Q4 2020 IQVIA Holdings Inc Earnings Call
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Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the IQ the of fourth quarter 2020 earnings conference call on.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask the question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question press the pound key.
A reminder, this call is being recorded thank you I would now like turn the call over to Andrew Mark quick Senior Vice President Investor Relations and Treasury. Mr. Mark quick please begin your conference.
Thank you.
Morning, everyone. Thank you for joining our fourth quarter and full year 2020 earnings call.
With me today, Ari Boothby, Chairman and Chief Executive Officer, Ron <unk>, Executive Vice President and Chief Financial Officer, Eric Sherbet, Executive Vice President and General Counsel of Nick Charles Senior Vice President financial planning and analysis.
Today, we'll be referencing of presentation, but that will be visible during the school for those of you on a webcast of this presentation will be available in the events and presentations section of our TV <unk>.
Investor Relations website at IR.
<unk> Dot com.
Now you may have noticed that we issued a press release. This morning, we inadvertently missed the quarterly P&L due to an administrative issue we apologize for this era.
P&L will be made available in our slide presentation and that will be posted to our on our website momentarily.
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, which are discussed in the company's filings with the secure.
He is on 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 the school, which should be considered the supplement to and not a substitute for financial measures prepared in accordance with GAAP are.
A reconciliation of these non-GAAP measures for 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 boutique.
Thank you Andrew and the good morning, everyone. Thanks for joining our fourth quarter and full year 2020 earnings call.
We'll review, how we closed 2020 and discuss 'twenty and 'twenty one financial guidance.
I am pleased to report that we finished the year with the very strong quarter.
We delivered double digit growth in.
All key financial metrics.
And once again reported the results above our financial targets.
This is all of the more remarkable since last year's fourth quarter was so strong.
As you know.
It was difficult for you and as we navigated through the pandemic.
We try to be as transparent as possible and provides the ability to our expected financial performance.
In such highly unusual circumstances, the default reaction would normally be to draw guidance on watch from the side loans, but.
As you know we tried our best to share with you what we saw.
And we did the same at the end of the third quarter, when we decided to provide of 'twenty and 'twenty one outlook as soon as we had some of the DDT.
Which was the full quarter earlier than usual.
Today, the southeast has become clearer on these.
Sided to update and raise the guidance.
Let's start by reviewing our fourth quarter results for.
The revenue for the fourth quarter came in at 3 billion to honor the $19 million, which was a $108 million of <unk>.
The high end of our guidance range.
Over 70% of these be came from strong organic performance.
Less than 30% from favorable foreign exchange.
Revenue growth was 13, 9% on a reported basis.
12, 2% of constant currency.
Fourth quarter, adjusted EBITDA of $735 million grew 14, 5%.
Reflecting our revenue growth.
And productivity measures the.
$25 million beat the volume of the high end of our guidance range was entirely due to the stronger organic revenue performance.
Fourth quarter adjusted diluted EPS of $2 and 11 grew 21, 3%.
The beat here entirely reflects the adjusted EBITDA drop through.
Our strong fourth quarter of financial results were driven by <unk> operating achievements.
During 2020.
And then we will cover on those achievements starting with technology.
Demand for our technology offerings remained strong in 2020.
Six new clients decided to deploy oce last year brings.
Bringing our total number of client wins to 140 since the launch.
As you know.
At the beginning of 2020, the top 15 net global pharma clients begun deployment of the Lucy.
In the U S.
These clients has now decided to begin global oce deployments for the medical teams.
Namely the almost 2000 medical science liaisons worldwide.
The same client is also expands the use of <unk> technologies through our HCP engagement management platform.
We launched this platform during 2020.
HCP engagement management works in conjunction with the oce to ensure global commercial activities are executed in compliance.
On global regulations.
In addition to HCP engagement management, you would have seen the during 2020, we also launched oce optimizer.
Lucy Optimizer easy of real time maps based territory and sales rep alignment solution.
Which helps our clients plan their sales rep activity.
And improve their marketing plans.
Switching to our real world business.
Our <unk> business has been relatively well insulated from the impacts of the virus and it has strong growth for the year.
The business has advanced in the use of secondary data.
Monitoring and virtual research of approaches.
Which half of the team pivots creeping towards <unk> in the newly multiple world as the onset of the pandemic.
Our rich clinical data assets are key to our real world differentiation.
The team has continued to invest in these rich clinical data assets.
