI software solutions have become market leading. Let me share a few examples of AI wins and awards in TAS this last call. We launched a GenAI solution, which collects structured and unstructured survey inputs from over 30,000 HCPs across 36 countries in multiple languages and in minutes delivers analytics and insights to our clients on how their interactions and messages about their brand resonated. This work would normally take a week at least for human analysts using existing tools. A Top 10 client awarded IQVIA a contract to implement our centralized GenAI reporting and analytics solution across their entire U.S. sales force, consolidating different legacy tools. IQVIA's comprehensive GenAI solution enables users to ask questions and get contextual responses in the form of charts, graphs, and KPIs. This AI solution also proactively alerts the user of key trends, anomalies, and the changes that would be required. In another example, a U.S. Medtech client selected IQVIA to implement IQVIA's AI solution to onboard and train patients to utilize their medical device for diabetes. IQVIA's AI solution incorporates the real time sentiment analysis, provides automated transcription and smart engagement recommendations. It empowers patients to take more control of their treatment, which, of course, promotes better adherence to treatment protocols. Lastly, for AI in TAS, IQVIA won the award of Best Use of Artificial Intelligence in Healthcare out of 4,500 nominations in the 8th Annual MedTech Breakthrough Awards. IQVIA's leading AI solution here is called SmartSolve Enterprise Quality Management System, eQMS, which simplifies quality compliance and connects regulatory and quality processes for life sciences customers. Moving to real world. IQVIA won an effectiveness study with a mid-sized pharma client focusing on patients who have not responded well to their previous migraine treatments. We were selected due to our strong therapeutic expertise combined with our direct-to-patient approach to accelerate recruitment and reduce site burden. A U.S. EBP client awarded IQVIA a real-world post approval safety and efficacy study in Japan for their coronary intravascular therapy. The aim of the project is to demonstrate the safety and effectiveness of their device, which could potentially increase the clients' market share in Japan, as well as help the client register the device in other regions. Within the quarter, a Top 15 pharma client awarded IQVIA a significant contract to study the effectiveness of a therapy for schizophrenia. The study will use data tokenization to link multiple data sources and then apply AI to provide a comprehensive view of patients pre and post-therapy in real world settings to physicians, patients and caretakers. Finally, you may have seen that IQVIA was recognized by a respected independent third-party research organization as a leader in medical affairs and life sciences regulatory operations. IQVIA's global end-to-end solutions enable medical affairs customers to manage and curate the richness of data coming into the organization, transforming evidence into insights that can enable actionable initiatives. Let me now move to R&DS. Let's start with the trending therapeutic area, obesity treatment. A Top 15 pharma client selected IQVIA Labs to conduct globally harmonized high volume testing to ensure accelerated enrollment. It's expected this will result in a significant reduction of study timelines for this therapeutic area, where speed-to-market is key. Our strength in the vaccine development area led to another major role to conduct a Phase III trial for a new influenza vaccine that will enroll approximately 50,000 volunteers. Turning to oncology, which represents, once again our largest therapeutic area in R&DS bookings this quarter. I'll offer a few examples. A Top 20 client selected IQVIA to conduct a large Phase III oncology study focusing on small cell lung cancer, a disease with a high need for effective treatments. We won this study due to our strong therapeutic expertise, data and analytics capabilities as well as our proven delivery approach, which includes a dedicated delivery unit project staffing that is exclusively focused on the clients' study. By the way, for some time now, we've been deploying this unique delivery approach for large customers, who have an especially complex study portfolio across multiple therapeutic areas. A biotech client selected IQVIA to support a large scale global complex Phase III program to test and validate their innovative cell and gene therapy vaccine for colorectal cancer. Lastly, in oncology, a Top 25 pharma client awarded IQVIA a contract to develop an optimum clinical strategy and to execute a bladder cancer study in the U.S. They were awarded this engagement-based on IQVIA's AI enabled site selection and feasibility solutions that will help the clients meet aggressive timelines. We discussed AI initiatives in TAS and, in fact, AI enablement is also pervasive in RDS. A couple of other such examples; a U.S. biotech client awarded IQVIA for full service clinical trials, which are supported by IQVIA's AI enabled data and analytics, increasing the likelihood of success for each trial reducing the risk of protocol amendments as well as the need to add countries and sites after the trial starts. In another example, we were awarded a Pharmacovigilance Project by a large biotech client to manage all case processing work worldwide using our AI capabilities. The IQVIA AI enabled solution is designed to dramatically improve productivity, reduce cost, and enhance data quality and accuracy. We will continue to share more exciting AI initiatives across the businesses, hopefully, at future investor forums. I'll now turn it over to Ron for more details on our financial performance.

Operator:

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

Ari Bousbib:

Yeah. Thanks, Shlomo. Look, I wouldn't read much into the tweaks in the guidance. It's -- we review all of our business unit forecast and we build all that up and it falls wherever it falls. The FX is slightly more favorable than it was last time we reported. So that kind of is driving a little bit in aggregate, the higher -- a little bit higher on revenue. Again, I wouldn't read much there. EBITDA, it's -- whatever the mix of business fell, okay? When you have a little bit more of certain offerings than others. And as a result, we've got the margin fell whatever it fell. But look, we're still delivering margin growth and even -- I mean, yeah, I see what you mean. I mean, frankly, I didn't even -- we don't focus on that. These are small tweaks, and I wouldn't -- it could vary again next quarter. So there is nothing other than wherever the mix of business fell, frankly. We're still delivering at this level, what's the margin expansion here, about 30 basis points at the midpoint and 50 at the high end. So that's very strong given the markets we've been navigating here from the -- for the first half. And on the EPS, I think it's largely better control of CapEx, which, in turn, more favorability on D&A. And so, it's below the line basically. That drives the EPS -- the higher point on EPS. Again, these are tweaks. I wouldn't pay much -- I wouldn't draw much conclusion on that.

David Windley:

Hi. Thanks for taking my question. Good morning. Ari, you've talked in some of your recent public commentary about price pressure or price expectations from customers in your opening remarks. You mentioned budget sensitivity, I think in the context of TAS. Could you just kind of bring us up to current on your assessment of the market environment in terms of customers' willingness to kind of pay your asking price?

David Windley:

Yeah. Thank you.

Anne Samuel:

Hi. Thanks for taking the question. I was hoping perhaps you could speak a little bit more about the performance of your different business segments within TAS and perhaps where you started to see some of that outperformance. Thank you.

Anne Samuel:

That's great to hear. Thank you.

Elizabeth Anderson:

Hi, guys. Thanks so much for the question this morning. Can you talk about the burn rate maybe in the back half of the year? Is that something you could sort of see based on the mix of business at this point that you think could creep up sequentially? How do you kind of view that as we progress through the back half?

Elizabeth Anderson:

Yeah.

Elizabeth Anderson:

Great. Thanks.

Operator:

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

Ari Bousbib:

Thank you, Max. I'm just -- we are laughing here because when did 1.3 become the benchmark? I mean, I know we reported amazing over 1.3 book-to-bill ratios in the past couple of years, largely because of the COVID studies and so on. But we're very happy with 1.27, we're happy with 1.2. We are happy with these book-to-bills. They are very, very strong. And you're talking about a rebound in bookings. We had excellent bookings. I don't know what -- we are happy with this performance. There's no rebound. It's very good. I think the bookings we reported this quarter are the first -- third highest ever, right. So I'm not sure what the question is with respect to bookings. Did you ask about conversion as well or no, I'm sorry, I didn't…

Ari Bousbib:

That's true. We hand the price.

Ari Bousbib:

Yeah. I'm sorry. Yeah. So again, RFP flows, total pipeline and qualified pipeline in this area are up basically all around. The qualified pipeline, I think, it was up across the number of 12%, was up 12%. And total pipeline is up single digits. RFP grows as well, right, but mid-teens, right?

Ari Bousbib:

Yeah.

Ari Bousbib:

Thank you. Yeah.

Jailendra Singh:

Thank you and thanks for taking my questions. I want to go back to the individual businesses you talked about in TAS -- RWE and Consulting both improving in the second quarter. Last quarter you called out RWE, some recovery after some slowdown in Q4, Consulting taking a step down. How are you thinking about these individual businesses as you think about TAS expectations in second half considering that recovery in consulting remains relatively volatile? And is RWE back to mid to high-teens growth rate or is there still room for recovery there?

Jailendra Singh:

But your real world numbers sound optimistic.

Jailendra Singh:

Yeah, well, may not…

Jailendra Singh:

No. That is -- not like that.

Operator:

Thank you. Your next question comes from the line of Justin Bowers of DB. Your line is open.

Ari Bousbib:

Well, thank you. First of all, it's not like the market is rebounding. I mentioned before that client cautiousness and budgetary discipline continues especially at large pharma. It's not -- didn't go away. But what we did say before was that within the portfolio of offerings that we have, there are certain things that are mission-critical for our clients. And what happened last time -- last year at this time is that we expected those things to happen and they were pushed to the right, okay? They were delayed. We said all along that at some point those things have to be done. And that is what is happening now, and what we see happening in the second half. So it's not like the market overall has grown is that the segments of the market that are -- must-do for our clients are finally happening, and they will be happening in the second half. So that's number one for the market. So from that sense, you could say that the market is a little better in the sense that the clients are willing to spend that money, but, again, I mentioned before, the negotiations are tougher. So to answer the second part of your question, what we are doing differently here is, obviously, being more responsive to our client needs. We are being more accommodating with their terms and we are commercially being more aggressive to make sure that we actually do win those projects that the markets are putting out there, the clients are putting out there for bid.

Ari Bousbib:

Thank you. It's true. It's true broadly. Obviously, the mission-critical stuff is mission-critical and needs to be done. So yeah, that is improving the overall average, but even -- I would say, even for the rest, I think we've seen improved decision-making. Faster timelines. Thank you.

Tejas Savant:

Hey guys. Good morning, and thanks for the time here. Ari, just following up on that line of questioning on TAS. I guess could you share a little bit of color around what gives you confidence to this improved decision-making timeline sort of dynamic continues here, particularly given the election cycle that sort of heating up as we speak? And then, on the analytics and consulting piece within TAS, are you starting to see the work related to those new drug approvals you talked about both year-to-date and last year starting to show up in the project backlog or is that still upside to come heading into year-end in '25? Thank you.

Operator:

Your next question comes from the line of Dan Leonard of UBS. Your line is open.

Ari Bousbib:

Yeah. You want to answer that anyone here? I mean, look, first of all, there is recovery in TAS. We just talked about it at length in the past few questions. So that's understandable. Secondly, the compare is more favorable. We had a deterioration in the fourth quarter last year. It was the lowest quarter of the year, last year. And we said all along that there would be a mirror image in '24 versus '23, that is the first quarter will resemble the fourth quarter, the second quarter will resemble the third quarter, etc. So we do see fourth quarter up. But -- and it's not unusual by the way, there is a seasonality in Q4 that you can go back many years. It's always the case that Q4 is much stronger. So these are the three reasons; one, recovery in TAS accelerating; two, compares; and three, seasonality, which is not surprising. Anything else, guys, you want to…

Ari Bousbib:

Yeah.

Operator:

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

Ari Bousbib:

Yeah. Thank you so much. Yeah. So look, we said all along that it will be -- acquisition would contribute to a better point to our growth this year. And we wish we would do more acquisitions, but valuations continue to be high and we are -- we have a big pipeline, but it's not always the case that we are able to close. So far for the year, it's a little bit more than a point and it's a little bit more entire than in RDS, but that's it. And look, just -- we haven't spent much so far, but we hope to spend more in the second half and we'll see what happens. Yeah.

Michael Ryskin:

Great. Thanks for taking the question. I'm not sure you addressed this before, but there have been a couple of prominent cancellations of clinical trials in the industry in the last couple of months. You called out one specifically on 1Q that impacted your performance then -- in your book-to-bill then. Just wondering if cancellations have trended any better recently. I know that the prominent ones always make the news, but just wondering what's happening behind below the surface on that trend.

Operator:

Your next question comes from the line of Jack Wallace of Guggenheim Securities. Your line is open.

Ari Bousbib:

Yeah. I don't think I can give you much more color than that. It's just what the chips fail, okay? So [Technical Difficulty] and I know that this would have attracted two questions. We would have to look at it again at this range, it's just -- we just build up our forecast and that's where the most appropriate range fell. It could be also -- we did a little bit more acquisitions this quarter and generally, acquisitions come in at very low margin in the first year. So that could have impacted. It's not a big different number, frankly. So in the grand scheme of things. So I can't give you much more color than that.

Ari Bousbib:

I think they liked our solution better. I think it gave them more ability to achieve their goals. I can't go into the details of the program, and that's -- yeah, they just like it better. Thank you.

Patrick Donnelly:

Hey, guys. Thanks for taking the questions. Ari, you talked a little bit on the capital deployment side about wanting to do more in M&A. Maybe the environment is not too friendly at the moment. But how are you thinking about priorities there? I know you guys have bought back some stock. You seem pretty comfortable with the leverage ratio. So maybe just talk through your priorities, M&A landscape, and then again, I mean, any targets on the leverage side with the debt would be helpful.

Operator:

Your next question…

Operator:

Understood. Your last question comes from the line of Matt Sykes of Goldman Sachs. Your line is open.

Ari Bousbib:

Thank you. Well, look, first of all, when there is a timeline between funding and -- on RFP and then the timeline between an RFP and a booking. So if -- this is a business that has long cycles. So it's good that we have just as we were cautioning you not to panic when funding declines, and we said it's not going to affect us for a while. We don't get excited because funding this quarter was very strong. Yeah. It's good for our midterm and long-term prospects, but it's not like it's going to affect the mix. Also, we have a very large backlog, the largest in the industry. And it's not going to meaningfully change the mix of what we do in the next few quarters and what's large pharma, what's EBP, what's full-service versus what FSP. But you are correct that the more EBP, the more full-service, and that certainly helps mitigate the recent trend we've seen where, as we discussed in the past, large pharma has been swinging the pendulum a little bit more towards FSP as it has happened many times in the history of this industry. So you are correct, from that standpoint, that -- as more EBP funding is there, there'll be more EBP work in the quarters to come. And therefore, when that backlog converts into revenue, there'll be a higher mix of full-service versus FSP relative to what it is now. Thank you.

Kerri Joseph:

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

Operator:

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.

Ari Bousbib:

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our first quarter results.

Operator:

[Operator Instructions] We'll take our first question from Elizabeth Anderson at Evercore ISI.

Ari Bousbib:

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

Shlomo Rosenbaum:

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.

Ronald Bruehlman:

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.

Max Smock:

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.

Ari Bousbib:

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.

Anne McCormick:

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?

David Windley:

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.

Ari Bousbib:

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.

Operator:

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

Operator:

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

Ari Bousbib:

What was the first part?

Ari Bousbib:

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.

John Kim:

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?

Ronald Bruehlman:

Yes.

Charles Rhyee:

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?

Operator:

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

Ari Bousbib:

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.

Operator:

Our next question comes from Luke Sergott at Barclays.

Luke Sergott:

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?

Operator:

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

Operator:

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

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Treasury. Mr. Childs, please begin your conference.

Ari Bousbib:

Thank you, Nick, and good morning, everyone. Thank you for joining us today to discuss our 2023 results. You saw that we had a good quarter. Let me start the call by sharing the latest of what we are seeing in our end markets, along with our key accomplishments for 2023. On the clinical side, demand from our R&DS clients remained strong. Net new bookings for the quarter exceeded $2.8 billion, the second largest quarter in IQVIA history, representing a quarterly book-to-bill of 1.31. Our quarterly RFP flow was up 13% year-over-year, driven by EBP and large pharma. Our qualified pipeline grew double-digits versus prior year. Emerging biotech funding was strong. According to BioWorld, fourth quarter EBP funding was $21.6 billion, the highest quarter in the last two years continuing the sequential improvement we've seen throughout the year. For the full year, EBP funding for 2023 was $70.9 billion, up 17% versus the prior year, and that represents the largest year on record, if we exclude the outlier years of 2020 and 2021, when there was dramatic outstanding due to COVID. As we close 2023, we're proud of what we have achieved in R&DS. The business booked $10.7 billion of net new business, including record high service bookings of $8.4 billion. Our backlog stands at $29.7 billion, and that's up 9% year-over-year. The business added nearly 400 net new customers in the year. We made great progress with our clinical research strategies. We significantly expanded our R&D site network and management organization through strategic acquisitions that offer clinical research coordination study feasibility and patient recruitment capability. We further expanded the capabilities of the lab business through the launch of a new synthetic antibody discovery offering, which is differentiated from the traditional animal-derived antibodies that are used by our competitors. And we partnered with the Coalition for Epidemic Preparedness Innovations, CEPI, who enhance the world's ability to rapidly conduct clinical research for vaccines and other biological countermeasures against emerging infectious diseases in underdeveloped countries. Turning to TAS. The commercial side of our business continues, of course, to face the macro environment that we've described in the past as our clients remain cautious with their spending and their cost containment. Our results in the quarter were slightly better than what we had expected. Although, discretionary spending has not yet rebounded to the levels that we expect, they will, and it continues to be a headwind. Fundamentally, leading market indicators do point to an upcoming improvement. For instance, the FDA approved 55 new molecules in 2023 and that's almost 50% more than the prior year and it is the highest level since 2018. The spend on new drug launches by our pharma clients is expected to be over $190 billion over the next five years. That's up over 25% compared to the prior five-year period. Frankly, in our own engagement with customers in the recent past, we noted an improved customer sentiment during the quarter. In fact, the pipeline of opportunities remains strong even as decision time lines remain elongated and negotiations more difficult similar to what we indicated last quarter. Based on these dynamics, we continue to expect demand to pick up, but not before the second half of the year. And as a result, we may see the 2024 sequential short trend for TAS to be the inverse of what we experienced in 2023. We might see revenue growth in the first quarter that resembles the growth of the fourth quarter of 2023 and grow to gradually improve as we move to the back end of the year. Now despite more difficult macro environment, the TAS business had some significant achievements in 2023. We continued expanding our commercial technology and analytics offerings. We, in fact, added 33 new clients on our OCE technology platform. We successfully launched a new software platform, which tracks the performance of 1.6 million drugs covering 600 diseases across 93 countries. We successfully introduced a first-in-kind med tech consumption offering that supports the complex journey that medical devices take as they travel from manufacturer to health care providers. And we acquired a quality metric to extend our suite of patient health measurement tools using clinical outcome assessments and patient reported outcomes. Let me now turn to the results for the quarter. Revenue for the fourth quarter grew 3.5% on a reported basis and 2.6% at constant currency compared to last year and excluding COVID-related work from both periods, we grew the top line approximately 6% on a constant currency basis, including approximately 1.5 points of contribution from acquisitions. Fourth quarter adjusted EBITDA increased 5%, reflecting our ongoing cost management discipline. Fourth quarter adjusted diluted EPS of $2.84 faced the continuing headwind of the step-up in interest expense and the UK corporate tax rate increase. Excluding the impact of these items, our adjusted diluted EPS growth was 11%. Now, a few highlights of this business activity this quarter. Let's start with TAS. The midsized pharma client awarded IQVIA, a four-year outsourcing program to support their life cycle strategy of converting established brands to over-the-counter sales in more than 40 countries. Similarly, IQVIA won a four-year contract with a large pharma client to provide global market intelligence via a single globally accessible source of commercial data. In the quarter, we won a significant contract with a large pharma in the dermatology, rheumatology and oncology therapeutic areas. This program will allow our clients to access detailed prescribing patterns in local markets, and enhanced HCP targeting in 18 countries. The CDC selected IQVIA to provide comprehensive monitoring services following the end of the COVID public health emergency status. IQVIA will support the CDC in analyzing data in near real time. On the respiratory virus response, including for influenza and RSV, identifying at-risk groups and improving overall population health. In the quarter, our Patient Services business, which is showing faster growth within our past segment, secured a significant contract with a large pharma that includes adherence monitoring, co-pay support and at-home treatment administration. In our real-world business, the National Health Service of England awarded IQVIA, a large contract to deploy our privacy technology and to enable the NHS efforts to ensure the highest standards of patient data governance and privacy controls. Moving to RDS, a top 5 pharma client selected IQVIA as a key clinical FSP provider. Noteworthy here is that, a competitor of ours had been the 100% sole provider previously. This partnership will help the client improve clinical trial oversight and manage costs more effectively. In Q4, another top 5 clients awarded IQVIA a full-service Phase 2 study on ALS, also known as Lou Gehrig's disease. IQVIA was selected due to our vast expertise in ALS disease as well as our faster recruitment time lines. In the quarter, a biotech client selected IQVIA to conduct a complex trial for a promising cell and gene therapy targeting myositis, which is an autoimmune disease. We were selected due to our AI capabilities that allow us to identify sites and develop an innovative trial strategy. Also in the quarter, IQVIA expanded its partnership with a major pharma company by securing six new global oncology trials, consisting of a mix of early and late-stage trials. We were chosen due to our expertise in oncology and our ability to efficiently manage large complex trials. A leading biotech firm, selected IQVIA to conduct a program comprised of three initial stage studies in cancer research. The client is expanding from local to global development and needed a large-scale partner like IQVIA. In Q4, IQVIA was awarded a major contract from a top 10 global pharma to become its primary pharmacovigilance platform provider. This multiyear program includes replacing their legacy systems with IQVIA's drug safety monitoring technology which uses generative AI capability to automatically extract adverse event information from unstructured data sources. Finally, and before I turn it to Ron for a detailed financial review, I would like to take the opportunity to acknowledge and congratulate our employees around the world for the nice recognition the company just received. For the seventh consecutive year, IQVIA was named one of the world's most admired companies in Fortune's annual survey. And for the third year in a row, IQVIA was named the number one most admired company in our category. Lastly, before turning it over to Ron, I'd like to specifically mention the prestigious recognition received by Christina Mack one of IQVIA's senior leaders, who is the Chief Scientific Officer for our real-world business. Christina was named 2023 PharmaVoice 100 honorary, is a peer-recognized industry-wide honor. We are very proud at IQVIA of Christina's work and our passion for accelerating innovation in health care through the use of evidence-based decision-making. Let me now turn it to Ron for our financial review.

