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spk00: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that 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 now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, you may begin your conference.
spk09: Thank you. And good morning, everyone. Thank you for joining our fourth quarter 2021 earnings call. With me today are Ari Goosby, Chairman and Chief Executive Officer, Ron Brooman, Executive Vice President and Chief Financial Officer, Eric Sherbert, Executive Vice President and General Counsel, Mike Fedock, Senior Vice President, Financial Planning and Analysis, and Brian Stengel, Associate 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 in 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 will differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, 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. 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 Uzbe.
spk03: Thank you, Nick, and good morning, everyone. Thank you for joining today for our fourth quarter results. It was great to see many of you in person at our Analyst and Investor Conference in November. And as you will recall, we shared our expectations that we would meet or exceed our three-year Vision 22 targets. We also laid out our plans to make 2022 yet another inflection point in our growth trajectory, and further accelerate the company's growth rate in the next three-year phase of our journey to 2025. The team highlighted the power of connected intelligence, which brings together IQVS differentiated capabilities and drives our leadership position in the clinical and commercial markets. This underpins our new 20 by 25 strategy, which alludes to our plans to achieve at least $20 billion of revenue by 2025. We're excited about this next phase of growth for IQVIA, and we are busy refining our strategies and action plans, and you will hear more about it as the year progresses. Two weeks ago, IQVIA was named to Fortune's list of the world's most admired companies for the fifth consecutive year. Importantly, we earned a first-place ranking within the healthcare, pharmacy, and other services category for the first time. We ranked number one in the categories of innovation, capital deployment, global competitiveness, quality of product and services, and long-term investment value. I want to thank our nearly 80,000 employees worldwide, for this recognition is a tribute to their innovation and drive. Turning now to our results, we ended 2021 on a high note, despite COVID-19's continued impact on many parts of the world. We delivered robust top and bottom line growth in the quarter, which, as you know, was against a much tougher year-over-year comparison than earlier in the year. These results reinforce our confidence that we will achieve our 2022 guidance, and, of course, it sets us up well to meet our ambitious 20 by 25 targets. Let's review the fourth quarter. Revenue for the fourth quarter grew 10.2% on a reported basis and 11.6% at constant currency. The $62 million beat above the midpoint of our guidance range was driven by stronger operational performance across all three segments, as well as higher pass-throughs, partially offset by FX headwinds. Compared to prior year and excluding COVID-related work, our core businesses, meaning RMDS and TAS, grew mid-teens at constant currency on an organic basis. Ron will provide a lot more detail in his remarks, including additional COVID-adjusted numbers for each segment. Fourth quarter adjusted EBITDA grew 12.7%, reflecting our revenue growth, as well as ongoing productivity initiatives. The $27 million debt above the midpoint of our guidance range was entirely due to our operational performance. Fourth quarter adjusted diluted EPS of $2.55 grew 20.9%. That was 13 cents above the midpoint of our guidance, with the majority of the BIT coming from the adjusted EBITDA drop-through. Let me now provide an update on the business. On the commercial side of the business, it was a strong year for new molecules and launches as the industry continued its recovery from the COVID-19 pandemic disruption. This year, 15 new molecules were approved by the FDA and 72 new commercial launches took place. IQVS supported nearly 80% of launchers by top 20 pharma and approximately 60% of all launchers. This highlights our scale globally and across all customer segments in applying advanced technology and analytics capabilities to enhance launch planning, engagement, and measurement. Overall, We've seen significant momentum and continued demand for our technology solutions. There are now over 3000 clients who have adopted one or more of our technology platforms, including human data science cloud, orchestrated analytics, E360, omni-channel navigator, Engage, and of course, orchestrated customer engagement or OCE. In fact, The footprint of our OCE platform itself has continued to grow, with over 350 clients having adopted one or more modules on the platform since launch. Early in 2021, we launched IQVIA Next Best Action, which is an AI-driven, omnichannel customer engagement decision engine. Two top 20 pharma clients have successfully rolled out this intelligence engine to orchestrate customer engagements in over 30 countries and across more than 40 brands each. Two other top 20 pharma are currently in the implementation phase. Another highlight in our task business has been the success of DMD Marketing Solutions, a leading provider of data and digital marketing solutions that help brands deliver personalized digital content to healthcare professionals. we entered into an enterprise agreement with the top 10 pharma clients to utilize DMD's advanced analytic capabilities to power omnichannel engagement across all eight of their brand franchises. To date, 18 of the top 20 have adopted at least one of