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spk00: Good day, ladies and gentlemen. Thank you for joining us on this call covering the quarter ended September 30th, 2021. Also on the call today, we have our CEO, Dr. Steve Cutler, and our CFO, Mr. Brendan Brennan. I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call. Certain statements in today's call will be forward-looking statements. These statements are based on management's current expectations and information currently available. including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, and listeners are cautioned that forward-looking statements are not guarantees of future performance. Forward-looking statements are only as of the date they are made, and we do not undertake any obligation to update publicly any forward-looking statement, either as a result of new information, future events, or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by the company. This presentation includes selected non-GAAP financial measures, which Steve and Brendan will be referencing in their prepared remarks. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release statement headed, Condensed Consolidated Statements of Operations. Please refer to the appendix of the earnings presentation for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. To assist investors and analysts with year-over-year comparability for the merged business, we have included combined company information. These measures include financial information that combines the standalone ICOM PLC and PRA health sciences information for revenue and adjusted EBITDA, and other metrics as if the merger had taken place on January 1, 2020, with conforming adjustments to the current year presentation. Specifically, these financials represent the simple addition of the historical adjusted financials of each company. These combined financials are not intended to represent pro forma financial statements prepared in accordance with GAAP or Regulation SX. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes. Taking the call today to one hour, and would therefore ask participants to keep their questions to one each with an opportunity to ask one related follow-up question. I would now like to hand over the call to our CFO, Mr. Brendan Brennan.
spk01: Thank you, Kate. In quarter three, ICOT achieved gross business wins of $2.72 billion and recorded $346 million worth of cancellations. Consequently, net awards in the quarter were a record $2.37 billion, resulting in a net book to bill of 1.27 times. and a trading 12-month meant book-to-bill of 1.3 times. At the beginning of the third quarter, consolidated backlog on 606 basis was $18.1 billion. This backlog figure accounts for legacy ICON backlog at the end of quarter two, along with total backlog from PRA adjusted to include past trues in keeping with ICON's reported backlog methodology. With the addition of the new awards in quarter three, our backlog grew. to a record $18.6 billion, representing an increase of 3% from closing of the acquisition. Included in the press release and the earnings slides, you will note that we included a reconciliation of non-GAAP measures. Adjusted EBITDA excludes stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction, and integration-related costs and their respective tax benefits. Adjusted revenue in the quarter three was $1,870,000,000. This represents a year-on-year increase of 167% or 165% on a constant currency basis. On a combined company basis, adjusted revenue increased 25% from the comparable period last year. One of the key strengths of the new icon is our increased customer diversification and balanced representation across customer segments. In the third quarter, our top customer represented 8.3% of revenue, and our top five customers represented 28.2% of revenue. Our top 10 represented 43.3%, while our top 25 represented 64.7%. Adjusted gross margin for quarter three was 27.9%, and adjusted SG&A expense was 10.5% of revenue in the quarter. On a combined company basis, adjusted EBITDA was $325 million in the quarter, or 17.4% of revenue. In a comparable period last year, adjusted EBITDA was $266 million, or 17.7% of revenue on a combined company basis, representing a year-on-year increase of 22%. Adjusted operating income for the quarter three was $300.1 million, a margin of 16%. The adjusted net interest expense was $46.5 million for the quarter, and the adjusted effective tax rate was 17% for the quarter. We continue to expect that the effective tax rate for the fourth quarter will be 17%. We continue to work through the expected changes on a go-forward basis to our tax position, given the recently announced OECD global tax deal and expected increase to the minimum corporate tax rate in Ireland. We plan to give an update on the new target tax rate when we issue 2022 guidance, at which point we will have more clarity on the anticipated US tax changes that have not yet been finalized. Adjusted net income attributable to the group for the quarter was $209.8 million, a margin of 11.2%, equating to diluted earnings per share of $2.55. During the quarter, the company recorded $149.8 million of transaction and integration-related costs U.S. GAAP income from operations amounted to $5.1 million or 0.3% of revenue. U.S. GAAP net loss attributable to the group was $94.3 million or a loss of $1.17 per share compared to $1.72 per share for the equivalent prior year period. Net accounts receivable was $540 million at the 30th of September 2021 This compares with net accounts receivable of $417.4 million at 30 June 2021. On a comparable basis, day sales outstanding were 26 days at September 30, 2021. This compares with 43 days at the end of June 2021 and 64 days at the end of September 2020. Cash generation from operating activities in the quarter was $299 million. At September 30, 2021, the company had a net cash balance of $1.01 billion, and debt of $5.93 billion, leaving a net debt position of $4.92 billion. This compared to net cash of $707.2 million at September 30, 2021, and net cash of $359.8 million at September 30, 2020. Capital expenditure during the quarter was $24.4 million. We ended quarter three with a debt to trailing 12 months adjusted EBITDA, including synergies below four times. The priority of capital deployment remains on debt pay down in the near term. Given our strong cash flow generation, our stated goal and expectations to reach two and a half times adjusted EBITDA by the end of 2023 remains unchanged. With all that said, I'd now like to hand over the call to Steve.
