Q1 2022 IQVIA Holdings Inc Earnings Call
Ladies and gentlemen, this is the operator today's conference Caygill to begin momentarily until that time your lines will again be placed on hold. Thank you for your patience again todays conference is scheduled to begin momentarily until that time your lunchwagon deeply sent home. Thank you for your patience.
[music].
Yeah.
Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the IQ V. I, a first quarter 2022 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.
If he would like to ask a question. During this time simply press star followed by the number one I'm going to let phone keypad.
If you would like to withdraw your question press the pound key.
This call is being recorded.
I would now like to turn the call over to Nick Childs Senior Vice President Investor Relations and corporate Communications. Mr. Coutts. Please begin your conference.
Thank you.
Good morning, everyone. Thank you for joining our first quarter 2022.
Earnings call with me today are Ari Buoys me, Chairman and Chief Executive Officer, Rob Roman Executive Vice President and Chief Financial Officer, Eric Sherbet, Executive Vice President and General Counsel, Mike Feedstock Senior Vice President financial planning and analysis and Brian Stangl.
Your 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 and the events and presentations section of our IQ via Investor Relations website.
I R Dot IQ via dotcom.
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.
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.
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 .
Alrighty Lucy.
Thank you Nick and good.
Morning, everyone.
Thank you for joining today to discuss our first quarter results.
<unk> had very strong financial results in the quarter.
And that is despite the broader macro environment.
On this note.
Regarding first the tragic situation in the Ukraine, our Fulton concerns from the beginning have been around the safety and wellbeing of our employees.
The patients we support and all those affected by the ongoing events.
We've been actively supporting our employees and their families on the ground with evacuation support relocation services and financial assistance.
For example, we accelerated bonus payments and actually we continue to pay our employees there regardless of their ability to perform any work.
In addition.
<unk> capabilities are being utilized to help support the resulting refugee crisis. For example, Ukrainian refugees are entering surrounding countries with medi sees on prescriptions.
And medical professionals in those countries are seeking to identify and convert product information on these prescriptions into their local equivalent.
To help you have established a free online service for medical professionals to search.
Product name active ingredients and strength and the tool generates at least matching products in which you have or the local country around the Ukraine is.
Also we've been working very closely with our customers suppliers and clinical sites across the region to ensure continuity of our in flight clinical trials.
And then sure of course that our clients are able to continue to support the effective delivery of medicines to vulnerable patients in the region, who depend on these medicines.
In Ukraine.
We are providing support to ensure that trial patients who have begun receiving treatment remain on their treatment protocols.
Established direct to patient shipments of investigational medical product and patient call centers in order to ensure patients can continue in Russia. We are guided by ethical concerns to ensure the safety of patients already enrolled in clinical trials, we are utilizing our globe.
Logistics and procurement infrastructure to facilitate the movement of investigational medical products lab kits and samples into and out of the country to minimize potential adverse impacts of patient care.
Four studies that are in startup or early phase in both countries. We are redirecting patient recruitment to other countries based on consultations with all customers.
Even though we're a little less than 1% of our overall revenue and approximately 3% of our global patient recruitment come from the Ukraine and Russia.
The operational disruptions I just described will have some financial impact, which we have incorporated into our updated guidance.
Now another key focus area for investors in the quarter as you well know has been the emerging biopharma funding environment.
We've received a number of questions on these topics you saw earnings release in February .
And we have addressed those in multiple forums. However.
There has been some lingering questions on the same topic I wanted to take this opportunity once again to reiterate our comments with a specific focus on the funding environment and be on our own company's exposure to this edp segments I'll start by stating that the concern about EVP funding environment is overseas.
<unk>.
I wanted to support the assertion with four key points number one the industry has observed the slowdown in public funding compared to the record levels seen in 2020 one but.
The private venture venture capital markets have continued to be strong and funding in the first quarter of 'twenty. Two was the third highest ever according to the National venture Capital Association I would also observe that the CBP firms are sitting on large amounts of cash from the very strong funding cycles in 2020 one.
Number two.
When there is a reduction in EVP funding or the IPO market contracts.
Mid and large pharma companies often step up their acquisition activities.
Companies, and frankly that benefits us as we have longstanding relationships with these customers.
In fact, you may have seen the recent acquisition of Checkmate pharmaceuticals by Regeneron, which illustrates this very point.
Number three history tells us that when EVP funding slows it does not have a significant effect on our business.
For example, following the last EVP funding slowed down in 2015 and 16, our IQ via Baidu would take unit saw no interruptions in net new business and revenue growth nor any unusual increase in cancellations.
And finally number four when we look at either our pipeline or RFP activity, we have simply need simply not seen in slowed them no unusual cancellation activity no unusual delays in decision making.