Operator:

[Operator Instructions] Your first question comes from the line of Anne Samuel from JPMorgan. Your line is open.

Ari Bousbib:

Well, thank you, Anne. I mean, look, we -- early last year, we're expecting that things would turn around second half of last year. And as you know, it didn't happen. Now it's got to happen at some point. So, we then thought, well, by the second quarter of later -- at the end of last year's third quarter, I thought, okay, second quarter of 2024. We are now expecting this to happen second half. And in support of all of these, I mentioned some data points in my introductory remarks. Look, the FDA approved 50% more molecules than last year and is the highest level since 2018. That really generally bodes well for the commercial business as our clients prepare for launching those drugs into the marketplace. And those launches come for significant support from the type of services that we provide, whether it's data launch consulting, planning, market access, pricing support and so on and so forth. And in fact, our own market expectations of spend by pharma over the next few years, compares very favorably to the prior period. Now, in our own conversations with clients, we're noting more optimism on the outlook for 2024. But perhaps because we've been hurt before, we've tried to be appropriately cautious in planning. And really, when we build up the forecast for our TAS business based on the pipeline, I might note, I don't think we said that before or even if we report any of these numbers here, but we have a pipeline of opportunities with a very detailed methodology that's been proven over time. And I can tell you that our pipeline for the year for the 2024 year is higher than it has ever been on the TAS business. So that gives us comfort that the forecast is appropriately built and hopefully, we'll be -- we have upside favorability if things work out perfectly well. But we've built enough caution on the forecast here that we feel good about the TAS business for 2024 as we presented it. Now, a word of caution, the business saw a decline in growth through 2023 with every quarter being worse than the previous one. We expect 2024 to be sort of the mirror image of that. That is the first quarter to be more like last year's fourth quarter and the second quarter more like the third quarter, et cetera, with the ramp up through the year and hopefully building momentum as we progress through 2024.

Ari Bousbib:

You mean the cadence? Yes, anyone has any

Ari Bousbib:

Yes.

Anne Samuel:

Great. Very helpful. Thank you so much.

Operator:

Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open.

Ari Bousbib:

Okay. Well, thank you, Shlomo, for the question. There was no specific contract or particular award or anything like that. I would just say that, by segment, the EBP segment was particularly strong. I mentioned funding was very strong in the quarter. The highest on record. Again, if you exclude the COVID years. And so EBP was particularly strong. I'd say with -- again, we don't talk about book-to-bill per segment, but the EBP book-to-bill, if you will, was higher than our 1.31. So, comparatively, we had -- and I would say about 25%. Is that correct, guys? 25% of our bookings in the year were EBP. So that's a little bit of color that I can give you. But nothing -- no one time big award or anything that skewed the numbers pretty strong across the board.

Ari Bousbib:

Right. Correct.

Ari Bousbib:

Well, I don't generally like to comment on competitors. But yes, there have been a number of disruptions sort of company is being acquired or spun off in the CRO space. And that always introduces some level of disruption. I mean some of these companies have been in trouble. The fact that, they've been acquired by private equity or conversely spun off in the public markets. Does that mean that they'll be more competitive, less competitive? It's hard to tell. It's disruption often. Often, happens. If you take a longer view of this question, we believe that our merger seven years ago, significantly disrupted the industry and led to a large number of subsequent transactions which resulted from what we believe was reactions to the clear competitive advantage that we think we established that enabled us over the past few years to gradually gain market share. But other than that, I mean, I don't have any further comments.

Shlomo Rosenbaum:

Thank you.

Tejas Savant:

Hey, guys. Good morning. So my first question here is on the R&D side of things. Ari, can you help us think through just a shift in mix in FSP versus hybrid versus full service work and the margin implications of that? And similarly, sort of any shift in the mix of work as you head into 2024 on therapeutic area basis? And what that means -- what that might for your backlog burn rates?

Tejas Savant:

That's right.

Ari Bousbib:

And then your second question?

Ari Bousbib:

Yes. Thank you, Tejas. No, it's not anything -- any one contract or a specific level, as I mentioned, the overall sentiment bubbling up into a pipeline that I mentioned is the highest that we've had ever. Now, the pipeline doesn't always translate exactly as it is. It's probability adjusted and so on and so forth, but that's a good indication from a metric standpoint that we should be up for the year. And we've built some level of cushion here because we've been burned/delayed last year. And so that's what kind of gives us a little bit of confidence along with the conversations we're having with our clients. Again, I wouldn't -- this is not like -- we're not seeing a sharp uptick all of a sudden, okay? Our clients are -- especially large pharma, very, very focused on cost containment. They've all announced significant cost reduction programs. Some of them in anticipation of really unknown impact of the IRA, some in anticipation of some LOEs coming soon in the next few years or other variables, but the fact is there are these large pharma cost discussions that we're having with clients as well, and we are a significant vendor and therefore, those conversations have tended to be more difficult than they were in the past with respect to negotiations and pricing and so on. That is still there. The number of opportunities, the number of projects, the number of compensations, all of which translate into a pipeline, the request for proposals and so on that we're having are clearly up. And given the life cycle of the sales processes as we know them, we are anticipating that those would concretize into sales towards the back end of the year.

Tejas Savant:

Thanks guys. Appreciate it.

Luke Sergott:

Hi, guys. Can you talk about the -- we keep talking about the TAS recovery, but -- and the big pipeline that you guys have, but can you kind of double-click into what that looks like versus discretionary versus the sticky side? I think there's a lot of confusion about where the weakness has been in TAS and where the strength has been? And if there's actually any change or improvement on the side of like regulatory and medical writing, things like that to give more confidence in that back half recovery that you're talking about?

Luke Sergott:

It does, it does. Thank you. And then I guess a follow-up on the -- there's a lot of concern here. Some of your peers talked about biotech RFP slowing in 4Q. But just as you look at the actual step-up needed to maintain the book-to-bills and the bookings levels that you guys have had. Do you see that, that level of RFP volume across all your segments is enough to sustain it over the next six months? Or could we see some softening here maybe in the 1Q? And obviously, this is just more of a quarterly dynamic as the full year kind of paces out as what you're talking about. But just when you're thinking about the actual bookings getting -- you're closing that sales cycle, could some stuff get pushed out to more of the back half of the year.

Luke Sergott:

No, that's why I'm in my seat and you're in your seat. Appreciate. Thank you.

Operator:

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

Ari Bousbib:

The question is how much of our bookings was FSP. I think a little over 20%, is that correct?

Ari Bousbib:

How much -- can you be more -- well, how much was EVP? 25%?

Ari Bousbib:

Right. And I think FSP is mostly large pharma, right?

Elizabeth Anderson:

And then how would you comment on the rate card as we think about 2024 in terms of both full service work and FSP?

Ari Bousbib:

Yes. No, no, rate card, the rates, labor and so on.

Elizabeth Anderson:

Got it. That’s super helpful. Thank you.

David Windley:

Hi, good morning. Thanks for taking my question. A little bit of a follow-up to Elizabeth there. Ari, we spent in December, quite a bit of time talking about the decision cycle environment with, I think, principally large pharma. So I joined late, but I've heard you describe that your RFP flows look pretty good. Your awards look pretty good. Those things seem to be holding up, but you had described that whether it was IRA or pending loss of exclusivity of important products or whatever that clients were kind of mulling over their prioritizations and processes a lot longer than normal. And I suppose part of that is probably also a little bit of Elizabeth -- your answer to Elizabeth's question around pricing and trying to meet budget cut targets and things like that. How would you -- I'd love for you to elaborate on that environment? And do you feel like you're closer to the end of it? Or are we still in the middle of it? When do we think large pharma will be back the business, so to speak?

Nicholas Childs:

Second highest bookings quarter ever.

David Windley:

Okay. So if I could follow up then. To go the next step and ask perhaps what might be the factors that are influencing the disconnect between a high single-digit to double-digit RFP award pace with a below mid-single-digit revenue growth. So I understand part of that is TAS, I'm going to try to head off a little bit in the past. Part of that is TAS. I know that. So, we'll set that aside. And I know you also attribute some to COVID, but COVID is now small enough that it is like any other big project that you would see come to a conclusion in any given year and ramp transition those people to a new project and ramp that up. So, it would seem that you're to a point where the backlog growth should be translating to R&DS revenue growth, and there's a disconnect there. So to what would you attribute that?

David Windley:

Thank you.

Nicholas Childs:

Thank you very much, and thank you, everyone, for joining us today. We look forward to speaking to you again on our first quarter earnings call in April. The team and I will be available the rest of the day to answer any follow-up questions you have. Thank you. Thank you very much.

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA's Third Quarter 2023 Earnings Conference Call. [Operator Instructions]. 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.

Ari Bousbib:

Thank you, Nick, and good morning, everyone. Thank you for joining us today to discuss our third quarter results. So in line with our expectations, R&DS is performing very well. The TAS business continued to grow, but revenue fell short of what we had expected. About half of our total revenue shortfall came from foreign exchange headwinds versus our previous guidance, and the other half from persistent weakness in demand in the TAS segment. Despite the TAS revenue shortfall, our productivity actions allowed us to deliver on our profit guidance. We continue to receive questions about the health of the industry and customer demand. And I'd like to give you the latest of what we are seeing in the market. Let's start on the clinical development side. Demand in the R&DS segment remains strong. Net new bookings exceeded $2.6 billion, representing a quarterly book-to-bill of 1.24x overall, including pass-throughs. And given that this quarter, there is a significant difference between services bookings and bookings with pass-through, I note that our services bookings were the highest ever at $2.3 billion, resulting in a 1.4x services book-to-bill. Our backlog reached $28.8 billion, growing 11.7% versus prior year, another historic high. Our quarterly RFP flow was up 10% year-over-year with growth across all customer segments. Our strong performance is supported by continued healthy market dynamics. Emerging biotech funding was strong in the quarter. According to BioWorld, third quarter EVP funding was $18.7 billion, the largest quarter this year. Year-to-date, EVP funding through Q3 was up 8% versus prior year. If you look at the first half, large pharma R&D spend, it was above 20% of net revenues, highlighting continued strong R&D activity within large pharma as well. Based on these indicators, the clinical trial industry remains healthy. Our strong market position, market wins, scale and differentiated offerings give us confidence that our R&DS business will continue to deliver above-market growth. Turning now to TAS. On the commercial side of our business, we are obviously facing a tougher macro environment. Our clients remain cautious with their spending and have extended their decision-making time lines beyond what we would have normally expected. I'm sure you also saw that several large pharma have announced significant cost reduction programs. And obviously, we are a significant vendor to large pharma. Now we had anticipated to see improvements as we progress through the year, specifically in the quarter, we usually see activity pick up in September after the slower July, August summer months. It didn't happen. While we still have growth for the segment as a whole, we experienced further declines in our Analytics and Consulting business somewhat slower-than-expected growth in the discretionary parts of our real-world business as well as some impact from the China situation. While the acceleration we are anticipating is taking longer than expected, based on our pipeline, we remain confident that there will be a rebound in demand sometime in 2024. We know this because the pipeline of opportunities remain strong even as decision time lines are elongated, and negotiations with our customers have become more difficult. We also know this because historically, going back 25 years, every time there was a pullback in spend on the commercial side. The industry adapts and comes back within a year or two. With this as context, let's now review the third quarter results. Revenue for the third quarter grew 4.9% on a reported basis, 4.1% at constant currency. Compared to last year, and excluding COVID related work from both periods, we grew the top line approximately 8.5% on a constant currency basis, and that includes approximately 1.5 points of contribution from acquisitions. Third quarter adjusted EBITDA increased 9.1%, driven by revenue growth and ongoing cost management discipline. Third quarter adjusted diluted EPS of $2.49 faced the ongoing headwind of the step-up in interest expense and the U.K. corporate tax rate. If you exclude the impact of these nonoperational items, our adjusted diluted EPS growth underlying was 13%. Let me share a few highlights of business activity in the quarter. And let me start with TAS. This quarter, IQVIA was awarded several noteworthy analytics contracts to support our clients' go-to-market strategies. For example, an EBP clients selected IQVIA to provide analytics around key prescriber and payer trends for their women's health products. In another significant win this quarter, IQVIA secured a large U.S. data analytics contract with a top 10 pharma client that has been buying from a competitor for over a decade. We also received an award from an EBP client to support the launch of their first branded product into the diabetes market. This will be an end-to-end launch solution, including field reps, inside sales reps, OCE, information management infrastructure, data analytics, commercial compliance and co-pay card operations. Also in the quarter, I'm sure you saw that we received an award from Sanofi to deploy our OCE platform within the Middle East and Africa markets. Sanofi has been using IQVIA in many markets around the world to support the HCP engagement. On the tech side, we've been getting some questions about our partnership with Salesforce. And I just want to confirm that IQVIA has been a key life sciences partner to Salesforce for many years now with offerings that span from clinical to commercial. And we plan to continue this strong partnership with Salesforce, combining our life sciences domain expertise and intelligence with sales force technologies and platforms. Moving now to Real-World. We were awarded multiple rare disease studies from both large pharma and biotech clients, highlighting our expertise and differentiated offerings within this growing therapeutic area including innovative study design, patient recruitment and AI-enabled technology to provide unique solutions. A couple of examples. The top 20 large pharma awarded IQVIA a 10-year study to improve patient treatment for a rare genetic liver disease. The Japanese EVP client awarded IQVIA 2 large post-marketing surveillance studies on rare diseases in the circulatory nervous and muscular systems. Moving now to R&DS. We entered into a strategic collaboration with the Coalition for Epidemic Preparedness Innovations, CEPI, aimed at enhancing the world's ability to rapidly conduct clinical research for vaccines and other biological countermeasures against emerging infectious diseases. This collaboration is a key enabler of CEPI's mission goal, which is sponsored by the G7 and G20 countries to develop safe, effective and globally accessible vaccines against emerging disease outbreaks within 100 days. We've also entered into an innovative strategic collaboration with Argenx, a global immunology biotech company leveraging our connected intelligence capabilities we bring together end-to-end asset development services, ranging from regulatory to market authorization to integrated technology-enabled pharmacovigilance safety tracking. This will allow Argenx to accelerate the market launch of new rare disease therapies to autoimmune patients. In the quarter, a top 10 pharma client renewed the FSP partnership with IQVIA as they look to design and launch their new clinical monitoring model. IQVIA will codevelop the solution leveraging our expertise, innovative tech-enabled approach and exceptional delivery performance. IQVIA has remained the sole global medical information center provider by one of our large pharma clients. IQVIA differentiates in the market as the only provider to have successfully utilized an AI, natural language processing solution for medical information. As has been the case in the last few years, R&DS continues to win big in oncology with multiple awards in the quarter, a few examples. IQVIA won a late-stage program with a biotech company developing immuno-oncology therapies, we were selected after successful delivery of an earlier stage trial as well as our unparalleled data analytics to help identify patients and populations with unmet needs. We were awarded a Phase III oncology trial from a large cutting-edge biotech company. IQVIA was selected for our expertise in endometrial carcinoma cancer as well as our ability to accelerate trial start-up. This is an important trial, given the unmet medical need and limited treatment options for patients with this condition. Also, IQVIA was awarded 2 large global oncology trials from a midsized pharma client. IQVIA was selected due to our strategic design and operational expertise in oncology including our ability to manage multiple large complex trials and our experience in managing the unique safety profile of these molecules. With that, I will turn it over to Ron for more details on our financial performance.

Operator:

[Operator Instructions]. Your first question comes from the line of Elizabeth Anderson with Evercore ISI.