spk04: Thank you, Brendan, and good day, everybody. Today, we're delighted to recognize another milestone in ICON's acquisition of PRA Health Sciences by reporting our first quarter as a combined organization. The overall environment and clinical development continues to be robust, with strong demand seen across large pharma, small and mid-sized companies, biotech, and medical device companies throughout the quarter. RFP growth has been solid, and we continue to be encouraged by the healthy level of biotech funding year-to-date. I'm proud to highlight that our team at ICON has continued to aid in the advancement of several new drug approvals this quarter, which now total 27 year-to-date. As seen by our strong performance in the quarter, our customers are continuing to turn to ICON as their trusted partner in clinical development. The response from customers to the merger has been excellent, leading to increased engagement with new and existing customers across all segments and delivery models. Customers are eager to understand our enhanced offering that features increased scale, innovative solutions and broader service capabilities. We are particularly encouraged by the increased number of strategic partnership discussions that are currently ongoing across our service areas, which we expect will drive continued long-term growth for ICON. During the quarter, Icon increased net business wins to a record $2.37 billion, delivering a quarterly book to bill of 1.27 and growing our backlog to $18.6 billion, an increase of approximately 3% since the close of the acquisition at the start of the third quarter. New award activity was strong across all of our operating segments. Revenues also increased 25% on a combined company basis and our backlog burn for the quarter increased to over 10%. In addition, diversity of our customer base, one of our key strategic merits of our combination, was improved in the quarter with a notable decrease in our customer concentration. I was also delighted with our cash collection efforts, which moved our DSO down to 26 days and reduced our leverage to less than four times adjusted EBITDA, including synergies. This should allow us to reduce the interest rate on our term loan in Q4. We are pleased with the level of new wins secured from our cross-selling initiatives across legacy organisations and are confident of the expected revenue synergies these will drive in the longer term. We have seen strength across a number of service offerings, in particular central and specialty laboratories, imaging, our Acelicare site networks and in-home health services. We have already seen great examples of the power of our combined resources in certain segments and regions, such as large pharma and Asia-Pac, respectively. We are clearly displaying to customers our improved depth and breadth of talent and experience across our business. Our integration is progressing smoothly, with several key accomplishments worth highlighting. In the quarter, we completed a significant number of office integrations across several regions, with a number more planned in the coming quarters. Initiatives to enable a unified employee experience are underway, including an initial phase of benefits harmonisation, as well as enterprise-level system planning and data centre connectivity. We have united a number of teams across operational segments and global business support functions. We continue to utilize a best-of-both approach to the integration of the legacy organizations, ensuring that new icon benefits from the wealth of experience, talent, and optimal processes from both organizations. Our priorities remain unchanged through this integration phase, a continued focus on project delivery for our customers, as well as employee retention and engagement. The COVID-19 pandemic continues to present new opportunities for our industry to find ways to increase efficiencies and challenge the traditional model of clinical monitoring. The demand for our unique suite of solutions in areas such as remote and risk-based monitoring, direct-to-patient services, and the seller care in-home services continues to remain at a high level. While new ICON has continued to contribute to the development of COVID-19 vaccines and therapies, as expected, our level of COVID work began to decrease as a percentage of total revenue in the quarter from quarter two levels, as large vaccine trials wind down and treatment work increases. At the end of quarter three, COVID-related projects represented about 5% to 7% of our total backlog, down slightly from the end of the second quarter. While there are still approximately 15% of sites that remain restricted in some capacity due to COVID across the globe, we saw this figure continue to improve over the course of the third quarter. Importantly, our customers' interest in and adoption of enhanced delivery solutions remain as high as changes brought on by the global pandemic have begun to show the value of deploying remote technologies and patient-centric services that can lead to increased efficiencies and continuity in their clinical trials. Our enhanced ability to invest in and deploy such novel remote technologies and services at scale over the next few years will open a further competitive advantage over smaller and mid-sized CROs. To that end, we have seen strong demand for our decentralized clinical trial solutions, which we believe will be the most comprehensive and integrated offering in our industry. Our unique suite of solutions integrates all of the key components needed to run a hybrid or full DCT trial, from patient concierge services to wearables to a full-service technology platform. ICON's offerings incorporate leading technology capabilities with the necessary operational expertise and delivery focus required to run these trials successfully. We saw evidence of significant customer interest in the quarter as Icon engaged in a number of enterprise-level partnership discussions with pharma customers, and I'm pleased to report that one of these discussions has led to a leading biopharma company selecting Icon's DCT platform as their enterprise solution across all of their decentralized trials. As the marketplace continues to evolve, we see a consistent need to offer solutions that are more patient-centric and technology-enabled to customers. The new icon has continued to invest in talented people, technologies, and innovation internally, as well as with partners to disrupt traditional product development and delivery models. Through our patient site and data strategy, we continually look for ways to reduce the burden on patients, clinicians, and sponsors. Expanding access to treatments for patients while ultimately increasing the overall efficiency of clinical trial execution. In the third quarter, we expanded our partnership agreement with DeepLens, a specialty software and services provider that focuses on improving patient recruitment in the community oncology sector. DeepLens provides sites with an artificial intelligence platform that harmonizes EHR data, unstructured data, and genomics data to enable patient matching to trial inclusion-exclusion criteria. By combining ICON's vast data resources with DeepLens' technology and community oncology network, sponsors can readily gain