Q2 2022 IQVIA Holdings Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the IQ V. I, a second quarter 2022 earnings conference call.
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The Speakers' remarks, there'll be a question answer session.
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Ill.
I'd now like to turn the call over to Nick Childs Senior Vice President Investor Relations and corporate Communications. Mr. Kelly You May begin your conference.
Thank you.
Good morning, everyone. Thank you for joining our second quarter 2022.
Our earnings call with me today are.
Our E boosting chairman and Chief Executive Officer, Rob Romaine, Executive Vice President and Chief Financial Officer.
Eric Sherbet Executive Vice President and General Counsel, Mike feedback Senior Vice President financial planning and analysis, and Brian Stangl Associate Director Investor Relations.
Today, we will be referencing a presentation and then we'd 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, IR IQ via Dot com.
Hi.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call will include forward looking statements 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 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.
Reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.
Okay.
I would now like to turn the call over to our chairman and CEO .
Ari Lucy.
Yes.
Thank you Nick and good morning, everyone. Thank you for joining us today.
To discuss our second quarter results.
IQ Yeah delivered strong financial results this quarter.
Despite the dynamics of the broader macro environment and the various global and geopolitical issues.
Let me address a few of the Q1s. Some of you have continued to ask about the impact of biotech funding.
The CLO industry.
As we have said on several occasions. The recent decline in biotech funding has not had any significant impact on our business.
Our exposure to pre commercial EVP remains at just over 10% of our backlog.
We have not seen an impact on bookings or.
Our rfps, nor any increase in cancellations or delays in clinical trial work from the slowdown in biotech funding.
Actually RFP dollars from the overall EVP client segment continued to grow double digits in the quarter.
In China, the government imposed Covid Lockdown had a modest impact on our second quarter results, mostly from disruptions to our clinical and laboratory operations.
Our commercial business was virtually unaffected.
Our experience in managing through prior locked down during the pandemic has been helpful.
In minimizing the operational impact from site closures.
Our guidance assumes that.
Modest impacts from Covid related Lockdowns in China will continue through the end of the third quarter.
Ukraine, we continue to work with sites and sponsors to ensure the safety of our employees and patients.
While working to mitigate trial disruptions caused by the ongoing crisis.
In Russia.
We continue to conduct trials currently underway.
To ensure the safety of patients already enrolled in clinical trials.
But we are moving our recruitment on new trials to other countries.
The financial impact of the Russia, Ukraine crisis are tracking in line with the expectations, we communicated back in April .
More generally we are of course monitoring.
You the possibility of a recession.
I would just note that over the past 20 years IQ of yet.
Along with the broader CLO industry.
Has shown resilience to economic downturns.
During recessionary times over the past two decades.
Annual S&P 500 revenue contracted by as much as 10%.
While <unk> clinical business and the CRO industry as a whole never experienced a year of revenue decline.
The resilience of the CRO industry likely reflects the long cycle nature of our business.
As well as of course, the mission critical importance of critical research and more generally the defensive nature of healthcare.
With that as background, let's review the second quarter.
Revenue for the second quarter grew 3% on a reported basis and seven 1% at constant currency.
The $46 million beat above the midpoint of our guidance range was primarily driven by the timing of pass through revenues versus our expectations.
As well as some operational upside.
Compared to last year, and excluding Covid related work from both periods our base businesses grew 16% at constant currency on an organic basis.
Ron will provide additional detail in his remarks, including <unk> adjusted numbers for each of our segments.
Second quarter, adjusted EBITDA increased 10, 8%, reflecting our strong revenue growth.
And ongoing cost management discipline.
Second quarter adjusted diluted EPS of $2 44.
Grew 14, 6%.
Or even entirely by our adjusted EBITDA growth.
Let me provide some more update and color on the business in the quarter.
The continued strong performance IQ.
It is driven by our highly differentiated capabilities.
As you know the key differentiator for us in the clinical and commercial spaces.
Is <unk>, yes connected intelligence.