Ari Bousbib:

Yes. You're asking -- Elizabeth, thanks for your question. You're asking about contrasting the pullback in spend on the commercial side versus continued strength in R&DS.

Ari Bousbib:

Yes. But there is no pull back on spend in R&DS. I don't think I said that. I said the opposite. Funding in R&DS has been very strong. I'm sorry if I misspoke -- was misunderstood, but there is no pullback in R&DS quite the opposite. I mentioned in my introductory comments that the -- if you look at the EBP sector, which has been under pressure and people have been concerned about, we see EBP funding in the quarter actually higher than it was last year. And I think year-to-date, I mentioned that funding was up 8% year-over-year. So I also mentioned that we are experiencing a strong continued RFP flow growth. It's actually up 10% in the quarter year-over-year. So I think it's quite the opposite. Our world continue at a record high level, again, higher than last year. To give you some more color, our qualified pipeline is up 16% year-over-year and continues to be very, very strong. Our total pipeline as well, very strong, record high historically. I mentioned our book-to-bill in the quarter is 1.24x and basis, including pass-throughs, and when you exclude pass-throughs and you just focus on services, our book-to-bill is 1.4x. Our services bookings were $2.3 billion in the quarter. That's a historic high for us. So again, nothing that we see and we've been handling this point over and over again in the environment or in an all internal metric leads us to believe there is anything changed on the R&DS spend. There are different dynamics. It is true that we have -- we see our clients, large pharma, especially explore new models with more FSP or hybrid type of services awarded. I mentioned we won some large FSPs, which explains, of course, the lower amount of pass-throughs in the quarter in our bookings. But other than that, the spend is strong and our prospects for the business continue to be very strong on the R&DS side.

Ari Bousbib:

Yes. I mean -- large pharma, you saw, I think 2/3 of the top 10 large pharma and we know that, that's basically the case. The vast majority of large pharma companies have announced either publicly or internally a significant cost-cutting program, that's due to the macro environment, which is very challenging. Concerns raised by the IRA and the general issues that we see geopolitical problems all over the world, continuing wars in Europe, the Middle East. And of course, we have the situation in China which has all but frozen the market for multinational corporations in China. So all of those are headwinds plus the companies that were very active during the COVID years are seeing dramatic pullbacks in revenue and all of that is putting pressure on margins. And as a result, large pharma has been -- and I would say, unusually so, very aggressive in launching cost reduction programs. Now I said before that, that is not reflected. So far, we haven't seen that in the R&D side of the house. Again, I want to reiterate very strong strength. I mean a good momentum in the business and all the metrics show that there is no slowdown there. Again, not surprising. It's a long-cycle business. However, we're bearing the brunt of those cost reduction initiatives on the TAS segment where we see that projects that should take a certain amount of time are taking a lot more time to get decided or awarded. And we see our clients negotiating on terms a lot harder than they ever were. And all of that has caused us to come short on the TAS segment in our revenues. But again, we're confident that this is will rebound. We know this because the pipelines continue to be very strong on the TAS segment. And we -- if you look back at every time there was a pullback of source from large pharma in history, whether you go back to the 2008, '10 period or anytime some big legislation was enacted. There was always a little bit of a pullback. And then it came back, the company -- the industry is very innovative and comes back growing and our business goes along with it. So we're confident that we'll come back sometime in '24. Thank you, Elizabeth.

Charles Rhyee:

Just wanted to follow up on the TAS segment here. You talked about sort of longer time lines. But when you're in discussions with clients, do they continue to express an intention to kind of continue with the projects? Or are they sort of just on hold? And how much of this is -- you mentioned the IRA. How much would you attribute to sort of the pharma companies kind of reviewing pipelines and projects overall? And do you have a sense of how long that kind of process could take? You mentioned sort of reacceleration sometime in '24, but is -- do you think that's early next year? Or could that stretch into later next year?

Charles Rhyee:

Sorry, and the portfolio review?

Charles Rhyee:

No, no. On the commercialization side, I misspoke. I meant, how much has the IRA impact is sort of as a -- has that had an effect on when pharmas have portfolio reviews and where they put their discretionary spend, but it sounds like you're saying it's more just the general macro environment that's had an impact on?

Operator:

Your next question comes from the line of Dan Leonard with UBS.

Ari Bousbib:

So again, this is a very -- we thought it would be helpful just because there's uncertainty. And you will recall that even in the -- at the peak of COVID, we decided to give you guidance early. And we're doing this because we hope that, that's helpful to you. Now it's an initial outlook based on where we are in our planning process. We have not completed that planning process. So I would caution you that this is, again, preliminary, and we will come back as is our custom when we release full year earnings early in '24 with detailed and precise guidance by segments, et cetera. Just on your question, we are guiding to mid-single digit overall revenue growth. That includes $300 million of step-down from COVID and I think that's essentially are in R&DS. So if you added that back to our total revenues, that would be another couple of hundred basis points on top of that. And of course, we have -- we expect 100 basis points of foreign exchange headwinds assuming FX rate remains where they are today. So when we say mid-single digits, that's really on a reported basis once you adjust for the COVID step-down and FX, it's more high single digits, which I'm sure you agree for and about $15 billion revenue company is quite an achievement in the current environment. With respect to segment growth, I think it's too early to give it to you. We obviously have an idea, but what should we -- I mean, I just gave it to you when we tell you that the COVID impact is 100% in R&DS, you could just assume that we are expecting -- is actually for now, assume about the same across the segments, that is mid-single digits, I would say, okay, before the COVID adjustment.

David Windley:

Ari, I wanted to focus on margin. You commented in your prepared remarks about productivity initiatives that you took in the third quarter, you're talking about the bookings mix being heavy to service, and so that could be beneficial in R&DS to EBITDA growth. Just wondered if you could talk expansively about any further productivity initiatives that you might be able to take? And kind of what are the drivers to get you to that 50 basis points of EBITDA margin expansion for next year?

Operator:

Your next question will come from the line of Justin Bowers with Deutsche Bank.

Ari Bousbib:

Thank you, Justin, for your question. Yes, we are actively engaged with our customers to help them with their cost reduction programs. Look, we have to, we are a large vendor to large pharma across the board, clinical and TAS. And they come to us and ask us to help them. So we have an opportunity to do that. Obviously, it affects our revenue growth, that's primarily the case in TAS because that's where the pricing changes and the renegotiated terms impact us almost immediately, less so in R&DS, but mostly in TAS. Now the opportunities, if you will, for us, is that in those conversations, we try to offer more services, that has always been the case. That's a traditional way of engaging with our clients when they seek our cost reductions. We try to capture a bigger share of their spend in exchange for being able to deliver those services at a lower price point. And so the benefit for us is longer term, we get a bigger piece as they give us more volume. We've seen that happen, frankly, on the commercial side and on the R&DS side, over the past 5, 6 years and certainly since the merger. And we certainly hope that, that will materialize, but it will take a couple of years to materialize because when clients need to switch vendors, it takes time to let the contract and convey them to us. Your next question was on the...

Ari Bousbib:

It's about -- yes, about 100 basis points, yes. Again, that's the assumption for 2024 at this stage. Yes. That's what's baked in -- when we come back we'll give you formal guidance. This is really not guidance. It's really a preliminary look on where we are. Thank you, Justin.

Shlomo Rosenbaum:

I just want to drill down a little bit more into TAS. You talked about the discretionary areas. Maybe you can just get a little bit more into -- is it consulting, BPO, software data sales? Maybe just a little bit more of detail as to how growth is trending within each one of kind of the subsegments. I know you don't break it out exactly revenue-wise, but it is helpful to kind of think about what's going on beneath the surface there?

Operator:

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

Ari Bousbib:

Thank you, Luke. Yes, you're absolutely correct that an FSP award comes at a lower booked margin than a full-service program. And you're also correct that this has -- is a cyclical development in the industry. I recall very well that at the time we did the merger 7 years ago, and coming into at the time, the legacy Quintiles organization, it was explained to me that the industry was now in the midst of a switch from full service to FSP. And as a result of which, Quintiles at the time had pulled back from servicing these clients because they didn't want to do FSP work given its lower margin profile. I thought at the time there was a strategic error and we since then, of course, have decided to serve our clients with the full portfolio of services, including FSP and including full service and including hybrid and everything else. We serve clients. We don't push offerings. So if at this point in time, our clients are interested in more FSP or more hybrid models, that's what we will sell to them. It is then incumbent upon us to work on our cost structure to try to recover margins when we execute the work at a higher level than when we booked it out, and try to continue to develop cost containment and cost reductions so that we can offset the margin mix impact. Look, we are a very large company we are executing thousands of trials at any given point in time. We manage a portfolio of businesses. Once again, we are about a $15 billion revenue company growing mid-single digits before your account for the step down in COVID revenue and the FX headwind. And we are at adjusted EBITDA margins of 24%, and we are expanding those margins. And we intend to continue that model well into the future despite cyclical headwinds that may occur, whether it is a tougher spending environment on the TAS side, whether it is a switch to FSP from some of our large pharma clients. You saw in the quarter, again, $2.3 billion of services fee revenue, excluding pass-through bookings resulting in a book-to-bill of 1.4x, again, a historic high in our bookings. That included some FSP wins, again, not anything that would move the needle dramatically. But on a large number like this, you can see that we have less pass-throughs, that will materialize in our margin mix in the next couple of years, not next quarter, obviously, and we fully intend to offset that with our cost reductions and continue to increase our margins. Thank you for your question.

Jailendra Singh:

I want to ask about the capital deployment strategy over the next 12 months. Has there been any change there in terms of your priority to pay down debt versus buyback shares or even M&A allocation? And one quick clarification, what is the magnitude of the swaps rolling off next year?

Ronald Bruehlman:

Yes, we have about $800 million of swaps rolling off in the second quarter of 2024. Adding to that -- add anything to that, which is at about an average rate of about, call it, somewhere between 2.5% and 3%. So it will be a headwind next year, but not to the extent that you saw on the swap that rolled off this year.

Nicholas Childs:

Well, thank you, everyone, for joining us today. We look forward to talking to everyone on our next call. And myself and the team will be available for any follow-up calls and any other follow-up questions you have across the day and over the next few days. So feel free to reach out. Thanks, everyone, for joining.

Operator:

Ladies and gentlemen, thanks for standing by. At this time, I would like to welcome everyone to the IQVIA Second Quarter 2023 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] And just as a reminder, this call is being recorded. I would now like to turn the call over to Mr. Nick Childs, Senior Vice President, Investor Relations and Treasury. Mr. Childs, please begin.

Ari Bousbib:

Thank you, Nick, and good morning, everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered another quarter of strong operational results with 9% organic revenue growth, excluding the impact of foreign exchange and COVID-related work. The demand environment for the industry continues to be healthy, which supports our confidence in the long-term outlook for our businesses. Emerging biotech funding continued its healthy trend. According to BioWorld, second quarter EBP funding was $17.1 billion, up 33% versus prior year and up 10% sequentially versus Q1. Clinical trial starts were up over 10% sequentially compared to Q1 2023. FDA approvals continued their strong momentum, which is a positive indicator for our commercial businesses going forward. There were 26 approvals in the first half of the year, and that's up 30% versus the average of the prior five years. M&A activity in the biopharma sector remains strong with over $90 billion spent in the first half. 2023 is on pace to be one of the largest years in the last decade in both value of transactions and number of deals, and that is with a high interest rate environment. Our Q2 demand metrics showed continued healthy growth. Net new bookings were just under $2.7 billion, which was our second largest quarter ever and represented a quarterly book-to-bill of 1.28. By the way, before I move on, I know that some of you inquired last quarter about our services book-to-bill, and I think some of you are concerned about what that may have implied about our performance. So just to remove any concern, our services book-to-bill this quarter was, Nick, 1.34?

Ari Bousbib:

1.34. And our trailing 12-month book-to-bill is 1.34 overall. And again, for those who asked, it's the same on a services basis. Once again, going forward, if there is any meaningful deviation between our total book-to-bill ratio and the services book-to-bill, then we will let you know. Otherwise, you can assume they are roughly the same. Now as a result of these bookings, our backlog reached $28.4 billion, growing 11% versus prior year on both reported and constant currency basis. Another metric we track is our quarterly RFP flow. And this past quarter, it was the largest ever. It was up 8% year-over-year and 6% sequentially. For the longer-term fundamentals of the industry are certainly very positive. Now in the short term, our clients have continued to be cautious with their spending due to the uncertain macroeconomic conditions and that's reflected primarily, I would say, only in some subsegments of our commercial business segments, that is TAS and CSMS. In the second quarter, these businesses were stable with the TAS segment growing in the second quarter at a rate consistent with the first quarter as we had anticipated in our guidance. Of course, last time we spoke, we expected client spending in these commercial businesses to show signs of acceleration by now. But unfortunately, they have continued to delay decisions. Our pipeline is still there. However, decisions keep being moved to the right. And as a result, we now expect these commercial businesses to perform for the balance of the year similarly to what we saw in the first half. For the TAS segment, that represents approximately 6% growth organically, excluding the impact of FX and the COVID step-down. And that 6% growth organically for the year is actually very strong in the current environment. With that, let's review the second quarter results. Revenue for the second quarter grew 5.3% on a reported basis and 5.5% at constant currency compared to last year. And again, excluding COVID-related work from both periods, we grew the top line 9% at constant currency on an organic basis. Second quarter adjusted EBITDA increased 8%, driven by the revenue growth and ongoing cost management discipline. Second quarter adjusted diluted EPS of $2.43, as expected, faced the headwind of the step-up in interest expense and the UK corporate tax rate change. Excluding the impact of these non-operational items, our adjusted diluted EPS growth would have been 14%. A few highlights of business activity. IQVIA has been awarded a significant contract with a top 10 pharma to implement our full commercial data and analytics solution suite. This suite of offerings will benefit our clients by utilizing insights powered by AI, such as personalized engagements with HCPs; leveraging our multichannel capabilities, including digital; precise geographical sales targeting; and better cost efficiency by reducing the number of resources that are manually generating insights. This initiative positions IQVIA as a strategic partner with this large top 10 pharma client for AI-powered data and analytics solutions. Another top 10 pharma extended and broadened an analytics project to track the sales performance of their top-selling immunotherapy oncology drug in Europe. The project allows commercial teams to continuously track brand performance, factoring AI-generated insights and improve, as a result, execution across seven cancer indications in over 25 countries. In another win, IQVIA was awarded a significant contract from another top 10 pharma client to deploy our OCE Optimizer application globally. This is an AI-powered multichannel sales management application that optimizes HCP engagement in real-time. IQVIA was selected over two other competitor solutions because of the seamless integration that OCE offers with the client's current ecosystem, the superior AI capability and our successful history with these clients in previous global system implementations. Also, in the quarter, IQVIA was selected by multiple clients to deliver regulatory-mandated plus post-approval safety studies in Europe. In each case, IQVIA was selected over preferred providers due to our deep expertise in sourcing data from the local health systems in Europe and our ability to bring multiple databases together in a harmonized manner for research. We were awarded a five-year pregnancy exposure study from an EBP customer to collect and analyze health information from women who take prescription medicines or vaccines during pregnancy and compare results with women who have not taken them. We won this award because of our rich experience in post-approval safety studies in pregnancy and deep experience in epidemiology. In the quarter, IQVIA has been recognized by the Artificial Intelligence Breakthrough Awards with the prestigious Best AI-Based Solution for Healthcare award. IQVIA was recognized for its AI software, including natural language processing and proprietary large language models technology, which analyzes complex and unstructured patient data to provide unique insights into patient care and disease states. This technology is helping clinicians identify and screen at-risk patients, enabling targeted intervention to patients in need. IQVIA continues to differentiate in the application of AI analytics with two of the top 10 pharma companies designating their use of IQVIA AI as their innovation of the year. In addition, both Databricks and Snowflake separately named IQVIA their 2023 Health and Life Sciences Partner of the Year. These awards recognize AI and tech partners for their exceptional accomplishments and joint collaboration. There's a lot going on at IQVIA with generative AI, and we will likely be discussing this at the appropriate time at a future investor meeting. Let me now move to R&DS segment, which had another strong quarter, including several key wins. Our expertise in oncology continues to be a differentiator for us. In the quarter, a midsized pharma company awarded IQVIA two large Phase III trials for gastric and prostate cancer, which are expected to last about six years. The client selected IQVIA due to our therapeutic expertise and infrastructure to run global complex oncology studies as well as our global data assets. Also this quarter, a large FSP client renewed their partnership with IQVIA as a preferred provider this time without soliciting competing bids. This client was a historical lockout account for the historical Quintiles legacy company. We won here due to our FSP expertise, scale and delivery capabilities. In our lab business, the top 10 pharma awarded us a large study in the quarter for a novel drug that improves the quality of life of patients suffering from a serious autoimmune disease that impacts one out of 50 people worldwide. This study is our clients' top R&D program, and it has positioned IQVIA as the largest laboratory service provider for this client. Lastly, I'm proud to share that Sheetal Telang, Vice President of Therapeutic Strategy at IQVIA, has been honored with the 2023 Rising Star Award by the Healthcare Business Women's Association. Sheetal earned the award for strong and innovative leadership of critical industry initiatives, including by increasing diversity and inclusion levels among patients enrolled in clinical trials. I will now turn it over to Ron for more details on our financial performance.

Operator:

[Operator Instructions] We'll go first this morning to David Windley at Jefferies.

Ari Bousbib:

Yes. Thank you, Dave. Look, the environment from what we have been able to see over the past 1.5 years, two years has not changed. I know there have been rumblings about EBP funding on one hand and concerns about the impact of the IRA on the other hand. And it's true large pharma is evaluating the longer-term impact of the IRA and in that context, taking another look at their portfolio of studies, both in-flight and to come. And some of them reprioritized some of the studies. But fundamentally, our business has been sound, strong, growing sequentially every quarter. Our bookings have been beating record after record. So we really did not experience any tremor at all in the market on the R&DS side. And this quarter was just a continuation of what we had experienced. With respect to your second question about staffing and site start-up, attrition rates are back to pre-pandemic levels, which is about 10% to 12%. So, from our -- on our end, things are good. We continue to actively recruit and hire because we're growing organically at a very high rate. And therefore, we need the people to execute the work. So that recruiting is targeted at meeting the incremental demand. Obviously, there's always competition for talent. And right now, we have about 87,000 employees, and we continue to recruit thousands of people a year. So that's on our end. With respect to the site staffing issues, they saw -- frankly, we continue to see some staffing issues at some sites, but it's really, to a lesser degree than in prior, let's say, probably half a year or three quarters, and it's already dramatically reduced. So really, we are essentially getting back. I'm not going to say to 100% staffing levels at the site because there's still, again, are sporadic issues here and there, but it's not -- you're correct, it's not the severe issues we experienced perhaps six months or nine months ago. So it's much improved. Thank you, David.

Operator:

Thank you. We'll go next now to Ann Hynes at Mizuho.