In the quarter, our overall R&D RFP dollars were up 13% year over year and RFP dollars from Edp.
Up over 16%.
The broader industry continues to show strength.
We're seeing clinical trial starts up 7% in the first quarter compared to last year with a 14% increase in oncology trials thoughts, which is a therapeutic area as you well know that's predominantly sponsored by E. B piece now.
Let me focus on our own exposure to these segments specifically.
Pre commercial E. B pieces, which are those are the pieces that have zero revenue and are the most vulnerable and exposed to the funding environment and here I want to make another four points number one.
As of March 31 <unk>.
<unk> commercially bp's represented just over 10% of our total R&D as backlog number two.
Less than 7% of our overall RFP dollars in the quarter came from pre commercial Edp's number three.
This exposure to pre commercial EVP for IQ via isn't.
He's not only minimal, but also I want to point out that underlines our vetting process.
Taking on a pre commercial edp is extremely rigorous and thorough process includes for example, our review of the client cash balances payment history via BDC and quality of their science and of course progress with clinical development. So.
Again said differently not every EVP, who knocks that's our goal with the molecule that DCP is interesting makes it into our backlog.
Number four I will simply remind you that this exposure primarily impacts our R&D segment.
Proximate be 45% of <unk> total company revenue comes from our commercial businesses and as you know.
There is virtually zero pre commercial.
Exposure on the commercial side spot.
We've almost comments.
Background, let me now delve into the first quarter results.
Revenue for the first quarter grew four 7% on a reported basis and six 8% at constant currency.
The $23 million beat above the midpoint of our guidance range was driven by strong operational performance across all three segments and that was of course, partially offset by foreign exchange headwinds.
Bear to prior year, and excluding Covid related work for both US our core businesses grew about 13% at constant currency on an organic basis.
Ron will provide additional detail in his remarks, including could be to adjusted numbers for each of our three segments.
First quarter adjusted EBITDA grew nine 1%, reflecting our revenue growth as well as ongoing productivity initiatives.
First quarter adjusted diluted EPS of $2 47.
Grew 13, 3% that was 4% above the midpoint of our guide which is with about <unk> of the beat coming from operational improvements.
And I'll provide an update on the business and let's start with the commercial and technology side.
We've spoken before and you're familiar with IQ, yet connected intelligence framework, which leverages, our advanced analytics technology and domain expertise across the entire clinical and commercial portfolio and has been critical in supporting the emerging needs of the pharma industry.
I wanted to give you a recent example of how these capabilities are being deployed in the quarter.
We entered into a multiyear agreement with <unk> for.
For the development and commercialization of new indications for their rare disease product currently approved for treatment of the rare autoimmune disorder affecting the muscles.
Our collaboration with our Gen X incorporates a QTS connected intelligence to support clinical development real world evidence regulatory and commercial support to accelerate the development of these products for potential treatment of other severe autoimmune diseases.
And to expand globally.
As an exciting new product with a lot of upside potential in its currently approved to treat six indications has the potential for up to 15 indications plus these drug has already been launched in the U S and has plans to launch in Europe and in Japan in the next year another.
Another example of our clients selecting a queue guys integrated capabilities to solve complex problems is fair are European pharma client recently selected <unk> vigilance platform and our regulatory information management technology. This is an area that's a real headache for our clients and our technology.
<unk> simplified and streamlined our processes.
<unk> will benefit from our technology is integrated AI ml capabilities automation of labor heavy activities and easy implementation to date over 150 clients have adopted one or more solutions within our safety regulatory and <unk> 42.
All of the technology in <unk>.
Real World evidence I'm sure you've seen that we were selected to support Darwin or data analysis, and real world interrogation network downwind ease of strategic initiatives.
M. Eight this is a major win for IQ via as he draws on our proprietary technologies and methods and deep scientific and operational expertise.
It will help us deepen our relationship with health care providers and sites across Europe .
Moving to critical technology <unk> continues to lead the industry in decentralized clinical trials, our end to end solution of integrated technology and services capabilities are being utilized on just over one third of our foodservice trials globally to date, we've recruited over 300.
<unk> patients across 80 countries covering over 30 indications.
Now whether for traditional or decentralized trials demand for our suite of digital clinical technology offerings continued to increase in the first quarter to date over 400 clients have adopted one or more modules within our orchestrated clinical technology suite since launch one of the scheme.
Modules for example is our clinical trial payments solution.
This technology ensures accurate timely and transparent investigator payment processing.
A key driver of both site and sponsored satisfaction.
All of the top 10, and 25 of the top 30 pharma clients have now selected IQ via statement technology solution for the trials. This includes a major award in the quarter with a top 10 sponsor to migrate their entire payments ecosystem across several.