Let me give you a few examples of how IQ guys applications here.
Our clients solve their most complex problems.
<unk> AI driven next best action platform helps our clients integrate multiple data sources.
Transforming raw data into personalized recommendations to sales marketing and medical personnel, which of course leads to deeper relationships with health care providers in.
In the quarter.
<unk> pharma client chose <unk> <unk> solution to completely transform their omnichannel commercial engagement model and to improve their go to market efficiency across multiple brands in eight countries by up to 30%.
Another example in the quarter, we were selected by a top 20 pharma client to optimize the delivery of brand content directly to health care providers for one of their respiratory brands.
Our solution here connect digital and field sales channels to deliver highly personalized content that results in high quality.
Emulous brand experience for health care providers.
This will improve this client's digital engagement metrics like three five times.
Another area, where demand has been growing is pharmacovigilance.
Platform here combines unique catalog of over 500000 safety specific terms and patterns with natural language processing to mine vast amounts of online data.
To identify potential adverse events.
In the quarter another top 10 pharma clients selected our solution to reduce the risk of noncompliance and to increase data accuracy.
Seemingly improving their efficiency by up to 75%.
Beyond large pharma or commercial solutions are also resonating with EVP clients, especially when they decided to commercialize their assets on their own following approval.
For example in the quarter, we contracted with a leading EVP clients to implement and manage their entire end to end commercial information management and to support their patient engagement and access programs.
This includes data provisioning master data management and data modeling.
Our ability to offer these services on a fully integrated platform will allow for a more streamlined implementation generating savings of up to 20%.
<unk> multi vendor solutions.
As you know.
<unk> continues to be the global leader in real World evidence.
In the quarter, a top 10 pharma awarded it major.
Project and medical Affairs.
The project Leverages, our AI and ml capabilities to provide near real time disease insights across five different therapeutic areas.
Insights will help identify misdiagnosis and suboptimal treatment, which will in turn improve patient outcomes.
As you know.
Our eco or electronic clinical outcome assessment platform has.
<unk> won multiple awards for its breakthrough patient engagements innovations.
The product includes a library of over 1500 pre built clinical outcome assessments, which enables sponsors to deploy assessments to patients up to 14 weeks sooner than competitors' offerings.
This efficient efficiency.
<unk> risks to study startup timelines and allows our clients to capture more feedback on patients.
Similarly, amplifying the patient voice real time.
The top five sponsor recently engaged IQ via to couple this equal our platform with our patient randomization tool. So.
So that we eliminate redundant workflows improve data accuracy and patient compliance, thereby reducing site onboarding activities.
An estimated 50%.
Finally.
In the overall R&D is business, we continued our strong momentum delivering over two $6 billion of total net new business in the quarter, including pass throughs. This.
Services bookings also.
<unk>.
Historic High we have seen recently.
Over one $9 billion.
This resulted in the second quarter contracted net book to Bill ratio of 134, including pass throughs and 132, excluding pass throughs over the last 12 months, our contracted net book to Bill ratio was 132.
Both including and excluding pass throughs.
As you can see there continues to be strong positive momentum across the business.
And an unprecedented level of engagement with our clients across our portfolio of commercial and clinical businesses.
Despite the broader environment.
I will now turn it over to Ron for more details on our financial performance. Thanks, Ari and good morning, everyone.
Let's start by reviewing revenue.
Second quarter revenue of $3 billion $541 million grew 3% on a reported basis and seven 1% at constant currency.
In the quarter Covid related revenues were approximately $250 million, which was down about $300 million versus the second quarter of 2021.
And our base business that is excluding all COVID-19 related work from both this year and last organic growth at constant currency was 16%.
Technology and analytics solutions revenue for the second quarter was $1 billion and $408 million up four 1% reported a nine 4% in constant currency.
Now, excluding all Covid related work organic growth at constant currency and Taz.
10%.
