Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2020 Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. Thank you. I would now like to 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 first quarter earnings call. With me on the call today are Ari Bousbib, Chairman and Chief Executive Officer; Michael McDonnell, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Nick Childs, Senior Vice President, Financial Planning and Analysis; and Jen Halchak, 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 IQVIA's 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 impacts from COVID-19, which is 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 as 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. @ And finally, please bear with us as we're conducting this call from various remote locations. We will do our best to make sure the call goes smoothly. I would now like to turn it over to our Chairman and CEO, Ari Bousbib.

Thank you, Andrew, and good morning, everyone. Hope everyone is safe and well. Thanks for joining us on our first quarter 2020 earnings call. I want to apologize in advance that, given the crisis, I will be a little longer in my narratives today in an effort to provide you a good amount of color on what we're seeing on the ground. Of course, as always, if we don't have time to get to your questioning, our team is available to answer questions after the call. Today, we will review our first quarter performance. We will also provide guidance for the second quarter and update our full year guidance in light of COVID-19. First, let's review how we've been navigating the challenges over the last couple of months. We've instituted a precrisis management structure to ensure that we align on priorities across the organization. I've been meeting every day with my senior leadership team. As disclosed, communication has allowed us to be agile and decisive in our response to the crisis, and collectively, we're currently centered around four priorities. First, the safety of our employees, patients, health care professionals, customers, suppliers with whom we frequently interact. To limit exposure, of course, we prohibited substantially all travel, supplied PPE to field-based employees, closed facilities and have most of our staff to work remotely. We've added bandwidth VPN capacity to our advanced infrastructure to enable remote working and avoid service disruptions. Second, as clinics and hospitals have become inaccessible and has become unsafe or difficult for patients to travel, we've continued to do everything in our power to mitigate disruptions to clinical trials and ensure patient safety. Wherever possible, we have been transitioning to remote monitoring with the number of remote monitoring visits reaching 5x the level they were prior to the…

Thank you, Ari. Good morning, everyone, and I also hope that you're staying safe and healthy. Let's start with revenue. First quarter revenue of $2.754 billion grew 3.7% at constant currency and 2.6% reported. As Ari noted, revenue outperformed our revised first quarter guidance due to greater-than-expected pass-throughs, which, as we have said, are very hard to predict. Technology & Analytics Solutions first quarter revenue of $1.117 billion grew 5.5% at constant currency and 3.9% reported. R&D Solutions first quarter revenue of $1.441 billion grew 2.4% at constant currency and 1.8% reported. First quarter Contract Sales & Medical Solutions revenue of $196 million grew 2.6% on a constant currency basis and 1.6% reported. Turning to profit. Adjusted EBITDA was $562 million for the first quarter. First quarter GAAP net income was $82 million, and GAAP diluted earnings per share was $0.42. Adjusted net income was $294 million for the first quarter or $1.50 per share. Let's now turn to R&D Solutions backlog. Closing backlog at March 31, 2020, was $19.6 billion. New business wins remain strong, and to date, we have not experienced any COVID-19 related cancellations. Let's now review the balance sheet. As of March 31, cash and cash equivalents totaled $927 million and debt was approximately $12 billion, resulting in net debt of $11.1 billion. Our net leverage ratio was 4.7x our trailing 12-month adjusted EBITDA. Cash flow from operating activities was $163 million in the first quarter. CapEx for the quarter was $141 million, and free cash flow for the quarter was $22 million. A reminder, the first quarter is seasonally our lightest free cash flow quarter. To date, we have not experienced any collection delays related to COVID-19. Prior to the COVID-19 outbreak becoming a pandemic in March, the company had repurchased $321 million of its…

[Operator Instructions]. Your first question comes from the line of Tycho Peterson from JPMorgan.

Ari, I'm just wondering if you can talk to the mitigation efforts, what percentage has actually moved to virtual enrollment and remote monitoring at this point and how comfortable the FDA is maybe switching trials mid course to more remote monitoring. If you could just talk to those dynamics.

