IQVIA Holdings, Inc.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVS second quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll 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, press the pound key. As a reminder, this call is being recorded. Thank you. I would like to now turn the call over to Andrew Markwick, Senior Vice President, Investor Relations and Treasury. Mr. Markwick, please begin your conference.

Thank you. Good morning, everyone. Thank you for joining our second quarter 2020 earnings call. With me on the call today are Ari Boosby, Chairman and Chief Executive Officer, Michael McDonald, Executive Vice President and Chief Financial Officer, Ron Braulman, who will be Mike's successor as of August 1st, Eric Sherbert, Executive Vice President and General Counsel, Nick Charles, Senior Vice President, Financial Planning and Analysis, and Jen Halczak, Senior Director, Investor Relations. Today we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our IQVIA Investor Relations website, at ir.iqvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, including COVID-19 impacts. which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to, and not a substitute for, financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Boothby. Thank you, Andrew, and good morning, everyone.

Thank you for joining our second quarter 2020 earnings call. Before we get to the results, I'm sure you all saw the announcement last night, and so this will be Mike's last IQvia earnings call, and so I wanted to take the opportunity to thank him for his service and wish him well in his new role at Biogen. I also want to thank Ron and welcome him back. He really never left, but I want to thank him for agreeing to serve as our interim chief financial officer until we decided on a permanent successor. Many of you already know Ron, and I'm sure you are delighted to welcome him back to the CFO chair. Now, to our results. Revenue adjusted EBITDA and earnings all came in above our guidance ranges. We are also updating our guidance for the year and raising our full-year revenue, adjusted EBITDA, and earnings ranges. Before we review the numbers, I'd like to give you a quick operational update. During the second quarter, we saw gradual improvement in the accessibility of clinical research sites in the R&D solutions business, pretty much in line with what we told you three months ago. Global site access improved from approximately 20% in April to 40% at the end of June. Average site accessibility for the second quarter was about 30%, again in line with the assumption that we made when we set our second quarter guidance. The progress of global site reopenings is continuing into the third quarter, and today it's at 53%. I should point out that the progress has been slowing somewhat in the past couple of weeks as a result of several localized COVID-19 flare-ups in geographies around the world, and especially in parts of the United States. As sites have become accessible, we've seen an improvement in the number of on-site monitoring visits. In fact, on-site visits are now exceeding the number of remote visits. And as a result, remote visits have reduced from the peak in the second quarter. Of course, wherever sites are still inaccessible, our ability to deliver solutions like remote monitoring and virtual trials remains critical to ensuring trial continuity. Now, patients who are already enrolled in trials have slowly begun returning for in-person treatment. As you would expect, this varies by therapeutic area. For example, oncology patients are returning at a faster rate than dermatology patients. Also, The recent outbreaks in parts of the US have hampered the pace of recovery in the number of patients enrolled in trials who are willing to come in for in-person treatment. For trials that have not yet started, the pace of site startup and patient recruitment has obviously been slow. It's improving, but still slow. For example, Patient recruitment for new trials, which had been virtually halted during the second quarter, has resumed over the past few weeks and is now at about 25% of normal baseline enrollment levels. We expect this to continue to improve over time. RMDS business development activity has remained very strong. we still have not had any material cancellations of trials in our backlog due to COVID-19. Interactions with clients such as bid defenses continue as clients adjust to working virtually. RFP volume and value continue to hold at basically similar levels to 2019. And of course, the RNDS team has been awarded a wide range of COVID-19 vaccine therapeutics and related lab work. Of course, you will have seen we announced our collaboration with AstraZeneca last week to accelerate development of a potential COVID vaccine. COVID-19 more broadly has accelerated interest in our virtual trials solution. including StudyHub. Awards for our virtual trial solutions have actually doubled, albeit of a relatively small base. We're leveraging our virtual trial technology platform, StudyHub, to deliver a seamless patient experience. As you know, the platform combines e-consent, telemedicine, e-coa, and digital communication. Moving to technology and analytics, we continue to have very little interruption in data supply or demand. Our data production centers around the world remain fully operational and our technology and analytics deliveries continue in the ordinary course. Selling activities have started to resume as clients have adjusted to working virtually as well. There is still some delayed decision-making for ad hoc services work, But we've had real good momentum in our fastest growing businesses, such as real world and tech. Our real world business continues to expand, even in this environment, with strong growth in the quarter. As a reminder, the results of our real world business are reported in our TAS segment. So unlike our CRO peers, this growth is not included in our NDS results. In the technology space, OCE has added 35 new clients so far in 2020. OCE deployments continue to progress as scheduled as clients look to accelerate their usage and get up and running on the platform even faster. We now have 115 customers that have chosen OCE and they represent over 60,000 potential users of the platform. Most of these customers are still in the early stage of deployment. So far, our win rate in this segment when going head-to-head against the incumbent is approximately 70%. Finally, in our CSMS business, we've not experienced any material cancellations Although, as expected, we've experienced softer demand for field reps, which, of course, impacts revenue. Additionally, business development has slowed considerably in this segment. Let's now review the second quarter results. Revenue for the second quarter came in at $2,521,000,000, which is $118 million above the midpoint of our guidance range. Now, $41 million of these $118 million BIT came from FX and pass-throughs. Second quarter adjusted EBITDA was $483 million with a $25 million BIT versus the midpoint of our guidance. And this came entirely from better operational performance. Second quarter adjusted diluted EPS was $1.18. Second quarter RNDS contracted backlog, including pass-throughs, grew 13.5% year-over-year to $20.5 billion at June 30, 2020. We saw good growth in awards for our large pharma clients as well as our EBP clients in the quarters. We had broad-based booking strength by offering with particular strength in full-service clinical and in lab. The contracted net book-to-bill ratio including pass-throughs was 164 for the second quarter of 2020, and excluding pass-throughs, the second quarter contracted book-to-bill ratio was 1.60. The LTM contracted book-to-bill ratio at June 30th was 1.43 including pass-throughs and 1.42 excluding pass-throughs. As we said previously, we've continued to make every effort to preserve employment during this crisis, and to the extent possible, we have not affected base compensation for our employees. Of course, we've worked to reduce other costs and discretionary spend, And as a result of these actions, our adjusted EBITDA came in well above our expectations. You can see when you adjust for pass-throughs and FX that the dropped through incremental margin on the revenue beat was over 30%. So far, even considering several flare-ups around the world, things seem to be moving in the right directions. Sites are reopening globally, allowing us to resume our critical work in our NDS. We continue to be cautiously optimistic, and we anticipate a sharp recovery in the back end of the year. Mike will review in more detail how we see the second half playing out. Finally, a quick update on our 2021 planning process. As I've already shared with you, We started this process earlier than usual, and our plan is to provide 2021 guidance before the end of this year. Given the positive trends we've seen in operational execution and client demand, together with catch-up work and the associated change orders that we currently anticipate, as well as the COVID awards, we remain optimistic that in 2021 we will see a return to our previous growth trajectory. Now, I'll turn it over to Mike for some more detail on the quarter, how we see the second half of the year playing out, and the upward revisions to our guidance.