Research and development solutions second quarter revenue of $1 billion $950 million was up three 1% reported and 6% at constant currency and excluding all COVID-19 related work organic growth at constant currency and R&D was 22%.
Contract sales <unk> medical solutions, or CSM that second quarter revenue of $183 million declined five seven.
7% reported but grew two 1% at constant currency <unk>.
Excluding all COVID-19 related work organic growth at constant currency and CSN that was 7%.
First half revenue of $7.109 billion grew three 8% on a reported basis and six 9% at constant currency.
And our base business that is excluding all COVID-19 related work organic growth at constant currency for the first half was 14%.
Technology and analytics solutions revenue for the first half was $2 $847 million up five 4% reported and nine 6% at constant currency.
<unk>, all COVID-19 related work organic growth at constant currency and Taz.
With 10% for the first half R&D.
R&D solutions first half revenue of $3 billion $884 million was up three 3% at actual FX rates and five 3% at constant currency.
Excluding all Covid related work organic growth at constant currency and R&D was 19% and finally, our contract sales <unk> medical solutions. Our CSM. That's first half revenue of $378 million declined two 3% reported.
And grew three 9% at constant currency, excluding all COVID-19 related work organic growth in constant currency in CSM that.
With 6%.
Now, let's move down the P&L, our adjusted EBITDA in the quarter was $800 million representing growth of 10, 8%, while first half adjusted EBITDA was $1 $612 million up 10% year over year.
Second quarter GAAP net income was $256 million and GAAP diluted earnings per share was $1 34.
For the first half we had GAAP net income of $581 million.
Or $3 <unk> of earnings per diluted share.
Adjusted net income was $466 million for the second quarter and adjusted diluted earnings per share grew 14, 6% to $2 44.
For the first half adjusted net income was $943 million or $4 91.
Sure.
Alex already highlighted R&D solutions delivered yet another strong quarter of new business.
This graph that we're showing here shows the growth of our backlog over the past few years at actual currency rates and.
And it demonstrates the sustained strength of our clinical business through the Covid pandemic now.
Now you'll recall that as our bookings reached record levels during the pandemic.
Many of you expressed concerned about a looming that so called Calvert cliffs.
And we told you then that are COVID-19 related bookings would be replaced by new programs that span the breadth of our therapeutic area expertise and in fact, that's what happened.
As of June 30, our contracted backlog stands at a record $25 $6 billion, including pass throughs.
That's a 50% increase over about three years.
The COVID-19 contribution to our backlog, which peaked at 11% ROE in 2021, it's now approximately 6%.
Okay, let's turn to the balance sheet as of June 30, cash and cash equivalents totaled $1.428 billion and gross debt was $12 billion $767 million.
Resulting in net debt of $11 $339 million.
Our net leverage ratio as of June 30 was $3 five eight times trailing 12 month adjusted EBITDA.
Second quarter cash flow from operations was $329 million and Capex was $161 million.
<unk> and free cash flow of $168 million for the quarter. Now this was somewhat lower than prior quarters and it mainly reflected the timing of cash collections, which we expect to normalize in the second half.
You saw in the quarter that we are quite active in the market repurchasing $590 million of our shares and this puts our year to date share repurchase activity at just shy of $1 billion.
This leaves us with slightly over $1 5 billion of share repurchase authorization remaining under the current program.
Yeah.
Okay moving to guidance, our full year 2022 revenue expectation at constant currency remains unchanged.
On a reported basis that strengthening of the dollar since April has caused an incremental full year revenue headwind from foreign currency.
Inflation of approximately $125 million based on rates as of.
This Monday July 18th.
We're updating our revenue guidance to reflect this.
For the full year, we now expect revenue to be between $14.400 billion in.
<unk> $14.550 billion.
Which represents year over year growth of seven 4% to eight 5% at constant currency and three 8% to four 9% at actual FX rates.
Now as a reminder, this equates to low to mid teens organic growth at constant currency, excluding COVID-19 related work.
Our projected revenue growth includes just over 150 basis points of contribution from M&A.