And these assets now include over $1 billion Act the non identified patients globally.
And the team is busy integrating new to reach clinical data into research.
In 2020.
We launched <unk> our COO.
The active research experience for registry to have communities and public health portfolio to better understand the impact of COVID-19 on the population.
Leveraging this platform along with our vast experience of registries and on an index.
To partner with the FDA.
To support a better understanding of how people out of affected by exposure to COVID-19.
This work with the help identify which symptoms individual's experience the length and severity of symptoms and whether any medications will supplement the op taking effect the severity of those symptoms.
It's a per foot.
Application of a real world capabilities.
Similarly, we have become the partner of choice around the world to assist the areas governments and health care authorities, we lost scale of diagnostic testing and monitoring of Covid patients.
These.
New series of offerings, which leverages our.
Connected capabilities.
Contributed incrementally to the strong sequential growth in our <unk> segment.
Moving to R&D, yes, as you know the <unk> team responded quickly in 2020 to support our clients for the development of vaccines and therapies.
For COVID-19.
We've been involved in more than 300 clinical trials and studies for the virus, including four of the five vaccine trials that made it through phase III and were funded by the U S governments in the operation of Wolves.
To help speed of recruitment, we leveraged our direct to patient solutions.
Which include the use of patient registries and <unk> sponsored advertisement.
To date.
We recruited over 100000 patients to call the trials.
The pandemic has accelerated the need for remote and risk based monitoring in clinical research.
Which in turn.
<unk>.
The accelerated the adoption of our virtual try on the technology.
In total we have one.
One over 60, new students using our virtual trial solutions.
Cross 10.
Tara beauty areas.
The awards of which five top 10 pharma clients.
The technology suite combines E consent.
<unk> seen equal.
E Cola and digital communication.
And as the platform on half cloud with Salesforce platform that is purpose built for healthcare and life Sciences.
This technology has been the.
To speed the vaccine development.
And it was an important factor in helping the team secured a two phase III full service Covid trials that we're working on.
The environment for R&D and outsourcing remained very healthy.
Biotech funding remains strong with the National venture Capital Association reported a record number of deals for the year.
The pipeline of late stage molecules continues to expand.
And is at an all time high.
Neither of these healthy environment.
Combined with our differentiated capabilities.
That has resulted in strong new business awards for the RMB ESP.
Our contracted backlog, including pass throughs grew 18, 5% year over year.
$22 $6 billion at December 31, 2020 as the results.
The next 12 months revenue from backlog increased to five 9 billion.
Up 13, 5% year over year.
We continued to build on our strong momentum in the fourth quarter.
With the team delivering a contracted net book to Bill the ratio of 141.
Including pass throughs.
142, excluding pass throughs, we exited the year with an LTM contracted book to Bill the ratio of 153, including pass throughs and 144, excluding pass throughs.
We expect continued strong activity going forward.
Pipeline of R&D as opportunities is growing double digits in both volume and dollars the across the wide.
The wide range of therapies.
I'll now turn it over to Lon for more details on our financial performance. Thanks, Ari and good morning, everyone.
As already mentioned this was the strong quarter to close the year.
Let's start by reviewing revenue.
Fourth quarter revenue of $3 billion and $298 million grew.
<unk> grew 13, 9% on a reported basis and 12, 2% at constant currency.
Revenue for the full year with the $11.359 billion, which was up two 4% reported in two 3% of constant currency.
Technology and analytics solutions revenue for the fourth quarter of $1 billion of $425 million increased 17, 4% reported.
And 15, 1% at constant currency.
The sequential bump in growth this quarter versus the nine 2% growth in the third quarter was due to the COVID-19 related work that already mentioned.
Full year technology, and analytics solutions revenue was $4.858 billion up eight 3% reported and eight 1%.
At constant currency.
R&D solutions fourth quarter revenue of $1 billion $684 million was up 14, 5% at actual FX rates.
And 13, 2% at constant currency.
Pass throughs were a tailwind of 220 basis points to the fourth quarter R&D revenue growth.
The entirely to Covid work.
But you should note that R&D assets delivered double digit organic growth on both the services and the fixed or fixed basis.
Again strong performance, especially considering the tough comparison to the fourth quarter of 2019 on organic service revenue also grew at a double digit rate.
For the full year R&D solutions revenue was $5 billion $760 million.
Essentially flat on both the reported and constant currency basis.