DMD's solutions. We're very excited for the future growth of this business within IQVIA. Real-world evidence, another highlight IQVIA continues to play a leading role in the use of secondary data to answer key questions for life science customers. In the fourth quarter, we want two large post-authorization safety studies in an autoimmune area with a top 10 pharma. These studies use existing healthcare data to observe patients over a period of 10 years to better understand long-term effects of the treatments. We were also recently awarded a disease registry project for an upcoming novel gene therapy. Here, we will recruit a broad population of patients with a specific disease to understand how they are currently managing clinical practice. This information is vital to our life science sponsors to inform the design of subsequent clinical trials so they can target patient groups with the highest unmet need. Moving to clinical technology, we saw increased adoption of our orchestrated clinical trial, OCT platform, which supports trial planning, site management, patient engagement, trial management, and clinical data analytics. During the year, we added 90 new oct clients bringing the total to over 350 clients who have adopted one or more modules within our clinical technology suite since launch including all of the top 10 and 18 of the top 40. within oct's digital patient suite this year we secured three preferred provider partnerships We talked 30 pharmaceutical clients to provide our interactive response technology, IRT capabilities, to support site operations across their entire clinical trial portfolios. This technology facilitates patient randomization to ensure protocol adherence and streamlines site supply chain management to reduce drug wastage and to drive significant cost reductions. our solution was awarded a top ranking by industry leaders in a recent ISR report for randomization and trial supply management capabilities. We also saw increased demand for our industry-leading decentralized clinical trial offering. Approximately one-third of our active full-service clinical trials incorporate one or more of our DCT technology or services capabilities, and we expect these to continue to grow as the need for these capabilities in complex studies becomes more evident. For example, we are currently executing a full-service trial for treatment of multiple system atrophy, a severe degenerative neurological disorder affecting the body's involuntary functions. We are deploying a full suite of capabilities, including e-coa, e-consent, and home research nurses on this study to significantly reduce the travel burden on these patients who have significant mobility challenges. Finally, our overall RNDS business continues to build on its strong momentum with over $2.4 billion of net new business, including pass-throughs, and it set a record for quarterly service bookings achieving over $1.9 billion of service bookings for the first time ever. This resulted in a fourth-quarter contracted net book-to-be ratio of 1.36, excluding pass-throughs, and 1.24, including pass-throughs. For the calendar year, we delivered over $10 billion of total net new bookings for the first time ever, an increase of 14.6% compared to 2020. This led to an LTM contracted net book-to-bill ratio of 1.35% excluding pass-throughs and 1.34% including pass-throughs. Our contracted backlog in RMDS, including pass-throughs, grew 10.2% year-over-year, to a record $24.8 billion as of December 31, 2021. And now I will turn it over to Ron for more details on our financial performance.
spk06: Thanks, Ari, and good morning, everyone. Let's start by revealing revenue. Fourth quarter revenue of $3,636,000,000 grew 10.2% on a reported basis and 11.6% at constant currency. You'll recall that last year's fourth quarter was a much tougher comparison than earlier quarters, as we picked up incremental demand for mega vaccine studies in RNDS and government-related COVID work within TAS. Also, the core business began to rebound from the effects of COVID-19. In this year's fourth quarter, COVID-related revenues were approximately $325 million down about 25% versus the fourth quarter of 2020. In our base business, that is, excluding all COVID-related work from both 2021 and 2020, organic growth at constant currency was mid-teens. Technology and analytics solutions revenue for the fourth quarter was $1,496,000,000, up 5% reported and 6.6% at constant currency. Year over year, TAS experienced just over 400 basis points of headwind due to a step down in COVID-related work. Excluding all COVID-related work, organic growth at constant currency in TAS was high single digits. R&D Solutions' fourth quarter revenue of $1,944,000,000 was up 15.4% at actual FX rates and 16.3% at constant currencies. Excluding all COVID-related work, organic growth at constant currency and R&DS was approximately 25%. Contract sales and medical solutions, or CSMS, fourth quarter revenue of $196 million grew 3.7% reported and 7.4% at constant currency. Excluding all COVID-related work, organic growth at constant currency and CSMS was low single digits. For the full year, revenue was $13,874,000,000, growing at 22.1% reported and 21.1% at constant currency. COVID-related revenues in 2021 were approximately $1.8 billion, with just under 80% of that attributable to R&DS, about 20% due to TAS, and the remainder in CSMS. The incremental COVID-related revenues in 2021 versus 2020 accounted for approximately half of our growth in 2021. Full-year technology and analytics solutions revenue was $5,534,000,000, up 13.9% reported and 12.4% at constant currency. Excluding COVID-related work, organic growth at constant currency and TADS was high single digits. Full-year revenue in R&D solutions with $7,556,000,000 growing at 31.2% reported and 30.4% at constant