Ari Bousbib:

Okay. I don't think we disclosed by sub-segment, the margins, but it's very good margin, I think, put it this way. The consulting is good margin, and the analytics is also very strong margin. A lot of our analytics work is delivered out of offshore centers in Bangalore, in Manila. And we generate good margins. It's a lot of standardized work. We have workflows that we use in processes that over the years, we've refined. And that work -- when we say consulting, don't think McKenzie-type consulting. Consulting is really, again, a pricing market access study, a launch study, a sales force optimization study. So, these are operationally geared consulting services that our clients utilize to support often the launch of new drugs or the reprioritization of geographic markets or specific restructuring of their sales organization in certain geographies or in certain therapies, those types of projects. And it's not like they are not going to do them. Those must -- are must-do projects. But the environment, the climate, the higher interest rates has kind of put people on sort of on a hold pattern, if you will. The pipeline is there. No one is spending is. I am just not doing the project. And therefore, we would say, well, the prospects are lower. Now, we have -- the projects are still there, but the decision-making seems to be pushed to the right. We were hoping, frankly, up to two, three months ago that things would recover by now in terms of the decision-making and accelerate. And that's why we, frankly, we were hoping that we would get back to the 8%-or-so growth, higher single-digit growth for the TAS segment for the year. We were expecting a strong acceleration, but we haven't seen it materialize in the second quarter. And so as of now, based on what we've seen, I think it's prudent to say that this -- the type of growth rates we've seen for the segment as a whole, which is 6% organically at constant currency and not including the COVID impacts, it should be -- should continue the rest of the year. Thank you.

Operator:

Thank you. We'll go next now to Eric Coldwell at Baird. Baird, excuse me.

Ari Bousbib:

All right. Sure. Of course, Eric. Thank you. So let's start with data, right the core of the business. That has not changed. I would say 90-plus percent of our business for the year on the data side is just locked in by the month of December for the following year. So there's no change there. That's recurring revenue, and not much has happened there. The level of discretion in terms of data by here for the clients is much less than the analytics and consulting segment that we were just discussing. For the faster-growing businesses, real world and commercial tech, now let's take the technology suites. It's not like the revenue is a reflection of the sales in the year. It's -- the revenue generated in technology is longer cycle, corresponds to technology awards from prior periods, from prior years. So nothing has changed there on the revenue side. There is cautiousness, similar to consulting and analytics, on the technology side in terms of new buys and new transitions. There's a number of dislocation in technology going on right now, by the way, both on the clinical side and on the commercial side, the main CRM competitor decided to change their platform. So as a result, clients are kind reviewing their technology decisions on the technology side. We've got new innovations. We've got the main competitors there, Medidata and others and Oracle, are launching a new suite. So, there is dislocation. So, because of that, clients are kind of taking their time to review decisions, but that's not impacting our revenue in year. On the real-world side, again, some of these are longer-term studies. There is a little bit, but again, I don't think that we've seen it affect our revenue year that much. A little bit of cautiousness and perhaps a little bit of delay on the late-phase real-world studies that we've seen. Again, I'm just giving you a really high-level commentary here on -- just to really scratch the business. But fundamentally, it is a 25% piece of the TAS segment, that's consulting and analytics, that's essentially down year-over-year by, I think, about 5%, if I recall. And so everything else is pretty much stable as expected.

Ari Bousbib:

What's your follow-up?

Ari Bousbib:

Yeah. And I think it was done towards the end of the quarter. I mean, I can tell you, so it's a company called Cognitive for which we paid almost $300 million, so clinical site network. As you know, as part of our strategy overall, we are -- we've been acquiring certain assets that have strong patient enrollment capability in specific therapies. So Cognitive is, in particular is strong in internal medicine, in CNS, in vaccines as well and has some large pharma customers. So, we -- the company is headquartered in Arizona. It's -- obviously, it's a significant multiple of revenue. But -- and we acquired that towards the end of the quarter. And we have a bunch of all smaller stuff over here, but that's the -- what else do we have here? We have a $36 million investment in a small--

Ari Bousbib:

Right, right, right. It management organization, yes. That was in psychiatry and smoking cessation. So again, highly specialized site benefit organization we've done a couple this past quarter.

Ari Bousbib:

Yes, yes -- no. So we had already -- we do have -- we had a network that we had started ourselves. But we -- you're correct. I don't think we -- I mean we bought maybe one other one last year, if I remember -- you're correct. Again, these are -- it's not like we are buying dozens of this, but there happens to be that coincidentally, we bought two in the quarter. And that's basically the bulk of the spend that you see there.

Operator:

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

Ron Bruehlman:

I'll take the margin question first, Tejas. Look, there were a couple of things here. Number one, we've had market expansion all year. So it's really good indicator that it's credible to say we're going to have it in the back half of the year. We have a number of productivity initiatives underway to reduce cost. And those tend to be, of course, more back-end loaded. You get more benefit as you go through the year. So that's certainly going to support margins in the back half of the year. I think you have -- another thing that's happening is some of the labor cost pressure that we've been feeling over time on a year-over-year basis. You're starting to kind of lap that and get more pricing benefit in as well. So it's a combination of factors. Now all those factors overcome a little bit of drag from mix. For instance, the info business, which is -- tends to be a profitable business, never grows as fast as the rest of the business. So we're very confident in the margin outlook for the back half of the year, and those are the reasons.

Tejas Savant:

Thanks, guys. Appreciate the color.

Operator:

We'll go next now to Luke Sergott at Barclays.

Ari Bousbib:

Thanks for the question, Luke. I'm not sure what you mean by R&DS coming back. I mean it's very strong. The R&DS segment is not experiencing any delays in decision-making that we can see, frankly. Again, we had another record quarter of bookings. Nothing's changed there. And our RFP flow, again, is at a record level. I could spend time giving you stats on the -- on our leading indicator metrics on the R&DS side, a qualified pipeline and the pipeline overall and so on are at a record high, and recontinue our sales activities as before, again, nothing -- no sign of delaying decision making on R&DS side. I want to be very clear on that. On the TAS segment and CSMS and again, it's largely affecting the consulting and analytics segment. And I would say almost exclusively, the issue is I can't quantify in month. I mean the stuff that's in our pipe that we've had since the end of last year. And here we are, August 1, and the clients on that specific opportunity still hasn't decided to -- everything is negotiated, and they know they have to do the study, but they could do the study next year. So. whatever clients -- on that side of the business, clients are basically saying to themselves, well, do I need to do this now? Or can I keep the can another few months? So. this stuff has been our pipeline six months, and we haven't taken it out because the client still is telling us that they want to do it. They just haven't signed yet. So, yes, I mean it's a bit in the time frame that you're talking about. It would have taken a month or two, and it's taking six months or more.

Ari Bousbib:

It's really all over. Every client has -- it's hard to -- it weighs on everyone. Is there going to be a recession? Is there going to be a recession? Maybe we should delay the launch in Portugal. Maybe we should not look at our sales force now. If we do this next year, maybe that project that we were planning to do -- to evaluate whether we should adjust pricing in consideration of the IRA implications and so on, on this drug, in that market, in that therapy, we push it back. So it's not like I can give you a blanket answer. It's just the environment, the atmospherics are such that -- look, I'm sure someone is going to ask me a question, and I'm assuming it's going to be Shlomo, but our cash flow wasn't too special this past quarter and is the same thing. Why are large pharma companies that are sitting on massive piles of cash not paying their bills on time? Our collections are not where they should be. And it's just -- it's a high interest environment. So people tend to just find all kinds of reasons why there was a comma missing in an invoice, and therefore, we can't pay you and send me by the invoice in two weeks. It's just the environment. I don't have another answer.

Ari Bousbib:

Thank you, Luke.

Ari Bousbib:

Here we go.

Ari Bousbib:

Yes, yes.

Ari Bousbib:

Thank you. So quickly on the real-world evidence, it's been double-digits for one and it's still strong double-digits. So nothing changed there. With respect to AI, we're obviously very excited by the opportunity. This is not new for us, right? I mean we've been working on this for a long time. We've invested since 2015, 2016, and we own the number of market-leading and proprietary AI software engines. We've dedicated AI/ML resources for a long time. And we are extremely well positioned. We apply AI in drug development, discovery, clinical development, safety, market access, medical affairs and, of course, in commercialization to inform promotional and sales and targeting activities. We are using AI in NLP processes, in translations of medical documentations and protocols. That's for the offering part of the business, if you will. On the internal side, we've applied AI to many of our own internal processes. For example, lead to cash, we -- really across a set of processes to create efficiencies operationally. So it is a great opportunity for us and has been for the past few years. Now, how do you use AI to gain competitive advantages? It helps optimize site identification based on the patient populations that we derive from our -- that we mine in our databases, helps optimize patient recruitment techniques based on data and analytical footprint. It helps optimize development -- drug development protocols. We can -- we have support -- it has built predictive enrollment models based on all the protocol criteria thresholds. You're familiar with the next best application in our OCE suite, which leverages the know-how and the historical data to create predictive models of engagement with customers. We've also been developing a novel biomarker database with IQVIA's own natural language processing tools. We've used it in Alzheimer's studies to have an early identification and recruitment of patients with most likely to develop Alzheimer's. A lot of activities, frankly, to expand patient pathways. So if you look into -- I'm sure it's somewhere in our websites or literature, we have over 150 patent pending methodologies and algorithms, more than 30 predictive data disease models, more than 300 life science-specific analytical libraries, I mean I could go on and on. We've got a lot of stuff here on proprietary material in AI. Now this whole buzz around generative AI, as people are finding out, it's not so easy to apply and actually derive precise and relevant insights. And I'm looking forward to presenting why even using -- and by the way, we are working with -- everyone has announced significant generative AI applications and models because it's really -- as always, it's -- if you don't have access to the business rules and to the relevant content, you're going to come up with what they call hallucinations. And we've tried it and we are working with partners -- with technology partners, and it's very clear that we have the sauce internally here that would enable those large language model tools to be a lot more effective and accurate and precise than what they are today in the world of life sciences, where they basically only have access to what's available on the Internet or on public sources. That's why I can say now, but again, it's a very exciting development. Obviously, we are very busy leveraging internally. And there was a question earlier on margins and margin expansion, and it's one of the several initiatives that is helping us generate margin expansion.

Operator:

We go next now to Jailendra Singh at Truist.

Ari Bousbib:

You are asking about the data business?

Ari Bousbib:

Okay.

Ari Bousbib:

Okay, okay. Yes. I mean, look, I don't know what to say here. It's just not the same planet, the only way I can put it. The scale, the global presence in over 100 countries, the level of granularity, the infrastructure -- the IT infrastructure to process, cleanse, cure, connect all that data on a global basis, the business rooms. I mean look at health care, data is chaos. It's -- you can have as much data as you want. If you don't understand it and connect it and cleanse it and know what you're dealing with, it's not really relevant. We have data on about 1.4 billion...

Ari Bousbib:

1.2 billion patients. And that -- I don't think there's anyone that has anything resembling what we have. I mean I just don't know what it's like.

Jailendra Singh:

Got it. Thanks a lot.

Nick Childs:

Okay. Well, thanks, everyone, for joining us today. We look forward to speaking to all of you again on our third quarter earnings call. The team and I will be available the rest of the day to take any other follow-up questions you may have. Thanks for joining.

Operator:

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.

Ari Bousbib:

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%, excluding the impact of foreign exchange. Our RFP flow set a new quarterly record. It was up sequentially 15%, versus Q4 2022. Operationally, attrition levels have continued to decline, and they are now, in fact, back to pre-pandemic levels or slightly below that. Site selection was up double digits year-over-year. This increased productivity helped mitigate the unfavorable impact of the staff's proteges [ph] that investigator site that we spoke about in prior calls. R&DS organic revenue growth at constant currency, excluding COVID-related work, was 17% in the quarter. That was well above the upper end of our expectations. Within TAS, we continue to see some client cautiousness related to discretionary spending. TAS growth for the quarter was 6% organic at constant currency, excluding COVID-related work, and that was within our expectations, but towards the lower end. In summary, industry demand remains healthy despite some cautiousness in discretionary spending, mostly in the short-cycle businesses. The diversification of our businesses allows us to balance the current slower short-cycle growth with the resilience of our long-cycle businesses, demonstrating that IQVIA is a company that can operate effectively under different macro environments. And with that, as context, let me review the first quarter results. Revenue for the first quarter grew 2.4% on a reported basis, 4.7% at constant currency and compared to last year and excluding COVID-related work from both periods, we grew the top line as a company, 11% at constant currency on an organic basis. First quarter adjusted EBITDA increased 4.8%, driven by revenue growth and ongoing cost management discipline. First quarter adjusted diluted EPS of $2.45 declined slightly as expected driven by the onetime step-up in interest rates. Excluding interest expense and the U.K. tax rate headwinds that we discussed in the prior call, our adjusted diluted EPS growth exceeded 9%. I'd like to share a few highlights of business activity in the quarter. Within TAS, a top 10 pharma awarded IQVIA, our first omnichannel marketing deal in the Asia Pacific region. IQVIA's omnichannel marketing program provides client teams with AI ML powered insights and recommendations to deliver effective personalized digital engagements with ACP [ph] In the quarter, IQVIA won an award for our in-home patient services offering. This biotech client is launching a new MS treatment and selected IQVIA based on our ability to deliver testing and monitoring to the patient's home. These differentiated capabilities ease the burden for patients with limited mobility. Moving to the real-world part of our TAS business. IQVIA was awarded a major post authorization safety study to assess the impact and outcomes of prescribing a certain asthma drug to pregnant women with severe asthma. We won this large contract with a top 10 pharma client due to the breadth of our capabilities, including our relevant experience in the safety trials, our strong data and analytics capabilities and increased delivery efficiency with faster patient enrollment. Also in the quarter, we were awarded a large global intervention study with a top 10 pharma to identify high-risk cardiovascular patients by measuring the prevalence of high-sensitivity C-reactive protein. This protein is produced by the liver in response to inflammation in the body. Elevated levels of this protein in the blood are associated with an increased risk of cardiovascular disease, including heart attack and stroke. IQVIA was selected based on our ability to connect lab and clinical capabilities with therapeutic and real-world expertise in a cost-efficient manner. This study will have a significant impact on the future management of cardiovascular patients. Moving to R&DS. Continued strong momentum with our $2.6 billion of net new bookings in the quarter, translating into a book-to-bill of 1.28 in quarter, which brings our LTM book-to-bill to 1.35 in. A few highlights in the quarter. Oncology continues to be our largest therapeutic area. And in the quarter, a high-profile cutting-edge biotech company entered into a strategic partnership with IQVIA. This is a big deal. In fact, we were already awarded our first trial, which is for a novel bispecific antibody with potential development opportunities across several tumor types. Bispecific antibodies are designed to bind 2 different target molecules simultaneously. This project will leverage our end-to-end clinical trial solution, including protocol design, specialized medical and regulatory expertise, biomarker development and our integrated clinical operations, analytics and technology. We really are the only company with the ability to bring together these capabilities which, in turn, helped the client optimize trial design and reduce time to market. Importantly, going forward, this partnership creates multiple opportunities within this client's large oncology portfolio. We continue to have strong success with our clinical FSP [ph] trials business with several recent notable wins, including a significant preferred provider award with a major pharma. This was a competitive win against two incumbents and it further diversifies our portfolio of FSP clients and increases our share in that segment. We continue to deploy innovations in our clinical technology suite. Most recently, we introduced a new cloud-based platform within our research site network that will streamline document workflows and allow real-time collaboration among study teams. We already deployed this new technology to approximately 15% of IQVIA network sites across 28 countries, and we expect to deploy it to 40% of our sites in the next 12 months. The goal of deploying this technology at the site is to increase site productivity, which frees up more time for site support, compliance reviews and continuous monitoring of patient safety and study quality all of which are very important, especially in an environment where we experienced staff shortages at the site. Finally, a couple of nice accolades for our global IQVIA team. First, I am proud to share that our lab business received the prestigious Singaporean President Certificate of commendation, which is awarded to organizations that had a significant impact in the fight against COVID-19. In fact, five of our employees in Singapore received a Public Service Medal Award for their outstanding contributions to manage the impact of the pandemic. This is a nice recognition of the unique role we play in supporting public health. Second, our Scotland-based lab business recently achieved a global green lab certification for its commitment to practicing sustainable science. This certification is recognized by the United Nation's "Race to Zero" global campaign as the international gold standard for lab sustainability best practices towards a zero carbon future. I will now turn it over to Ron for more details on our financial performance.

Operator:

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

Ari Bousbib:

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.

Ari Bousbib:

Thanks, Shlomo.

Anne Samuel:

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?

Anne Samuel:

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

Operator:

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

Ari Bousbib:

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?

Ron Bruehlman:

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.

David Windley:

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.

Operator:

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

Ari Bousbib:

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.

Ari Bousbib:

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.

Ari Bousbib:

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

Ron Bruehlman:

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.

Ron Bruehlman:

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.

Operator:

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

Ari Bousbib:

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.

Max Smock:

Okay, great. Thank you.

Sandy Draper:

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.

Sandy Draper:

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

Unidentified Analyst:

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?

Operator:

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

Ari Bousbib:

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.

Dan Leonard:

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.

Nick Childs:

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

Operator:

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

Ari Bousbib:

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.

Elizabeth Anderson:

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?

Nick Childs:

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.

Justin Bowers:

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.

Nick Childs:

You said the growth on real world - nothing different.

Ari Bousbib:

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.

Ari Bousbib:

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.

Nick Childs:

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.

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Treasury. Mr. Childs, please begin your conference.