access to difficult-to-reach patients that are eligible for their oncology trials. We are also getting significant interest from customers in our Synoma tokenization tool that allows us to follow clinical trial patients on a long-term basis. Sponsors spend a large amount of their development budgets on long-term follow-up for trial patients, and the Sonoma tool, in conjunction with our Symphony data asset, allows key information to be collected and utilized in a much more cost-efficient manner. Our partnership with DeepLens and the rollout of our Sonoma patient tokenization tool are just a few examples of the many initiatives we have ongoing at ITON. to offer truly differentiated solutions to our customers that drive forward our patient site and data strategy. Since the acquisition, we are continuing to refine and focus the innovation priorities for Nuicon on our customers' core needs. Faster access to patients, more efficient clinical development, and diversity and inclusion in trial participants. The new icon is well on the way to becoming the world's leading healthcare intelligence organisation. We are committed to continuing to invest in and progress initiatives that are centred on these key focus areas in the industry. We're excited about the progress we're making in creating a new paradigm for bringing clinical research to patients by offering expanded capabilities and solutions to customers while also delivering significant value to shareholders. By continuing to invest in innovative technologies, talent, and novel solutions, we expect to create significant long-term shareholder value as we build on our market-leading operational capability and best-in-class global support services model. With a strong performance in the third quarter, we are increasing our 2021 outlook with revenue guidance in the range of $5.43 to $5.53 billion and adjusted earnings per share guidance in the range of $9.55 to $9.75, up 1.5% and 3.8% respectively from the midpoints of our previous ranges. As we look forward to 2022 and beyond, we continue to expect to deliver on the long-term projections we made earlier this year at the time of the acquisition of PRA. revenue growth in the high single digits on a combined company basis, adjusted EBITDA growth in the low teens, and EPS growth in the mid to high teens. We've already made good progress on our synergy targets, and I'm confident that we will achieve both our cost and revenue targets of $150 million and $100 million, respectively, over the next four years. We plan to provide more definitive guidance on 2022 in January at the JPMorgan Healthcare Conference. In addition, we are looking forward to holding an in-person analyst date, which we intend to schedule in March of 2022. Finally, we were delighted to be included as the only CRO in Forbes' 2021 World's Best Employers list. And I'd like to thank the 38,000 employees of the new icon across the globe for all of their dedication, hard work, and commitment during the quarter. We look forward to the exciting journey ahead as we continue to build the world's leading healthcare intelligence organization. So operator, we're now ready for questions.
spk13: Thank you. Ladies and gentlemen, we'll now begin the question and answer session. If you'd like to ask a question, please press star and one on your telephone and wait for your name to be announced. Once again, it is star and one for any questions you may have. And your first request today is from the line of Patrick Donnelly of Citi. Please go ahead.
spk11: Great. Thanks for taking the questions, guys. Steve, maybe just on kind of one of the final points you had there in terms of the synergies. Can you talk about the revenue synergies opportunities? You know, the deal has been closed for a few months. You know, you certainly sound confident in that opportunity, but as you've been out talking to customers and you've kind of had the companies together, can you just talk about that opportunity set? And again, the confidence level and that number, you know, continuing to move higher, I guess.
spk04: Sure. Patrick, you know, I think we've been public in saying about a hundred million dollars over approximately four years is our expectations. I believe we're well on track for that. We've made some early inroads. Our business development group has been out selling areas like, I mean, the obvious areas are our lab, central and specialty lab. Legacy PRA didn't have a lab, so there's a very obvious one there, and we've been able to secure a number of new awards for our lab through our Legacy PRA group. The imaging group is also, they didn't have that. We've been able to move that along. Language services, AccelaCare, the site network, and the home health network. So all of those areas really where there's no overlap at all, we've been able to secure some early wins. And we feel like we're well on track for that $100 million annual sort of revenue synergy number. That's not to say we haven't got continue to work to do, but I think our business development group and our operational folks have been strong in being able to get those out and those offerings to customers, particularly in the biotech space and in customers that we hadn't, as legacy icon, hadn't been able to access through some of those services. So I feel good about where we're at there.
spk11: Great. That's helpful. And then maybe just you touched briefly on staff retention. That's always a risk with mergers, particularly in this labor market. I'm sure it's even higher. But can you just talk about any metrics you have there to kind of talk us through? And then maybe on the back of that, Brendan, just in terms of the labor costs themselves, inflationary pressures, you just talk about the moving pieces on the margin side, how you're managing through that as we go into 22. Thank you, guys.
spk04: Sure, I'll let Brendan comment on the margin side of things. I think there's no question. It's not necessarily merger related, but the labour market really across the globe, but particularly in North America, is challenging at the moment, is very tight. And I think as we come out of the pandemic and unemployment rates go up or down, depending on the perspectives, there's a little bit of a new paradigm around the whole working opportunity, people working from home, how much they work in the office. We're working through our challenges on that front. You know, overall retention has been a little more elevated than I would have liked, but it's not out of whack, and it's, I think, in line with our competitors and, indeed, our customers. And our customers certainly understand the challenges of the labour market that we have at the moment. As with any business and at any time, there are certain parts of the organization that you see retention being a little lower than you'd like it to be. North America is probably our biggest challenge at the moment. But on the other hand, Europe is in a good place. Asia Pacific is in a good place. A number of our functions have really settled down very nicely and very well. India is in a good place. So it's patchy, as always, and there are always things we can do to improve it, and we're working hard to make sure we continue to improve that number. Brendan, do you want to talk about the margin?