currency. Excluding COVID-related work, R&D has organic growth at constant currency for both total revenue and services revenue with low double digits. Full-year CSMS revenue with $784,000,000 representing 5.8% growth on a reported basis and 5.7% at constant currency. And excluding COVID-related work, organic growth at constant currency and CSMS was low single digits. Now I'll move down to P&L. Adjusted EBITDA was $828 million for the fourth quarter, which was 12.7% growth on a reported basis. Full year adjusted EBITDA was $3,022,000,000, up 26.8% year-over-year on a reported basis. Fourth quarter GAAP net income was $318,000,000, and GAAP diluted earnings per share was $1.63. Full year GAAP net income was $966,000,000, or $4.95 of earnings per diluted share. Adjusted net income was $496 million for the fourth quarter, up 20.7% year over year, and adjusted diluted earnings per share grew 20.9% to $2.55. For the full year, adjusted net income was $1,760,000, or $9.03 per share, up 41%. Now, as already reviewed, R&D Solutions delivered another outstanding quarter of net new business. R&D's backlog now stands at a record $24.8 billion, an increase of 10.2% year-over-year. Full-year 2021 net new bookings, including pass-throughs, rose to over $10 billion for the first time, and that's 14.6% growth compared to 2020. Okay, let's move to the balance sheet now. Cash flow was, again, quite strong in the quarter. Cash flow from operations was $692 million, and CapEx was $184 million, which resulted in free cash flow of $508 million. This brought our free cash flow for the full year to a record $2.3 billion, up 70% versus the prior year. At December 31, cash and cash equivalents totaled $1,366,000,000, and gross debt was $12,125,000,000, resulting in net debt of $10,759,000,000. Our net leverage ratio at December 31 was 3.56 times trailing 12-month adjusted EBITDA. Now, it's worth highlighting that our improved free cash flow over the last two years allowed us to deploy approximately $4.5 billion of capital to internal investments, acquisitions, and share repurchase. While at the same time, we were able to reduce our net leverage ratio from a high of 4.8 times in Q2 2020, which you'll recall was the height of the pandemic, to nearly 3.5 times. And in doing this, we achieved our Vision 22 net leverage ratio target of 3.5 to 4 times a full year early. In the quarter, we repurchased $174 million of our shares, which resulted in full-year share repurchase of $395 million. And we ended the year with 195 million fully diluted shares outstanding. and $523 million of share repurchase authorization remaining under our existing program. Now, last week, our Board of Directors approved a $2 billion increase to our share repurchase authorization, which increases our remaining authorization to just over $2.5 billion. Now, let's turn to the guidance. As you saw, we're reaffirming the full year 2022 revenue guidance that we issued at our analyst and investor conference in November. And in maintaining this guidance, we actually absorbed a $70 million revenue headwind from FX since we initially guided in November. Now, additionally, we're raising our full year 2022 profit guidance versus what we provided you in November and So to summarize the overall guidance for the full year, we expect revenue to be between $14 billion, $700 million, and $15 billion, which represents year-over-year growth at 7.1% to 9.2% at constant currency and 6% to 8.1% on a reported basis compared to 2021. Now, we now expect adjusted EBITDA to be between $3,330 million and $3,405 million, representing year-over-year growth of 10.2% to 12.7%. And we also now expect adjusted diluted EPS to be between $9.95 and $10.25, which represents year-over-year growth of 10.2% to 13.5%. Our full-year 2022 guidance assumes that December 31, 2021 foreign currency exchange rates remain in effect for the balance of the year. Now, compared to the prior year, I should mention FX is now a headwind of 110 basis points to our full-year revenue growth. And our projected revenue growth includes a little bit over 100 basis points of confidence. Now, at our analyst and investor conference in November, we told you to anticipate that our COVID-related revenue will step down by approximately $1 billion in 2022, but will more than compensate for that headwind with strong growth in our base business. And let me give you some additional detail around this that I think will be helpful. Excluding COVID-related revenue, the FX headwind, and the contribution of acquisitions, our total company revenue guidance implies organic growth at constant currency in the low to mid-teens. At the segment level, we anticipate full-year technology and analytics solutions revenue growth of between 5% and 7%. Excluding COVID-related work, we expect organic revenue growth at constant currency in TAS to be in the high single digits. Research and development solutions revenue growth is expected to be between 8% and 10%. Excluding COVID-related work, we expect organic revenue growth at constant currency in R&DS to be in the upper teens. And finally, contract sales and medical solutions revenue is anticipated to be down about 2%, But excluding COVID-related work, we expect organic revenue growth at constant currency and CSMS to be in the low single digits. Let's move to the first quarter now. As you all know, the first quarter of last year marked a continued rebound in our base business after the 2020 pandemic-related decline. In addition, Q1 and Q2 of last year represented our peak COVID-related revenues. As a result of this, the first half of the year will have the most challenging year-over-year compares. For the first quarter, revenue is expected to be between $3.5 billion and a growth of 4.8% to 6.6% on a constant currency basis and 3.1% to 4.9% on a reported basis.