I guess, you've got forms to our technology.
The scale of these technology migration is the largest of its kind in the industry and encompasses 120 clinical studies across all phases with over 6000 sites globally.
Beyond these clients highlights our overall R&D as business continued to see strong momentum in the quarter delivering over $2 5 billion of net new business, including pass throughs decent.
This included a record quarter of over one $9 billion of services bookings.
<unk> in the first quarter contracted net book to Bill ratio of one two.
Excluding pass throughs and $1 31 <unk>.
Including buses.
The last 12 months, our contracted net book to Bill ratio was 133, excluding pass through and 132, including Buster.
Our contracted backlog in R&D is grew nine 1% year over year to a record $25 $3 billion as of March 31, 2022, as a result, our next 12 months revenue from backlog increased to over $7 billion growing 8% from a year ago.
As you can see there is a lot of strong positive momentum across the business, regardless of the choppy macro environment.
On a final note <unk> was named the top CRO in overall reputation by clinical trial sites around the world in the 2021 central watch Global site Benchmark survey.
This is a big deal for US. This is a rigorous and independent survey that is highly respected in the industry over 60000 investigators trial coordinators research nurses and other clinical professionals, representing clinical trial trials sites from around the world, We're asked to rank and.
School, 29th Crows across 35 performance related attributes we are proud to.
We have been selected and named the top CLO.
Overall reputation with especially specifically we received high marks, especially high marks for our comprehensive decentralized trials direct to patient recruitment.
And therapeutic clinical regulatory and technology expertise.
I will now turn it over to Ron for more details on our financial performance wrong.
Thanks, Lori and good morning, everyone, let's start by reviewing revenue first.
First quarter revenue of $3 billion $568 million grew four 7% on a reported basis and six 8% at constant currency.
In the quarter Covid related revenues were approximately $375 million.
Was down about 35% versus the first quarter of 2021.
In our base business that is excluding all COVID-19 related work from both this year and last organic growth at constant currency was about 13%.
Technology and analytics solutions revenue for the first quarter was $1 billion and $439 million, which was up six 8% reported and nine 8% at constant currency.
Excluding all COVID-19 related work for organic growth at constant currency.
In tech and analytics solutions.
Was just over 10%.
R&D solutions first quarter revenue of $1.934 billion was up three 5% at actual FX rates and four 7% at constant currency.
Again, excluding all COVID-19 related work organic growth at constant currency and R&D.
Was approximately 17%, which was consistent with our expectations.
Contract sales <unk> medical solutions, our CSM, that's first quarter revenue of $195 million grew 1% reported and five 7% at constant currency.
Excluding all Covid related work organic growth at constant currency in CSM mask with mid single digits.
Okay, let's move down the P&L now adjusted EBITDA was $812 million for the first quarter.
Which represented growth of nine 1% on a reported basis.
First quarter GAAP net income was $325 million that was up 53, 3% year over year and GAAP diluted earnings per share was $1 68.
54, 1% year over year adjusted net.
Net income was $477 million for the quarter up 12, 2% year over year and adjusted diluted earnings per share grew 13, 3% to $2 47.
Now we've already reviewed R&D solutions delivered yet another outstanding quarter of net new business.
Our backlog at March 31 stood at a record $25 3 million billion dollars, an increase of nine 1% year over year.
Next 12 months revenue from backlog increased 8% year over year to just over $7 billion I would note that both the backlog and next 12 month revenue numbers I just quoted.
We're affected by FX rates at quarter end and that is to say they were lower than they otherwise would have been due to the strengthening of the dollar during the quarter.
Okay, moving now to the balance sheet first quarter cash flow from operations with.
With $508 million and Capex was $177 million that resulted in free cash flow of $331 million and as a reminder, our free cash flow in the first quarter of each year, it's affected by the timing.
Of annual bonus payments.
At March 31, cash and cash equivalents totaled $1 $387 million and gross debt was $12 $637 million.
Which resulted in a net debt of $11 billion and $250 million. Our net leverage ratio at March 31 was 364 times trailing 12 month adjusted EBITDA.
In the quarter, we repurchased $403 million of our shares which leaves us with slightly over $2 $1 billion of share repurchase authorization remaining under the current program.
Now, let's move to guidance.
For the full year 2022, our expectation remains unchanged that organic revenue growth, excluding COVID-19 related work will be low to mid teens at constant currency.
Since February FX fluctuations have caused an incremental full year revenue headwind of over $200 million ads.
As of yesterday's rates.
In addition, we currently estimate a revenue disruption from the Russia, Ukraine crisis to be.
In the 40 million to $50 million range.
Accordingly, we are updating our revenue guidance range to reflect these two factors.