Okay.
Since FX fluctuations.
It had a minimal impact on our profit our adjusted EBITDA guidance remains unchanged, we are tightening the guidance range to be.
Clean $3.345 billion and $3 billion $395 million.
Which represents year over year growth of 10, 7% to 12, 3%.
And our adjusted diluted EPS guidance also remains unchanged, we are tightening the range here to between $10 and $10 20.
Which translates to year over year growth of 10, 7% to 13%.
Our full year 2022 guidance assumes that foreign currency rates as of July 18 continue for the balance of the year.
Since issuing our initial guidance at our analyst and Investor Conference in November FX fluctuations had caused full year revenue headwind of over $400 million.
Moving to our third quarter guidance.
We expect revenue to be between $3 billion $515 million and $3 billion $565 million or growth of eight 4% to nine 8% on a constant currency basis, and three 7% to five 1% on a reported basis, excluding covered related work, we expect organic revenue growth at constant currency.
In the low to mid teens in the third quarter.
Adjusted EBITDA is expected to be.
Be between $805 million and $820 million up 10, 6%.
12, 6% and adjusted diluted EPS is expected to be between $2 34, and $2 42, growing seven 8% to 11, 5%.
So to summarize we delivered a very strong second quarter our base business.
Delivered mid teens organic growth at constant currency, excluding COVID-19 related work, our R&D business had another strong bookings quarter with over $2 6 billion of net new business.
Contracted backlog backlog at the end of the quarter.
Is it a new record of $25 $6 billion up over 7% year over year, we repurchased nearly $600 million of our shares while maintaining our net leverage ratio of approximately three six times trailing 12 month adjusted EBITDA and finally, we adjusted our revenue guidance to reflect changes in foreign <unk>.
Exchange, but held our earnings guidance unchanged.
And with that let me turn it back over to our operator for Q&A.
Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. We request that you. Please limit yourself to just one question so that others in the queue may participate as well, we'll pause for just a moment to compile the Q&A roster.
Our first question comes from Sandy Draper from Guggenheim. Please go ahead. Your line is open.
Thanks, very much and congratulations on a solid quarter in a tough environment.
Actually going to let other people ask about R&D solutions I'm sure there'll be a lot of questions. There, but my question Ron is on the cost side as well.
Sure.
Out of Covid, but certainly getting further past that and sort of trying to act in a more normal way.
These are buying patterns are what people are focused on changed. It also was there sort of a certain focus during COVID-19 up. These are short term tech solutions, we need because trials are being shut down or whatever it is we can we can't get salespeople into doctors' offices.
Coming out is that the general trends persisting or are you seeing any shift and refocus on new areas on the tech side.
Yes, Thank you Sandy and good morning to you.
Again, not a stop answering your question by saying there is absolutely none of.
Those concerns we haven't seen any of that.
We're very pleased with the continued growth of our business really across the board and you know that.
We like to think of our business in three buckets, the high growth ones, which is real world.
And technology.
And that represents.
Mike we're going to say what about 40%.
5% of the total.
And Thats experiencing continued growth hasn't abated during COVID-19 at all.
And it continues to sell through to sell through at the same pace.
And then we have the.
<unk>.
Kind of labor based consulting primary market research analytics business, which grows mid to high single digits and Thats been very strong through Covid and continues to be strong essentially other St business, that's about 5% or so 25% <unk>.
Similarly.
The last the balance the 30% is basically our historic IMS data business, and Thats kind of flattish to up to 102%.
Quarter in quarter out and it also has been essentially.
Flat.
In terms of.
It's growth and through the Covid crisis. So.
As Ron mentioned constant organic constant currency revenue growth.
<unk>, excluding <unk> was 10% in the quarter and also 10% for the first half. So again, the really we're not seeing anything at all that's changed versus the depend any peak.
Before the pandemic continued strong momentum thank you sandy.
Our next question comes from Eric Coldwell from Baird. Please go ahead. Your line is open.