Excluding the impact of pass throughs R&D solutions full year reported revenue grew two 2%.
The <unk> revenue of $189 million were down 10% reported and 11, 9% on a constant currency basis in the fourth quarter for.
For the full year CSM, that's revenue of $741 million was down 9% at actual FX rates of nine 2% at constant currency.
The demand for field Rep continues to be soft in the current environment.
As a result business development activity has slowed.
But the business has performed modestly better than we expected as our clients have largely retain existing field reps.
Now moving down the P&L adjusted EBITDA was $735 million for the fourth quarter.
Which was growth of 14, 5% for the full year adjusted EBITDA was $2 billion $384 million.
Fourth quarter GAAP net income was $119 million and GAAP diluted earnings per share was <unk> 61.
For the full year GAAP net income was $279 million and GAAP diluted earnings per share with the $1 43.
Adjusted net income of <unk> $411 million for the fourth quarter, and $1 billion and $252 million for the full year.
Adjusted diluted earnings per share grew 21, three per second of fourth quarter of $2 11 accounts.
Full year adjusted diluted earnings per share was $6 42.
Now it's already highlighted R&D new business activity remains strong backlog grew 18, 5% year every year with the closed 2020 of 22 6 billion.
We expect $5 9 billion of this backlog of convert the revenue over the next 12 months, which represents a year over year increase of 13, 5%.
And yet provide the basis for our 2021 guidance, which I'll be discussing shortly.
Now, let's go to the balance sheet at December 31, cash and cash equivalents totaled $1 $8 billion.
And GAAP was $12 5 billion.
So our net debt was $10 7 billion.
Our net leverage ratio at December 31.
Proved of four five times trailing 12 month adjusted EBITDA.
And that compares to.
The peak of four eight times at the end of the second quarter and four seven times at the end of the third quarter.
And Youll recall that we've committed to deleveraging is between three five and four times net leverage as we exit two.
<unk> thousand 20, <unk> on you can expect that we'll make good progress towards this target in 2021.
Due to our double digit adjusted EBITDA growth.
And improved free cash flow conversion.
The cash flow.
Continues to be at the bright spot cash flow from operations was $750 million during the fourth quarter up 29% year over year.
Capex was $176 million.
Our resulting in free cash flow of $574 million for the full year free cash flow was one three for $1 billion up 61% year over year.
We resumed share repurchase activity during the fourth quarter repurchasing of $102 million of our shares.
For your share repurchases were $423 million.
We ended the year of $194 8 million diluted shares outstanding and currently have $918 million of share repurchase authorization remaining under our program.
As the result of our strong free cash flow performance actions, we took at the onset of the pandemic to access capital market and capital allocation decisions. During the year, we now have $3 $3 billion of dry powder on our balance sheet.
Between the Undrawn revolver of $1 $5 billion and the cash balance of $1 8 billion.
We will continue to be judicious in how we use it for liquidity consistent with our goal of reducing net leverage.
Okay, let's turn to guidance now, we're raising our full year guidance by $250 million for revenue at the low end of the range and by $300 million at the high end of the range. The new revenue guidance is $12 $550 million the $12.900 billion.
A little under half of its increase is driven by a stronger outlook for the business and the remainder of its from favorable FX movements versus the guidance. We provided provided on our third quarter call.
I note that the revised guidance includes about 200 basis points of FX tailwind versus the prior year.
We're also on raising our full year profit guidance, we've increased our adjusted EBITDA by $35 million at the low end of the range and by $40 million at the high end of the range.
The resulting in full year guidance of $2 $760 million of $2 billion and $840 million.
The change in FX versus our prior guidance actually it had a slightly negative impact on profit due to the unusual mix of currency fluctuation versus the historic norm.
So of the adjusted EBITDA increase that you've seen our guidance is more of an entirely the result of the stronger organic revenue outlook.
We are raising our adjusted diluted EPS guidance by 12 percentage at the low end of the range and by 13 centers of the high end of the range to $7 77 to $8 eight.
This represents year over year growth of 21% for 25, 9%.
And let me go a little deeper to provide you with some color to help you with your models for.
First when Youre modeling quarterly revenue keep in mind that the second quarter will be easiest comparison in the fourth quarter will be the toughest comparison.
And within our adjusted diluted EPS guidance.
Interest expense of approximately $415 million of.
Operational depreciation and amortization of slightly over $400 million.
Other below the line expense items, such as minority interest of approximately $50 million and the continuation of share repurchase activity.
