Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IQVIA Holdings Inc (IQV, Financial) reported a 5% revenue growth excluding the impact of foreign exchange and COVID-related work.
- Adjusted diluted earnings per share increased by 8.6% year over year.
- The company secured a record backlog of $30.6 billion, representing a 7.7% growth versus the prior year.
- IQVIA Holdings Inc (IQV) won several significant contracts, including a multiyear global implementation for a major division of a top five pharma client.
- The company continues to invest heavily in AI and machine learning, which has led to market-leading proprietary AI software solutions.
Negative Points
- Large pharma clients are exercising budgetary cautiousness, leading to tougher price negotiations.
- The EBITDA guidance was slightly lowered due to the mix of business offerings.
- There is continued pressure on pricing from large pharma clients, affecting both TAS and R&DS segments.
- The company experienced a decline in COVID-related revenues, which impacted overall growth.
- There were notable cancellations of clinical trials, which have affected the company's bookings.
Q & A Highlights
Q: The guidance is raised for revenue and EPS at the midpoint, but the EBITDA guidance was lowered slightly. Can you explain the nature of the revenue and the pacing for the third and fourth quarters?
A: (Ari Bousbib, CEO) The tweaks in the guidance are minor and largely due to the mix of business. FX is slightly more favorable, which impacts revenue. The EBITDA margin fell slightly due to the mix of offerings, but we are still delivering margin growth. The EPS increase is driven by better control of CapEx and favorability on DNA.
Q: Can you update us on the market environment in terms of customers' willingness to pay your asking price?
A: (Ari Bousbib, CEO) Large pharma companies have announced cost-cutting programs, leading to more disciplined spending and tougher negotiations. Budgetary constraints persist, but decision timelines have improved. Pricing remains challenging in both TAS and R&DS, but we are responding with productivity programs and AI deployment.
Q: Can you speak more about the performance of different business segments within TAS and where you saw outperformance?
A: (Ari Bousbib, CEO) The data business remains stable, while the rest of the business has shown sequential improvements. Real-world evidence (RWE) has picked up significantly this past quarter, contributing to overall growth.
Q: How do you view the burn rate in the back half of the year, particularly in the clinical side?
A: (Ari Bousbib, CEO) The burn rate fluctuates due to pass-throughs and the mix of offerings. We expect R&DS to grow in the 7%-plus range after adjusting for COVID and FX. The mix of our bookings continues to increase towards more complex studies in oncology and rare diseases, influencing the burn rate.
Q: Did you quantify how much RFP flows and the qualified pipeline were up at the end of the second quarter?
A: (Ari Bousbib, CEO) RFP flows and the total pipeline are up, with the qualified pipeline up 12% and total pipeline up single digits. RFP flows are up mid-teens.
Q: How are you thinking about the performance of RWE and consulting within TAS for the second half?
A: (Ari Bousbib, CEO) We expect TAS to grow in the 6% to 7% range at constant currency for the second half. Real-world evidence is expected to grow in the high single digits to low teens.
Q: How much of the strength in TAS and the outlook for the rest of the year is due to market improvement versus IQVIA winning its fair share of business?
A: (Ari Bousbib, CEO) The market is not rebounding significantly, but mission-critical projects that were delayed are now happening. We are being more responsive to client needs and commercially aggressive to win these projects.
Q: Can you elaborate on the improved decision-making timelines and whether it applies to new opportunities as well?
A: (Ari Bousbib, CEO) Improved decision-making timelines are true broadly, not just for mission-critical projects. We see faster timelines overall, which is encouraging.
Q: Can you talk about the potential revenue mix-shift to EBP versus large pharma and its implications for FSP versus full-service mix?
A: (Ari Bousbib, CEO) There is a timeline between funding and RFPs, and then between RFPs and bookings. While EBP funding is strong, it will not immediately change the mix. However, more EBP work will lead to a higher mix of full-service versus FSP in the future.
Q: Can you provide more detail on the mix shift impacting margins in the back half of the year?
A: (Ari Bousbib, CEO) The mix shift is due to where the business fell, including more acquisitions this quarter, which generally come in at a lower margin in the first year. The impact is not significant in the grand scheme of things.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