spk05: Now, excluding COVID-related work, we expect organic revenue to be expected to be between $800 million and $815 million, up 7.5% to 9.5%.
spk06: And finally, adjusted diluted EPS is expected to be between $2.40 and $2.46, going 10.1% to 12.8%. So to summarize, we delivered very strong fourth quarter results on both the top and bottom line against what was 2020. RDS recorded its largest ever quarter of service bookings and for the first time had over $10 billion of total net new bookings in a year.
spk05: A contracted backlog improved to a record of nearly $25 billion in the full year to a record $2.3 billion. We closed 2021 with net revenues Average of 3.6 times trailing 12-month adjusted EBITDA. Our board approved a $2 billion increase to our share repurchase authorization.
spk06: And finally, we're reaffirming the full year 2022 guidance that we provided in November for revenue, and we're raising our adjusted EBITDA and adjusted diluted EPS guidance. And with that, let me turn it back over to the operator for questions and answers.
spk00: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. And we'll pause for just a moment to compile the Q&A roster. Your first question is from Jack Meehan with Nefron Research.
spk11: Thank you, and good morning. I wanted to talk a little bit more about COVID and appreciate all the color you gave, Ron, during the prepared remarks on this. So at the end of the day, you talked about a billion of COVID tapering this year. There was 1.8 in 2021. Can you talk about, you know, the bastion of COVID, you know, kind of over the next few years? Do you think there's some aspect that might prove stickier this in TAS, you know, or some ongoing work in R&DS, just any color there would be great.
spk06: Yeah, well, continue to burn off over the next two years. I think it'll be a gradual decline in 2022, but it's going to continue on into 2023.
spk05: Yeah, it's hard to foresee, Jack.
spk06: you know, how much additional COVID work there might be. You know, we've all been surprised by the ups and downs of the pandemic and so forth, so it's certainly possible there could be more right now. We're basing our projections on what we, you know, we currently have in the backlog, and we'll see where it goes from there and see what other work might come along.
spk05: Yeah, Jack, I mean, this is exactly right, and I, you know, all we can do is Look at the situation today.
spk03: If we learn anything about this pandemic, we just can't predict the evolution. So we do have, you know, in our RFP pipeline, especially on the RMDS side, you know, requests for, you know, proposals to assist in new therapies to address COVID. There are even, you know, large, you know, top 10 farmers that we are talking to about potential therapeutics. So I do anticipate there will be some residual amount of COVID work ongoing. But unless things change dramatically based on the picture today, you know, it's just going to gradually taper down. That's what we have here, you know, through 2020, hopefully. But that's what we have.
spk05: It's all largely based on burning off the virus. the world, both commercial and clinical.
spk11: Great. And then just as a follow-up, would be great to get your latest thinking on labor and maybe wage inflation. What is, how has your review changed at all related to when you initially gave guidance around just wage inflation and the impact that might have on the forecast for 2022?
spk05: Yeah, I mean, look, that's a good question.
spk03: That's the single most important challenge, operational challenge we have is people management. I mean, look, it's wonderful to be the leader in this space and to have, you know, such a demand as well. And the result of that is we need a lot of people. Even though technology is gradually taking over more and more of the
spk05: work that we deliver, but we still need a lot of people.