Our guidance also assumes the effective tax rate will remain largely in line with 2020.
Our full year 2021 guidance assumes the current foreign exchange rates remain in effect for the balance of the year.
Now before turning to the first quarter guidance, let me give you a.
I look at the segment growth rates for 2021, we currently expect tech and analytics solutions reported revenue growth to be between 9% and 12%.
R&D solutions reported revenue growth to be between 14% of 17%, which includes a 100 basis point headwind from pass throughs.
<unk> reported revenue growth.
It is expected to be down about 2% weaker earlier in the year and recovering later in the year.
Now as in the past, we're all for providing guidance for the coming quarter.
This assumes that FX rates remain constant through the end of the quarter.
On that basis first quarter revenue is expected to be between $3 billion of $150 million and $3 billion $200 million.
Representing reported growth of 14, 4% to 16, 2%.
All three segments should the river similar constant currency growth rates to what we saw in the fourth quarter.
Adjusted EBITDA is expected to be between $660 million $675 million, representing reported growth of 17, 4% to 21% and finally adjusted diluted EPS is expected to be between $1 81, and $1 87 of 27%.
224, 7%.
So to summarize we delivered strong fourth quarter results with double digit growth in all key financial metrics and Thats on top of the strong fourth quarter in 2019.
We've posted mid teens revenue growth for both our Taz in R&D segments.
R&D of backlog improved to $22 $6 billion up 18, 5% year over year.
We posted strong free cash flow for the fourth quarter and the full year of $574 million for the quarter and $134 billion for the year.
We closed 2020 with net leverage of four five times trailing 12 month, adjusted EBITDA and a very healthy liquidity position and.
Including an undrawn revolver and $1 8 billion of cash and as we look to 2021, we see double digit revenue growth margin expansion adjusted diluted EPS growth of over 20%.
Our continued robust R&D bookings activity and a further reduction in our net leverage ratio.
And with that let me hand, it back over to our operator for the Q&A session.
At this time I would like to remind everyone in order to ask the question Press Star then the number one on the telephone keypad for pause for just a moment of how the Q&A roster.
Your first question comes from Robert Jones with Goldman Sachs. Your line is open.
Great. Good morning, Thanks for taking my questions I guess, maybe just on on taas, It seems like record constant currency growth.
The quarter from the segment, despite the events management business I'm, assuming not really coming fully back in if I heard you correctly. It sounded like a good portion of the acceleration was driven by real world evidence for the government.
Just curious how sustainable some of that work might be into 2021 kind of what's assumed in this in this healthy guidance of 9% to 12% in Ntis and then just any thoughts on the other pieces of taas outside of real world evidence in the guidance would be helpful.
Yes. Thank you.
Sure.
Luke.
Taz in general.
Has it been more insulated from the impacts of Covid during 2020, the RMB ads will see SMS.
Of all data on the needs of these consulting.
The real World business, we're pretty much on effective.
And as you know to deal on the.
Buckets that we have where we had issues with the events management business.
On.
Which essentially came to a halt now in the fourth quarter of the underlying ties.
The business returned to normal growth rate you have already returned to normal growth rates in the third quarter I think we booked we posted nine 2% of.
Constant currency growth in the third quarter of.
The sequential increase in that growth rate in the fourth quarter.
Which is about <unk>.
Let's call it 600 basis points was on.
Entirely new as you know due to the.
Incremental the work from Covid related activities.
So we expect this incremental contribution to continue about the same face new.
Moving to the first quarter.
Now similar to RMB as the Kobe working dialogue has been faster execution.
And the guidance that we do you.
For.
2021.
Does it include the covey the work that we have visibility to.
I can tell you there is no coffee the work in the second half of 2021, that's built into our guidance. It is still early in the use of this could change, whereas the it's not going to stop.
But right now the <unk>.
Bulk of what we see in terms of coffee the working ties for 'twenty and 'twenty. One is in the first quarter similar of in the fourth quarter and the new group of sales in the second quarter and Thats. It.
What is the Covid work by the way it's the.
The mainly related to projects for governments.
Essentially using the our people on analytics.
To support.
All forward to use in the management of the crisis.
The real work of real World work for the FDA that that.
I described the my introductory remarks, we also performing large scale diagnostic testing and monitoring of Covid patients for other governments Europe in Asia around the world and we are assuming that's kind of go away.
On <unk>.