For the full year, we now expect revenue to be between $14 $450 million in 2000, $14.750 billion, which represents year over year growth at $6, 9% to 9% at constant currency and four 2% to six 3% reported both compared to 2021.
Now as a reminder.
In the revenue guidance, we provided in our Q4 call in February we absorbed to $70 million FX headwind versus the initial guidance, we provided at our analyst and Investor Conference in November .
Our projected revenue growth includes just over 150 basis points of contribution from M&A activity.
Now despite the macro factors that affected our revenue guidance, we are reaffirming our full year 2022, adjusted EBITDA and adjusted EPS guidance range.
Ranges that we provided on our fourth quarter 2021 earnings call.
This includes absorbing the earnings impact of loss revenue in Russia, and Ukraine as well as the cost that remain there such as salaries and assistant provided to employees.
Accordingly, we continue to expect adjusted EBITDA to be between $3 billion $330 million and $3 billion $405 million representing year over year growth of 10, 2% to 12, 7%.
And we continue to expect adjusted.
Adjusted diluted EPS to be between $9, 95, and $10 and 25.
Or year over year growth of 10, 2% to 13, 5% now.
Our full year 2022 guidance ranges assume that foreign currency rates as of yesterday April 26 remain in effect for.
The balance of the year.
Moving on to second quarter guidance.
I'll remind you that the first half of last last year represented our peak for Covid related revenues and as a result of that the second quarter should be the toughest year over year compare in terms of revenues.
So for the second quarter revenue is expected to be between $3 billion $470 million and $3.520 billion representing growth of four 6% to 6% on constant currency basis, and <unk>, 9% to 4% on a reported basis.
Excluded excluding COVID-19 related work, we expect organic revenue growth at constant currency to be in the low to mid teens consistent with what we had in Q1 actuals and our projected full year revenue growth.
Adjusted EBITDA is expected to be between $790 million and $805 million up nine four to 11, 5%.
Adjusted diluted EPS is expected to be between $2 35, and $2 42.
Growing 10, 3% to 13, 6%.
<unk>.
So to summarize we delivered very strong first quarter results on both the top and bottom line against what had been a very strong first quarter of 2021.
Our base business maintained low teens organic growth at constant currency.
Excluding COVID-19 related work.
With double digit growth on this basis in both pads and R&D, our R&D bookings.
The business recorded its largest ever quarter of service bookings.
Contracted backlog exceeded $25 billion for the first time rising over 9% year over year with over $7 billion expected to convert to revenue over the next 12 months.
We maintained our net leverage ratio of three six times.
12 month, adjusted EBITDA on a trailing basis, and finally and most importantly, despite the turmoil around us we remain very confident in our outlook and accordingly have maintained our full year 2022 profit guidance.
So with that let me hand, it back over to the operator for our Q&A session.
At this time, if you would like to ask a question Press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the lineup Eric Coldwell from Baird. Your line is open. Please ask your question.
Thanks, very much good morning.
Two quick ones, both on geography, first with Russia, Ukraine, I am sorry, if I missed it but could you tell us the impacting Q1, and then how the $40 million to $50 million of annual impact is phase through the year I guess I would assume the majority of that or a significant portion is in <unk>, but would love to get your sense on how.
You face that $40 million to $50 million projected impact and then secondarily early in the pandemic IQ via was the first and perhaps most vocal company to talk about the impact of.
China and Asia Pac when Covid first broke out obviously a lot of conversation. These days on the rolling Lockdowns in China Love to get an update on what Youre seeing from.
The impact in that market and how you're operating across.
That region, given the governmental actions ongoing today, thanks very much.
Thank you good morning, Eric and thanks for your questions on the first one Ukraine.
Ukraine, Russia is not even 1% or about 1% of our revenue and less a little less.
So corny to Huntington <unk> hundred $40 million, let's say and.
Obviously as being significant displacement in the world that cannot be done.
Similarly in our NDA as I might point out.
Some of that May come back some of the trial will obviously needs to continue and will be delayed it just takes time.
Because of the disruption you want to answer the specific question on how much per quarter. We said, it's we sized it at $40 million to $50 million like look it's less than a proportionate impact in Q1, obviously because the conflict didn't start until late February . So we had a few million dollars of impact in Q1, not a huge.
Impact you're right Eric.
It's probably that $40 million to $50 million, it's probably front end loaded in the year, because we should recapture a little bit as we get late in the year and we start shifting work and that always takes longer than you think it's going to take so we're not assuming a huge recovery of work and.
In 2022, but ultimately as we.
Find new patients and move their clinical trial activity outside.
Outside of Russia, and Ukraine, we should recover a lot of that probably by the backend of the year or early next now with respect to China.
Two.
Situate the conversation China.