spk03: And at 80,000 people, we know we have to recruit many thousands more this coming year. We have attrition, which is an issue really for everybody. You know, the great resignation is affecting us as well post-pandemic. A lot of people, you know, recruit talent from IQVIA. But look, we are adjusting to this. We're creating all kinds of flexible work arrangements, compensation arrangements, loyalty building programs, training programs, Back to Work, Future of Work, which is an initiative that we have to redefine roles and what's expected from our employees. So we're being very innovative in terms of our workspace, really working on a lot of multiple fronts. With respect to the numbers and how it affects our members, obviously it's challenging when you have to raise compensation costs and generally people management costs. However, I would point to you that our margins, our adjusted EBITDA margins, have continued to grow. I mean, in fact, they've been growing more than, and they are expected to grow more than ever before. And the reason for that is we are finally getting the leverage on the massive restructuring and cost increase, and that's offsetting, more than offsetting, the wage inflation headwinds. Again, I point to the growth of our profit numbers relative to the growth of our revenue numbers, and you see that we significantly materially grow our profit materially higher than significant margin growth.
spk05: Yeah, I also would say, Jack, that we do have the ability in a lot of instances to raise prices, to adjust prices. We have some, you know, provisions for improvement in our MSA agreements. We also have some short cycle businesses. So wherever we have the ability to
spk06: adjust prices, we are doing so. And, you know, we're getting some offset there as well.
spk11: Great. Thank you, guys.
spk00: Your next question is from Eric Coldwell with Bayard.
spk10: Thank you. Good morning. So probably the number one topic here recently has been the biotech funding environment and any potential knock-on impacts to the group. Competitor who also reported at the same time this morning and is very exposed to pre-commercial biotech said their RFP volumes were down 10% in the fourth quarter, down 25% in January, but that they haven't seen any cancellations or delays so far, no business impact so far. I'm curious if you could help us by, one, talking about your mix of pre-commercial biotech as a percent of R&D backlog or bookings, and two, talk about what you're seeing in real time in terms of business demand, bookings, other related activity in that pre-commercial biotech space. That would be very helpful. Thank you.
spk03: Yeah, thanks, Eric. Well, as you can imagine, we track these numbers pretty tightly, and there, as you know, many definitions of what's biotech funding and so on. We are not seeing in the actual RFP pipeline any changes versus what has been, as you know, a very strong demand environment for the EDP segment in general. In terms of percent of our bookings, what do we give here? We don't have the backlog, but we have the bookings. Let me see. I got a few numbers here for you.
spk05: I think, look, in terms of the actual bookings,
spk03: Large pharma still represents the majority, right? A little bit over half. Is that correct? That's correct. And then we, you know, maybe, you know, somewhere around 10-ish percent of our bookings and the rest. So, again, I'd say, you know, 35% plus is EBP. And that has been the case. Again, it fluctuates. As you can imagine, these things, these numbers go up and down. Now, if you compare where we are here in terms of the RFP flow, It still continues to grow double digits in dollars and volume. I mean, it's really, really high, more than double digits. I don't know if it gives you the numbers, but the pipeline is very, very strong. I mean, actually, our pipeline is about equal to our backlog as we speak right now. And, again, as I said before, COVID is basically gone, more or less. It's very, very tiny. percentage of the total pipeline here. A lot of it is oncology, which is up, seeing very good EDP growth in the pipeline. I'm talking now, okay, not the books. I'm talking the pipeline to your question, what do we see going forward, okay, which would be normally a line indicator of the funding. And we see that EDP of our pipeline right now. So, again, we don't see any significant changes. Look, I wouldn't – yes, it's true. For example, January was lower. The month of January was lower than the EDP funding. But I wouldn't extrapolate from one month or from one quarter, for that matter. As you know, generally, the levels of EDP funding – are very, very high.
spk05: I mean, we must be in the top three years ever in terms of funding.
spk03: So OK, maybe that this year will be a little lower than last year. Again, these were record years. We're talking about orders of magnitude greater in terms of multiples of the funding if you just go back three, four, five, six years. So, yeah, I mean, a step down in funding doesn't concern us. We continue to see very, very good both bookings and even higher numbers in the pipeline.
spk10: Hey, Ari, if I could just do one follow-up. Could you remind everyone what your definition of EBP, the emerging biopharma, what your technical definition is, what it takes for a client to fit into that?
spk03: We look at how much they spend in terms of clinical development, of R&D spend.
spk10: I was just going to say some of that client base would actually be companies that have the commercial pipeline.
spk06: Yeah, that's correct. That encompasses what you might call small pharma as well that has commercialized product.
spk03: Let's say if a company spends less than a couple hundred million, I don't know exactly the number and how we segment it. We have tons of analytics and segmentation definitions, but broadly speaking, a company that spends less than a couple hundred million dollars in a given year in its R&D budget for us as an EVP. That's just one definition. We've got others also triangulate, as you can imagine, but that's one definition that I happen to like.