Hopefully by the middle of the year in our guidance, but again that's.
That can be that's between two I have.
And the expectation again, it's not baked into guidance of an expectation of what we'll continue to of.
City of the type of work as we've developed the ticketing team on.
New set of offerings, which we intend to go to market going forward.
No. That's helpful. And then if I could just ask one on on the Rds side a similar question.
I know the Covid work in the pass through of implications, it's been kind of a moving target, but just similar similar thoughts will be appreciated on how youre thinking about COVID-19 versus non COVID-19 related work in the <unk> guidance for 2021, yes. So again just as he does.
<unk> did contribute significantly to RMB as growth, obviously, I mean look.
Mid double digit growth in the US is not the New York, We said volume growth.
Salaries because of the the accelerated to the high single digit growth that we always anticipated pre pandemic. If you go back for the guidance, we gave the long term balance again.
The.
In the June of nine of 2019.
We did expect.
<unk> to reach high single digits eight nine and then eventually 10%, but that's that's.
That's the underlying sales growth business.
Now.
We the R&D, yes.
It also of course would be misleading to look at beyond the us business.
And say that's the new normal.
Net.
The double digit growth.
Obviously, it's hard to harder to determine where the has been the without the code the board because without the Covid work. The other business that has essentially been pushed to the right while in.
In R&D. So as you can on this thing, but by the way even absence the launch Covid trials that we've been.
The previous to work on we would have had very strong underlying R&D of services growth in the fourth quarter as well.
Now, we expect Covid work to be with us through 2021.
And maybe also into 2022.
Because as the need for vaccines for multiple manufacturers to meet global demand there on new vaccines that are being developed for variance of the virus.
There are alternative vaccines that are needed in case of adverse safety events of quality issues on manufacturing delays the.
The on novel treatment programs are starting to the specific population of then conditions and of course of the post approval commitments to regulators all of which do require continued on MBS.
Work.
On.
Look the Avalon backlog to execute $22 6 billion at the end of 2020.
We are the.
We have got the ability to execute on these existing backlog.
And thats the ability we continue to improve.
The site startup of the patient recruitment continues to improve.
The next 12 months revenue from backlog has increased so all of this provides the basis for our 2021 R&D revenue guidance the.
Pipeline of opportunities is very strong.
If we exclude COVID-19 the opportunities our pipeline is showing good growth for example, the oncology pipeline.
In the new double digit growth.
The CNS pipeline is up low double digits to one of these 12, 13% cardiovascular and diabetes five is growing strong double digits very very strong double digits.
No.
And for your question, suggesting that the what happens.
Gross COVID-19.
We're not falling off.
We have.
The vast majority of the of the backlog is not the Covid obviously.
If you look at our bookings in 2020.
Sure.
Every quarter, except for the first quarter of obviously.
The Covid related the World group presented between 15 and 20% of.
All of our.
Services bookings.
<unk>.
The full do you or I think it was exactly the 15% one five so we continue to book very very solid good business across all therapy areas and we expect our strong.
Growth in R&D is to continue even post COVID-19.
Thank you great. Thanks, Larry.
Forgive me for the next question on the key phase of Brexit.
The next question comes from Tycho Peterson of Jpmorgan. Your line is open.
Hey, Thanks, Alright, sorry to follow up on that and the first question, but I think previously you talked about real world evidence is actually picking up as the.
The pandemic linked.
Lingers, just given that you need to understand why people have more severe symptoms of lot of that seems a rush to market. So I'm just curious as to why do you think that piece will drop off after after the first quarter given yes, there seems to be a growing global multiyear peers are talking about it being a pretty strong year for real world evidence.
Yes, Yes go ahead of them. So, yes, I guess I mean, Tycho I think already was alluding to earlier I think he said.
Look it's still early in the year and this could change on anything we want to get ahead of ourselves.
And for our guidance that we don't have line of sight into of contractors obviously.
The soft moving environment with the Covid work on its cost execution and we saw very good growth in the first quarter and we expect that to repeat in the in the second quarter of of task.
We mentioned in his prepared remarks at the beginning of obviously, we're doing work with the FDA and we're looking at.
On how Covid is impacting the population then on what kind of treatments and therapies of people been on the drug regimens of people been on the maintenance the symptoms may be on the severe as other other patients.
We obviously got a seat at the table here, we're talking to governments on I think that means we are becoming kind of.