Thank you good morning, I wanted to hit on capital structure.
The comments obvious comments about looking at the potential for a recession rising interest rates et cetera.
Number of companies have changed their capital allocation and capital structure strategies I am curious if you could talk about what youre doing on those fronts maybe.
Maybe discuss any terms maturities or issues with.
The various fixation instruments you have on your variable rate debt.
I do believe that the majority of your debt is effectively fixed at this point.
And then what is embedded in your interest rate assumptions for the year.
And how much has 22 guidance in total have been impacted from your first guidance to current guidance in relation to the interest rate increases that we've seen so far I know thats a lot but.
No.
You I wouldn't expect less from you Eric.
That's one question that you managed to pack 10 questions in one so no.
I think it's still obviously a diagnosis comments right.
It's a topical question, obviously and you can imagine we are looking.
The broader environment the rates you saw the ECB.
Bump.
50 basis points this morning.
And we do have some euro debt as you know.
Obviously look those points.
At which those changes cross certain thresholds and.
Does have an impact on our.
The capital structure, and we are modeling all of those and making different scenarios as to how we would change or not our capital allocation strategy.
Now it remains what it was I'm going to ask wrong.
To give you more detail and address the specifics of your question.
Yeah, Eric to your specific question I think you asked about.
R R.
In essence about whether our debt and how much of our debt is fixed rate versus variable rate. So how much is affected going forward and.
I know this is of interest to that group and any of that about 45% of our debt is fixed rate just shy of 60% is fixed with swaps.
We did have a euro four that fixed even more of our debt up until recently that we're about at the floor now with the recent ECB decision so of the up to today was like.
775, <unk>, 75% fixed but going forward it'll be more like just shy of 60% fixed.
And you had asked about what is our guidance assume and we pretty much follow what the market consensus is there of that in the U S. About assuming a couple of 75 basis point increases in the U S in July and September .
25 basis point increases in the fourth quarter, two two times and for the Euro we have a series of increases smaller increases assumed out through.
The balance of the year totaling.
Over just slightly over 100 basis points baked into our numbers and that's pretty much in line with the market consensus right. Now now you asked also about.
How much has.
Interest expense the increase in rates affected our interest expense assumptions.
Since November I guess, when we put our initial guidance out I'll have to go back and look at that it's obviously had an impact not so much in the first half of the year.
But more in the second half of the year obviously.
The rate increases or the pace of rate increases has been kind of backend loaded in the year, but we'll have to come back with an answer to that Nick has it handy.
Yes.
Right now, we're thinking it's somewhere between $50 million to $75 million of that we're seeing on interest.
But you've seen that we've been able to hold the EPS number. So we've had some some favorability in terms of our assumptions on share count and all of that below the line that kind of helps us manage that a little bit better.
Our next question comes from Elizabeth Anderson from Evercore. Please go ahead. Your line is open.
Hi, guys. Thanks, so much for the question.
Yeah.
Maybe maybe take Erickson have a combined combo.
If you could talk about the assumptions regarding China, specifically in your embedded in your <unk> guidance and then four.
Looking at the guidance that you gave for <unk> it implies.
Nice EBITDA step up in the fourth quarter and you guys. Obviously did a nice job managing the SG&A line in particular this quarter. So I just wanted to understand there. If there was something specific to call out that was driving sort of that step up in EBITDA there.
Or what the explanation there.
Well, thanks to news of it.
These are two very distinct questions. So let me just and just towards.
The second one.
Fourth quarter look.
Fourth quarter.
There is some level of seasonality in our business historically has always been the case, both on the commercial side and on the clinical side and the fourth quarter traditionally is always the strongest one.
You are specifically alluding to EBITDA and I would point that if you go back and look in general our margins.
In the fourth quarter are higher.
Then, let's say sequentially the third quarter for example.
And in general it's about a point higher.
A little less than that maybe a little bit more than that depending on the years.
And that is because on the commercial side, it's the end of the year.
A lot of the budge tends to be spent and a lot of purchases get done last minute.