Well, thank you. But the -- on your question, about 50%, I would say, moved to remote monitoring. Obviously, the FDA has issued guidance on how we should do remote monitoring. The guidelines are extremely beneficial that provide a way to enable remote approaches to monitor patients and site data. Obviously, you have to check that they're taking their medication and so on. We built the industry's largest central monitoring organization, and it's across 5 global locations. It supports our remote monitoring capability. We have hundreds of already successfully executed risk-based monitoring studies, RBM studies, in which remote monitoring has been the key component. This is before the crisis. And we complete thousands of remote monitoring visits successfully every year, and the number is growing. So we were happy with the FDA guidance. There are, of course -- I just -- besides, there are trials where remote monitoring of data is not always an option. Even when the technology and complexity of the -- and the regulatory infrastructure allows this, sometimes it's not always feasible. Not all of the components of the trial also may be monitored remotely. So the key to monitor successfully is to apply the appropriate level of remote and on-site monitoring based on risk. To do that, you need a good therapeutic understanding of the protocol. You need to [indiscernible] strong analytics and technology. So we've got all these elements at scale, but not every trial lends itself to remote monitoring.

And then for a follow-up, as we think about the recovery, just wondering if you could give us some color on what type of work you think could come back sooner, Phase I versus II, III, oncology versus other therapeutic areas. And to what degree do you have to fight through sites that have been repurposed for COVID and beds that have been turned over? How much of a headwind could that be as we think about trial sites getting back up and running?

Obviously, the -- look, we've got to -- over 100,000 sites around the world. So the situation is very different site by site, and you're right to point to therapeutic differences. Patient safety, obviously, in oncology is paramount because the patients are in the middle -- especially for in-site trials, where you can't just stop the treatment mid-course. So those are more likely to come back faster. The activities that are hampered by these -- by the lack of access are site start-up, patient enrollment and, as we just discussed, monitoring. So it's not just the monitoring visits. It's also the early part, and as you know, we've got a big backlog of trial in start-up phase. So that has been the key hindrance for us. Thank you. I'll ask everyone to if you could just -- given the timing constraint, I just want to limit your questions to one, unless it's an obvious follow-up. Thank you. Thanks, Bob.

Our next question comes from Bob Jones from Goldman Sachs.

I guess maybe just to follow-up on that line of questioning, Ari. If you look at the update from the end of March with the number of sites that you guys framed as inaccessible, I think real time, you're saying 80%, and then obviously expecting 100% back online by 4Q. Maybe just spending a little bit more time understanding what's informing the cadence of the recovery. Obviously, you guys are a lot closer to it than us on this side of the world. And so just trying to get a better sense of really kind of how you're thinking through that type of recovery because I think, on the surface, obviously, it does seem to be fairly sharp but kind of V-shaped from here to the end of the year.

Well, look, what we're talking about here is accessibility to on-site monitoring. That doesn't necessarily mean that all of the activities related to the trial are going to be enabled just because we can now access safely the site. You also have to have patients coming back. For example, we've seen in China that even when the site is open, not all patients are willing to come in. There's going to be a little bit of lingering concerns. So that's number one. Number two, once the site is accessible to our CRAs, then they can go in and perform all the tasks that -- as I said in my introductory remarks, there are many tasks that we cannot do remotely, that the vast majority of the trials are going to require us to go back on-site and do the work that we would have done now in the second quarter or third quarter, checking documentations, making sure everything is in order and so on, physically, which is required. And our clients have already told us they will require that, when they accept remote monitoring visits, it's really to check on the patients and to do all the things we can do remotely. We still have to go on-site to do that work. So this snapback does include a catch-up, if you will. In a given trial, that means, and I think our clients understand that, that the overall cost of the trial is going to go up because in addition to the remote monitoring visits, which we're doing now, we still have to do an on-site visit. It won't be the same on-site because a lot of the activities will have been done remotely, but there is an incremental piece of work that still needs to be done to ensure full compliance. So this is part of why it looks like a V-shaped somewhat.

Our next question comes from Eric Coldwell from Baird.

A couple of topics. First off, in the early days of IQVIA, there was a lot of talk about fixed-price contracts, and I know that conversation died down over time. But I am curious, to the extent that you implemented fixed price contracting, what are the impacts on those contracts in the current environment? And secondarily or as an add-on, I'm curious if you have any early views on what change orders will look like over the next year or so, net negative, net neutral, net positive. Just your best guess on what happens to the total book of business compared to original expectations and what you might need to go back to clients for.