spk10: All right, last one. If you had to guess, and maybe you're not willing to do so, but if you had to guess just off the cuff, not holding your feet to the fire, would 10% of your... You know, I...
spk05: I don't know if I can give you these numbers, but you know what?
spk03: Why don't we do this? Why don't we give us, you know, on follow-up questions, we'll try to give you a little bit more clarity or range on what's in the backlog. We'll try to do that. I'll ask the finance team here to – I'll try to prevail and use my executive privilege. I'm still pretty happy on these guys. But I don't know at this point, you know, you put me on the spot here. I don't know exactly what I'm going to give you.
spk06: To give you a partial answer to that and say the last two years, large pharma orders have been, bookings have been slightly over 50% of our. Yeah, correct.
spk10: All right. Well, look, I appreciate it. And I thought you had a great quarter.
spk05: So good job. Keep it up and look forward to the rest of the. Thanks so much. Thank you, Eric. Usually you tell us at the beginning of the questions.
spk03: I was concerned, but thanks for sending it again.
spk05: All right. It's all good. All right. The questions we're getting are on RFPs and wage inflation. I want to go back to the wage inflation discussion and either down margins, because it is notable you're guiding for expansion here. You talked about, you know, benefit from the original merger integration plan.
spk07: You talked about digitization and maybe some price increases, but can you maybe just give us a little bit more color on how you're planning to drive margin expansion in this environment this year?
spk05: Are you pulling forward any additional cost actions?
spk03: No, not at all. Not at all. As I said before, just to make myself clear again, largely leveraging the benefit of all the cost actions that we took post-merger. You will recall, go back and look at the numbers, we have significant restructuring amounts every year, which obviously affected our cash flow. And we are now benefiting and leveraging those overhead optimizations, outsourcing actions, consolidation of infrastructure, merging of IT systems, etc., etc. Now, in addition to this, Part of the reason you see margin expansion actually probably accelerate in 2022 versus 2021 in a quite significant way. I think some of it is what I just said, and some of it is a mixed benefit. I want to remind everyone that the COVID-related work, which was quite significant portion over the past year or two, was at a lower margin than we would otherwise have our base business at. Okay? Lots of it was government work, whether it's on the commercial side, very small margins, or on the R&D side, where we also contributed to the global effort to address the pandemic by pricing our COVID-related clinical trials, you know, not at the same level as they would otherwise have for traditional work. And so in terms of mix, as this COVID-related work gradually tapers down and the base business continues to grow as a proportion of the total, then, of course, you've got a benefit on the margin side. I might add further that the amount of pass-throughs on COVID-related work was unusually high, you know, vaccine trials and came also earlier on than it would on the normal trial timelines. So the combination of lower margins, service margins to start with, plus a higher proportion, an unusually high proportion of pass-throughs, all of that contributed to be, you know, to, you know,
spk05: then obviously the mixed impact on margins is going to be more favorable. And that's the other reason you see an acceleration of our margin growth.
spk07: Okay, that's so cool. And then a follow-up on APAC, you know, your long-term guidance is 11% to 13% growth through 2025. Obviously, within China, there's been a lot of noise, you know, Wuxi Biologics getting placed on the unverified list. They're a CDMO, you're a CRO, so very different markets. But can you just talk on your view on China here in the near term?
spk03: And, you know, does any of this kind of noise... We've got a couple hundred million dollar business in China. It's been growing double digits over the last few years. We have a fully-owned CRO subsidiary in addition to IQVIA. We have a core IQVIA business, and we've got a fully-owned CRO subsidiary that's called Kuntuo, which is designed for local Chinese regulatory requirements and largely caters to the local market, the local biotechs, whilst IQVIA parents. deals with the work of multinationals sponsors for their piece of the clinical trials in China when it exists. It's a unique setup, which in combination with our global CRO platform allows us to capture higher growth opportunities with China. Again, we feel good about our capabilities in this market and about our prospects to continue this growth trend. Look, there are local CROs that are emerging. There are formidable competitors that are gaining share of outfits in China. As you know, I don't need to belabor the point. China is a complex market.
spk05: There are lots of factors involved. how market dynamics play out.
spk03: But without worries, without concern, we continue to invest as required. We have a good market position, and it's a small piece of our total business.
spk07: One last quick one before I hop off on OCE on retention. You talked about 350 clients using over one module. Your biggest competitor did, I think, talk about winning that Roche. Are you able to comment on that dynamic at all?
