ICON plc

good day and thank you for standing by welcome to the icon q4 and full year 2023 earnings conference call at this time all participants are in listen only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you'll need to press star one and one on your telephone you'll then hear an automated message advising your hand is raised to withdraw your question please press star one and one again Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Kate Haven. Please go ahead.

Good day, and thank you for joining us on this call covering the quarter and full year ended December 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 20F filed on February 24th, 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 a 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.

Thank you, Kate, and good day, everyone. ICON delivered strong results in quarter four and for the full year 2023 as our team successfully navigated a dynamic environment impacted by several macroeconomic and geopolitical challenges. Through consistent operational delivery, increased scale, and our comprehensive suite of solutions, we were successful in securing new partnerships and expanding existing relationships across our customer segments and with the world's top 20 pharma companies in particular. Overall, we continue to experience positive demand trends in our industry. In the fourth quarter, we did see some volatility in RFP activity across customer segments, as small biotech was somewhat muted toward the end of the year, with some companies continuing to be deliberate with their overall development spend decisions. With that said, we are encouraged by the improving sentiment among customers in quarter one, as well as underlying trends from a funding perspective that suggests a stabilizing market as we've entered 2024. Within the large pharma segment, we continue to see a strong level of opportunities anchored by the strength of our new and existing strategic partnerships. In totality, across all segments, our overall trailing 12-month RFP activity increased in the high single digits in quarter four, consistent with quarter three. And this appears to be continuing, or even accelerating, early in 2024. Given this backdrop, and in line with our previous comments, we expect Book to Build to be in the range of 1.2 to 1.3 times on a quarterly basis in 2024, with an overall target of 1.25 times for the full year 2024. In quarter four, net bookings increased 8% on a year-over-year basis, driving 10% growth in total backlog over quarter four 2022. We saw continued strength in demand across our large pharma segment for both full service and FSP solutions, as well as excellent performance from our laboratory services business. Our innovative and scaled offerings are resonating well with customers and strongly positions ICON for further traction in new and existing customer accounts. To this end, in quarter four, we were awarded a new full-service strategic partnership with a top 20 pharma customer, creating significant new business potential in phase one to four studies across a number of therapeutic areas in their portfolio. Our depth of experience in long-standing and transformational large pharma partnerships was one of the key criteria for selecting ICON. as well as our collaborative approach in achieving meaningful efficiencies in their development programs. In reflecting back on the numerous accomplishments across our organization in 2023, there are several in particular that highlight our commitment to operational excellence. Our efforts in driving forward our ambitious automation agenda resulted in the achievement of greater than two million hours of automated activity in 2023 across a number of functions and processes. We have set another goal for automation in 2024, driving to deliver significant further improvement in areas such as critical study startup activities, further automation of our back office activities, as well as processes such as data ingestion and review, with a target of 3.5 million hours for the full year. At the time of the acquisition of PRA Health Sciences in July 2021, we set ambitious targets for both synergy realization and total debt pay down. The following two-year period was characterized by unexpected macroeconomic pressures and challenges in our market. Despite this dynamic, we remained consistent in our planned actions and were able to accelerate both the full cost synergy realization as well as our target leverage ratio. ahead of our initial timelines as we closed out 2023. This was all possible, of course, through the efforts of our over 41,000 employees across the world who have worked tirelessly to progress our customers' projects, many of whom have been recognized with prestigious industry awards for their efforts. Turning to review our financial performance in the quarter, ICON delivered a strong set of financial results, with revenue growth of 5.3% over quarter four 2022. Direct fee revenue growth continues to be robust and within the high single digits on a year-over-year basis, while pass-through revenue was slightly below our expectations due to the wind down of COVID-related trials in the quarter. With strong direct fee revenue growth and lower than expected pass-through revenue, we saw a notable uptick in gross margin on a sequential and year-over-year basis, resulting in a 30.4% margin for quarter four. On this note, we do anticipate returning to a more normalized gross margin profile of approximately 30% for the full year 2024. On another positive note, ICON again delivers substantial growth on adjusted EBITDA in quarter four, as SG&A expense was essentially flat on a sequential basis, resulting in a margin of 21.7%, well ahead of the mid-term target we set back in early 2022. Given the revenue mix shift in quarter four, our full year 2023 adjusted EBITDA margin of 20.9% was stronger than anticipated. an impressive 180 basis point growth in adjusted EBITDA margin in 2023 on a year-over-year basis. We expect an adjusted EBITDA margin expansion of circa 50 basis points on a full year basis in 2024. We continue to successfully execute our capital deployment strategy in the fourth quarter, closing the previously announced acquisition of Phillips Pharma Solutions in October. While this transaction is a small contributor to ICON's overall revenue, it supplements our current medical imaging capability and adds cardiac safety solutions to our service offering, providing our customers with a more integrated service. In addition, earlier this year, we closed the acquisition of Human First, a cloud-based technology company focused on accelerating and improving digital health technology selection in clinical trials. The addition of Human First will position us to become the industry leader in integrated clinical outcome assessment solutions, allowing customers to make evidence-based decisions to reduce patient burden and enhance data quality. Separately, we have a number of capital projects that are in development to bring additional efficiency to critical trial pain points and ultimately deliver more value to our customers. We are well underway in developing a comprehensive planning and oversight capability for site selection and activation that is coupled with improved resource forecasting, designed to deliver enhanced patient recruitment timelines. In addition, we continue to progress our investments in AI and automation. One example is the development of our Firecrest site and investigator database, designed to provide in-depth insights to address industry challenges such as investigator and site activity and their overall performance. We were very pleased with the upgraded credit rating we received from Moody's in December. ICON's second upgrade to investment grade rating in the fourth quarter following the S&P global ratings upgrade in October. This important milestone allows us the ability to refinance our variable late debt and move forward toward a more favorable capital structure that will give us more flexibility from a capital deployment perspective, particularly in the second half of 2024. We have a definitive plan that has been approved by our board and will be executed in the first half of this year, allowing us to achieve the targeted total interest expense reduction of approximately $100 million on a year-over-year basis from 2023. In line with our strategy, M&A remains the priority as the optimal way to deliver shareholder value, and we fully intend to utilize the strength of our balance sheet to acquire companies that complement our current services and add to our ability to deliver faster and more efficiently for customers. However, we have also secured approval to opportunistically spend up to $500 million on share repurchases over the next 12 months. Given the positive trajectory from our performance in quarter four and current market conditions in the start of this year, we are reaffirming the full year 2024 financial guidance we issued in January. We expect revenue to be in the range of $8.4 to $8.8 billion, an increase of 3.4 to 8.4% over full year 2023. Additionally, we expect adjusted earnings per share to be in the range of $14.50 to $15.30, representing an increase of 13.4% to 19.6% over the full year 2023. I'll now turn it over to Brendan for further details on the financial results. Brendan?