Ari Bousbib:

Thank you, Nick, and good morning, everyone. Thanks for joining us today to discuss our fourth quarter and full-year results. As we close 2022, we are very proud of what we've achieved at IQVIA. It was a record year for our R&DS business, we achieved bookings of $10.8 billion, which was the highest ever, our backlog stands now at a record $27.2 billion, and the business added over 275 new customers in the year. We improved access to critical research; we've expanded our decentralized clinical trial capabilities by launching the first self-collection safety lab panel for U.S. clinical trial participants in collaboration with Tasso. Our DCT program achieved GDPR validation in Europe, marking the first time a DCT offering received this data privacy validation. And our connected devices business added 50 new customers, including wins with two top-10 pharma companies. We made significant advancements as well in our real world business. We increased the number of active data sources by more than 30% across more than 50 countries, and we enhanced access to real world data for European and U.S. regulators through our partnerships with European Medicines Agency and the Real-World Alliance. We expanded our digital marketing capabilities with the acquisition of Lasso Marketing, which offers a technology purpose-built for healthcare marketers to execute digital campaigns. We deployed capital of $3.7 billion during the year. This included $1.3 billion in acquisitions, $1.2 billion in share repurchase, $700 million in CapEx, and repayment of $510 million of debt. At the same time, we were able to reduce our net leverage ratio to 3.45 times adjusted EBITDA. 2022 also marked the end of our Vision 22 three-year strategic plan. No one could have predicted the volatile macro environment we would have to operate in during this period. Despite the many headwinds we have faced, since 2019, when we set these goals, we in fact exceeded our Vision 2022 goals. I am proud of the resilience, resourcefulness, and creativity that our employees around the world demonstrate every day in support of IQVIA's mission. It is these attributes that allowed our company to deliver on the commitments we made to you in 2019. And as you know, since the beginning of '22, the industry has been reporting a slowdown in demand for clinical and commercial services caused by reductions in biotech funding, as well as the higher interest rate environment and macro economic uncertainty. As we've discussed before, while we've of course seen anecdotal evidence of these concerns we, at IQVIA, remain confident that the fundamentals of our industry and the demand from our clients remain healthy. And, in fact, we remain confident in our ability to deliver on our 2025 goals. As we begin 2023, there are more molecules in development than at any other time in history. Our RFP flow was up 13% for the full-year. We, in fact, saw acceleration in Q4 to 22%, with double-digit growth in all three segments; large, midsize, and EBP segments. Our net new business reached a record $3.1 billion in Q4, which is up 29% versus prior year. For the full-year, we achieved bookings of $10.8 billion despite the large COVID bookings we had in 2021 that didn't repeat in 2022. And yes, in our commercial business, while we are seeing some short-term fluctuations in discretionary spend categories such as, for example, consulting, demand for our commercial services nonetheless remains on a favorable growth trend. Finally, let me just acknowledge and congratulate our employees around the world for the nice recognition the company received last week. IQVIA was named to Fortune's list of the World's Most Admired Companies for the sixth consecutive year. Importantly, once again, we earned the first place ranking within our industry group. We also rank number one in seven out of nine categories, including innovation, people management, use of corporate assets, social responsibility, quality of products and services, global competitiveness, and long-term investment value. Turning now to the results for the quarter, revenue for the fourth quarter grew 2.8% on a reported basis, 7% at constant currency compared to last year. And excluding COVID-related work from both periods, we grew the top line 10% at constant currency on an organic basis. Fourth quarter adjusted EBITDA increased 11.1%, reflecting our strong revenue growth and ongoing cost management discipline. Fourth quarter adjusted diluted EPS, of $2.78, grew 9% driven by our adjusted EBITDA growth. Few highlights of business activity this quarter; in our technology business, IQVIA recently entered into a milestone agreement with Alibaba Cloud to collaborate in China. Through this collaboration, IQVIA will be the first company to make its Salesforce-based products available on Alibaba Cloud and the only life sciences provider to have a full Salesforce-based ecosystem of products hosted locally and designed to be compliant with China's data residency and privacy regulations. Through our partnership with Alibaba Cloud and Salesforce, IQVIA will continue to extend the OCE suite, delivering innovative capabilities tailored to meet China's specific market needs. As you know, IQVIA's Human Data Science Cloud offers clients a combination of extensive data networks, data integration, and embedded intelligence, all of which help our clients deal with the challenge of increased data complexity and volume. A top-10 pharma awarded IQVIA our largest ever commercial managed services deal where we will take responsibility for managing the end-to-end commercial analytics for all their commercial brands globally. Personalization of care is becoming a focus of our customers' commercial strategy. This quarter, IQVIA was awarded a major patient support program by a top-10 pharma for their [indiscernible] cardiology product displacing the incumbent vendor. And once again validating IQVIA's uniquely differentiated integrated domain expertise, services, and technology platform. As I previously highlighted, demand from our EBP customers has remained high despite the funding levels returning essentially to pre-pandemic levels. As an example, a U.S. based emerging biopharma company recently selected IQVIA to be their end-to-end clinical to commercial partner. IQVIA was selected due to the breath of capabilities, our domain expertise, strong resources and technology such as OCE. IQVIA will support all aspects of their first commercial launch as well as provide clinical trial services for their future indications. In another example, Biostage which is a biotech company developing regenerative medicine treatment selected IQVIA to manage its first clinical trial of their esophageal implant product. Current treatment options for patients diagnosed with esophageal cancer result in only 20% survival at 5 years. In the first use of the implant, the trial demonstrated that the product was able to successfully regenerate tissue to restore the functionality of the esophagus. IQVIA was selected due to our dedicated gastrointestinal team, and our ability and expertise running the most complex cutting-edge cell and gene therapy trials. Within our RNVS, we also signed a long-term collaboration with Clalit, the largest health services provider in Israel to launch the first Prime Site in the region. The collaboration combines IQVIA and Clalit's capabilities in clinical trial delivery, real world research data, and genomics. Clalit operates a network of 14 hospitals and more than 1600 primary care clinics with special expertise in oncology, pediatric rare disease, and genomics. In Oncology, which remains the largest therapeutic area for R&D outsourcing, we continue to experience strong double digit year-over-year growth in bookings. As an example, we expanded one of our preferred partnerships with a top global pharma which awarded IQVIA a large early and late stage trial in multiple oncology indications. We were selected because of our analytics to optimize protocol development, site selection, and operational planning including our ability to recruit patients meeting their diversity targets. So, overall, the R&DS business continues the strong momentum. You saw we achieved new bookings of $3.1 billion in the quarter, the highest in our history. This translated into a quarterly book-to-bill of 1.51 including pass throughs. And excluding pass throughs, the business delivered almost $2 billion of total net new business in the quarter with a book-to-bill ratio of 1.30. For the full-year, our contracted book-to-bill ratio was 1.36 including pass throughs and 1.33 excluding pass throughs. I will now turn it over to Ron for more details on our financial performance.

Operator:

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

Ari Bousbib:

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

Operator:

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

Ari Bousbib:

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

Ari Bousbib:

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

Ron Bruehlman:

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

Operator:

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

Operator:

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

Ari Bousbib:

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

Ari Bousbib:

Yes.

Ari Bousbib:

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

Jack Meehan:

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

Jack Meehan:

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

Jack Meehan:

Thank you.

Luke Sergott:

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

Luke Sergott:

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

Luke Sergott:

All right, thank you.

Sandy Draper:

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

Sandy Draper:

Got it. Thanks, Ari.

Elizabeth Anderson:

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

Elizabeth Anderson:

That's very helpful. Thank you, sir.

Nick Childs:

One more question.

Charles Rhyee:

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

Charles Rhyee:

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

Charles Rhyee:

All right, great.

Operator:

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

Operator:

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

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator instructions] As a reminder, this call is being recorded. Thank you. I’d now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Treasurer. Mr. Childs, you may begin your conference.

Ari Bousbib:

Thank you Nick, and good morning, everyone. Thank you for joining us today to discuss our third quarter results. IQVIA delivered another quarter of strong financial results despite market concerns about slowing demand, broader macroeconomic challenges and the various global geopolitical issues. In fact, indicators of demand both from customers and in the market generally remain healthy. Industry clinical trials starts continue to trend ahead of last year, rising almost 7% year-to-date. The pipeline of active early stage and late stage molecules are both up 8% from 2019 pre-pandemic levels. EBP funding, which has been a lingering concern since the beginning of the year when one of our smaller competitors raised alarms. EBP funding improved in fact, in the quarter, according to Bio World, third quarter funding was $18.7 billion, the highest of any quarter this year. Year to date, funding is running at about a $60 billion annual rate, which exceeds the average of the last five years pre-COVID. Our own RFP flow grew mid-teens in Q3 and RFP flow in both the large pharma and EBP segments are up double digits on a year-to-date basis. Our Q3 book-to-bill was 1.39 excluding pass throughs and 1.27 including pass throughs, continuing our strong results from the first half of the year. And as a result, as you saw, our backlog grew 5.4% versus prior year on a reported basis and 9.4% excluding the impact from foreign exchange. As you can tell, we are not experiencing any signs of slowdown in demand. It also helps that we are extremely diversified. Remember, we serve over 10,000 customers in more than a 100 countries, including all top 25 large pharma clients across the spectrum of therapeutic areas. Now, while demand remains very healthy, as you know, and as we have been saying throughout the year, we have been dealing with operational challenges caused by the global macro environment including wage inflation, high levels of attrition, obviously the ongoing Russia-Ukraine disruptions, reoccurring China lockdowns that are still going on and perhaps that's a newer development, some staff shortages at certain investigator sites. As you know, we have been able to overcome all these issues as reflected in our results for the first nine months of the year. Although as we end the year, we are anticipating some minor delays in the timing of deliveries caused by this macro-disruptions and specifically by the bottlenecks that are created by staff shortages at certain sites and that are delaying the execution of our deliveries. This is why we decided to tweak the guidance a little in the final stretch to the end of the year. A notes on our capital location strategy, as a result of persistent high levels of inflation. Interest rates have been increasing sharply. In response, we're adjusting our capital allocation strategy to include some debt pay down, in addition to M&A and share repurchase opportunistically as in the past. In summary, the underlying demand in the industry and in our businesses remained strong and we are managing through the headwinds caused by the factors I just discussed. Now, let's review the third quarter in more detail. Revenue for the third quarter grew 5% on a reported basis and 10.5% at constant currency. The $22 million beat above the meat point of our guidance range was driven by operational upside in both TAS and R&DS services, offset by continued foreign exchange headwinds. Compared to last year and excluding COVID-related work from both periods, our base businesses grew 14% at constant currency on an organic basis. Notably on the same basis the R&DS business was up 18% and TAS was up 12%. Third quarter adjusted EBITDA increased 11.8%, reflecting our strong revenue growth and ongoing cost management discipline, offsetting the headwinds of wage inflation that are persisting in our business. Third quarter adjusted diluted EPS of $2.48 grew 14.3% driven by our adjusted EBITDA growth. Let me provide some color on the business, starting with the commercial and technology side. The exponential increase in industry data access and complexity has created tremendous new opportunities for inside and evidence generation. When making this data usable requires robust information management capabilities and as you know, at IQVIA, we've been building these capabilities for decades. In the call, the top 10 pharma clients selected IQVIA's human data science cloud to power large scale data and analytics programs by centralizing and harmonizing data for 35 large countries across their primary care and specialty medicine portfolio. We continue to advance digital marketing in healthcare. We're deploying a privacy-first open ecosystem that delivers healthcare information in a timely and personalized manner to meet the fast changing needs of the healthcare consumer. In the quarter, IQVIA acquired Lasso Marketing, which developed an operating system that's purpose built for healthcare marketers to coordinate and execute omnichannel digital campaigns from a single platform. In addition, DMD Marketing Solutions, which you will recall, we acquired about a year ago, was recently selected by a top 10 pharma client to bring to market 3 oncology and biological brands using digital insights to deliver personalized brand content to HCPs that are relevant to their practices and interest. Demand for our commercial technology solutions remained strong. This quarter, the top 20 pharma clients selected IQVIA's commercial technology ecosystem suite to transform its commercial operations into an AI-enabled commercial model. The customer will deploy IQVIA's orchestrated customer engagement suite, IQVIA's master data management and orchestrated analytics in more than 30 countries, driving a 20% efficiency gain in customer coverage and boosting the speed and precision of their older management process. In the real-world business, IQVIA continues to lead in innovative study design that combine multiple IQVIA capabilities. For example, in the quarter, we were awarded a multiyear portfolio of real-world studies in psychiatry from a midsized pharma company. We are combining faster data-driven recruitment time lines with a comprehensive home health infrastructure to reduce the burden on both the patients and the site. In another example, we were awarded a significant contract with a major med tech company to identify early markers for organ transplant rejection to a non-interventional study that combines our med tech, real-world and translational sciences capabilities. Moving to RDS. Our decentralized clinical trial, DCT program, has received independent compliance validation from EU General Data Protection Regulation, GDPR, from Trust Arc, which is the leader in GDPR validation. This is a big deal. This program is highly recognized in the industry as it requires 2 separate independent audits. It's a key achievement for IQVIA as it is the first time any DCT offering has received this European data privacy validation. In addition, we've now expanded our DCT capabilities by launching the first self-collection safety lab panel for U.S. clinical trial participants in collaboration with Tasso Inc., a leader in clinical grade blood collection solutions. Participants in clinical trials can now provide a blood specimen for lab testing in the comfort of their own home without the need to visit an investigator site or have a health care professional visit them, expanding our DCT offerings and capabilities. And of course, as you've seen, the overall R&DS business continues its strong momentum with services bookings in the quarter exceeding $2 billion for the first time ever. This translated into a quarterly book-to-bill ratio of 1.39 excluding pass-throughs. And including pass-throughs, the business delivered over $2.5 billion of total net new business in the quarter with a book-to-bill ratio of 1.27. Over the last 12 months, our contracted book-to-bill ratio was 1.35, excluding pass-throughs, and 1.29, including pass-throughs. I will now turn it over to Ron for more details on our financial performance.

Operator:

[Operator instructions] Your first question comes from the line of Dave Windley with Jefferies.

Ari Bousbib:

Well good morning, David. Thank you for the question and there are many elements of response built in your question itself. You clearly know the industry and what's happening very well. Look as a context as you all know in the field, patient visits have not fully recovered to pre-pandemic levels. So that's point number one. I think it was presented at an industry conference recently. I think it was on October 7 Society for Clinical Research Sites Summit, this issue of staff shortages that are affecting investor side operations was flagged as a development industry-wide. So that, if you will, is on the negative now. You're correct to point to DCT has obviously -- the less we require the patient to actually visit the site, the better it is as a counter to this issue. Now we don't see this issue as a sort of permanent or ongoing thing. It happens to be that what we have been dealing with, and we've been talking about from the beginning of the year, which is very high levels of attrition, people have a hard time going back to work. We have a harder time recruiting the skill sets that we require plus the impact on cost of labor that all of that has, all of these factors in combination are a significant -- or the single most important operational challenge we have seen. And as we've mentioned many times, we've been dealing with that and offsetting the impact of these issues with our productivity initiatives and cost-reduction programs. Now we're not the only ones to experience these staff shortages. The sites also have staff shortages as a result of the same factors. And when they have to prioritize dealing with the incoming flow of patients versus dealing with clinical trials. And so that's a development. You mentioned also the complexity of studies as new factors. And I think this is also correct. There is -- the mix, not just in our backlog, I think it's industry-wide that happens to be the evolution of the market, the mix of studies makes it -- makes the factors I just mentioned, even more acute. As you know, recruitment of patients is much more -- is correlated. The difficulty to recruit patient is correlated with the complexity of the study. Now this is an area where we can shine because we've got our data analytics and our technology, and we've proven many times that we are able to address complex studies and recruit patients better than we would have had otherwise. So which side is going to win, it's hard to tell. But look, so far, I mean, through the year, we've been able to address all of those. I mean you've seen our numbers every quarter we have been able to beat our own expectations, and that's because we've been able to address it. We have a very diversified, large-scale company, and we are able to adjust. We're not dependent on one single study. Had we been 1/10 of the size, we would be highly sensitive to a big study win or a big study loss. We're not. We just tweaked a little bit the fourth quarter numbers here just because we want to make sure we anticipate everything and be transparent and put this out to investors. Thank you for your question, Dave.

John Sourbeer:

I was just wondering if you could talk a little bit more on the inflation and hiring trends. And you also mentioned some attrition in the prepared remarks. Just how do you see this playing out into next year? I know you're not guiding on 2023, but do you see some easing on the trends there? And then on the other side, I guess, how is pricing looking? And are you able to offset any of these pricing -- these inflationary pressures on pricing?

Operator:

Your next question comes from Sandy Draper with Guggenheim.

Ari Bousbib:

Yes. Well, Sandy, and thank you for the question. Look, we are very pleased with the continued strong growth that we are seeing in TAS. You heard us, both Ron and myself, report organic constant currency revenue growth, excluding COVID from both years of 12%. That's really, really strong. And you know that the -- if we think about the business in three buckets and the high-growth bucket includes real world and commercial tech and they continue to be strong drivers of growth. We continue to find innovative ways to utilize real-world evidence for clients, as I described in my introductory remarks, and we care to deploy more of our technology solutions. You talked about digital marketing. So it's true that sales forces, sales reps as a demographic in general, are going down. And so any parts of any business that are reliant on physical interactions between sales reps and physicians, those businesses clearly have a downward long-term trends. So people who are dependent on CRM, for example, are going to experience headwinds. Now as I have mentioned many times before, we have been long ago at the forefront of the transition to digital marketing. Interactions with HCPs are now rapidly evolving towards digital interactions. And I mentioned in my introductory remarks, some examples, we made investments in this area. We bought DMD Marketing last year. We bought Lasso this past quarter. These are unique, this is kind of an operating system that enables pharma clients to buy and decide where to place promotional content. This is where the industry is going. We've made investments. We bought technology and companies that we feel are unique and will enable us to claim our fair share of that market. And we are here to support our clients in this transition. So you're absolutely correct. Overall, the traditional mode of going to market is going away. It's a slow trend downwards, but it is downward, but it is more than offset by growth in digital marketing, and that's what we've been investing in, and that's what's growing in our business. Thank you, Sandy.

Shlomo Rosenbaum:

This one is actually for Ron. Given the rise in interest rates and your focus on retiring more debt, can you give us a little bit of color as to how we should be thinking of the blended interest rate that we should assume on debt? And are you targeting kind of a leverage ratio instead of the mid-3s, low-3s, like how should we be thinking about this just more of an ongoing basis?

Ari Bousbib:

Yes. So I mean, that's the item that we've been working on. And as Ron mentioned, we decided that it was time to retire some of the debt that matures in '24. So we took out 5 10 in just a few weeks ago, a couple of weeks ago. And we're probably going to retire what is maturing in '24. We will retire that in '23. And so we will begin addressing the issue of interest expense. Of course, it's a 1-year issue right? From a comparison standpoint, we likely will have a step-up in interest expense in aggregate for us in '23 versus '22. But from then on, hopefully, rates are going to either stabilize or decrease. If you look at the forecast by the individual governance of the Fed, and you've got these charts with every dots representing each governor's anticipation of rates and they are really all over the map. For 2024, ranging from 2.5% to 5%. So hopefully, at some point, the rates will go down and then it becomes a tailwind, so to speak. But certainly, going to '23, it will be a headwind that we have to address, and we're planning to address and take other actions on other fronts to mitigate that impact.

Justin Bowers:

Just wanted to follow up on the comments around labor. And with -- we're seeing obviously some turnover in -- or some changes in the Bay Area and then some of your clients as well. So I wanted to get a sense of if the labor pressures that you're seeing are isolated in any specific pockets or geographies? And if some of the turnover we're seeing and those other areas provide you an opportunity to either hire talent, notably in TAS or just combat some of the inflation? And then the follow-up to that would be with some of the labor issues at the sites, is there a way to provide us some goal pulse on what the backlog conversion would be over the next 12 months in light of what you're seeing at the site level?

Operator:

Your next question comes from Patrick Donnelly with Citi.