<unk> is about 25% of our global revenue.
And that's about half and half R&D and commercial now.
Now to take the commercial side first.
We saw virtually no impact even though the worst of the Covid crisis, when everything was shut down in China on our commercial business, obviously some of the.
Business that requires some face to face interactions like <unk> consulting and so on obviously you went to zero, but the rest of the business. The technology <unk> analytics services continued pretty much intact. So we have no concerns there on the R&D is the obvious concern.
There were loved downward ease our ability to.
To access sites now right now, it's a fluid situation.
We are tracking closely what's happening on the ground, we have seen some disruption to site access and patient visits.
Again, mostly in Shanghai, because that's where the hub down has been limited so far it's hard to imagine that these are going to be prolonged.
For a very long time will expand into China, but again, we no one can tell.
So thats, where we are and we again we are.
Relatively confident.
Outside China that when these things happen now we've learned how to deal with it with our remote capabilities in our.
Our exciting development of decentralized trials et cetera.
We've become more of a depth and we are prepared to address those situations.
We believe the same will be true.
God forbid in China, the situation were to deteriorate, but frankly at this point, we haven't seen much again, it's de Minimis and we haven't.
And any adjustments or anything like that.
Forecast for China, and you know the company.
Okay. Thank you very much.
Your next question comes from the lineup Shlomo Rossington from Stifel. Your line is open. Please ask your question.
Hi, Thank you very much for taking my questions.
A quick question just is the is the year's revenue and profitability printing.
The way that you expected as you entered the year I mean, obviously.
A little bit of change with Russia and stuff like that.
The second quarter guidance is a little bit lower than what the street expected. Obviously the street doesn't have the insight into the pacing that you guys have at that level of detail and it could be that we just didn't get the same.
Kind of Covid headwind roll off year over year, and I, just want to kind of start with that question and then one follow up.
Well Shlomo. Thank you for your question good morning.
Luke.
I think Ron mentioned in his introductory remarks that.
Last year's first half.
Included the highest the peak revenues from Kobe.
The second quarter.
Will be the toughest compare year over year.
With Covid in the biggest step down year over year revenue will be in the second quarter. That's one factor.
Secondly, on a reported basis.
If you look at again, assuming FX rates remain where they are for the balance of the year the worst comparisons year over year in terms of FX impact or in the second quarter.
Okay, but the <unk>.
Underlying.
Businesses.
When you take this out Covid and FX.
Guys have to be out with the numbers you second quarter is consistent with the rest of them very very consistent and that's why we're giving you ex COVID-19 constant currency organic because that claims out a lot of the items that caused the volatility that you are seeing in really across the quarters of 2020.
Two when you look at it on that basis very consistent growth rate. So again I mean in pause I can tell you. The two hour what's built in our forecast and reflected in our guidance is Q2 constant currency organic growth. Excluding COVID-19 related work will be high single digits. So very strategically again, we'd go first.
Sure.
R&D is Q2 constant currency organic growth, excluding <unk>, you do that it would be upper teens.
And see SMS.
Will be low single digits, excluding COVID-19 related work.
Again comps constant currency organic growth, so you're right on a reported basis the number and the.
The actual globally to work included.
It looks a little choppy sequentially, but the realities of the underlying base business is pretty consistent and pretty strong okay, yes, and the other thing Shlomo.
It's pretty much aligned with our guidance that we gave I mean.
The linearity and how it's progressing over the quarter is exactly what we were expecting.
Okay Perfect and then this is another one for you or are you just.
A really good history of.
Aggressive on share repurchases when the stock dips in the stock has pulled back a lot.
You know at the analyst day communicated being.
And just you know extra more recently of having a lower leverage a targa.
Target in a for a longer period of time, but would you consider taking up the leverage to take advantage of the stock price given the fact that it seems like the.
Trends in the business really havent changed despite the changes in the stock price.
Cosmo.
My first one.
It would be to do that but it frankly.
We're not going to do that.
We can buy Youll thankfully.
No. There is a third factoring what you're articulating, which is our cash flow generation.
And as you've seen it's been pretty strong and that allows us.
More flexibility and affords us the ability to do both that is to maintain a.
Lower leverage ratio.
And.
Aggressively pursue share repurchases you saw we bought over $400 million.
In the first quarter.
Frankly.
Time Windows, where we cannot buy we reported earnings I think in February .
And then we approach the end of the quarter. So we don't have a lot of time.
And now we have already improved 27, but yes, you can expect that we will be.
Being the market.
At these levels or was any level Frank.
So again the answer to your question is yes, we will do.
Aggressive share repurchases, but no we would not.
Increase the leverage ratio.
Okay. Thank you.
