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 speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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.

Thank you and good morning everyone. Thank you for joining our fourth quarter 2021 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Mike Fedock, Senior Vice President, Financial Planning and Analysis; and Bryan 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 presentations 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. 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 Bousbib.

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 2022 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 phase -- three-year phase of our journey to 2025. The team highlighted the power of connected intelligence, which brings together IQVIA differentiated capabilities and drive our leadership position in the clinical and commercial markets. This underpins our new 20 x 2025 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 years -- 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 health care, 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…

Thanks Ari and good morning everyone. Let's start by reviewing revenue. Fourth quarter revenue of $3.636 billion 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 from mega vaccine studies in R&DS 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 & Analytics Solutions revenue for the fourth quarter was $1.496 billion, 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 billion was up 15.4% at actual FX rates and 16.3% at constant currency. Excluding all COVID-related work, organic growth at constant currency and R&DS was approximately 25%. Contract Sales & 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 in CSMS was low single digits. For the full year, revenue was $13.874 billion, 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…

[Operator Instructions] Your first question is from Jack Meehan with Nephron Research.

Thank you and good morning. Wanted to talk a little bit more about COVID and I appreciate all the color you gave, Ron, during the prepared remarks on this. So at the Analyst Day, you talked about $1 billion of COVID tapering this year, there was 1.8 in 2021. Can you talk about the balance of the COVID work and just how you feel about the duration of COVID kind of over the next few years? Do you think there's some aspect that might prove stickier in TAS or some ongoing work in R&DS? Just any color there would be great.

Yes. Look, we do have a balance of COVID work, obviously. That's going to continue to burn off over the next two years. I think it will be a gradual decline during the course of 2022, but it's going to continue on into 2023. Yes, it's hard to foresee, Jack, how much additional COVID work there might be. 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 facing our projections on what we currently have in the backlog, and we'll see where it goes from there and see what other work might come along.

Yes. Jack, I mean, this is exactly right. And I -- all we can do is look at the situation today. If anything -- if we've learned anything about this pandemic is we just can't predict the evolution. So we do have in our RFP pipeline, especially on the R&DS side, request for proposals to assist in new therapies to address COVID, there are even large top 10 pharmas 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, it's just going to gradually taper down -- that's what we have here through 2023 and maybe beginning of 2024. Unless something else happens, which no one here hopes for. But that's what we have. It's all largely based on burning off the world, both commercial and clinical.

Great. And then just as a follow-up, it would be great to get your latest thinking on labor and maybe wage inflation? What is -- how has your view 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?

Yes. I mean, look, that's a good question. That's the single most important -- operational challenge we have is people management. I mean look, it's wonderful to be the leader in this space and to have such -- a $25 billion backlog to execute and strong commercial 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 work that we deliver, but we still need a lot of people. 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. The great resignation is affecting us as well, post-pandemic. We are -- we've become -- and that's the price of our success. I might say, we have become an academy company, a lot of people 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, the future of work, which is an initiative that we have to redefine roles and what's expected from our employees. So, we've been 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 numbers, 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 has continued to grow. I mean in fact, they've been growing more than -- and they are expected to grow more than ever before. We -- and the reason for that is we are finally getting the leverage on the massive restructuring and cost improvement initiatives that we launched immediately post-merger. And we're now getting the benefit of that leverage and that's offsetting -- more than offsetting the wage inflation headwinds. Again, I'd point to the growth of our profit numbers relative to the growth of our revenue numbers, and you see that we significantly materially raised -- grow our profit higher than -- materially higher than our revenue growth, which implies significant margin growth. Ron?

Yes. And also I would say, Jack, that we do have the ability in a lot of instances to raise prices to adjust prices. We have some provisions for improvement in our MSA agreements. We also have some short-cycle businesses. So, wherever we have the ability to adjust prices, we are doing so. And we're getting some offset there as well.

Great. Thank you guys.

Your next question is from Eric Coldwell with Baird.

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. Your 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.

Yes. Thanks, Eric. Well, as you can imagine, we track these numbers pretty tightly. And as you know, many definitions of what 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 EVP segment in general. In terms of percent of our bookings, what do we give you, we don't have the backlog, but we have the bookings. Let me see -- I have got a few numbers here for you. I think, look, in terms of the actual bookings, large pharma still represents the majority, right, a little bit over half. Is that correct?

That's correct.

Right. And then we -- maybe the midsize is perhaps about somewhere around 10-ish percent --

Yes.