spk01: Yeah, Patrick. So I think as we go through the course of this year, and you saw in my prepared comments the gross margin in the quarter coming up close to 27.9%, a lot of the dynamics at play are obviously some of the vaccine work that we've been working on, And certainly, you know, the call space as a result of, to Steve's point, the dynamics at play in terms of staff retention are probably impacting more as we go into Q4. I think overall, the trend in our gross margin profile will still be solid as we go from Q3 to Q4. So we still expect to see, as the mix of pass-throughs continues to come down on vaccine work, good progress from a gross margin perspective quarter over quarter. I think it'll be interesting then, I think that's, you know, that'll be a good jumping off point and a good marker in terms of gross margin profile to set maybe more of a tone for 2022. So we continue to see, as you said, good margin progression quarter over quarter from Q3 to Q4. And then that will probably be a good number to think about how we're thinking about some of those cost pressures as we go into 2022. Very helpful. Thank you, guys.
spk13: Thank you. Your next question is from the line of John Krieger of William Blair. Please go ahead.
spk02: Thanks very much. Steve, just to follow up on a couple of your comments, I think you indicated good uptake from larger, smaller, and even device clients. Can you give us a sense about the relative growth you're seeing across those three buckets?
spk04: Sure, John. I mean, device is still relatively a small part of our portfolio. I'd say a growing part, but it's still relatively small. Our large pharma customers, you know, we had a very strong quarter in terms of wins in that front. And then certainly on the RFP front, we're seeing good, solid growth in that area. The biotech also, we had a good quarter, significantly up. Revenue-wise, year-to-date, they had a good quarter in terms of new awards and RFPs. And so, you know, I think I said in my comments, it's really across the board we're seeing a very strong, robust environment. You know, it's hard to pull out any one particular area. It's across the board and we're seeing, you know, a lot of positivity in the environment in terms of RFPs, in terms of awards, and ultimately that's flowing through into revenues.
spk02: Sounds good. Thanks. And maybe another way to kind of cut that same question, if you think about your awards in the quarter or maybe your new trial starts, can you give us a sense about the uptake of some of these newer tools that you've got good capabilities in now, like DCT or home-based or site networks? Just curious how broadly those are being adopted in your newer wins.
spk04: Yeah, it's interesting. You know, I don't think there are many trials that we start these days that don't have a component of a decentralized trial. Now, you know, there are very few that are completely decentralized. I don't want to overstate that. But there are very few that don't have some sort of component, whether it be a risk-based monitoring component, a wearables component, a home health component. So, you know, customers are... increasingly asking us to include these sorts of decentralized type components. E-Consent's another one that's proven very helpful in the vaccine trials where you have many thousands of patients and many protocol amendments that all need to be approved by the patients. And so having an electronic copy, an electronic version has been extremely helpful in that respect. So The uptake is, you know, I would say very good in terms of individual components, but I don't want to overstate it in terms of the completely decentralized trial. They're still relatively rare animals. We do some of them, and we have some of them, and we're working well with some of them. But they're not, I wouldn't say, anywhere near as common as perhaps, as I say, the normal approach, which is a more hybrid version, I guess.
spk02: That's helpful. Thank you. Thanks, John.
spk13: Thank you. Your next question is from the line of Elizabeth Anderson from Evercore.
spk12: Please go ahead. Hi, guys. Good morning. Thanks for the question. I know you obviously talked about the COVID projects being 5% to 7% of backlog. So how should we think about that sort of transition from maybe more vaccine-based trials to more therapy-based trials as we sort of think about the backlog burning into revenue?
spk04: Well, you know, Elizabeth, I think we've been public in our comments in terms of the awards from a COVID point of view in the past. Those have certainly come down this quarter. You know, I think they're around about 11% of our revenue this quarter. Going forward, we would expect COVID-related work, and a lot of that's been vaccine, but that will come down, no question about it. Well, fortunately, or thanks to our good work, we're seeing a good uptick in non-COVID related work. But I wouldn't, you know, I would caution, there's no cliff here. I mean, we're going to see COVID work continue to be an important part of our backlog, albeit decreasing part of our revenue burden backlog for some time yet. I certainly see COVID becoming more endemic in the community going forward. And those treatment type trials are going to become more common. We're certainly, that's been an increasing part of our, of our wins in the recent quarter. The big vaccine trials, the days of the big vaccine trials are probably limited. If not over, there may be others coming forward in terms of second generation vaccines and who knows in terms of new variants, what might happen. But at the moment, the way we see it is it will be more around treatment work. That's the way our backlog is evolving and our revenue will obviously follow what's in the backlog. So there's no question that the COVID-related work is is decreasing, but it will still be an important part, I would say, of our revenue, you know, I would think for another at least 12 to 24 months.
spk12: Okay, that's very helpful. And maybe just to jump on the back of John's question, When you talk about the elements of decentralized trials, can you generalize and just say, do people dip their toes in with what you said, like e-consent or some of those things, and then generally expand? Is that the general momentum? I guess I'm just trying to figure out how to think about that ramping opportunity maybe within clients overall.
