ICON plc

good day and thank you for standing by welcome to the icon plc q1 2025 earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you will need to press star 1 and 1 on your telephone You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised 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 ended March 31st, 2025. Also on the call today, we have our CEO, Dr. Steve Cutler, our CFO, Nigel Clerken, and our COO, Barry Balfe. 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 21, 2025. This presentation includes selected non-GAAP financial measures, which Steve and Nigel will be referencing in their prepared remarks. For 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 in 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 in the interest of time. I would now like to hand the call over to our CEO, Dr. Steve Cutler.

Thank you, Kate. I want to begin my comments with a few perspectives on the market, given the dynamic and unpredictable environment in which we are currently operating. Our overall view has been one of cautious optimism as we began this year, noting positive leading indicators of midterm demand alongside more challenging dynamics of elevated cancellations and delays in clinical trial decisions and starts which has pressured our outlook on near-term revenue. We knew that this year was going to be one of transition for the company, and unfortunately, broader macro uncertainty had only accentuated those market risks as we progressed through the year. The persistent volatility and narrow focus of biotech funding has not yet supported a sustained recovery in that part of the market, despite continued progress in opportunity flow. Large farmer demand continues to be mixed, linked to company-specific exposure to loss of exclusivity and overall budgetary spend. On the positive side, we continue to generate momentum from our recent strategic partnerships, as well as in the mid-sized farmer segment. Net-net, there continues to be evidence of solid opportunities supporting the mid- to long-term outlook, as well as a continued need for innovation by our customers, and we remain highly constructive on our prospects going forward. However, conversion has been inconsistent on a quarterly basis as cautious behavior has tightened or delayed spending, and there remain broad elements of uncertainty in our market. We are focused on navigating this period adeptly to support our customers while capitalizing on the opportunities we do see to further improve our market leading position. The ICON team have good collective and individual experience in managing through similar cycles in this industry and well understand the need for agility and flexibility across our business to quickly react to opportunities and changes in demand. We are well placed to do this again. From a business development standpoint, overall opportunity flow was mixed in quarter one. In biotech, we've seen a significant increase in overall opportunities as well as a modest uptick in our win rate on projects that have gone through to decision. However, this was offset by an increase in the number of RFP opportunities that were ultimately cancelled by customers. Hence, while we are making progress in biotech, the segment remains challenging given the funding environment and continued cautious decision making. In large pharma, While RFP opportunities were more muted during the quarter, our success rate remained high, underscoring our strong partnership positioning in this segment. These mixed dynamics, in addition to delays in decisions we anticipated to be made in the quarter, negatively impacted our overall performance in bookings, decreasing our book to bill to 1.01 times in the quarter. In terms of cancellations, we saw elevated levels again this quarter, a similar absolute amount to quarter four. Reasons for cancellations were broad, ranging from portfolio prioritization to clinical data and futility decisions. Overall, in terms of customer split, the cancellations were in line with the relative distribution of revenue across the company. We anticipate continued volatility in bookings performance on a quarterly basis due to continued caution and reprioritizations. Cancellations remain a headwind to revenue this year, and our updated full year guidance reflects this dynamic continuing to be elevated in the near term. Our results for quarter one are reflective of the transition period we expected as we came into the year. Revenue in the quarter was impacted by the delayed next-generation COVID vaccine study that we disclosed in early March. Our focused efforts on driving operational utilisation alongside good cost control across our business resulted in better-than-expected adjusted EBITDA margin performance of 19.5% in the quarter, translating to earnings per share in line with our initial expectations to start the year. This clearly demonstrates our ability to align our resources with the work in our backlog and effectively manage our business. We have updated our full year guidance to reflect recent booking trends, including increased cancellations, as well as the removal of both of the next generation COVID trials, approximately $350 million that were previously expected to start this year. We felt it was appropriate to take this action as one of those studies was canceled early in quarter two and will be reflected in our second quarter cancellations. And the other study was on 90-day hold as of the end of quarter one. However, we received a positive update on the second study just this week, lifting the hold to restart patient screening activity. We have resumed work on this project and are actively working with this customer to begin screening patients. We will provide further updates as we gain additional visibility on the expected impact and timeline for study enrollment this year. As we navigate this period of uncertainty, we remain focused on customer delivery and continuing to strengthen our offering, prioritizing investment and execution of what is squarely within our control. While we ultimately can't influence decisions on study cancellations, we can ensure we are delivering even better for our customers. This ultimately leads to increased visibility of in-flight studies and solutions to expedite development milestones, which will also assist us in our efforts to improve our burn rate. To that end, we have seen early benefits from leveraging best practices and implementing standardization across our portfolio in areas such as trial planning, activation, and oversight as well as contract management. By streamlining processes and unifying platform technology across our operational units, we are seeing better performance on our study cycle times. This integration is driving increased cross-sell opportunities within customers with meaningful wins in ancillary offerings such as laboratory services. In quarter one, we saw evidence of this with a new partnership award in labs with an existing large pharma strategic customer, expanding our position and providing additional opportunity for growth. This partnership win is representative of the solid opportunity and continued growth we've seen in our laboratory services business, as well as recent momentum in our early phase business. Beyond our focus on operational delivery, we have leveraged one of our longstanding core competencies, managing our cost base to align with customer demand. We have been executing on our plans to ensure proper alignment of resources across our business, as well as identifying additional opportunities for further efficiencies through automation and other non-labour elements of our costs. Our investment in digital innovation has also continued in earnest, with the release of two new AI-enabled tools in the quarter which will advance our strategy to accelerate trials, enhance data, and optimize operational efficiencies. The first is iSubmit, which automates the clinical trial document management process, primarily through managing electronic trial master files. It also uses AI to improve compliance, reduce the burden on clinical project teams, and manage documents in an efficient and accurate way. The other tool is SmartDraft, which streamlines the clinical contract drafting process during study startup, allowing sites to shorten overall startup times. These two new releases join our broader suite of AI solutions that are truly enhancing our delivery for customers, embracing the opportunities that AI and advanced technology are presenting to transform clinical development. Finally, We continue to execute our capital deployment strategy, balancing further investment in the business while returning capital to our shareholders. We have highlighted our current priority on share repurchase, given our recent share price performance, and we executed on this with the repurchase of $250 million in shares over the course of quarter one. Within the confines of Irish law, We plan to assertively allocate capital towards share repurchases in the near term while also evaluating strategic M&A opportunities that are in our pipeline. We remain focused on addressing key customer challenges such as patient recruitment and retention by enhancing and scaling our current clinical services. Our concentration on these key areas will aid in our return to growth over the short to medium term. Importantly, the strength of our balance sheet affords us the opportunity to execute both share repurchases and acquisitions should they meet our strategic and financial criteria. Before handing over to Nigel, I'll close out with a perspective I often share with investors when asked about cyclical periods in our industry and customers' changing behaviour and requirements when it comes to development needs. And simply put, It's why we exist as a company and as an industry. Day in and day out, we are adapting to meet our customers' needs and opportunities as we partner with them to navigate the complex and ever-changing healthcare environment to develop life-saving medicines. It's incumbent upon us as an organization to identify the available opportunities and manage that change appropriately, ensure we are innovative, agile, and resourced to meet the needs of our customers and become an even better partner for them. We are keenly focused on capitalising on the many opportunities that are in front of us at this time of uncertainty to further solidify our leading position in the market. I want to thank all of the employees across ICON that are working incredibly hard to do just that. I'll now hand it over to Nigel for a review of our financial results.