The company of choice with other governments around the world, but I think we just don't want to get ahead of off balance here and things are going to ask for on the view I would just add Tycho that we've included in our guidance, what we have direct visibility to but this is the very fast moving environment. The things pop up all the time, so it could change I mean.
It's just that.
We are delighted drug discovery the work right I mean, we are.
Super excited because.
The broader picture here of strategically that these crises as bad as it was for everyone in terms of our company.
We'd be talking it's almost like this company.
The existed for the situations license.
All of it.
Sets of capabilities that we've spent so much effort and investments developing proof.
Proved to be exactly what was needed to help our clients and to help governments, whether it's on the commercial side on the real world side or on the <unk> side and our relationships with clients as the.
Strengthened.
This all sets of capabilities of being demonstrated.
And we expect the continued to capture.
Neither bigger share of.
Of spend going forward into the very long term.
In the life science in the industry.
And we really are very excited by the pipeline of opportunities again, both on the commercial side and on the R&D of site.
Okay. That's helpful. And then just two quick follow ups I'm, just curious on recovery trends, where you stand in terms of the set of test ability I think it was 70% coming out of <unk>, So where does that stand today and then secondly, I didn't hear you mentioned OTT I'm just curious.
How we should think about that rollout and any potential synergies with the oce.
Thanks.
Most of the completed.
What was the question was on fire.
With the on site access and site access actually remained fairly close to the 70% number I mean just.
Learn new ways to work around that although we would expect it to improve gradually.
Okay.
In the first.
On the trough of the index at the worst.
Moment of the crisis.
We were right on 1% of site access.
No.
That really created huge huge headwinds for a variety of business as you know.
Second quarter earnings call. We told you that we had gone up to 53% site access and at the end of the third quarter. We were at about 70% site access and the kind of bad news. Good news here is that we have not improved at the time, but Mexico is the remainder of so many of us on how ever.
We've learned to work around that and the reason why hasnt been backlog of the sense frankly, because of all of these new flare ups et cetera, but the good news here is that it.
Right because the.
It's Doug so margin we found the.
Of the number of sites, but it's really.
The other metrics.
The main metric we looked at the beginning of the pandemic was site access because of again without that you've got nothing.
What we found out that the visa.
Critical mass of five axis, which again is about the level, where we are now.
Whereby our remote monitoring capabilities, then prevent the material disruption.
For the delivery of our services in general we've got site net worths relationships, we can work around.
Size of that are not yet up and running for clinical research.
And today, we can people, it's much faster to remote learning.
During the vs. When this pandemic hit.
Now if you look at startup activity, which is another important.
Metric that we were looking at.
We have also come to a hold is now.
Now back to baseline levels of <unk>.
Pre pandemic and Thats extremely good news.
And there hasnt been any major change from the.
From these new.
For the increases in Covid cases of the new variance of the virus so the startup activity.
People have room to.
The work with the virus and its essentially back to pre pandemic levels, and we don't see that changing patient recruitment another very important metric.
Obviously, usually lags the site startup, but essentially those trends are very strong on the patients are returning to sites.
Essentially.
To pre pandemic levels. So again, we're very encouraged by that.
Another question on top of orchestrated clinical trials, the OCC rollout and how do you think about that yes, yes.
Well I mentioned that luxury the remark that our virtual trials of.
Technology has been reached.
<unk>.
The royalty with frankly or in the context of the.
Of Covid, if you step back.
And think about what <unk> does.
Of the four blocks because of digital sites suite.
Which you don't focus on blue on the on the sides type for payments Etfs.
That is the digital patient suites.
The patient has to go through the consent eco that's where the virtual trial essentially is the business.
On the hub that you have the digital trial management suite with the CMS.
Risk based monitoring and then of the compliance suite the range smart and vigilant so.
The technologies.
<unk> suite.
The patient suites, and the compliance suite went live during 2020.
And the technologies in our trial management suites will be going live shortly most of the <unk>.
Of the score beginning of the second quarter of this year.
So again all of the full suite of <unk>.
The patients and the compliance they are all went live during 2020.
And the the.
Trials.
The management suite will be live.
To be.
Probably March April timeframe. This year and we are seeing very strong interest from clients we have.
We've seen an increase in RFP activity for new OTT platform, not just for individual suites of standalone products, but for the whole platform.
We are seeing interest on all customer segments in large mid and EVP.
And the stay tuned we'll report more on that but the the assets of.
Of your question is.