Ron Bruehlman:

Look, the interest expense is going to be pretty much what it is, and it's going to be based upon rate increases and so forth. And we'll do what we talked about in terms of debt reduction. And really what you're looking for is what can we do up above the EBITDA line and above to offset some of the items below, like interest spend, below the line that we have less control over in the short term. And we see our demand environment, as we laid out today, is fundamentally being very healthy. Yes, we highlighted a few executional challenges due to macro factors, but we don't see them as being permanent. And we see the outlook for next year without getting into guidance for 2023. Obviously, at this point, it's being fundamentally strong on an operating basis. Nothing has changed there. We're going to try to continue to drive cost reduction to offset not just what Ari said about the continued labor pressures, which hopefully will abate, but we can't count on that. But also to help offset some of what we see below the line in interest expense. And we'll be coming out with guidance in the February time frame and lay it all out for you then.

Operator:

Your final question comes from Elizabeth -- from Luke Sergott with Barclays.

Ron Bruehlman:

I'm not sure what you mean by the jump off, but...

Ron Bruehlman:

Well, look, I think in any given year, we targeted 80% to 90% of adjusted net income for cash flow. But cash flow is inherently volatile. So 1 year, it may be a lot better, 1 year it may be a little bit less. And certainly, from quarter-to-quarter, you see that to a much greater degree. And we had a not so great second quarter and a much better third quarter. And the reason is pretty simple, our collection -- timing of collections, it was just much better in the third quarter than it was in the second quarter. And nothing has fundamentally changed in terms of our cash flow. We're going to continue driving towards maximizing cash flow, trying to minimize our day sales outstanding and remain a strong cash generator. My only comment there is don't put too much weight on the quarter-to-quarter fluctuations because that's the nature of cash flow. It's not like earnings, it's not accrual-based. So it tends to be more volatile and more difficult to predict on a short-term basis.

Ari Bousbib:

Absolutely nothing changed at all, okay? Overall, RFP flow is 10% up year-to-date, 15% in Q3. What we call the qualified pipeline, which means it's advanced, it's not early stage, it's not speculative, is up 19% year-over-year. Awards in Q3, the awards are -- should I mention the number? The awards in Q3 are 22% up, second highest quarter ever. Plus 10% sequential growth. I mean, I don't know what else to tell you. I'm looking at every number possible. On the demand side, we see no change. It's widespread, large pharma, EBP. We've been saying this for the -- from the beginning of the year. You guys are not believing us, but the numbers are showing, are -- and I guess everyone else is coming to the story as well.

Nick Childs:

Okay. Thank you, everyone, for joining us today. We look forward to speaking to all of you again soon. The team will be available rest of the day to take any follow-up questions you may have. Thanks, everyone.

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star, one again. As a reminder, this call is being recorded. Thank you. I’d now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, you may begin your conference.

Ari Bousbib:

Thank you Nick, and good morning everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered strong financial results this quarter despite the dynamics of the broader macro environment and the various global geopolitical issues. Let me address a few of the key ones. Some of you have continued to ask about the impact of biotech funding on the CRO industry. As we have said on several occasions, the recent decline in biotech funding has not had any significant impact on our business. Our exposure to pre-commercial EBPs remains at just over 10% of our backlog. We have not seen an impact on bookings or RFPs, nor any increase in cancellations or delays in clinical trial work from the slowdown in biotech funding. Actually, RFP dollars from the overall EBP client segment continued to grow double digits in the quarter. In China, the government-imposed COVID lockdowns had a modest impact on our second quarter results, mostly from disruptions to our clinical and laboratory operations. Our commercial business was virtually unaffected. Our experience in managing through prior lockdowns during the pandemic has been helpful in minimizing the operational impacts on site closures. Our guidance assumes that modest impacts on COVID-related lockdowns in China will continue through the end of the third quarter. In Ukraine, we continued to work with sites and sponsors to ensure the safety of our employees and patients while working to mitigate trial disruptions caused by the ongoing crisis. In Russia, we continue to conduct trials currently underway to ensure the safety of patients already enrolled in clinical trials, but we are moving recruitment on new trials to other countries. The financial impacts of the Russia-Ukraine crisis are tracking in line with the expectations we communicated back in April. More generally, we are of course monitoring, as are you, the possibility of a recession. I would just note that over the past 20 years, IQVIA along with the broader CRO industry has shown resilience to economic downturns. During recessionary times over the past two decades, annual S&P 500 revenue contracted by as much as 10% while IQVIA’s clinical business and the CRO industry as a whole never experienced a year of revenue decline. The resilience of the CRO industry likely reflects the long cycle nature of our business, as well as of course the mission critical importance of clinical research and more generally the defensive nature of healthcare. With that as background, let’s review the second quarter. Revenue for the second quarter grew 3% on a reported basis and 7.1% at constant currency. The fully $6 million beat above the midpoint of our guidance range was primarily driven by the timing of pass-through revenues versus our expectations, as well as some operational upside. Compared to last year and excluding COVID-related work from both periods, our base businesses grew 16% at constant currency on an organic basis. Ron will provide additional details in his remarks, including COVID-adjusted numbers for each of our segments. Second quarter adjusted EBITDA increased 10.8%, reflecting our strong revenue growth and ongoing cost management discipline. Second quarter adjusted diluted EPS of $2.44 grew 14.6% driven entirely by our adjusted EBITDA growth. Let me provide some more updates and color on the business in the quarter. The continued strong performance at IQVIA is driven by our highly differentiated capabilities. As you know, the key differentiator for us in the clinical and commercial spaces is IQVIA’s connected intelligence. Let me give you a few examples of how IQVIA’s applications here help our clients solve their most complex problems. IQVIA’s AI-driven next best action platform helps our clients integrate multiple data sources, transforming raw data into personalized recommendations to sales, marketing and medical personnel which of course leads to deeper relationships with healthcare providers. In the quarter, a top 10 pharma client chose IQVIA’s solution to completely transform their omnichannel commercial engagement model and to improve their go-to-market efficiency across multiple brands in eight countries by up to 30%. Another example in the quarter, we were selected by a top 20 pharma client to optimize the delivery of raw brand content directly to healthcare providers for one of their respiratory brands. Our solution here connects digital and field sales channels to deliver highly personalized content that results in high quality, seamless brand experience for healthcare providers. This will improve this client’s digital engagement metrics by 3.5 times. Another area where demand has been growing is pharma co-vigilance. Our platform here combines a unique catalog of over 500,000 safety-specific terms and patterns with natural language processing to mine vast amounts of online data and to identify potential adverse events. In the quarter, another top 10 pharma client selected our solution to reduce the risk of non-compliance and to increase data accuracy, ultimately improving their efficiency by up to 75%. Beyond mass pharma, our commercial solutions are also resonating with EBP clients, especially when they decide to commercialize their assets on their own following approval. For example, in the quarter we contracted with a leading EBP client to implement and manage their entire end-to-end commercial information management and to support their patient engagement and access programs. This includes data provisioning, massive data management, and data modeling. Our ability to offer these services on a fully integrated platform will allow for a more streamlined implementation, generating savings of up to 20% versus multi-vendor solutions. As you know, IQVIA continues to be the global leader in real world evidence. In the quarter, a top 10 pharma awarded IQVIA a major project in medical affairs. The project leverages our AI and ML capabilities to provide near real-time disease insights across five different therapeutic areas. These insights will help identify misdiagnosis and [indiscernible] treatments which will in turn improve patient outcomes. As you know, our ECOA, or Electronic Clinical Outcomes Assessment platform has won multiple awards for its breakthrough patient engagement innovations. The product includes a library of over 1,500 prebuilt clinical outcome assessments which enables sponsors to deploy assessments to patients up to 14 weeks sooner than competitors’ offerings. This efficiency reduces risks to study start-up timelines and allows our clients to capture more feedback from patients, ultimately amplifying the patient’s voice real time. A top five sponsor recently engaged IQVIA to couple this ECOA platform with our patient randomization tool so that we eliminate redundant workflows, improve data accuracy and patient compliance, thereby reducing site on-boarding activities by an estimated 50%. Finally, in the overall R&D as business, we continued our strong momentum, delivering over $2.6 billion of total net new business in the quarter, including pass-throughs. The services bookings also remained at the historic high we have seen recently of over $1.9 billion. This resulted in a second quarter contracted net book-to-bill ratio of 1.34 including pass-throughs, and 1.32 excluding pass-throughs. Over the last 12 months, our contracted net book-to-bill ratio was 1.32, both including and excluding pass-throughs. As you can see, there continues to be strong positive momentum across the business and an unprecedented level of engagement with our clients across our portfolio of commercial and clinical businesses despite the broader environment. I will now turn it over to Ron for more details on our financial performance.

Operator:

[Operator instructions] Our first question comes from Sandy Draper from Guggenheim. Please go ahead, your line is open.

Ari Bousbib:

Yes, thank you Sandy, and good morning to you. I’d start answering your question by simply saying there is absolutely none of those concerns. We haven’t seen any of that. We’re very pleased with the continued growth of our TAS business, really across the board, and you know that we like to think of our business in three buckets

Ari Bousbib:

--45% of the total, and that’s experiencing continued growth, hasn’t abated during COVID at all, and continues to sell through at the same pace. Then we have the labor-based consulting, primary market research, analytics business which grows mid to high single digits and has been very strong through COVID, and continues to be strong essentially at the same pace, and that’s about--

Ari Bousbib:

--25% approximately, so the last balance, the 30% is basically our historic IMS data business, and that’s kind of flattish to up 1% or 2%, quarter-in, quarter-out, and also has been essentially flat in terms of its growth through the COVID crisis. As Ron mentioned, constant--organic constant currency revenue growth for TAS excluding COVID was 10% in the quarter and also 10% for the first half, so again really we’re not seeing anything at all that’s changed versus the pandemic peak, or before the pandemic peak. Continued strong momentum. Thank you Sandy.

Eric Coldwell:

Thank you, good morning. Wanted to hit on capital structure. With the obvious comments about looking at the potential for a recession, rising interest rates, etc., a number of companies have changed their capital allocation and capital structure strategies. I’m curious if you could talk about what you’re doing on those fronts, maybe discuss any terms, maturities or issues with the various fixation instruments you have on your variable rate debt, because I do believe the majority of your debt is effectively fixed at this point, and then what is embedded in your interest rate assumptions for the year and how much has ’22 guidance in total been impacted from your first guidance to current guidance in relation to the interest rate increases that we’ve seen so far. I know that’s a lot, but--

Eric Coldwell:

[Indiscernible] comments, right?

Ron Bruehlman:

Yes Eric, to your specific question, I think you had asked about our--in essence about whether our debt and how much of our debt is fixed rate versus variable rate, so how much is affected going forward. I know this is of interest to the group in any event. About 45% of our debt is fixed rate, just shy of 60% is fixed with swaps. We did have a euro floor that fixed even more of our debt up until recently, but we’re about at the floor now with the recent ECB decision, so--

Ron Bruehlman:

Seventy-five percent--

Ron Bruehlman:

Yes, but going forward it will be more like just shy of 60% fixed. You had asked about what our guidance assumes, and we’ve pretty much followed what the market consensus is there in the U.S. about assuming a couple of 75 basis point increases in the U.S. in July and September, and 25 basis point increases in the fourth quarter two times. For the euro, we have a series of increases, smaller increases assumed out through the balance of the year, totaling just slightly over 100 basis points baked into our numbers. That’s pretty much in line with the market consensus right now. Now, you asked also about how much has interest expense--the increase in rates affected our interest expense assumptions since November, I guess, when we put our initial guidance out. I’ll have to go back and look at that. It’s obviously had an impact, not so much in the first half of the year but more in the second half of the year, obviously, as the rate increases or the pace of rate increases has been back-end loaded in the year. We’ll have to come back with an answer to that, unless Nick has it handy.

Operator:

Our next question comes from Elizabeth Anderson from Evercore. Please go ahead, your line is open.

Ari Bousbib:

Yes, thanks Elizabeth. These are two very distinct questions, so let me start with the second one, the fourth quarter. Look - fourth quarter, there is some level of seasonality in our business, historically it has always been the case both on the commercial side and on the clinical side, and the fourth quarter traditionally is always the strongest one. You are specifically alluding to EBITDA, and I would point that if you go back and look in general, our margins in the fourth quarter are higher than, let’s say, sequentially in the third quarter, for example, and in general it’s about a point higher - you know, maybe a little less than that, maybe a little more than that, depending on the year. That is because on the commercial side, it’s the end of the year, a lot of the budgets tend to be spent and a lot of purchases get done last minute, and obviously both our clients want to do that before they close the year and our sales force pushes, as always, to make the quarter and so on, so forth for more sales at the end of the quarter and at the end of the year, so there’s that kind of momentum on the commercial side, whether it’s data or analytics or just across the board on our commercial portfolio. That’s always the case year in, year out, and this year it’s a little bit stronger than might have indicated in prior years, but it’s not inconsistent. On the clinical side, it’s all driven by the execution of the backlog and when and how it converts, so that’s really--you know, we do a roll-up project by project of when we anticipate the work will be done and costs incurred and revenue recognized, and we do that bottom-up and that’s where it comes out. Again, in general fourth quarter tends to be stronger in the clinical side as well historically, and that is probably because people want to try to execute the work before the end of the year, so that’s not unusual. Agree that’s sequentially a bit more than prior years, but again nothing inconsistent. Ron, you want to say something?

Ari Bousbib:

Yes, just a remark on China, bear in mind it’s less than 3% of our total revenue. We have a strong presence there relative to our competitors and we are doing very well. On the clinical side is where the impact is. Remember, on the commercial side we have exactly zero impact from the lockdowns - that was the case during the pandemic at the peak of it, and it continues to be the case today. On the clinical side, obviously the issue is accessing sites, and when it’s closed, it’s closed. But we have learned during the pandemic how to work with that and to do remote visits, etc., and so far at least, the impact from China lockdowns, which have been extensive, as you know, in Shanghai and Tianjin and some other areas, we have been able to manage through that and whatever financial impact was essentially absorbed in our numbers. Thank you Elizabeth.

Derik de Bruin:

Hi, good morning. Thank you for taking my question. I’ve gotten a bunch of questions from investors along the lines of I think people appreciate that the RD&S business was very resilient during the past recessions, but you’re absolutely right - having done the Quintiles IPO, I remember the growth rates back then. I think the question I’ve gotten some on the TAS business, and just sort of, like, how that goes, particularly on the consulting side of the business, and any sort of potential impact from recession there. Thank you.

Operator:

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

Ari Bousbib:

Yes, so I assume you mean globally, not just Russia and Ukraine. Look - Russia, Ukraine, the first part of your question, we addressed that, as you said, quite effectively. That doesn’t mean that it was easy or that it didn’t consume an enormous amount of management attention and work. Thankfully we were able to reallocate resources and clinical work to other sites. Now, this itself does not add incrementally to the existing burden of the existing sites. Your second point is more--I think is truly valid. It is true we have a lot of work to execute, as mentioned many times. This is our single most important operational challenge, that is execution, and that requires people. People recruiting, retention and development is our single most important operational challenge in the current environment. I think I’ve mentioned before, and I see the trend continuing, the high attrition levels we’ve seen are somewhat plateauing and diminishing. That may have something to do with perhaps a more recessionary environment and people less likely to jump ship. It also may have to do with the fact that we really have a strong book of business and we are, hopefully, I want to believe, a more exciting work environment and more exciting company to be part of. We’re doing our part to try to retain our people. The sites themselves, we are not seeing--I’m sure if you asked specifically the individual, they’d say yes, I’m burnt out. Are we asking people to work more and to be more productive and so on? Yes, but again that’s just the nature of the type of work that we do. We’re not seeing any execution difficulties as a result of people being, quote-unquote, burnt out. We’re not. When people are burned out, they either quite or they ask to be allocated to something else, and that’s what we try to do. We’ve always tried to prioritize the wellbeing of our employees, and during the pandemic that has accelerated. I may not have mentioned this before, but even for myself on downwards, we’ve had a dramatic change in tone and how we address issues with employees’ work flexibility. We do live in a different environment where the considerations for employees, valued employees and skilled employees to remain at the company involve more than just work and compensation, and so we are doing our part to address that. We will be 90,000-plus people by the end of the year, and we continue to hire. In this year, we have hired by the end of the year more than 25,000 people just to replace attrition and to support the growth. We are really a hiring machine. We’ve dramatically, dramatically improved the level of sophistication of our human resource management functions around the world, and the type of analytics and artificial intelligence tools we use to track our employees’ workload are really very unprecedented, so it is an issue and we are managing it. You wanted to add something, Mike?

Operator:

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

Ari Bousbib:

Okay, well thank you and good morning. This is obviously a good question. Again, I mentioned before for the commercial side, I do the same on the clinical side, I am almost daily asking a number of people to monitor activity. Again, I wouldn’t be saying this unless I had a certain level of confidence that so far, as of late last night, I can assure you there simply is no sign that the pipeline--you know, very early indicators is slowing down, the RFP volume is slowing down, and it is across the board in every segment. The second quarter was another quarter of record bookings. I can tell you, I think the awards--the volume was the second highest quarter ever, so we’re just not seeing it. I know there are concerns, and it is true that the volume of funding has gone down, it’s just not translating into a slowdown in either the strength and growth of our pipeline has never as large, record growth and volume, both dollars and numbers, or the RFP volume or the awards or the bookings. Now, you are asking a very, very pertinent question, which is the clients, whether EDP, midsize, large pharma who are requesting proposals or who are in the pipeline, when did they get their funding; and you are absolutely correct - it takes maybe three years, I’m going to say, before the funding raised today is actually spent. A lot of what is going to be disbursed by these companies that have booked--with whom we’ve booked business each quarter is cash that was raised in prior periods, so you want to try to say, well, funding is low now and therefore two years, three years from now, maybe bookings should go down. That’s just not the experience historically. Again, our business is not dependent on secondary public offerings from pre-commercial EDPs. It’s just not. Secondly, a lot of things are going to happen over the next few years where--you know, that’s the benefit of scale. Remember we are all over the world, we have the largest volume of business of any CRO in the world. We’re not exposed to one client, two clients, 10 clients, a segment, another segment, a geography, another geography. At any given point in time, we are working on well over 2,500 trials. We are a big ship, and like every big ship, it’s very hard. You’re not going to see from us 50% growth in a quarter, but on the other hand the converse is also never going to happen. We are a very big ship, and these disturbances in a long cycle business do not affect the direction of our business. Any other comments you want to make?

Operator:

Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, your line is open.

Ron Bruehlman:

It was $125 million, was the FX headwind on revenue on the full year versus what we guided in April.

Ron Bruehlman:

The actual FX headwind, so the FX headwind on our full year guidance--

Ron Bruehlman:

--was $125 million.

Ron Bruehlman:

Correct.

Operator:

Our next question comes from Tejas Savant from Morgan Stanley. Please go ahead, your line is open.