Your next question comes from the line of gap from Nephron Research. Your line is open. Please ask your question.
Thank you and good morning.
One of the big debates from the CRM industry has also been labor how did your wage and turnover trends comparative versus prior periods can you just comment on how youre managing through that.
Right.
Yeah, well look.
It's interesting we've.
Sure.
We obviously experiencing the same trends that we've talked about before which is given the strength of the industry backdrop, there's obviously competition for talent.
And we are really really are actively recruiting and hiring to meet incremental demand.
We also saw like the rest of the industry attrition.
Pick up towards the end I think it has stabilized I would say over the past.
Few weeks, we track this very carefully and look at it on a weekly basis.
And it seems to have the kind of plateaued in these attrition levels.
Plateau than maybe even start to come down a little bit.
We have approximately 82000 employees and we recruit thousands of employees a year.
So we do have the Towne acquisition capabilities to be able to meet this increased demand and.
We have we actually it's fascinating you know back to the Ukraine situation, we are actually Luke.
Looking now at <unk>.
Repositioning.
Individuals from these countries, Russia and also Ukraine.
In different geographies and utilize them in other places so.
<unk>.
We are really literally our global footprint allows us a little bit more in agency. We are seeing some margin pressure from labor cost increases.
But.
We have the flexibility again because of our global footprint.
To do some arbitrage and moving things.
Around the world to optimize our cost structure. We of course have our ongoing that's part of our DNA we are continuing.
That's what we do day in day out productivity initiatives and cost optimization.
Actions.
Look we've also increased the rate the rate cards on existing Rfps and we are looking for ways to.
Pass along some of those.
Cost increases into pricing, where we can so the combination.
Of all of that obviously this is easier to do the pricing lever.
You're on short cycle businesses and on the longer cycle businesses.
Where we are already priced in some price escalations without they don't always reflect the wage inflation that we actually seeing in the market, but again the combination of all of these.
Levers that allows us to manage that.
<unk>.
Fairly effectively.
And by the way the OLED the oldest cost pressures that we're talking about already factored.
In our guidance.
Also wanted to point out I mean, maybe that's the only fresh with cities now but [laughter].
We paid in aggregate the highest ever.
Level dollar level of bonuses for 2021 to our employee population in aggregate.
<unk> continued to pay.
I would say, it's a very respectable at a high level.
<unk> employees, even during the worst of the pandemic.
And I think we see you know employee surveys, which we do very frequently.
Higher and higher satisfaction levels and loyalty to.
To our company.
My understanding is not every one of our peers has done that and in fact, we know specifically other peer that has paid zero, although leading mutual bonuses last year. So.
That also has created some.
<unk> exited at some other.
Peer companies and we're benefiting from that as well so.
It's a it's a complex situation.
Wages are going up there is attrition and so on and so forth, but there are a lot of moving parts here, including competitive ones.
And we feel confident that we can address these issues.
Without changing anything in our guidance.
Thanks for your question.
Yes.
Your next question comes from the line of Jon <unk> from UBS. Your line is open. Please ask your question.
Hi, Thanks for taking my questions I was wondering if you could just talk a little bit on the real world evidence business growth in the quarter and is.
Is it still going to be a double digit grower. This year, even if maybe some of the COVID-19 work going away throughout the year.
Okay.
Real World evidence, we saw strong growth you saw in towers in general organic constant currency revenue growth. Excluding <unk> was just over 10% in aggregate and the high growth segments. As you point out our real world evidence and of course as you all know commercial tech, which continued to be strong drivers.
Growth.
And I gave several examples specific client examples of how in the commercial world in the technology space and real World evidence, we are utilizing our unique capabilities.
So.
Real World evidence.
Is.
Do you disclose the numbers here or not I mean, if I could.
I'd say it continues to be a high teen.
The growth driver, excluding any COVID-19 impact.
The numbers, we've been giving for a railroad have excluded that from the beginning so that business has been consistently in the high to upper teen growth rates.
We see that continuing exactly John we see that continuing to your last question good outlook.
We expected a step down in revenue in which we've been talking about for a while now.
We've always said during the height of the pandemic.
That.
And that's true for real World is truthful commercial and certainly it's extremely true for the <unk> business.
Colby the work essentially crowded.
Out the rest of the business because our clients understandably refocused their dollars.
Kobe, whether it's vaccines or therapeutics or what have you while the commercial side Gulf.
Government work to track and monitor COVID-19 patients et cetera, and they turn to US as you know we had a very strong share of that market appropriately.
And the concern is that some of you had expressed at the time as well one that goes away then what happens well. We told you at the time when that would go away the base business would come back because we knew that there were a lot of projects that were had been essentially put on hold and that there was a lot of pent up demand that needed to.