And obviously, both our clients want to do that before the growth of the year and our sales force pushes always to make the quarter and so on and so forth for more.
Sales at the end of the quarter ends at the end of the year. So there's that kind of momentum on the commercial side, whether it's data analytics or or just across the board on our commercial portfolio.
On the so that's always the case year in year out and this year, it's true moves a little bit stronger than might have been the case in prior years, but he is not inconsistent.
On the clinical side.
It's all driven by the execution of the backlog and when and how it converts so that's really.
We do a roll up of project by project of when we anticipate the work will be done in.
Cost incurred and revenue recognized.
And we do that bottom up and Thats, where it comes out.
In general fourth quarter tends to be stronger in the clinical side as well historically.
And that is probably because people wanted to try to raise that you do it before the end of the works.
So with that again not unusual I agree that's sequentially more.
More than prior years, but again nothing inconsistent.
The wrong you want to yes, just to answer your question on China.
The impact there, but modest impact in Q2, we're assuming the continued modest impact in Q3, mainly around our lab business in clinical trials is not all the sites are open in areas, where theres shutdowns or restrictions. The only caution I would say there is just that none of us knows exactly what's going to happen in <unk>.
Where future lockdowns might happen and so forth, but right now we're not expecting a big impact yes.
China very mind, it's less than 3% of our total revenue.
We have a strong presence there relative to our competitors, we are doing very well.
On the clinical side is where the impact is remember on the commercial side, we are exactly zero impact from the Lockdowns that was the case during the pandemic as of <unk> and it continues to be the case today.
On the political side, obviously, the issues accessing sites and when its closed its closed.
But we have rooms during the pandemic how to work with us than to remote visits et cetera.
And so far at least the impact.
From China log downs, which have been extensive as you know in.
Hi, Tien tsin and some other areas.
We have been able to manage through that and whatever financial impact was essentially absorbed.
In our numbers.
Thank you Elizabeth.
Our next question comes from Derik de Bruin from Bank of America. Please go ahead. Your line is open.
Hi, Good morning, and thank you for taking my question.
I've gotten a bunch of questions from investors and along the lines of I think people appreciate that our DNS business was very resilient during.
In the past recessions.
Absolutely right I mean, having done the Quintiles IPO I remember the growth rates back then.
I think the questions I've gotten some on the Tas business and just sort of like how that goes particularly on the consulting side of the business.
And any sort of potential impacts from a recession there. Thank you.
Yes.
Well. Thank you for your question Luke.
The the resilience that's all views on the clinical side then.
<unk>.
Born by the Easter real long term Easter as I mentioned in my introductory remarks on the commercial side you are correct. I mean, I guess you pointed to consulting because consulting is.
Usually the most discretionary type of spend that our clients.
So far not one.
I would say that's one noise not one.
Nothing we are looking I am asking every day.
Click on the business in every aspect.
And I can tell you there is no indication whatsoever that somehow people are curtailing their budgets on the commercial side bear in mind, the last big recession, we had along with the housing crisis in the end of the two.
2008 910.
The commercial business was affected really by different factors that were very large pharma consolidations and on the commercial side. When you have a large pharma merger. While you go from two clients to one client.
Domestic <unk> revenues not so much on the clinical side generally if you are in.
Pharma companies that emerge are in the same therapy.
The.
Our priorities once let you merge.
And generally.
The thought when pharma emerge they have complementary therapies and clinical trials continue.
So yes, there are those large that's pharma consolidation wave that took place at the time, but a lot of it driven by tax considerations.
Affected our commercial business, we are not seeing any of that.
So far.
Secondly.
There was a unique phenomena than which was that there was a bit unusual.
Large number of patent Expiries and those eloise were sort of accelerating into 2008 to 2012 timeframe.
The so called patent cliffs and that was coupled with an unusually low.
A number of.
New product approvals.
And in the pharma commercial business is largely driven by the net of new approvals.
<unk> XR loss of exclusivity.