-- of our bookings. And the rest, so again, I'd say 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 pipe of the RFP, of flow, okay? 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 we can give you the numbers, but the pipeline is very, very strong. I mean, actually, it's about -- our pipeline is about equal to our backlog as we speak right now, okay? 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 more than 20%, the CNS, more than 33% up. Agree, across therapy categories, we are seeing very good EBIT growth in the pipeline. I'm talking now, okay, not the book. 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 EBP in the pipeline actually represents a majority 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 of EBP funding, but I wouldn't extrapolate from one month and -- or from one quarter for that matter. As you know, generally, the levels of EBP funding are very, very high. I mean, we are -- we must be in the top three years ever in terms of funding. So, okay, maybe that this year will be a little lower than last year, which, 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, yes, I mean, the step-down in funding would -- doesn't concern, as we continue to see very, very good, both bookings and even higher numbers in the pipeline.

Hey, Ari, if I could just do one follow-up. The -- 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 category versus some of the other?

Well, we look at how much the spend in terms of clinical development, of R&D spend. Okay.

Some of that client base --

So below that number -- I'm sorry?

Go ahead. I was just going to say some of that client base would actually be companies that have a commercial pipeline, they wouldn’t have these -- ?

Yes, yes. That's correct. That encompasses what you might call small pharma as well that has commercialized products, in addition to commercial.

Let's say, if a company spends less than a couple of hundred million, I don't know exactly the number and how we segment it, we have, as you know, tons of analytics and segmentation definitions. But broadly speaking, a company that spends less than a couple of hundred million dollars in a given year in its R&D budget, for us is an EBP, that's just one definition. We've got others also we triangulate, as you can imagine. But that's one definition that I happen to like.

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 backlog be pre-commercial biotech? 20%?

I don't know if I can give you these numbers. But you know what, why don't we do this? Why don't we give us on follow-up questions, we'll try to give you a little bit more clarity or range on what's in the backlog. We will try to that. I'll ask the finance team here to -- I'll try to prevail and use my executive privilege to prepare all these guys. But I don't know at this point, you're putting me on the spot here. I don't know exactly what I'm going to give you but I will give you something.

Eric, it's helpful to give you a partial answer to that and say the last two years, large pharma orders had been -- bookings have been slightly over 50% of our bookings. So that gives you at least to start at what you're looking at anyway.

Right. Yeah, correct. All right. Well, look, I appreciate it, and I thought you had a great quarter. So good job, keep it up and look forward to the rest of the call. Thanks so much.

Well, thank you, Eric. Usually, you tell this at the beginning of the question, so I was concerned, but thanks for saying it again.

All right. It's all good.

All right. Next question.

Your next question is from Tycho Peterson with JPMorgan.

Hey thanks. Ari, given that most of the questions we're getting are on RFPs and wage inflation, I want to go back to the wage inflation discussion and EBITDA margins because it is notably you're guiding for expansion here. You talked about benefits from the original merger and integration plan. 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? Are you pulling forward any additional cost actions?

No. Not at all, not at all. As I said before, just to make myself clear again, the -- largely, the main driver of our margin expansion is simply leveraging the benefit of all the cost actions that we took post merger, okay? 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 optimization, outsourcing actions, consolidation of infrastructure, merging of IT systems, et cetera, et cetera. 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 mix 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? Last 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 not at the same level as we 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, vaccine trials and came also earlier on than it would under normal trial timelines. So the combination of lower margin service margins to start with, to us, a higher proportion -- an unusually high proportion of pass-throughs, all of that are contributed to be to an adverse impact, mix impact on our margins. As this work gradually tapers down, then obviously, the mix impact our margins is going to be more favorable. And that's the other reason you see an acceleration of our margin growth.

Okay. That's helpful. And then a follow-up on APAC. Your long-term guidance is 11% to 13% growth through 2025. Obviously, within China, there's been a lot of noise, biologics getting placed in the unverified list. They're CDMO, you're a CRO, so very different markets. But can you just talk on your view on China here in the near-term? And does any of this kind of noise potentially benefit you?

Well, I mean, I don't know if we disclosed this, but we've got a couple of $100 million 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 Punto [ph], which is designed for local Chinese regulatory requirements and largely caters to the local market, the local biotechs, whilst IQVIA parent deals with the work of multinational sponsors for their piece of the clinical trial 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 that are formidable competitors that are gaining share. There are hundreds literally of outfits in China. As you know, I want -- I don't need to be able to pull, but China is a complex market. There are lots of factors external to our industry that can affect how market dynamics play out. But I'm -- we're not worried, we're not concerned. We are continuing to invest as required. We have a good market position and it's a small piece of our total business.

Okay. One last quick one before I hop off. On OCE on the retention, you talked about 350 clients using one or more. Your biggest competitor did, I think, talked about winning back Roche. Are you able to comment on that at all?

Anyone?

No. Look, we don't comment on individual customers and dynamics with individual customers. And as the Roche win is a very big win and the large majority of that is outside of the U.S., I think about 90% or so.