The address and that's exactly what is happening exactly what has happened now.
That is true and real world evidence is true on the commercial side and it is true certainly in R&D, yes.
Thank you.
I appreciate the color there and then just maybe one follow up as youre approaching around that three five times levered any thoughts on M&A and what areas are potential.
Type of businesses would you be looking at if there were to be built.
Well look.
We.
<unk> always said.
We gave guidance we were done and thats been consistent by the way you can look at our record is between one and two points of the of our.
Our revenue top line growth over the long term has been supplementing our organic growth we make acquisitions.
In our core businesses, when they are strategic and add capabilities.
Allow us to enter adjacent markets, where we think we can add value.
We have walked away, we do walk away from I want to say 90 plus percent of the companies we look at in the market.
We always felt valuations were very frothy and we did not.
But wanted to.
Despite the rate environment and so on we did not want.
To pay for assets more than what they were worth and unfortunately for those we did you know find yourself in an environment with valuations I've taken a beating and now you've got a lot of private equity owned businesses that are very attractive that we would like to buy but the entry points for those.
Current owners at the time the acquisition was very high and.
And so I just don't know how that it's going to take time.
And because of that I am suggesting that.
We are going to if we were always cautious we are going to continue to be cautious now having said that we will step up to the plate when the acquisition is extremely attractive.
Extremely accretive.
To our operations in our financials and.
We've done that in the quarter actually we bought Cigna.
Significant lab business, which was very attractive and I believe that's the bulk of our acquisition spend.
Yes.
And we liked very much the lab business as we discussed before these are very strong and necessary capabilities in all our business has been doing spectacular.
We obviously, we look at <unk> when they come up but again those are the valuation premiums on those assets have been out of reach for us.
On the commercial side, we have bulk technology companies and we will continue to look at the digital space.
We've got as you know a.
Strong interest in growing and continue to grow on the commercial side.
The commercial side is becoming increasingly sophisticated.
The.
Go to.
Market strategies of our clients, becoming a lot more.
A key to how.
Roger.
<unk> oriented businesses look at the world with the much better.
We see what you see with our Oce suite.
OC ecosystem does with a lot of embedded intelligence.
It is no longer we're not talking about the simple.
<unk> point solution.
As is the case for most of the competition.
Our system is that it is an ongoing.
Ongoing alive.
<unk>.
We with the sophisticated AI analytics.
That enable the users to make decisions.
On a timely basis with respect to targeting the right customer at the right time with the right message.
And.
And so anything that complements our advances our position in the U S digital.
And European digital commercial spaces, where it's most advanced.
We will look at and we would be.
<unk> enough.
Two to enter those spaces and complement our capabilities. So that's what it should do.
I'll just give you my overall.
<unk>.
Panorama here in terms of acquisitions.
Thanks for taking the questions.
Your next question comes from the lineup look sorry from Barclays. Your line is open. Please ask your question.
Good morning, and thanks for the question here just a couple of cleanups on the co would step down into Q2 reminders I might've missed this one can you remind us what you guys did in <unk> last year.
And by the segments, just so we have an idea how that paces out.
But we had a combination of projects in the tag segment, you'll recall, we did a lot of government work, which is stepping down as we go through this year and the R&D segment, we were working on some Mega Codeine Covid vaccine studies and safety monitoring work.
Also therapeutics, but we were involved in hundreds of different COVID-19 related projects. So.
Are you asking what.
Type of work, we're doing or.
Adjusted revenue numbers I'm, just trying to get at.
Don't know if I missed the numbers.
The numbers I told you it was.
We did about $375 million and now Youre talking in Q2 or Q1 now Q to Q2 of last year I'm, just trying to get a sense of the step down.
Hi.
And you can infer from the numbers. We gave you on the conference call. What Q1 was last year, which was over $550 million in Q2 with slightly larger than that last year.
Helpful.
Exactly that's exactly what I was looking for all right.
So and that's something here a little more strategic as you think about it. So I mean when are you. When you guys came on.
After the merger you started going after.
Fat tails of biotech right and going after all the bookings and so now when youre getting up to record booking levels. One nine plus are you guys at capacity of what your business can handle.
And I guess, it's more of a sense of it I understand it's hard just to add additional bodies given the tight labor market. So give us a sense of the type of work Youre now taking on how that's changed.
And if we should expect the overall bookings to continue to climb or if this is kind of.
Peak at your capacity right now.
Well first of all I.
Capacity is always good.
Is people driven in this business as you know, but I would say.
If anything says when he sees the merger.
Our ability to take on more work with the same amount of people has increased significantly.
Because of our decentralized critical I think.
Ah trials capabilities.
The increase in technology content.
In data analytics.
In.
<unk>.