spk04: They don't usually expand within the trial. Once you've planned the trial, it has a component of a sort of a wearable or the e-consent component or a risk-based monitoring or the home health. You know, that would tend to be set. I mean, obviously that was not the case as we pivoted during the pandemic. Everything became a, and so there was some pivot. But normally, I think as we get into more steady state now, the new starts we're seeing have that component or one or more. It can sometimes be more than, you know, e-consent plus a wearable plus a risk-based. You know, it varies, but it usually is set for the trial. So it doesn't expand. But we're seeing, I think, increasing interest in those components because we're increasingly able to provide evidence that it is a more efficient way of doing these trials. And with the pressure on resources, hiring and getting people is challenging for us. We have a lot of work to do, and prosecuting that work requires us to hire. And the ability to be more risk-based and remote with our monitoring... is allowing us to be much more efficient with those monitoring resources. And so there's a big incentive for us to drive forward with this, and we're seeing customers increasingly interested in doing that sort of work. So I would say it will increase. There'll be more components of more trials become decentralized. But I think we're, you know, I would hesitate to say that in two years' time everything's going to be fully decentralized. This is going to be a marathon, not a sprint. It's going to take I'd say many, many years for us to move to being, and we'll probably never be fully decentralized. But I think at the moment, there's probably, I don't know, one or 2% of trials are fully decentralized. I'd say, you know, certainly in starts, probably 75, 80% of our trials have some component of decentralization. And I think going forward, the number of components involved in those trials is only going to increase as we prove the model and we show how efficient it can be and, of course, as regulators audit and approve.
spk12: Perfect.
spk13: Very helpful. Thank you. Thank you. Your next question is from the line of Noah Burnett of JP Morgan. Please go ahead. Noah? Noah?
spk03: Noah. Hey guys, can you hear me? Yes, we can. Can you hear me? Yep. Hey, it's Tycho, actually. A couple questions. You know, congrats. It sounds like the integration is going fine so far. Can you give us any color on, you know, the PRA numbers? Obviously, they had a blowout second quarter, and I'm really just curious if, you know, the guidance increase is more tied to the PRA side versus ICON or, you know, just how it's been performing overall.
spk01: Hey, Tycho, you know, I hate to disappoint, but I'm going to say we're the new icon, and we're going to present our numbers on that basis on a go forward. I will say, though, that there was good growth across both organizations. I think if you look at the year-over-year growth that we talked to, it wasn't dissimilar in both organizations. So we were really, I mean, we always said we were two organizations coming from a point of strength, and the combination would be a great one, and that's what we've seen. So, yeah, we're really happy with how that's progressed so far.
spk03: And the step up in backlog burn, I mean, sequentially 8.7 to 10.4, is that just a function of the blended combination or, you know, the COVID work rolling off, or can you maybe just touch on the backlog burn?
spk01: Yes, I'll take that on as well. I mean, yes, it is. I mean, it is more to do with the blending of the organizations, and we're happy to see it in excess of 10%. We were very happy with the combined backlog, as we talked to, 18.1 at the start of the quarter, 18.6 at the end of the quarter. And that, of course, reflects, as we have always done, the pass-through elements coming into the historical PRA backlog and that entire piece being added to the historical ICON backlog. So, yeah, that's certainly the range that we're thinking about.
spk03: All right. And the last one for Steve. It sounds like you're flagging some early wins here, which is great to see. Are there particular things that your customers are honing in on? I mean, one of the things you've talked about in the past is accelerating, you know, patient recruitment with Acela, you know, the care network, and maybe that can even step up a little bit with a combined combination. So can you maybe just touch on that aspect in particular around patient recruitment?
spk04: Yeah, I mean, we are seeing a lot of interest in the patient recruitment, particularly around the Acela Care site network. That business has been moving nicely for us. It played a major role in our in our vaccine work, and I think on the back of that, you know, we're getting some good publicity, good, you know, good verification, validation of that model. You know, there's a number of aspects into it. I talked about the revenue synergies, the labs and the imaging and patient, as I say, the home health is also stepping up. There's a lot of interest in that around, particularly around the decentralised trial basis. You know, the early wins are really in those areas. They do tend to be focused around the efficiency aspect of the trials, of home health, of an ability to do risk-based monitoring. We're talking to a big customer around taking over a large region around their monitoring area and applying some of our data analytics to their monitoring process and an ability to identify how to monitor, you know, more effectively and more efficiently, quite frankly. So, you know, the scale that the organisation now brings to, you know, to our customers is really starting to play out nicely in terms of the discussions we have for new business. We really are able to deploy a depth and a breadth of scaled resources that allows us to provide a very efficient, or much more efficient and effective service. So that's where I'm encouraged on the business wins.
spk03: And last one, are you finding any more doors opening with all that kind of consolidation in the background? Are you starting to kind of see some of your customers shift away from some of the combined combinations? Sorry, I didn't quite get the question. It was really a question on all the consolidation in the background in the CRO space, and is that starting to kind of drive more discussions your way?
spk04: Oh, you know, I don't. I hesitate to say that, Taika, to be honest with you. I think we're certainly not being hurt by the consolidation that we're putting together. We've seen you saw the backlog increase since the closing of the acquisition. We've seen RFPs are up double digits over the year. We had a very good quarter, not just in terms of new business wins, but RFP numbers coming in. You know, I think customers haven't necessarily expressed to me any concerns about the industry and the consolidation going on in the industry. But, you know, so I don't get to worry about that. I think, you know, we're focusing on what we're doing and we're not hearing any concerns. I think the evidence in terms of the data suggests that our customers are not concerned either. That's great to hear. Thanks. Good.
spk13: Your next question is from the line of Eric Coldwell from Barrett. Please go ahead.