Ari Bousbib:

Well, okay Tejas, thank you very much and good morning. Look - again, your question on the pre-commercial EBPs needing more funding and having issues is a good theoretical question and correct one for the industry, we are just not exposed to those folks. We have very little of our backlog that’s with pre-commercial EBPs. Those pre-commercial EBPs have been carefully vetted because that’s our process, long pre-dating the current decline in biotech funding. We never take on a molecule that doesn’t have very solid science behind it, that our scientific experts have vetted and believe in. That in and of itself is a guarantee that the science will be developed and that the clinical trials will go on independently of the funding, because worst case scenario, that science will be purchased by large pharma. You are seeing it today. You are seeing a number of large pharma companies buying out pre-commercial EBPs because those pre-commercial EBPs may be running into funding issues but the science is good, therefore the trial will continue no matter what. That’s number one. Number two, we are not going to take into our backlog a company that doesn’t have funding. It just doesn’t happen for us. We do a thorough financial vetting of the project before we put it into our backlog, so we don’t have that exposure. Our business model is different than perhaps some other smaller CROs that essentially team up with pre-commercial EBPs and go around to raise funding and they put that into their backlog. We don’t do that, so this is the reason why we’re not seeing anything different to, again, neither the pipeline nor the RFP volume, nor the awards nor the bookings. Again, I’ve got a huge slew of numbers, I’m looking at a very fine level of granularity here. Look at oncology - if we look at our qualified pipeline, which is really--you know, with a very, very fine comb, our oncology pipeline, there are lots of pre-commercial EBPs, and that’s--I am speaking about the qualified pipeline, that’s really, really high probability, it’s up in the quarter 17% - one, seven - year-over-year. You look at internal medicine, where there’s a lot of rare disease stuff, 14% up in qualified pipeline. The pipeline in general for EBP, the pipeline - the pipeline! - is 18% up year-over-year in the quarter. I mean, I’m looking at numbers that are literally record numbers, both in growth and in dollars and in volume, so I wouldn’t be speaking confidently if I didn’t have these numbers. Could I wake up tomorrow and the world is falling apart? I don’t know, but that that’s--you know? If I believed that, I wouldn’t cross the street. I’m looking at numbers. The rest is noise. Did you have another question? You had two questions.

Tejas Savant:

It was on M&A and just prioritizing vis-à-vis repos. Thank you, Ari.

Operator:

Our last question will come from John Sourbeer from UBS. Please go ahead, your line is open. John Sourbeer from UBS, your line is open.

Ari Bousbib:

Yes. Yes, we can hear you.

Ari Bousbib:

Okay, let me give you ’23 guidance - just kidding! I don’t know. It’s a little bit early, and as we discussed over the course of the past hour, there are lots of macro dynamics and so on and so forth. We’re not going to start venturing. There is basically nothing different today from what we told you at the end of last year in the underlying dynamics and fundamentals of our businesses, strategically or operationally. What’s changed is the financial environment and the dynamics of risk because of Russia-Ukraine, because of the energy prices and so and so forth, but that doesn’t affect, as we’ve said over and over again, the underlying dynamics and fundamentals of our business. As I sit here today, those are the same as they were when we gave you long term guidance back in November. Thank you for your question.

Nick Childs:

Okay, thank you everyone for joining us today. We look forward to talking to you after the call and on our next call at the end of the third quarter. If anyone has any other follow-up questions, we’ll be happy to take them. Thank you all for joining.

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, please begin your conference.

Ari Bousbib:

Thank you, Nick and good morning everyone. Thank you for joining today to discuss our first quarter results. IQVIA has very strong financial results in the quarter and that is despite the broader macro environment. On this note, regarding first the tragic situation in the Ukraine, our thoughts and concerns from the beginning has been around the safety and well being of our employees, the patients we support and all those affected by the ongoing events. We've been actively supporting our employees and their families on the ground with evacuation support, relocation services and financial assistance. For example, we accelerated bonus payments and actually we continue to pay our employees there, regardless of their ability to perform any work. In addition, IQVIA capabilities are being utilized to help support the resulting refugee crisis. For example, Ukrainian refugees are entering surrounding countries with medicines and prescriptions and medical professionals in those countries are seeking to identify and convert product information on these prescriptions into their local equivalent. To help, we've established a free online service for medical professionals to search a product name, active ingredients, and strength, and the tool generates a list of matching products in whichever the local country around the Ukraine is. Also, we've been working very closely with our customers, suppliers and clinical sites across the region to ensure continuity of our in-flight clinical trials and ensure of course that our clients are able to continue to support the effective delivery of medicines to vulnerable patients in the region who depend on these medicines. In Ukraine we are providing support to ensure that trial patients who have begun receiving treatment remain on their treatment protocols. We have established direct to patient shipments of investigational medical products and patient call centers in order to ensure patient care can continue. In Russia, we are guided by ethical concerns to ensure the safety of patients already enrolled in clinical trials. We are utilizing our global logistics and procurement infrastructure to facilitate the movement of investigational medical products, lab kits, and samples into and out of the country to minimize potential adverse impacts to patient care. For studies that are in startup or early phase, in both countries, we are redirecting patient recruitment to other countries based on consultations with our customers. Even though a little less than 1% of our overall revenue and approximately 3% of our global patient recruitment come from the Ukraine and Russia, the operational disruptions I just described, will have some financial impact which we have incorporated into our updated guidance. Now, another key focus area for investors in the quarter, as you will know, has been the emerging biopharma funding environment. We received a number of questions on this topic since our earnings release in February and we have addressed those in multiple forums. However, there have been some lingering questions on the same topic and I want to take this opportunity once again to reiterate our comments with a specific focus, a) on the funding environment and b) on our own company's exposure to this EBP segment. I'll start by stating that the concern about EBP funding environment is overstated. I want to support the assertion with four key points. Number one, the industry has observed a slowdown in public funding compared to the record levels in 2020 and 2021, but the private venture capital markets have continued to be strong and funding in the first quarter of 2022 was the third highest ever according to the National Venture Capital Association. I will also observe that these EBP firms are seeking large amounts of cash from the very strong funding cycles in 2020 and 2021. Number two, when there is a reduction in EBP funding or the IPO market contracts, mid and large pharma companies often step up their acquisition activities of EBP companies and frankly, that benefits us as we have long-standing relationships with these customers. In fact, you may have seen the recent acquisition of Checkmate Pharmaceuticals by Regeneron, which illustrates this very point. Number three, history tells us that when EBP funding slows, it does not have a significant effect on our business. For example, following the last EBP funding slowdown in 2015, 2016, our IQVIA biotech unit saw no interruption in net new business and revenue growth, nor any unusual increase in cancellations. And finally, number four, when we look at either our pipeline or RFP activity, we have simply not seen any slowdown, no unusual cancellation activity, no unusual delays in decision making. In fact, in the quarter our overall R&DS RFP dollars were up 13% year-over-year, and RFP dollars from EBP were up over 16%. The broader industry continues to show strength. We're seeing clinical trials start up 7% in the first quarter compared to last year, with a 14% increase in oncology trial starts, which is a therapeutic area, as you well know, that's predominantly sponsored by EBP. Now, let me focus on our own exposure to the same, specifically three commercial EBPs, which are those EBPs that have zero revenue, and are the most vulnerable and exposed to the funding environment. And here I want to make another four points. Number one, as of March 31, pre-commercial EBPs represented just over 10% of our total R&DS backlog. Number two, less than 7% of our overall RFP dollars in the quarter came from pre-commercial EBP. Number three, this exposure to pre-commercial EBP for IQVIA is not only minimal, but also I want to point out and underline that our vetting process for taking on a pre-commercial EBP is extremely rigorous and thorough. The process includes, for example, a review of the clients cash balances, payment history, viability and quality of their science, and of course progress with clinical developments. So, again, said differently, not every EBP who knocks at our door with a molecule that they think is interesting, makes it into our battle. Number four, I will simply remind you that this exposure primarily impacts our R&DS segment. Approximately 45% of IQVIA's total company revenue comes from our commercial businesses. And as you know, there is virtually zero pre-commercial exposure on the commercial side. With those kind of a background, let me now delve into the first quarter results. Revenue for the first quarter grew 4.7% on a reported basis and 6.8% at constant currency. The $23 million beat above the midpoint of our guidance range was driven by strong operational performance across all three segments. And that was of course partially offset by foreign exchange headwinds. Compared to prior year and excluding COVID related work for both years, our core businesses grew about 13% at constant currency on an organic basis. Ron will provide additional detail in his remarks, including COVID adjusted numbers for each of our three segments. First quarter adjusted EBITDA grew 9.1% reflecting our revenue growth, as well as ongoing productivity initiatives. First quarter adjusted diluted EPS of $2.47 grew 13.3%, that was 4% above the midpoint of our guide, which is with about $0.03 of the beat coming from operational improvements. I'll now provide an update on the business and let's start with the commercial and technology side. We've spoken before and you're familiar with IQVIA's connected intelligence framework, which leverages our advanced analytics technology and domain expertise across the entire clinical and commercial portfolio and has been critical in supporting the emerging needs of the pharma industry. I want to give a recent example of how these capabilities are being deployed. In the quarter we entered into a multiyear agreement with Argenx for the development and commercialization of new indications for their rare disease product currently approved for treatments of a rare autoimmune disorder affecting the muscles. Our collaboration with Argenx incorporates IQVIA's Connected Intelligence to support clinical development, real world evidence, regulatory and commercial support to accelerate the development of this product for potential treatment of other severe autoimmune diseases and to expand globally. This is an exciting product with a lot of upside potential. It's currently approved for three -- six indications, has the potential for up to 15 indications. Plus this drug has already been launched in the U.S. and has plans to launch in Europe and in Japan in the next year. Another example of a client selecting IQVIA's integrated capabilities to solve complex problems is [indiscernible], a European pharma client recently selected IQVIA's Vigilance Platform and Regulatory Information Management Technology. This is an area that's a real headache for our clients. And our technology solutions simplify and streamline our processes. [Indiscernible] will benefit from our technology's integrated AI ML capabilities, automation of labor-heavy activities, and easy implementation. To date, over 150 clients have adopted one or more solutions within our safety, regulatory and four different [ph] suites of technologies. In the real world evidence, I'm sure you've seen that we were selected to support DARWIN, or Data Analysis and Real World Interrogation Network. DARWIN is a strategic initiative of the EMA. This is a major win for IQVIA as it draws on our proprietary technologies, methods and deep scientific and operational expertise. It will help us deepen our relationship with healthcare providers and sites across Europe. Moving to Clinical Technology, IQVIA continues to lead the industry in decentralized clinical trials. Our end-to-end solution of integrated technology and services capabilities are being utilized on just over one third of our full service trials globally. Today, we've recruited over 300,000 patients across 80 countries, covering over 30 indications. Now, whether for traditional or decentralized trials, demand for our suite of digital clinical technology offerings continued to increase during the first quarter. To date, over 400 clients have adopted one or more modules within our Orchestrated Clinical Technology suite since launch. One of these key modules for example, is our clinical trial payments solution. This technology ensures accurate, timely and transparent investigator payment processing. It is a key driver of both site and sponsors satisfaction. Four of the top 10 and 25 of the top 30 pharma clients have now selected IQVIA's payment technology solution for their trials. This includes a major award in the quarter with a top 10 sponsor to migrate their entire payment ecosystem across several legacy platforms to our technology. The scale of this technology migration is the largest of its kind in the industry and it encompasses 120 clinical studies across all phases, with over 6000 sites globally. Beyond these client highlights, our overall R&DS businesses continued to see strong momentum in the quarter, delivering over $2.5 billion of net new business, including pass-throughs. This included a record quarter of over $1.9 billion of services bookings, resulting in the first quarter of contracted net book-to-bill ratio of 1.32, excluding pass-throughs and 1.31 including pass-throughs. Over the last 12 months our contracted net book-to-bill ratio was 1.33 excluding pass-throughs and 1.32 including pass-throughs. Our contracted backlog in R&DS grew 9.1% year-over-year to a record $25.3 billion as of March 31, 2022. As a result, our next 12 months revenue from backlog increased to over $7 billion growing 8% from a year ago. As you can see there is a lot of strong positive momentum across the business, regardless of the choppy macro environment. On a final note, IQVIA was named the top CRO in overall reputation by clinical trial sites around the world in the 2021 CenterWatch's Global Site Benchmark Survey. This is a big deal for us. This is a rigorous and independent survey, that is highly respected in the industry. Over 60,000 investigators, trial coordinators, research nurses, and other clinical professionals representing clinical trial sites from around the world were asked to rank and score 29 CROs across 35 performance related attributes. We are proud to have been selected and named the top CRO in overall reputation and specifically, we received high marks, especially high marks for our comprehensive decentralized trials, direct to patient recruitment, and therapeutic clinical regulatory and technology expertise. I will now turn it over to Ron for more details on our financial performance. Ron?

Operator:

[Operator Instructions] Your first question comes from the line of Eric Coldwell from Baird. Your line is open, please ask a question.

Ari Bousbib:

Thank you. Good morning, Eric and thanks for your questions. On the first one, Ukraine, well Ukraine actually is like we're not even 1% or above 1% of our revenue a little less. So call it $130 million, $140 million, let's say. And, obviously, it's a significant displacement and the world that cannot be done primarily in R&DS. I might point out some of that may come back, some of the trial obviously needs to continue and will be delayed. It just takes time and because of the disruption, or you want to answer specifically, the question on the how much per quarter? We said it's -- we sized it at $40 million to $50 million, right? So it's less than a proportion of impact in Q1, obviously, because the conflict didn't start until late February. So we had a few million dollars of impact in Q1, not a huge impact. You're right, Eric, that it's probably that $40 million to 50 million is probably front end loaded in the year, because we should recapture a little bit as we get late in the year and we start shifting work. But that always takes longer than you think it's going to take. So, you know, we're not assuming a huge recovery of work in 2022, but ultimately, as we find new patients and move the clinical trial activity outside of Russia and Ukraine, we should recover a lot of that you know in probably back end of the year or early next. Now with respect to China, just to situate the conversation, China is about 2.5% of our global revenues and that's about half and half on U.S. and commercial. Now to take the commercial side first, we saw virtually no impact, even at the worst of the COVID crisis when everything was shut down in China on our commercial business. Obviously, some of the business that requires some face to face interactions like PMR, consulting and so on, obviously went to zero, but the rest of the business, the technology, the analytics, services continued pretty much intact. So we have no concerns there. On the R&DS the obvious concern if they were lock downs is our ability to access sites. Now, right now it's a fluid situation. We are tracking closely what's happening on the ground. We've seen some disruption to site access and patient visits, again mostly in Shanghai, because that's where the lock down has been limited to so far. It's hard to imagine that these are going to be prolonged for a very long time or expanded toward China, but again, we -- no one can tell. So that's where we are. Again, we are relatively confident outside China that when these things happen there we've learned how to deal with it with our remote capabilities and our ex-site development of decentralized trials, et cetera, we have become more adept and we are prepared to address those situations. We believe the same will be true if God forbid in China the situation were to deteriorate. But frankly, at this point, we haven’t seen much, again this is the minimus and we haven’t taken any adjustments or anything like that forecast for China. Any other comments guys? Okay thank you, Eric.

Operator:

Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open, please ask your question.

Ari Bousbib:

Well, Shlomo thank you for your question, good morning. Look, I think Ron mentioned in his introductory remarks that last year's first half included the highest, the peak revenues from COVID. The second quarter will be the toughest compared year-over-year with COVID in. Right? The biggest step down, year-over-year of COVID revenue will be in the second quarter. That's one factor. Secondly, on a reported basis, if you look at, again, assuming FX rates remain where they are for the balance of the year, the worst comparisons year-over-year in terms of FX impact, are in the second quarter, okay? But the underlying businesses when you take these out, COVID and FX, you guys help me out with the numbers, yes second quarter is consistent with the rest of…

Ari Bousbib:

So again, I mean, in TAS I can tell you the, what's built in our forecast and reflected in our guidance is due to constant currency organic growth, excluding COVID related work will be high single digits, so very consistent again with the first quarter. R&DS due to constant currency organic growth, excluding COVID will be upper teens. And CSMS will be low single digits, excluding COVID related work at again constant currency organic growth. So you're right on a reported basis the number with the actual COVID work included it looks a little choppy sequentially. But the reality is the underlying business is pretty consistent and pretty strong.

Ron Bruehlman:

Yes and the other thing I would say Shlomo is that, that's pretty much in line with our guidance that we gave. I mean the, the linearity and how it's progressing over the quarter is exactly what we were expecting.

Ari Bousbib:

My first inclination will be to do that, but very frankly, we're not going to do that. We can buy, you know, thankfully, there is a third factory you are articulating, which is our cash flow generation. And as you've seen, it's been pretty strong. And that allows us more flexibility and affords us the ability to do both, that is to maintain a lower leverage ratio and aggressively pursue share repurchases. You saw we bought for over $400 million in the first quarter. You know, frankly, there are time windows where we cannot buy. We reported earnings I think in February 15, and [Technical Difficulty] we be in the markets as we leverage a lot any level of time. So again, the answer to your question is, yes we will do aggressive share repurchases, but no we will not increase the leverage ratio.

Operator:

Your next question comes from the line of Jack Meehan from Nephron Research. Your line is open, please ask your question.

Ari Bousbib:

Yes, well look, it's interesting. We've, we're obviously experiencing the same trend that we've talked about before, which is given the strength of the industry backdrop, there's obviously competition for talent. And we are really, really actively recruiting and hiring to meet the incremental demand. We also saw like the rest of the industry attrition pick up towards the end. I think it has stabilized I would say over the past few weeks. We track these very carefully and look at it on a weekly basis. And it seems to have kind of plateaued and maybe even start to come down a little bit. Look we have employees and we recruit thousands of employees a year. So we do the talent acquisition capabilities to be able to meet this increased demand. And we have -- we actually it is fascinating back to the Ukraine situation, we are actually looking now at repositioning individuals from these countries, Russia, and also Ukraine, in different geographies, and utilize them in other places. So we are really literally our global footprint allows us a little bit more initiative. We are seeing some margin pressure from labor cost increases, but as we have the flexibility, again, because our global footprint to do some arbitrage and moving things around the world, to optimize our cost structure, we of course, have our ongoing, that's part of our DNA, you know, we are continuing. That's what we do day in day out productivity initiatives and cost optimization actions. Look, we've also increased rate cards on existing RFPs and we are looking for ways to pass along some of those cost increases into pricing where we can. So the combination of all of that, obviously, this is easier to do, the pricing level is easier on short cycle businesses and on the longer cycle businesses where we've already priced in some price escalations, but they don't always reflect the wage inflation that we actually see in the market. But again, the combination of all of these levers allows us to manage that situation fairly effectively. And by the way, all these cost pressures that I -- that we're talking about are already factored in our guidance. I also want to point out, I mean, maybe that's not my special series on that, but we paid in aggregate the highest ever level, dollar level of bonuses for 2021 to our employee population, in aggregate we continue to pay, I would set a very respectable a high level bonuses to our employees, even during the worst of the pandemic. And I think we've seen in our employee surveys, which we do pretty frequently, higher and higher satisfaction levels and loyalty to our company. You know, my understanding is not every one of our peers has done that. And in fact, we know specifically other peer that has paid zero or very little bonuses last year. So that also has created some employee Exodus at some other peer companies, and we're benefiting from that as well. So it's a complex situation. Wages are going up. There is attrition, and so on, so forth. But there are a lot of moving parts here, including competitive ones. And we feel confident that we can address these issues without changing anything in our guidance. Thanks for your question.