Process improvements that we've done since the merger is really dramatic so our ability to take on more work.
With the same amount of people is significantly enhanced so I don't see frankly us the triangle we work.
Because somehow we don't have the capacity, we just don't do that.
Again with the minor exception.
As before.
Hi.
Introductory comments.
For pre commercial evep's debt, knocking at our door for assistance.
And then in that don't qualify based on a rigorous vetting process.
But with that minor exception, we are able willing and eager to take on any and all the work. So certainly I hope we can give you.
Assuming the underlying dynamics of the market continued to grow.
Which is I think a very very valid assumption in <unk>.
Completely.
A conservative expectation.
And assuming that we continue to gain market share, which is also is that you could see that.
<unk>.
You should expect our bookings to continue to grow over the long term no question about it.
Alright, great. Thanks.
Thank you.
Your next question comes from the line of Patrick Donnelly from Citi. Your line is open. Please ask your question.
Hey, guys. Thanks for taking the questions.
Ari I just wanted to circle back on AVP really helpful commentary during the during the script I mean, it sounds like even if you did see some softening in your business is diversified enough, where the impact would be pretty negligible, but to date haven't seen anything and just a cleanup I guess why you wouldn't be seeing it versus some competitors like one yesterday, who called it out.
Is that coming down to your vetting process Youre, maybe not taking on higher risk trials that others are do you think it comes down to kind of that process internally.
Look I don't know I don't want to speak for other competitors I, obviously people in the industry No. We'll have knowledge of what their peers focus on in terms of market segments.
Look from.
The beginning of this merger, we said we were going to be a lot more thorough in terms of what gets into our backlog.
If you'll recall we switched from a.
Awarded business quarter in quarter, two contracted business.
We became a lot more rigorous in terms of.
The specific booking analytics I mean again.
Got it.
I certainly hope we never ever you hear from US God forbid that we are making an adjustment to our bookings because we are the.
Some kind of has some meteorite came from the the Cosmos and.
Our backlog, we you haven't heard that from us quite the opposite.
And so.
We tell you what the numbers are and those numbers are.
Thoroughly and rigorously.
Scrubbed.
I repeat we are not going to take you know there are many believe me there are many clients that coal companies a call or venture VC firms or.
There's a lot of there's a lot of biotech stuff all over the world.
High hopes.
And they'd love to.
To have us help them and support them.
And sometimes even wanted to leverage the fact that they are supported by a cute here in order to raise the money.
We just don't do that.
That's not our business.
There could be.
It is often the case that the EVP at a very early stage with one molecule and high hopes.
And a nice looking management team.
Go around raising money and they.
Come in with.
<unk>.
At least a an assertion that there is a.
See our own already involved in that has vetted there the scientific basis et cetera, and the more credible to CLO the better chances they have of raising money now we don't do that.
Simple.
Others do so.
There are significant differences between how we bid.
<unk> business someone asked earlier about capacity and I said this is not going to be a capacity issue for us, but look it's not like we are desperate for business. We have business. So we're not going to take on anyway. So I think that may be one difference and there is a certain market segment focus my job and the other comment yes. Thanks I was just just to build on <unk> comments.
In addition to the vetting on both a financial and scientific basis.
The nature of work that we typically take in is in the later stage clinical.
Its timeframe, whereby there's a lot more I think historical data versus whether youre dealing in <unk>, mainly in the preclinical our first in human space. So I think that's another benefit to the terminals that are.
Very important.
Yes, that's really helpful. Appreciate it.
Chris comment frankly was the right one which is it's a very small part.
Of our overall business our company right understood and then just a quick one on the pricing environment. What are you seeing there I know that's a concern as biotech falls off maybe pricing softens. It sounds like you guys still have a nice power there and on the back of that any delay in terms of getting reimbursed on some of the shifting trials in Russia, Ukraine just wondering.
As you put in a change order is there near term margin pressure that that alleviates as you go through the year and get reimbursed just trying to figure that piece out as well. Thank you, yes, yes of course, but again, it's a small small piece of the overall and we observe we are absorbing that cost.
So we haven't changed our profit.
Outlook and and we don't plan to do that for now there's no reason to do that we can absorb it we have enough initiatives. We are large enough diversified enough that we can handle.
The Russia, Ukraine situation and disruption of our clinical trials.
So long as it.
That's what that's done it is what it is now.
Okay. Thanks.
Thank you Patrick.
Thank you all for joining US today, we look forward to speaking to you again on our next earnings call.
Myself and the team will be available for the rest of the day for any follow up questions. So feel.
Feel free to reach out and look forward to talking to everyone again soon thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Yes.
Okay.
<unk>.
Sure.
Okay.
Yeah.
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Sure.
Yes.
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Yes.
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