spk06: Thank you. Appreciate it. So my question is maybe a bit of a, I'm not sure if postmortem is the right word, but a review of how, what you've seen in terms of patient identification, enrollment and retention over the last, call it, you know, what, 18, 20 months, at least in the U.S., since, you know, we had our national emergency declared. But I'm really globally, I'm just curious, have you, with the waves of lockdowns and reopenings, how have you seen patient enrollment and retention morph over this timeframe? And the reason I ask is because there seems to be two conflicting views in the market right now. One view is that as the world opens up, patients will be harder to identify. They'll be back at work. They'll be, you know, getting back to daily activities. And the other view is that means sites will be open and people will feel and be able to more freely move around. So I'm just curious how you're seeing these trends evolve as COVID opens and closes markets. Thank you.
spk04: Sure. So, Eric, you know, I think it's almost a little early to fully answer that question as we come out of the pandemic, or hopefully we're coming out of the pandemic and we're not going to go back into a sort of lockdown situation. You know, I will say very clearly that, you know, when the pandemic happened, the enrolment in our non-COVID trials dropped off substantially. That's not news to anybody. And then, fortunately, of course, we were able to enrol some very large COVID studies, which really helped to make up that shortfall. In fact, you know, overcompensated on a patient basis for that shortfall. I think as we truly come through it, I'm more a subscriber to your second explanation in that as the economy, as our, you know, social society opens up again, that patients and people will be more able to move around sites, You know, we talk about about 15% of sites still impacted. I think that's probably a number that might not change dramatically in the next year or so. There's still going to be a component as we get through this, as I say, COVID becomes more endemic. So I think there will be a sort of hangover there. But I do think that, you know, we're starting to see enrolment in our non-COVID trials go up, improve fairly substantially as those sites have opened and as at least in certain parts of the world, the economy has opened up again. So I'm a fully paid-up subscriber to your second component rather than the first one. I think that will happen. I think as we combine that with some of the new technology, some of the new data, the opportunities that we have, we'll be able to accelerate that. Obviously, our tokenization component is something that we've seen a lot of interest in in terms of a long-term follow-up of patients, the ability to follow those patients up and report on their long-term well-being, not just within the clinical trial, I think is something that we're excited about. And I think as we put in place those sorts of opportunities, we'll continue to see an increased enrolment of patients in trials. We're very much on the clinical research as a care option too, and that's part of our our Veridigm network and our DeepLens network, having patients who come into sites have clinical trials as an option. So we see ourselves being able to facilitate and drive recruitment, not just as trials happen within sites, but identifying those patients and have them go to those sites and have them be part of a clinical trial, have them giving them an option. to be in a clinical trial as opposed to being going and being prescribed some standard drug that they may or may not be eligible for. So there's various options we're trying to implement in terms of expanding the number of people and number of patients who get exposed to the opportunity to be involved in a clinical trial. We think that's going to be one of the ways to really drive our business in the longer term, of course.
spk06: Matt? Steve, thank you for that. And Brendan, I know there is reluctance to give too much detail on pass-throughs, but it is, they are hard to project and they're very lumpy in terms of revenue and then the impact on gross margin. I'm just curious if you can give us any sense, even if it's, you know, more qualitative on how pass-through bookings are coming in or what you see happening. I know you made a comment that the COVID pass-throughs will wind down a bit here as we progress through the year. But when you look at the total mix of work or the total pipeline, are you seeing any big shifts in pass-through versus, say, pre-COVID era periods? And, you know, if you could give us any more color on, you know, those statistics or what you're looking for as we move into 22 or beyond, that would be, I think, very helpful.
spk01: I think, Eric, as you say, it's a complex question. Certainly the vaccine studies that we've had in the business have significantly put a much larger proportional element of pass-through through the business in the first half of this year, certainly, and to some extent in the back end of last year. I do think we're tapering down on those studies now. So we are starting to see probably backlog and pass-through elements of backlog, coming back to kind of where they were prior to the pandemic, first, those vaccines. And as we get into Q4, I think the revenue run rate and how it ticks along from Q3 to Q4 will be a good indicator of what kind of, you know, post the big vaccine studies our revenue is starting to look like. So, again, to the same margin point I made earlier on about the margin point being much more reflective of what's called normalized levels of pass-through in Q4. I think that's true of revenue as well. Obviously, we'll give you more color as we go into our 2022 guidance. And obviously, Steve spoke of the fact that we're still ambitious about the high single-digit revenue growth that we talked to when we did the transaction as we go out into next year. But I think the lumpiness, to your point, will hopefully be predominantly done by Q4, and hopefully we can see a more normal pattern on a quarterly basis there afterwards.
spk06: Thanks. Last one for me should be pretty easy. Do you have or have you provided a long-term DSO goal on a combined basis? And just a quick reminder to save us from having to track it down, what is the term loan interest rate drop in Q4 if you maintain this leverage below 4X post-synergy?
spk01: And on the DSO, no, we haven't put out a target there yet. We'll have a think about it. I'm just really pleased with the fact that how good are my colleagues in Legacy PRA are doing their cash collections. So that's been an education to me and something that we're looking to pursue across the organization. So certainly we want to bring their skill sets in our best of both mentality to the whole company. And hopefully we continue to see that at DSO target fall from where we are, but I'm delighted obviously with the number we have in the quarter. On the interest rate, it'll be about 25 pips, Eric, on that interest rate as we go into Q1. I think we're coming into an inflationary environment, so you might see interest rates tick up on the bottom line, but certainly in the immediate term, it's about a quarter of a percent. Yep, fair enough. Thank you.