spk03: Anyone? I don't want to be the end.
spk06: No, look, we don't comment on individual customers and dynamics with individual customers.
spk05: And, you know, the Roche win was a very big win.
spk06: When and, you know, the large majority of that is outside the U.S., I think about 90% or so.
spk03: Yeah, 90% of the work of the project is outside the U.S. So I think we have the other independent subsidiaries, right, like Genentech? Yeah. Yeah. They have its own program, but, yeah, no, no, no, you know. Rorosh has reaffirmed their commitment and is looking to accelerate the rollout, actually, after the successful implementations we had in several regions. Plus, they've also expressed interest in purchasing other modules. So we're very pleased with our collaboration with this client, but beyond that.
spk00: Your next question is from John Krieger with William Blair.
spk05: Hi.
spk01: Hi, thanks very much. I wanted to come back to you guys made the comment that you expect your R&DS revenue growth this year, I think, to be in the upper teens.
spk05: Yeah, I think, look, I think that the double-digit growth
spk02: Growth was a marker that we have achieved and strive to achieve. If you remember at the beginning of the merger, the growth was very low in the single digits. So, you know, we think that continued acceleration will continue. And certainly that double digit sort of mark in the longer term is something that we're looking forward to maintain that acceleration.
spk03: Yeah, I mean, look, at our investor conference, we gave you, you know, even 25 targets for our company as a whole. And we say that the company as a whole will grow 10% to 12% annually. So, you know, R&D has to be growing into a double digit in order to achieve that.
spk05: And so, you know, that's kind of... kind of where we, didn't we give guidance also for price segments?
spk03: For 25? Do you have those numbers? While the team here is bringing this up, but again, I quote your attention, I bring your attention to what we gave as longer-term growth trends just a couple of months ago in November in New York, when we were all together in person, and we gave you long-term goals and growth trends, and all of which represented versus what we've had over the 19 to 20 years.
spk09: Double digits at the investor conference.
spk03: Yeah, strong double digits, yeah. So that's the long-term trend of the business. And, again, I point to you that these are large-scale businesses.
spk01: Yeah, absolutely. Very, very impressive. Thanks. And a quick follow-up, Ron. I think this one's probably best for you. In the quarter, can you remind us what the acquisition contribution was to growth, and did you buy anything notable in the fourth quarter?
spk06: Yeah, the acquisition contribution to the growth was – Relatively minimal. It was a little over 150 basis points. We made a couple of acquisitions in the quarter, the largest of which was a payer analyst.
spk00: Your next question is from Shlomo Rosenbaum from Stiefel.
spk08: Hi. About the breakdown of the upper single digit. revenue growth in TAS when you exclude COVID. What's driving the growth there as a real world? Is it evidence? Is it technology? And, you know, the information part of the business doesn't grow much at all. So maybe you can just help us with the composition and what are some of the, you know, really big drivers there?
spk03: Yeah, thank you, Shlomo. Well, we've done this before. We've told you what it's comprised of. And, you know, if you look at TAS, I mean, I like to – you've got the basic core information solution, which is the old, old IMS business, essentially the data.
spk05: Three percent of the business give or take.
spk03: And that's a flattish growth rate business.
spk05: And that's strategic. That's the way we do it. We just sell the data with very little price increases.
spk03: It's a flattish business. Then you've got the moderately growing piece of the business, which is, let's call it another quarter at this point, maybe a quarter of the business. That's analytics, consulting, various services. And that grows double digits now. It's been growing strong double digits in the past two, three years. It used to grow Mid to high single digit now is growing low to mid double digits the past few years. And then you've got the higher growth businesses and that's the real world and of course the technology businesses which will grow good mid-teens and that's about what do you want to say, the balance. So they're at 45% of the business today. So third, now obviously because real world, the fastest growing piece of TAS, real world and technology are growing at a much faster rate, so they now represent already 45% of the total. And so if you do the math, that should get you to high single digits underlying growth for the segments.
spk08: Okay, great. Thank you. And then maybe this is for Ron.
spk05: How much is the incremental FX headwinds impacting EBITDA and EPS guidance for 2022?
spk08: You talked about absorbing the $70 million debt, impacting the guidance, and just give us a little bit of color on that.
spk05: Well, we... We offset the entire $70 million in maintaining our revenue guidance.
spk06: So, I mean, another way of looking at it is we raised our constant currency revenue guidance by $70 million.
spk08: EBITDA went up like $10 million on each side, and EPS to like $0.05 on each side.