Thank you, Eric. Okay, I think it's a good question. But look, when we said fixed price, I think it's a big -- it's a "fixed price", right? It's -- we don't have any contract where we take to one price for everything. No, it's parts of the contract that are based on a specific milestone being achieved in exchange for a specific value to be paid. Now obviously, all contracts have caveats, have outs, have circumstances. And look, our clients want the trial to be conducted. So they understand there are changes of scope that are being discussed. Fixed price is assuming the site visit can actually be performed. If it cannot be performed, then there's no way to fulfill the contractual obligation. So there has to be scope changes. I'm not -- I understand where the question comes from, but it's not a concern for us. With respect to the book of business, in aggregate, look, the RFP flows, as I said earlier, are essentially flat to 2019, whether it's in dollars or in volume. And as you know, 2019 was a real, real record year. Our total R&DS pipeline is up mid-teens year-over-year, and our qualified pipeline for the next 12 months is the largest qualified pipeline we've ever had. So the message I'm trying to send here, and frankly, while it might be intuitively easy to conclude that, we ourselves are stunned by the degree to which this is a very resilient industry, the pharma industry. And as I said before, it's not going away. If anything, I think people are right in the past to target pharma companies. I think these talks hopefully will recede and people -- as people understand how crucial drug discovery is. And frankly, Eric, we are very confident going into 2021. We are -- this is why we've decided not to alter our operational capabilities. Even as many of our employees are essentially at home not very utilized, we decided we want to take care of them and continue because we've got strong expectations for 2021. It's also why we decided to engage as a leadership team. Now we've already started planning for 2021 because, again, we have good visibility on the book of business.

Your next call comes from the line of John Kreger from William Blair.

Ari, you've mentioned a number of things you've been able to do to help mitigate the crisis, like remote monitoring and virtual visits and televisits. Just curious, in your view, as you move to the recovery phase, let's say, next year, do you think any of these things are going to sort of be structurally adopted by sites and clients? Or are you viewing them primarily as just temporary ways to mitigate the crisis.

Yes. I mean look, we -- long before the crisis had been advancing our virtual trial platform and -- which is being -- was being piloted last year and which -- for which we're having a lot of demand right now, many, many clients calling to ask whether we can transition, now it's hard to do that in the middle of a trial. But we are doing it to the degree we can, and we [indiscernible] accelerating development. So we think the trend will continue, and certainly -- but you will always need physical visits as well, okay? There's no way around it. A virtual trial means that all the pieces that can be done remotely will be done remotely. The patient still has to interact with their physician. And to the degree they could do it with telehealth, they'll do that. But there will be physical interactions as well. So the answer to your question is yes, people will accelerate the way we're thinking about this going forward. So yes. I mean look it's true. I know what you're looking at. The unit price for a remote monitoring visit is less than a standard in-person site visit, given that there's less effort. There's no -- there's also less pass-through expense because there's no travel, for example, to the site. On the other hand, there is more time and more productivity. Again, as I said before, in-person site visits are still required, even in virtual trials, to meet the source data verification criteria. And until the standards, the regulatory standards change, we still need to verify the source data. And so yes, I mean the trial budget, actually, in the context of the crisis, as I said before, probably are going to go up, not down for now.

Your next question comes from Patrick Donnelly from Citi.

Great. Ari, maybe just on the TAS business. It seems like that's proven pretty durable during these uncertain times. Can you just talk through recent trends, conversations with customers there and then just expectations kind of through this? And then again, on the other side, it feels like we have a pretty good handle on the R&D business. You're expecting that acceleration in the back end. Can you just talk about the pace of tasks during the year and then again on the other side of this as well?

Patrick -- yes go ahead.

Patrick, do you mind just repeating again?

Which area of the business? I couldn't hear the first part of your question.

The TAS business, sorry.