Yes, 90% of the world -- of the project is outside the US. So I think the other, an independent subsidiary...

Yes.

Yes, that has its own program. But yes, no -- Roche 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, we're not going to comment. Yes.

Next question.

Your next question is from John Kreger with William Blair.

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 if you ignore COVID work, which is a very impressive number. Just curious, what do you think that business can do longer term?

Longer-term growth. Yes, I think -- look, I think that the double-digit 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 we think the continued acceleration will continue and certainly got double-digit sort of mark in the longer term is something that we're looking forward to maintain that acceleration.

Yes. I mean, look at our investor conference, we gave you even '25 targets for our company as a whole. And we said that the company as a whole will grow 10% to 12% annually, which presumably from a $15 billion base. So R&DS has to be growing into double digits in order to achieve that. And so that's kind of where we -- you know we view guidance or so by segment for '25? Do you have those numbers? While the team here is bringing this up. But again, I call your attention -- I bring your attention what we gave as a longer-term growth trend 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 a significant acceleration versus what we've had over the '19 to '22...

Strong double digits at the investor conference.

Yes, strong double digits. Yes. So that's the long-term trend of the business. And again, I point to you that these are large-scale businesses.

Yes, absolutely. Very, very impressive. And a quick follow-up, Ron, I think this one is 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?

Yes. 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 analytics company in Europe, but nothing terribly large.

Great. Thank you.

Your next question is from Shlomo Rosenbaum from Stifel.

Hi. Good morning. Thank you. Yes, Ari, can you talk a little bit about the breakdown of the upper single-digit revenue growth in TAS when you exclude COVID? What's driving the growth there? Is it real world evidence? Is it technology? And I 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 really big drivers there.

Yes. Thank you, Shlomo. What I -- we've done this before. We've told you what it's comprised of. And if you look at TAS, I mean, I'd like to look at it in terms of three tiers. You've got the basic core information solutions, which is the old IMS business, essentially the data. And that's about, I'm going to say, 30% of the business, give or take. And that's a flattish growth rate business, okay? No -- and that's strategic. That's the way we do it. We just sell the data with very little price increases. 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, used to grow mid to high single digits. Now it's growing low to mid-double digits the past few years.

Low teens.

Yes, low teens. Yes. 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 -- when it was to the balance, was like at 45% of the business today. Obviously, we used to say it's a-third, a-third, a-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 segment.

Okay, great. Thank you. And then, maybe just for Ron. How much is the incremental FX headwinds impacting EBITDA and EPS guidance for 2022? You talked about absorbing the $70 million of revenue. If I were to normalize, how much was that impacting the guidance and just maybe give us a little bit of color on that.

Well, we offset the entire $70 million in maintaining our revenue guidance. So, I mean, another way of looking at it, as we raised our constant currency revenue guidance by $70 million. I'm not sure I understand your question beyond that. EBITDA?

If it’s the EBITDA. Yes. EBITDA, you went up like $10 million on each side and EPS of like $0.05 in each side – is that sort of revenue...

Yes, EBITDA typically doesn't have a big -- an FX typically doesn't have a big impact on our EBITDA. 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 we have more offsets on the EBITDA side than we do on the revenue side, so you don't see as much impact there.

Okay. Great. Thank you.

Your next question is from Patrick Donnelly with Citi.

Hey, guys. Thanks for taking questions. Maybe just a 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?

Well, that's a good question. Look, we always -- obviously, we're always looking and even if you weren't looking, people call us. 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. We bought 40% that we didn't own from Q² -- I'm sorry, from Quest, that was our Q² lab joint venture, and we paid, I think, $760 million for that and we need a couple of more larger acquisitions. As you know, the multiple valuations in this space where we operate in the healthcare, technology, information space, the multiples that are really very high, and the reason for that is that private equity essentially is trading those assets from one private equity firm to another. And so 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 versus what you have seen us do before. We will be opportunistic if there are things -- assets that we would like to own, we will make a reasonable bids, and we won't get excited by what we have told the market is. Plus I've got good balancing CFO here with saying that we have healthy discussions with the business heads. And again, I hope that you could see from our history that our capital deployment has been prudent. We've been willing to have more debt and we may be willing to have…

Yes. Thanks Ari. And if I could just squeeze in one follow-up, if you have a minute. I just want to follow-up on 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 want to make sure that's the way you're framing it.

I cannot be -- I cannot overemphasize that we are not seeing that translate into our sales pipeline. I mean again, I gave you some numbers earlier in 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 -- the 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, we -- 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.

That’s encouraging to hear. Thanks.

Okay. Thank you.

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 in the rest of the day. Thanks.

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