spk13: Your next question is from the line of Dave Wandley from Jefferies. Please go ahead.
spk09: Hi. Good morning, good afternoon to you guys in Dublin. Appreciate you taking my question. I joined a little late, so I apologize for the, if any, redundancy. But I believe, Steve, at the end of your prepared remarks, you made a comment about, you know, kind of enthusiastic about your long-term guidance construct. And, Brendan, the answer you just gave Eric, you kind of touched on this, but I'm wondering if you believe that that long-term construct specifically applies to 22.
spk04: Oh, I mean, yeah, I think so. David, you know, we've given, I think we've talked about, you know, high single digits, the high single digits for revenue for 22. And I think that goes on beyond that in the teams on the EBITDA and EPS a bit higher. So, you know, we feel that, you know, 22 is going to be a good year. We feel like we're setting ourselves up. to be in a good position to really move nicely, whether it be burn rate, whether it be new winds. You know, 22 is shaping up as a good year for us.
spk09: Excellent. I appreciate that. A separate topic and following up on the decentralized trial commentary, I guess I'm wondering as you move into that and you see, as you mentioned, a high percentage of new trial starts that include something, I'm curious on two points. One, is there a common theme in that something or is it kind of all across the board? And then two, as you are pricing projects or maybe more appropriately, the RFPs that come through that ask for maybe some blend of traditional and DCT type approaches, is that revenue enhancing? Does the value of that project grow versus just a traditional approach? Or do the DCT elements actually drive an efficiency into that that shrinks the value of a project like for like?
spk04: Let me take the first one in terms of common themes. I don't have the data in front of me, Dave, in terms of the specifics there, but my My impression is that there are certain areas of a decentralized trial that we would commonly apply as a priority. Things like the risk-based monitoring approach and remote monitoring, I think, would be one that would be... In pretty much every trial we propose now, we have a component. It may not be everything, and it may not be in every... region, because certain regions have certain restrictions in terms of access to electronic health records, et cetera, et cetera. It's more difficult in Europe, of course. But that component, in some way, shape, or form, is probably the most common. Then you have things like wearables, probably a little less common, but still regularly, pretty regularly included. E-consent, we're very passionate about, given our experience, particularly with the vaccine trial. You know, it is a little variable, and as I say, there's very few trials that have everything in there, but I would say it's probably the remote monitoring, the risk-based monitoring that's doing that. And in terms of how that's impacting our pricing, I would say it's probably having a fairly minimal impact on our pricing and overall price at the moment, but it is helping, it is driving us to be more efficient. And so I would say it's margin-enhancing, And there may be a modest impact on revenue. It's pretty small, though, at the moment, really, because of the sort of hybrid approach and because of the fact that, as I said, even if we do risk-based, it's rare that the whole trial is risk-based and it's rare that the whole trial is remote. So I would say margin enhancing, modestly margin enhancing, probably not driving up our revenues, but that's okay as well. We feel that our customers then can do more trials with the with the dollars that they have. So I would say overall a benefit for us and certainly a benefit for our customers and offering it gives us an ability to, you know, to be more effective and efficient for them and help them to, you know, ultimately, let's be honest, get more shots on goal in terms of the trials they need to do. That's where we want to be. So we don't get worried about any sort of impact on revenue from being more efficient and more effective at all.
spk09: Right. Very good. I appreciate the answers.
spk13: Thank you. Your next question is from the line of Luke from Barclays. Please go ahead.
spk08: Hey, guys. Thanks for taking the question here. I'm just going to go back to Dave's first question on 22. I know you're not going to give the guide, but you talk about growing, you know, maintain comfortable in the high single-digit growth. IQV is out there talking about a 2% to 3% COVID headwind. resulting in a soft landing. When you guys are talking about that high single digit, are you talking about that X, the COVID headwind, or is that inclusive of it, implying a slightly, you know, 4% to 5% growth? Just any type of context and framework, because this is the only question we're getting from investors right now.
spk04: Okay. Well, Brendan can have a go at that one as well. But I think we're talking mid to high, so single digits, I think is what we said. And I think so we... we'd stick with that. To me, that includes everything. That does include something of a ramp down with the COVID work, particularly the large vaccine work. As Brendan said, the change in component with pass-throughs is probably going to be margin enhancing, even if the revenues, there is a little bit of a headwind. So I wouldn't disagree with the revenue headwind, if that's what you want to call it. But the the sort of qualitative guidance we're giving there in terms of mid to high includes any sort of headwind that we have expected from COVID or from lower amounts of COVID work. We do expect there's going to be a continued amount of work. The treatment sort of protocols are coming in. They're not as large. They're not as impactful in terms of your overall revenues, but there's a significant amount of work there. And as I say, it'll be an important component of what we do for, you know, for me, at least the next two years as we go forward at the moment.
spk01: Yeah, I wouldn't disagree with that. Luke, to your question there, I mean, you're quite right. There's obviously, you know, an outsized pass-through element in 2021. We won't see that. And as I said, I think we'll be more like a normalized pre-pandemic, you know, pass-through element as we go into 22. That'll have some impact, certainly, on the year-over-year comparisons. I think that the direct fee and margin revenue generating revenue that we always talk about and focus on, certainly in terms of our EBITDA profiles, it's still going to be very strong as we go through year over year. And that's where our focus is in terms of making sure that we can drive those numbers we talked to earlier on in terms of the double-digit growth.