The TAS business, okay. Yes, yes. Well, look, I mean, again, I just want to remind you, the TAS business roughly can be divided into 3 thirds, which is our legacy IMS info business and then you've got the technology business and then you've got the -- Technology and Analytics business and then you've got the Real-World business. So with respect to information, the demand and our ability to supply our -- the information has been -- if anything, had a little uptick in the middle of the crisis. And once again, this is a business that's been historically flat. It is subscription-based, license-based and is more than 90% recurring. So that is entirely intact. The part of the business that -- on the Real-World side that is based on patient-level data and so on is intact. The part of the business that's still prospective study is more similar -- more akin to the R&DS business and does require site visits. That has similar type of characteristics and has a little bit of headwind as a result of the crisis. The Technology & Analytics business is basically intact. A lot of it is also licenses and recurring business. What is true, frankly, in this business is that the business that requires -- that's more marketing and sales, that requires face-to-face interactions, it's not a big business, frankly, but it is essentially virtually coming to a halt because you just can't have meetings with doctors. You can't have the conferences where -- or the compliance meetings and so on take place. And it's very hard to do it remotely. Maybe -- I think the last number I saw is 12% of that business has been moved to webinar-type format, but it's clearly not the same thing. And so that is very…

Your next question comes from Sandy Draper from SunTrust.

And listen, with regards to time, it'll be a quick one, I think, for Mike. On the delay of the share or the halting of the share repos, what are sort of the key factors that open that back up to you? Is it really -- if you hit your fourth quarter, everything is fully ramped back up then you go back? Do you want to see a couple of quarters? Just how should we think about going back to a more normalized capital deployment strategy? What are the factors that go into that decision?

Sure, Sandy. Thanks for the question. As we mentioned, we did repurchase $321 million of our stock in the first quarter, and that all occurred largely before the crisis, including a chunk that we participated in a secondary offering by our sponsors. I think we're going to be judicious with respect to capital deployment, obviously, manage our liquidity as a priority. As I mentioned in the prepared remarks, we've not seen any disruption to -- or delays in collections at this point. We're continuing to manage that closely and carefully. We've got $1.4 billion on our $1.5 billion facility that's undrawn. So it puts us in a very good liquidity spot. But at the same time, obviously, with declines in EBITDA, leverage ratio has ticked up a bit. We're going to monitor that carefully. We prioritized keeping our employee base in a great place and not impacting base compensation in any way in anticipation of a big delivery task as things come back to normal. And I think that share repurchases, we'll just continue to monitor as we get through the crisis with the prudent time to reenter the market. Obviously, we would love to be buying shares at the current levels, but at the same time, we're going to be very judicious with our capital allocation, whether it's M&A, share repurchase or CapEx. And I think we'll logically find the most prudent time to reenter when we get through the -- to the other side.

Our final question comes from Shlomo Rosenbaum from Stifel.

So Ari, can you talk a little bit more about how the billing works in the current environment on the CRO side? If people can't get into the sites, is there a portion of what they do that's billable or a portion that's not billable? And then just to clarify, as part of this, when they actually have to go back in physically, the cost -- of that additional cost, you expect that to be largely borne by the clients versus being borne by the company. Is that correct?

Thanks. Yes, the second part of your question, yes. Obviously, as I said before, there are, as a result of the crisis, changes of scope to the trial, and that includes conversation with the client as to how do we handle that incremental work that needs to be done. As to the first question, I wasn't sure I understood. The practical, the actual way that we do the billing, I don't know, Mike, do you have any insights on that?

Yes. I mean I think -- bear in mind that revenue is driven by a percentage of completion, not so much the billing. But to the extent that we're able to complete tasks in the ordinary course and progress toward completion, we're able to bill that. In some cases, if we have milestones that we actually physically cannot hit because of factors that are outside of our control, in some cases, we have to have that conversation, are having those conversations with clients that allow us to bill and collect in cases where we're just stuck on not being able to hit a predetermined milestone, that didn't anticipate this kind of pandemic. So we haven't seen disruption at this point. We'll continue to monitor. We have a great road map in China where sites are now reopening, and we've not seen really any disruption of note at all anywhere in the billing and collections front, including in the R&DS business.

Thank you for taking the time to join us today, everyone, and we look forward to speaking with you again on our Second Quarter 2020 Earnings Call. Jen and I will be available for the rest of the day to take any follow-up questions that you may have. Thank you.

This concludes today's conference call. You may now disconnect.