spk06: Oh, yeah. Look, EBITDA typically doesn't have a big – or FX typically doesn't have a big impact on our EBITDA. You know, we've had a little bit of negative drag from FX, not like we did with the revenue that we absorbed in our numbers. And, you know, we have more offsets on the EBITDA side than we do on the revenue side, so you don't see as much impact there.
spk08: Okay, great. Thank you.
spk00: Your next question is from Patrick Donnelly with Citi.
spk12: Thanks for the questions. Maybe just to follow up on the M&A question earlier, can you just talk a little bit about the outlook? Obviously, cash flow really strong, leverage is pretty reasonable at 3.6 times. Are you seeing more activity in the pipeline given some of the volatility in the public markets, or does that take a little bit longer to play a role in kind of rattling out the potential sellers?
spk03: Well, that's a good question. Look, we always Obviously, we're always looking, and even if you weren't looking, people call us to Syria. There are lots of assets that are in the market. We haven't been that active over the past couple of years in terms of numbers of acquisitions. We've done a little bit more in dollars this year, largely driven by our largest ever deal, which was simply the consolidation of our lab business
spk05: We bought 40% that we didn't own from Q squared.
spk03: I'm sorry, from Quest. That was our Q squared lab joint venture. And we paid, I think, $760 million for that. And we need a couple more larger acquisitions. The multiple valuations in this space, where we operate in the healthcare technology information space, the multiples are really very high, and the reason they keep bumping up the valuations, and we look at these assets, but we are always going to continue to be very reasonable and conservative if we see value that we can create then we will certainly look at these assets but no major changes uh versus what you have seen us do before i will be opportunistic um if there are things assets that we would like to own we will make a reasonable bid and we won't get excited by what uh i've got uh you know a good balancing uh cfo here with fantasy that uh that uh you know we have we have healthy
spk05: discussions with the business heads and, again, our capital deployment has been prudent.
spk03: We've been willing to have more debt, and we may be willing to have more debt if necessary because we believe our business model is very different.
spk05: You know, leverage for us at the Even if you go back to legacy companies, we've lived with leverage ratios that were even six times.
spk03: And the reasons for why we were willing to live with those leverage ratios is simply because our business profile, our cash flow generation model, our business visibility profile, where the vast majority of our business is already booked early in the year, both commercial and clinical, all of that makes us comfortable that we can live with those, especially in an environment where I know there's a lot of talk about rising rates, and I would remind you that The bulk of our debt is at essentially fixed rates, largely because of hedges and the alignment between our euro and debt and euro profits and dollars versus dollar profits. So all of that makes us comfortable. Rates continue to be at historic lows. So we will do what's right for the business. We will allocate capital to first internal investments, secondly to acquisitions, and thirdly to share repurchase. And you will see us go back and forth depending on opportunities. But again, we intend to try to continue to reduce debt as is prudent. within the limits of what makes sense from a management standpoint. It doesn't make sense to eliminate our debt at the current rate. I mean, I would view that as negligence on our part. So that's, I guess, the best answer I can give to your question. Thank you very much. We're done?
spk12: Yes. Thanks, Ari. If I could just squeeze in one follow-up, if you have a minute. I just want to follow up on kind of the funding backdrop. Obviously, you've talked a little bit about the R&DS strength going out multiple years, double-digit growth. I guess when you think about the funding, I mean, it seems like you were never underwriting the type of record strength we saw last year in order to hit those numbers. If we did see some prolonged softness in the funding environment relative to last year's levels, it's still more than sufficient to support that growth outlook, I guess. I just wanted to make sure that's kind of the way you're framing it.
spk03: I cannot be... I cannot overemphasize that we are not seeing that translate into our state of pipeline. I mean, again, I gave you some numbers earlier, and biotech, I'm not giving you the numbers here because I don't know if I should give them to you or not, but the vast majority... a big majority of the RFP dollar pipeline and numbers, volume and dollars, is actually EBP. So, we are not seeing any impact from potential slowdown of the funding into our pipeline, not at all. And the pipeline is at record high levels. So, again, it won't affect us one bit. And, by the way, again, I'm not seeing that happening. We talk to EBP all the time.
spk09: Okay.
spk12: I encourage you to hear. Thank you.
spk09: Thank you. That's going to be our last question. So thank you for taking the time to join us today. We look forward to speaking again next quarter. Myself and the team will be available for any follow-up questions you might have the rest of the day. Thanks.
spk00: This concludes today's conference call. You may now disconnect.
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