ICON plc

ladies and gentlemen thank you for standing by and welcome to icon q1 results 2023 conference call at this time all participants are in a list and only mode after the speaker presentation there will be a question and answer session so ask a question you will need to press star 1 1 on your telephone i would now like to end the conference over to the speaker today kate even please go ahead mom the one is open

Good day and thank you for joining us on this call covering the quarter ended March 31st, 2023. 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, including the Form 20-F filed on February 24, 2023. 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 section titled, Condensed Consolidated Statements of Operations. While non-GAAP financial measures are not superior to or substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes. Included in the press release and the earnings slides, you will note a reconciliation of non-GAAP measures. Adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share exclude stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction-related and integration-related costs and their respective tax benefits. We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity for a brief follow-up. I would now like to hand the call over to our CEO, Dr. Steve Cutler.

Thanks, Kate, and good day, everyone. ICON made a good start to 2023 in quarter one. delivering solid results while continuing to develop our strategic initiatives in healthcare intelligence. We continue to navigate macroeconomic headwinds that are impacting our industry. While we expect these challenges to cause uncertainty in the short to medium term, now, more than ever, our customers are turning to Icon as a strong, stable, and strategic partner that has the broad services, resources, and capabilities to optimally manage their clinical development programs and functions. Notwithstanding this, we have seen a generally stable underlying market demand across customer segments, supported by the fundamental drivers of increasing R&D spend and further outsourcing penetration. This has resulted in improving sequential RFP trends in quarter one. Within customer segments, Demand from mid and large biopharma companies continues to show growth with a recent increase in the number of larger FSP opportunities. In the emerging biotech segment, cautiousness with regard to spending has continued as the broader funding environment remains challenged. Companies are actively conserving cash and prioritizing programs until they have improved visibility to additional funding. As a result, We have seen some delays in decision-making within this segment and more considered assessments on the scale and timing of their studies. While this dynamic creates a more challenging environment in this segment in the near term, our commitment remains unchanged in this area of the market that continues to fuel innovation in R&D. We are partnering with many of our biotech customers at an early phase of development, and connecting our operational and medical experts with their leadership teams to collaboratively regenerate optimal development plans and conduct their studies. In doing so, we get to truly understand our customers' objectives, and this builds meaningful and long-term partnerships. We remain encouraged by the traction we are gaining broadly in the marketplace and the opportunity ahead of ICON. Our unique position as a world-leading provider of clinical development services appeals to customers across all segments, and we've made good progress in advancing a number of strategic discussions with large and mid-sized pharma companies since our union with PRA Health Sciences. There is an increasing amount of engagement taking place at a strategic level in customer accounts as companies evaluate and review their optimal clinical development strategies. we are seeing a growing need for full service, functional, and hybrid solutions, with customers seeking a partner that has the necessary scale, expertise, experience, and breadth of offering to seamlessly execute their programs and or augment their existing infrastructure. To that end, in quarter one, we announced a strategic partnership with Leo Pharma, a global leader in dermatology, with ICON acting as their sole provider of clinical development services. The partnership will leverage both fully outsourced and functional outsourcing activities in a tailored and flexible hybrid approach to development. This unique model is designed to provide patients improved access to innovative trials while effectively and flexibly managing LEO's development portfolio. In addition, Our late-phase business was awarded a full-service strategic partnership in real-world solutions by a large biopharma sponsor in quarter one. This customer cited ICON's strong history of delivering real-world evidence studies, collaborative approach to deliver solutions, and assessment of CRO leadership as key decision criteria when awarding this partnership. We continue to see opportunity to improve our execution in key development activities such as study startup, site selection, patient identification and recruitment as trial complexity increases and durations expand. With challenging dynamics in the market, such as sites facing resource constraints, increasingly niche patient populations and an overall uptick in regulatory requirements, the need for novel solutions and new approaches is accelerating. As a consequence, our focus and investment innovation has continued to increase across a number of areas within our organization. We have demonstrated success with several tools we have developed at ICOM and believe we are in the early stages of creating even more meaningful improvements in clinical development. Our approach to innovation recognizes the importance of coupling our unique experience and expertise alongside technology to develop solutions that deliver value for customers. OneSearch, our integrated AI tool for site identification and selection, is driving remarkably better delivery of studies, with a 53% reduction in the median time for site identification and a 50% reduction in the percentage of non-enrolling sites on Icon Studies. Separately, we have launched a new customer-facing tool with our late-phase business called Cassandra, designed to more accurately predict post-marketing commitments. This model utilizes machine learning technology along with our leading expertise in phase four and post-marketing clinical trials to generate insights on late phase strategy and planning. Outside of technology, we are further investing in our differentiated capabilities with the purchase of the remaining shares in our joint venture with OncaCare, a global cancer research site network. OncaCare is uniquely positioned to increase patient engagement and oncologist participation in clinical research through more efficient clinical trial delivery and a patient-led approach. We are excited to add OncoCare to our leading site and patient solutions business with the critical therapeutic expertise and experience it brings to further enhance our offer. Moving to our financial performance in quarter one, Icon delivered solid results with a 5.3% revenue growth on a constant currency organic basis over quarter one, 2022. Excluding COVID related work on a constant currency basis, revenue increased 9% year over year. Gross bookings increased 6% sequentially, but a higher level of cancellations and contract modifications in the quarter resulted in net bookings growth of 3% over quarter four, 2022, and a net book-to-bill of 1.22. Solid direct fee revenue growth drove gross margin expansion of 200 basis points on a year-over-year basis. We also saw another quarter of impressive growth in adjusted EBITDA, resulting in an increase of 17.2% year-over-year, driven by cost management and the continued execution of our hub location strategy across global business services. Our capital deployment strategy continued as planned, with a further reduction in our floating rate debt exposure in the quarter. Additionally, we remain active in evaluating potential acquisition opportunities that strategically align with our portfolio and further enhance our offering. We are reaffirming our full year 2023 financial guidance of revenue in the range of $7.94 to $8.34 billion, representing 2.6 to 7.7% growth on a year-over-year reported basis, and adjusted earnings per share in the range of $12.40 to $13.05, representing growth of 5.5 to 11.1% on a year-over-year basis. The guidance assumes double-digit adjusted EBITDA growth for the full year 2023 over 2022. Finally, I want to thank our employees across ICON for their significant contributions to our performance in quarter one. We remain steadfast in our commitment to advancing and accelerating clinical development, and we are encouraged by the value we are delivering for customers, sites, and patients. I'll now turn the call over to Brendan for additional comments on our financial results. Brendan.