Operator:

Your next question comes from the line of John Sourbeer from UBS. Your line is open, please ask your question.

Ari Bousbib:

Okay. Well look, real world evidence, we saw strong growth. You saw that in TAS in general, organic constant currency revenue growth, excluding COVID was just over 10% in aggregate. And the high growth segments, as you pointed out, are real world evidence and of course, as you all know, Commercial Tech which continued to be strong drivers of growth. And I gave several examples, specific client examples of how in the commercial world and technology space, and real world evidence we are utilizing our unique capabilities. So, real world evidence is doing disclose the numbers here or not?

Ari Bousbib:

Yes, exactly John. We see that continuing. To your last question, with respect to that COVID step down in revenue, which we've been talking about for a while now, we've always said during the height of the pandemic, that and this is true for real world, is true for commercial and certainly is extremely true for the R&DS business. COVID work essentially crowded out the rest of the business, because our clients understandably refocused their dollars on COVID, whether it's vaccines, or therapeutics, or what have you. But on the commercial side, government works to track and monitor COVID patients, et cetera and they turned to us. As you know, we had a very strong share of that market appropriately. And the concerns that some of you had expressed at that time is, well when that goes away then what happens? Well, we told you that that time that when that would go away, the base business would come back, because we knew that there were a lot of projects that have been essentially put on hold and that there was a lot of pent up demand that needed to be addressed and that's exactly what is happening. Exactly what is happening. Now that's true with real world evidence, it's true on the commercial side and it is true certainly in R&DS. Thank you.

Ari Bousbib:

Well, look, we always said we've gave guidance, we have done, and that's been consistent. By the way you can look at our record is between 1 and 2 points of our revenue top line growth over the long-term has been supplementing our organic growth. We make acquisitions within our core businesses when they are strategic and add capabilities or allow us to enter adjacent markets where we think we can add value. We have walked away, we do walk away from I want to say 90 plus percent of the companies we look at in the market. We always felt that valuations were very frothy, and that we did not want to, despite the rate environment so long we did not want to pay for assets more than what they were worth. And unfortunately, for those who did you now find yourself in an environment where valuations have taken a beating and now you've got a lot of private equity owned businesses that are very attractive, we would like to buy. But the entry points for those current owners at the time we did the acquisition was very high. And so, I just don't know how that -- it's going to take time. And because of that I am suggesting that we are going to -- if we were always cautious we are going to continue to be cautious now. Having said that, we will step up to the plate when the acquisition is extremely attractive, extremely accretive to our operations and our financials and we've done that in the quarter actually, we bought significant lab business, which is very attractive. And I believe that's the bulk of our acquisition spending that and correct, yes. And we like very much the lab business, as we discussed before. These are very strong and necessary capabilities and our lab business has been doing spectacular. We obviously, we look at CROs when they come up, but again, the valuation premiums on those assets have been out of reach for us. On the commercial side, we've bought technology companies and we will continue to look at the digital space. We've got, as you know, a strong interest in growing, in continue to grow on the commercial side, the commercial side is becoming increasingly sophisticated, with the go to market strategies of our clients becoming a lot more akin to how larger, consumer oriented businesses look at the world with much better, you see what our OCE suite, how our OCE ecosystem does with a lot of embedded intelligence is no longer -- we're not talking about a simple CRM point solution, as is the case for most of the competition, our system is an ongoing, live, with sophisticated AI analytics that enable the users to make decisions on a timely basis with respect to targeting the right customer at the right time with the right message. And so anything that complements or advances our position in the U.S. digital and European digital commercial spaces where it's most advanced, we will look at and we will be aggressive enough to enter those spaces and complement our capabilities. So that's what you know, I just gave you my overall strategic panorama here in terms of acquisitions.

Operator:

Your next question comes from the line of Luke Sergott from Barclays. Your line is open, please ask your question.

Ron Bruehlman:

We have a combination of projects in the TAS segment, you'll recall, we did a lot of government work, which is stepping down as we go through this year. In the R&DS segment, we are working on some mega COVID vaccine studies and safety monitoring work and also therapeutics. But you know, we were involved in hundreds of different COVID related projects. So are you asking what type of work were we doing or revenue numbers?

Ron Bruehlman:

The numbers like I told you was, we did about $375 million and now are you talking in Q2 or Q1 now?

Ron Bruehlman:

And you can infer from the numbers we gave you on the conference call what Q1 was last year, which was, over $550 million and in Q2 it was slightly larger than that last year.

Ari Bousbib:

Well first of all I -- capacity we always is people driven in this business, as you know. But I would say if anything, certainly seems to merger. Our ability to take on more work with the same amount of people has increased significantly, because of our decentralized clinical trials capabilities. The increase in technology content, in data analytics, in process improvements that we've done since the merger is very dramatic. So our ability to take on more work with the same amount of people is significantly enhanced. So I don't see, frankly our turning away work, because somehow we don't have the capacity, we just don't do that. Again, with the minor exception of what I described before in my introductory comments, for pre-commercial EBPs, that knock at our door for assistance, and that don't qualify based on our rigorous vetting process. With that minor exception, we are able, willing, eager to take on any and all work. So certainly, I hope we continue assuming the underlying dynamics of the market continue to grow, which is, I think, a very, very valid assumption and a completely conservative expectation. And assuming that we continue to gain market share, which is also I think a conservative expectation. You should expect our bookings to continue to grow over the long-term, no question about it.

Ari Bousbib:

Thank you.

Patrick Donnelly:

Hey, guys, thanks for the questions. Ari, I just wanted to circle back on EBP really helpful commentary during the script. I mean, it sounds like even if you did see some softening your business is diversified enough where the impact would be pretty negligible. But to date, you haven't seen anything. And just to clean up, I guess why you wouldn't be seeing it versus some competitors, like one yesterday, who called it out? Then coming down to your vetting process, you're maybe not taking on higher risk trials that others are and you think it comes down to kind of that process internally?

Mike Fedock:

Just to build on those comments. You know, in addition to the vetting on both the financial and scientific basis, the nature of work that we typically take in is in the later stage clinical timeframe, whereby there's a lot more I think, you know, historical data versus whether you're down feeling an EBP is mainly in the preclinical or first in inhuman space. So I think that's a that's another benefit to the [indiscernible].

Patrick Donnelly:

Yep, now that's really helpful. I appreciate it.

Patrick Donnelly:

Right, yes, understood. And then just a quick one Ari on the pricing environment. You know, what you see in there? I know that's a concern and biotech falls off, maybe pricing soften and it sounds like you guys still have nice power there. And on the back of that, any delay in terms of getting reimbursed on some of the shifting trials in Russia, Ukraine, just wondering, as you put in a change order, is there near-term margin pressure that then alleviates as you go through the year and get reimbursed? Just trying to figure that piece out as well? Thank you.

Nick Childs:

Thank you, Patrick. Thank you all for joining us today. We look forward to speaking to you again on our next earnings call. Myself and the team will be available for the rest of the day for any follow up questions, so feel free to reach out. I look forward to talking to everyone again soon. Thank you.

Operator:

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, you may begin your conference.

Ari Bousbib:

Thank you, Nick and good morning everyone. Thank you for joining today for our fourth quarter results. It was great to see many of you in person at our Analyst and Investor Conference in November. And as you will recall, we shared our expectations that we would meet or exceed our three-year Vision 2022 targets. We also laid out our plans to make 2022 yet another inflection point in our growth trajectory and further accelerate the company's growth rate in the next three phase -- three-year phase of our journey to 2025. The team highlighted the power of connected intelligence, which brings together IQVIA differentiated capabilities and drive our leadership position in the clinical and commercial markets. This underpins our new 20 x 2025 strategy, which alludes to our plans to achieve at least $20 billion of revenue by 2025. We're excited about this next phase of growth for IQVIA, and we are busy refining our strategies and action plans, and you will hear more about it as the year progresses. Two years -- two weeks ago, IQVIA was named to Fortune's list of the World's Most Admired Companies for the fifth consecutive year. Importantly, we earned a first place ranking within the health care, pharmacy and other services category for the first time. We ranked number one in the categories of innovation, capital deployment, global competitiveness, quality of product and services, and long-term investment value. I want to thank our nearly 80,000 employees worldwide for this recognition is a tribute to their innovation and drive. Turning now to our results. We ended 2021 on a high note, despite COVID-19's continued impact on many parts of the world. We delivered robust top and bottom line growth in the quarter, which, as you know, was against a much tougher year-over-year comparison than earlier in the year. These results reinforce our confidence that we will achieve our 2022 guidance. And, of course, it sets us up well to meet our ambitious 2025 targets. Let's review the fourth quarter. Revenue for the fourth quarter grew 10.2% on a reported basis and 11.6% at constant currency. The $62 million beat above the midpoint of our guidance range was driven by stronger operational performance across all three segments as well as higher pass-throughs, partially offset by FX headwinds. Compared to prior year and excluding COVID related work, our core businesses, meaning R&DS and TAS, grew mid-teens at constant currency on an organic basis. Ron will provide a lot more detail in his remarks, including additional COVID adjusted numbers for each segment. Fourth quarter adjusted EBITDA grew 12.7%, reflecting our revenue growth as well as ongoing productivity initiatives. The $27 million beat above the midpoint of our guidance range was entirely due to our operational performance. Fourth quarter adjusted diluted EPS of $2.55 grew 20.9%. That was $0.13 above the midpoint of our guidance, with the majority of the beat coming from the adjusted EBITDA drop-through. Let me now provide an update on the business. On the commercial side of the business, it was a strong year for new molecules and launches as the industry continued its recovery from the COVID-19 pandemic disruption. This year, 50 new molecules were approved by the FDA and 72 new commercial launches took place. IQVIA supported nearly 80% of launches by top 20 pharma and approximately 60% of all launches. This highlights our scale globally and across all customer segments in applying advanced technology and analytics capabilities to enhance launch planning, engagement and measurement. Overall, we've seen significant momentum and continued demand for our technology solutions. There are now over 3,000 clients who have adopted one or more of our technology platforms, including human data science cloud, orchestrated analytics, E360, Omnichannel Navigator, Engage and of course, Orchestrated Customer Engagement, or OCE. In fact, the footprint of our OCE platform itself has continued to grow, with over 350 clients having adopted one or more modules on the platform since launch. Early in 2021, we launched IQVIA Next Best Action, which is an AI-driven omni-channel customer engagement decision engine. Two top 20 pharma clients have successfully rolled out this intelligence engine to orchestrate customer engagements in over 30 countries and across more than 40 brands each. Two other top 20 pharmas are currently in the implementation phase. Another highlight in our TAS business has been the success of DMD Marketing Solutions, a leading provider of data and digital marketing solutions that help brands deliver personalized digital content to healthcare professionals. In the quarter, we entered into an enterprise agreement with a top 10 pharma clients to utilize DMD's advanced analytic capabilities to power omnichannel engagement across all eight of their brand franchises. To date, 18 of the top 20 have adopted at least one of DMD solutions. We're very excited for the future growth of this business within IQVIA. Real-world evidence and other highlights of the year, IQVIA continues to play a leading role in the use of secondary data to answer key questions for life science customers. In the fourth quarter, we won two large post-authorization safety studies in an autoimmune area with a top 10 pharma. These studies use existing healthcare data to observe patients over a period of 10 years to better understand long-term effects of the treatment. We were also recently awarded a disease registry project for an upcoming novel gene therapy. Here, we will recruit a broad population of patients with a specific disease to understand how they are currently managed in clinical practice. This information is vital to our life science sponsors to inform the design of subsequent clinical trials so they can target patient groups with the highest unmet need. Moving to clinical technology. We saw increased adoption of our Orchestrated Clinical Trials, OCT platform, which supports trial planning, site management, patient engagement, trial management and clinical data analytics. During the year, we added 90 new OCT clients, bringing the total to over 350 clients who have adopted one or more modules within our clinical technology suite since launch, including all of the top 10 and 18 of the top 20. Within OCT's digital patient suite this year, we secured three preferred provider partnerships with top 30 pharmaceutical clients to provide our interactive response technology, IRT capabilities, to support site operations across their entire clinical trial portfolios. This technology facilitates patient randomization to ensure protocol adherence and streamline site supply chain management to reduce drug wastage and to drive significant cost reductions. Our solution was awarded a top-ranking by industry leaders in a recent ISR report for randomization and chart supply management capabilities. We also saw increased demand for our industry-leading decentralized clinical trial offering. Approximately one-third of our active full-service clinical trials incorporate one or more of our DCT technology or services capabilities, and we expect this to continue to grow as the need for these capabilities in complex studies becomes more evident. For example, we are currently executing a full-service trial for treatment of multiple system atrophy, a severe degenerative neurological disorder affecting the body's involuntary functions. We are deploying our full suite of capabilities, including eCOA, eConsent, and home research nurses on this study to significantly reduce the travel burden on these patients who have significant mobility challenges. Finally, our overall R&DS business continues to build on its strong momentum with over $2.4 billion of net new business, including pass-throughs, and it set a record for quarterly service bookings, achieving over $1.9 billion of service bookings for the first time ever. This resulted in a fourth quarter contracted net book-to-bill ratio of 1.36 excluding pass-throughs and 1.24, including pass-throughs. For the calendar year, we delivered over $10 billion of total net new bookings for the first time ever, an increase of 14.6% compared to 2020. This led to an LTM contracted net book-to-bill ratio of 1.35 excluding pass-throughs and 1.34 including pass-throughs. Our contracted backlog in R&DS, including pass-throughs, grew 10.2% year-over-year to a record $24.8 billion as of December 31, 2021. And now I will turn it over to Ron for more details on our financial performance.

Operator:

[Operator Instructions] Your first question is from Jack Meehan with Nephron Research.

Ron Bruehlman:

Yes. Look, we do have a balance of COVID work, obviously. That's going to continue to burn off over the next two years. I think it will be a gradual decline during the course of 2022, but it's going to continue on into 2023. Yes, it's hard to foresee, Jack, how much additional COVID work there might be. We've all been surprised by the ups and downs of the pandemic and so forth. So it's certainly possible there could be more right now. We're facing our projections on what we currently have in the backlog, and we'll see where it goes from there and see what other work might come along.

Jack Meehan:

Great. And then just as a follow-up, it would be great to get your latest thinking on labor and maybe wage inflation? What is -- how has your view changed at all related to when you initially gave guidance around just wage inflation and the impact that might have on the forecast for 2022?

Ron Bruehlman:

Yes. And also I would say, Jack, that we do have the ability in a lot of instances to raise prices to adjust prices. We have some provisions for improvement in our MSA agreements. We also have some short-cycle businesses. So, wherever we have the ability to adjust prices, we are doing so. And we're getting some offset there as well.

Operator:

Your next question is from Eric Coldwell with Baird.

Ari Bousbib:

Yes. Thanks, Eric. Well, as you can imagine, we track these numbers pretty tightly. And as you know, many definitions of what biotech funding and so on. We are not seeing in the actual RFP pipeline any changes versus what has been. As you know, a very strong demand environment for the EVP segment in general. In terms of percent of our bookings, what do we give you, we don't have the backlog, but we have the bookings. Let me see -- I have got a few numbers here for you. I think, look, in terms of the actual bookings, large pharma still represents the majority, right, a little bit over half. Is that correct?

Ari Bousbib:

Right. And then we -- maybe the midsize is perhaps about somewhere around 10-ish percent --

Ari Bousbib:

-- of our bookings. And the rest, so again, I'd say 35% plus is EBP. And that has been the case -- again, it fluctuates, as you can imagine, these things -- these numbers go up and down. Now if you compare where we are here in terms of the pipe of the RFP, of flow, okay? It still continues to grow double digits in dollars and volume. I mean, it's really, really high, more than double digits. I don't know if we can give you the numbers, but the pipeline is very, very strong. I mean, actually, it's about -- our pipeline is about equal to our backlog as we speak right now, okay? And again, as I said before, COVID is basically gone more or less. It's very, very tiny percentage of the total pipeline here. A lot of it is oncology, which is up more than 20%, the CNS, more than 33% up. Agree, across therapy categories, we are seeing very good EBIT growth in the pipeline. I'm talking now, okay, not the book. I'm talking the pipeline, to your question, what do we see going forward, okay, which would be normally a line indicator of the funding. And we see that EBP in the pipeline actually represents a majority of our pipeline right now. So, again, we don't see any significant changes. Look, I wouldn't -- yes, it's true. For example, January was lower -- the month of January was lower than of EBP funding, but I wouldn't extrapolate from one month and -- or from one quarter for that matter. As you know, generally, the levels of EBP funding are very, very high. I mean, we are -- we must be in the top three years ever in terms of funding. So, okay, maybe that this year will be a little lower than last year, which, again, these were record years. We're talking about orders of magnitude greater in terms of multiples of the funding, if you just go back three, four, five, six years. So, yes, I mean, the step-down in funding would -- doesn't concern, as we continue to see very, very good, both bookings and even higher numbers in the pipeline.

Ari Bousbib:

Well, we look at how much the spend in terms of clinical development, of R&D spend. Okay.

Ari Bousbib:

So below that number -- I'm sorry?

Ari Bousbib:

Yes, yes. That's correct. That encompasses what you might call small pharma as well that has commercialized products, in addition to commercial.

Eric Coldwell:

All right. Last one. If you had to guess and maybe you're not willing to do so, but if you had to guess just off the cuff, not holding your feet to the fire. Would 10% of your backlog be pre-commercial biotech? 20%?

Ron Bruehlman:

Eric, it's helpful to give you a partial answer to that and say the last two years, large pharma orders had been -- bookings have been slightly over 50% of our bookings. So that gives you at least to start at what you're looking at anyway.

Ari Bousbib:

Well, thank you, Eric. Usually, you tell this at the beginning of the question, so I was concerned, but thanks for saying it again.

Ari Bousbib:

All right. Next question.

Tycho Peterson:

Hey thanks. Ari, given that most of the questions we're getting are on RFPs and wage inflation, I want to go back to the wage inflation discussion and EBITDA margins because it is notably you're guiding for expansion here. You talked about benefits from the original merger and integration plan. You talked about digitization and maybe some price increases. But can you maybe just give us a little bit more color on how you're planning to drive margin expansion in this environment this year? Are you pulling forward any additional cost actions?