We are live for most of the of the products and it will be fully live and operational.
By the beginning of the second quarter.
Okay. That's very helpful. Thank you. Thank you.
Your next question comes from Ricky Goldwasser with Morgan Stanley. Your line is open.
Yeah, Hi, good morning, so backlog conversion clearly.
Even when we back the Covid pandemic the Covid pandemic.
So when we think about.
2021.
When should we expect the back.
For comparison.
Seven six.
5%.
For the pre Covid level should we think about it as the second half of 2021 for.
Sure.
Well it kind of like spirits to 2022, and then the second question I mean are you talking about patient recruitment in the plastics.
Getting to see patients on a couple of on site.
Covid tobaccos.
Are you seeing any.
Any impact on how on trial designs.
I mean, clearly right now for a relatively low percentage of the population in Saks unaided.
But.
As we see more people vaccinated would that Inc.
How do you think about trial design, and then potentially the b piece.
Recruiting new patients to trial.
So Ricky the alignment was pretty balance that we were struggling to hear you a little of it I think second part of the question was around patient recruitment and are we seeing expecting I guess pickup in terms of the population of getting vaccinated.
People, who are attending the sites I think.
From what we have.
So the <unk>.
If we think about it.
All right.
The details of vaccinated does that sort of the change have you guys think about designing trials. If someone has the confidence of vaccines of this means that the might be compromised can't tells the patient trials.
No I don't think so low.
No no I think they go part of the general recovery that we're seeing in the.
The view.
It doesn't change anything for the design of the trials I mean, it's just another.
Element that allows the patients to access softness and the size of interacting with healthcare professionals.
Would that be the same with the with the negative test already on.
Some of the what the antibody.
Let me change of the design mode and on the second what was the.
The first part of the question Ricky.
We're really struggling to hear on offline.
So the first one of those if you think about backlog conversion clean the backlog conversion.
For the quarter EBIT of what do we exclude COVID-19. So when do you expect to return to pre COVID-19 levels that Centerpoint Stakes in the should we think about of what do we model of the second half of 2021 or.
Early 2022 time timeline.
The backlog conversion is a really tough statistic the model out because it depends on backlog burn because it depends on how much we are adding to the backlog.
<unk>.
Any quarter. So what we've tried to do is provide guidance to the tally of how much we think it's going to burn during the course of the year of the next 12 months revenue.
And allow you to take it from there yes, the Covid work does burn quicker than the other work there's no question about that.
But we don't guide to a particular backlog conversion rate because it's just too difficult to do because it depends also on how much you happened to be booking. If you are booking a lot like we have been recently and obviously the backlog goes up and the burn rate goes down, but thats not a bad thing so yes.
Expect you would see.
A faster burn of the Covid related work, which we mentioned was about 15% of our service bookings in 2020.
And a more normal rate of burn on.
And the rest of the backlog and.
Sure.
I think it still remains to be seen how much additional COVID-19 related work, we're going to book as we go through 2021.
It's still a question Mark.
Alright, Thanks, Ricky I think if we can move for the next question on the cubic.
Your next.
Question comes from Eric Coldwell with Baird. Your line is open.
Thanks, very much I have one technical question and then and then more strategically so first off on getting a couple of inbound asks on the FX update I'm. Just curious if you could maybe clarify the more clear for us people who missed it the.
The FX guidance for 2021 is it plus 200 bps tailwind for the full year in total or was the update today that that's an incremental 200 bps. Since you first gave 2021 guidance a few months ago.
So when you look at the the year over year FX impact when Youre looking at the growth rates almost many of you are trying to take our reported guidance against the of constant currency guidance.
<unk> basis point tailwind year over year.
Similar to that in.
Cosmos, the SMS and a little bit lower on R&D, maybe about 100 basis points in R&D.
No he is asking vs.
The previous guidance versus that would be the follow on is what was embedded in the guidance a few months back. So we can just see the delta.
Previous guidance of one one.
Yes.
Yes, so what happened.
Yes.
So the.
Previous guidance on 100 basis points and the depth of closer to.
200 tailwind.
Perfect. Thank you very much for that.
A little more interesting question.
Really positive trends here in the cash flow and.
No it's been Ron I know, it's been a big focus for you we've seen some nice improvement here.
Over the last few quarters.
I'm just.
I'm, hoping you can maybe break this into two pieces first off.
Could you give us anything a little more specific or precise on what's really driving the improvement operationally number one and number two.