spk08: All right, great. And then I guess just one here, one last one on FSP, PRA. They had a large business. You guys also had another large business. Can you give an update on appetite here, demand, how that's been progressing, pricing, and any ability to pass on some of the wage inflation?
spk04: Sure. It continues to be a significant part of our business. It's growing nicely on the top line, as are the other more full-service components of our businesses. Luke. So we're happy with the progress that business is making. In terms of passing on, we've been in significant negotiations with a number of customers around some of those challenges. And let's be honest, customers have been accommodating, I would say, generally. Customers don't always like to hear about labor challenges and wage inflation. It's beyond what we expect in terms of normal inflation. But they've been I would say, receptive to those sorts of discussions, and we've made progress on a number of fronts in that. So I'm encouraged by, you know, our customers' understanding of those sort of challenges and our ability to mitigate any margin pressure that we have in that business. But there's, as always, lots of work to do in that space, and it remains one that we, you know, we continue to need to work harder.
spk08: Great. Thanks for the questions. Okay.
spk13: Thank you. Your next question is from the line of Jack Meehan from Nefron Research. Please go ahead.
spk07: Thank you. Good morning and afternoon. I was hoping maybe just a little color on what cost synergies may have already been recognized the first quarter out of the gate. I look at the pro forma cash EBITDA was up 7% sequentially versus the pro forma revenue, which was down 2.5% sequentially. So just maybe talk a little bit through the dynamic there would be helpful.
spk01: Yeah, we're happy, Jack, with the progress we're making. We're obviously pretty good cost controllers in the ICON organization, and that's obviously a strength we'll bring forward as we go further into the new ICON as we get into Q4 and certainly into 2022. I mean, not material is the quick answer, Jack, in terms of the first quarter. You know, you're talking about mid-single digits in terms of millions of dollars in terms of, you know, the actual synergy benefit in the quarter. We've got good visibility to how we're looking at the $150 million, as we've outlined before, and we're, you know, we're actioning a lot of items around that. We'll certainly help the progress of how that comes through into the P&L account over the next number of years. For now, I'd still tell people to have a think about that in the same way that we talked about when we did the transaction. I think as we get to the guidance in Q1, we might be able to give a bit more color in terms of when and how we think that timing will impact on the overall cost base.
spk07: Great. Thank you. And then another follow-up for you, Brendan. You referenced some of the changes in tax regulations globally. I know you're going to give us more thoughts in 2022, but just was curious your philosophy just Any high-level thoughts as to what this can mean up, down versus the prior forecast you talked about? Any type of magnitude you're thinking?
spk01: I suppose there are so many moving parts here, Jack, at the moment in terms of what's going through the Congress in the United States, which obviously will have a big impact. And there's been talk about different tax rates there, corporation tax rates in the States, which started off at a higher number. I believe now it's back down. It also impacts on the GILTI rates, as you guys know, the amount of work that you do outside of the United States. The other big piece that's impacting, of course, is the OECD rules around this new 15% global tax rate or minimum global tax rate. The Irish corporation tax rate previously was 12.5%. So quick math, obviously there's 2.5% of an impact there if you consider our historic tax rates versus that base Irish rate. So that's a piece of it, obviously. But it's not the whole story. And I suppose one of the reasons we're saying we'll talk more about that in January, hopefully, is that we'll have better visibility as to what's going to happen or shake out a little bit more, at least in terms of U.S. tax legislation. So I think, yes, probably it probably will be increasing a little bit, albeit still pretty competitive versus our peers.
spk07: Thank you.
spk13: Thank you. And your last question is from the line of Donald Hooker from KeyBank Capital Markets. Please go ahead.
spk10: Great. Thank you for squeezing me in. I'll just ask one. I was curious if you all would be willing to elaborate on the comment you made, I think, in the prepared comments around one large biopharma company selecting ICON's DCT platform as its enterprise solution. I'm just maybe trying to sort of understand that. Is that a Am I thinking of that as like a technology sale? Are you providing sort of a set of technologies that they are running clinical trials on, or is this part of a full-service solution embedded in your full-service solution, or is it some sort of standalone technology sale?
spk04: It's not a standalone technology sale, Donald, but it does involve services as well. But essentially, it's a hybrid. I mean, we will be providing the platforms and services, but they will be able to use the platform for their own internal trials as well. So that's the way it's working out at the moment. We're very encouraged by that as an endorsement of our platform. And this is a very significant organization. And so having their involvement with it, we think, is going to be a real positive for us from a platform and a platform development point of view. But it does involve services as well as the technology.
spk10: Yeah, but just to be clear, you mentioned they might use your e-consent tools, for instance, or monitoring tools for studies that they're not outsourcing to you as well, right?
spk04: That option is available to them should they wish to take it, yes.
spk10: Okay, thank you.
spk13: There are no further questions. Please continue.
spk04: Okay, thank you, operator. Well, thank you, everyone, for listening in today. We're pleased to have delivered another strong quarter. and our first as the new icon. So we look forward to further progressing our integration and building the world's leading healthcare intelligence organization, continuing to help our customers explore the development of drugs and devices. And finally, I want to take this opportunity again to recognize our entire 38,000 people around the globe for their commitment and efforts over the past quarter. So thank you all and have a good rest of the day.
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