Perhaps parse out from that.
Maybe some of the timing on the the <unk>.
Covid vaccine work and the higher pass through tailwind that you did finally get here in the fourth quarter.
Is that how much of the contribution was that versus let's say core underlying fundamental improvement.
Look it's a good question.
The as you can see from our cash flow statement the <unk>.
Principal driver in fact pretty much the whole driver of our improvement in cash flow of free cash flow in 2020 was due to improved collections performance and that's a combination of collecting quicker, but also billing in a more timely fashion in structuring our contracts so that.
That we bill earlier.
And part of our collections effort, which we put a lot of focus on bringing down our overdue receivables. We took our eye off the ball on that a little bit and put a lot of focus on that and were able to substantially put a dent in our overdue receivables, which has helped quite a bit.
And I think of lot of the processes, we put in place all of them should persist in the 2021, we have to continue to put emphasis on it but we've improved our processes and we expect that to continue now you did identify.
Something that's important which is that the COVID-19.
Related work did bring some benefit in terms of of.
Customer advances and being able to bear on advance that helped our 2020 cash flow.
So when you look at our 2020 cash flow as the percentage of adjusted net income it was unusually high we target more in the 80% to 90% free cash flow of percentage of adjusted net income in the normal year, but cash flow very lumpy.
It bounces around we had a very strong year in 2021.
The percentage of net income excuse me 2020, as a percentage of net income it probably won't be quite as strong in 2020, but.
Fundamentally we've improved quite a lot in terms of cash conversion and you should see continued benefit from that going into the future.
That's very helpful. Thanks, guys.
So I think we're kind of on close to the hour, but if we can take one more question. Please.
Absolutely. Your last question comes from Dan Brennan with UBS. Your line is open.
Great. Thank you. Thanks for taking the question I guess I guess the two part question one with on the Oce Ari. So obviously continued progress there I'm just wondering when when do we see OTT show up in revenue than the you've talked about the market out there.
On the timetable that would protect the <unk>.
And then you begin to generate tracking on that because of 140 wins to date any color about what's baked into the 2021 guidance and if not kind of when do we see it.
Yes.
Yes. So again, we continue to see very good traction in the marketplace in all of this it takes time to deploy we had 16 clients wounds in 2020, and I should point out.
Obviously, despite the difficult.
Environment created by the pandemic, we continue to sell.
The total of 140 client wins since launch.
Keep winning two out of three times against competition.
With the drawing.
Large clients, which we've disclosed before we have of global B programs with Ross.
We have.
Global deployment of the mobile all of these international operations.
Astrazeneca U S deployment as well.
We have another top 15 pharma deployment for <unk>.
Country in Asia, another of top 50 pharma accounts, that's globally deploying for the medical teams. So we already have.
And also if we should disclose this number but we do have.
Tens of thousands of users already now.
The move the needle on the top.
The.
9 billion dollar revenue company.
No not in 2021.
<unk> is providing the very significant growth.
And switching.
A M.
The area, where we expect strong.
Margin drop through.
Over time as we complete the implementations.
As you know I'd say the.
The drop through of becomes much more attractive win.
Revenue.
License.
<unk> net and you're starting to see the but we've continued to increase as we complete deployment and implementation now we continue to sell so that also will require implementation and the strategy. Overall is the same as for any technology company.
She is the land and expand.
Modal and as you know we.
We sold the Ace.
<unk> engagement management I've mentioned it.
We sold the HCP compliance.
We had the.
Launching additional modules.
And continue to expand so its not just with CEOC was kind of the stack.
The piece and then it continues to grow revenue.
Yes, I just wanted to say I think.
On time, and that's kind of the tendency to equate our tech business, where the oce.
As we've all talked about on a lot and we have a competitor in that space that talks about it a lot as well, but we have a much broader business as Ari was saying and just that.
Across performance management compliance information management social media.
The payer provider and then we have of growing clinical tax segment. So.
I just want to emphasize that the tech is a lot more of just oce for.
Yes.
Thank you.
Thanks, very much the answer where the company our announcement of thanks, everyone for taking the time to join US today and we look forward to speaking with you again on our first quarter of 2021 earnings call and will be available for the rest of the day to take any follow up questions that you might have thank you everyone.
This concludes today's conference call you may now disconnect.
Okay.
Yes.
On the net.
Okay.
Okay.
Okay.
Yes.