And.
Usually that's a net positive.
And at that time, there were there were these unusual circumstances, where we have the trough in new approvals and a peak in.
The loss of exclusivity and that was a reverse shrink but today, we don't see that we know the pipeline we know the molecules in the <unk>.
Supposed to be approved and the expire reasons, so on and we see none of that anytime soon so we're not concerned and we feel that the commercial business is fairly well insulated as well.
Thank you.
Our next question comes from David Windley from Jefferies. Please go ahead. Your line is open.
Hi, Thanks, Good morning, Thanks for taking my question.
You've touched on China, and Ukraine, very effectively you see the R&D business seems to be navigating through that really really well some of the things that we've heard.
Our that in addition to those acute issues in certain parts of the world that we have.
General staff burn out like we have in the broader health care system that sites are overwhelmed and site level turnover and things like that are affecting.
The capacity of the site.
At work that you might be using I wondered if you know again, you guys seem to be navigating that really well and so I wondered if you could talk to how you are supporting.
The sites to be able to continue to get your trials processed.
In an environment, where the global capacity for sites are somewhat affected.
Yes.
Mean globally, not just Russia, Ukraine, Russia.
Russia Ukraine.
First part of your question, we address that as you said quite effectively that doesn't mean that it was easy or that it didn't consume an enormous amount of.
Management attention and.
And the work.
But thankfully, we're able to reallocate resources and end to end clinical work to other sites now.
This itself does not add incrementally to the existing burden off of the existing size. Your second point you don't use more.
I think he is extremely valid it is true we have.
A lot of work to execute I've mentioned many times that this is our single most important.
Operational challenge that is execution and that requires people and people.
Our recruiting retention.
And development is our single most important operational and challenge in the current environment.
I think I've mentioned before and I see the trend continuing though high attrition levels, we've seen them all somewhat plateauing and diminishing that may have something to do with perhaps a more recessionary environment and people are less likely to jump ship also may have to do with the fact that we really have a strong book of business and we.
Our.
Hopefully I want to I want to believe or more exciting work environment that warrants I think company to be part of so we're doing our part to try to retain our people the sites themselves.
We are not seeing I mean, I am sure. If you ask specific individuals so yes burnt out.
Asking people to work more.
More and more productive and so on yes, but again, that's just the nature.
All.
Of the.
The type of work that we do we are not seeing any.
Execution difficulties as a result, our Q4 being quote unquote burnt out we're not we when people have grown out of the adequate.
Or are they asked to be allocated into something else and that's what we try to do.
We've always tried to prioritize.
The wellbeing of our employees in.
During the pandemic that has accelerated.
I think I may or may not have mentioned these before but even.
From my cellphone downwards, we've got we've had.
The dramatic change in tone and.
How we address.
Issues with employees, who work flexibility.
We do live in a different environment, where the.
The consideration for <unk>.
Employees are valued employees and skilled employees to remain in the company.
<unk> more than just work and compensation.
And so we are doing our part to.
To address that I mean, we will be <unk>.
90000, plus people by the end of the year.
And we continue to hire I mean this year, we will have hired by the end of the year more than 25000 people.
Just to replace attrition and to support the growth.
We are really.
Our hiring machine.
We've dramatically dramatically improve the level of sophistication.
Our human resource management.
Actions around the world.
The type of analytics and.
Artificial intelligence tools, we use to track.
Our employees.
Workload in our release.
Very unprecedented.
It is an issue we are managing it you wanted to add something Mike, Yes, I think Dave just on the color on the sites I think one thing we've seen is sites sites engaging with our on site support offering we have within Rds, so they're reaching out to us to try to assist them. So I'm not going to common stereotypes burned out or not but clearly they have a lot of <unk>.
Work to do and we're providing a service to help them execute that work which is great.
Okay.
Our next question comes from Jack Meehan from Nephron Research. Please go ahead. Your line is open.
Thank you good morning.
I was hoping you could share more perspective on the R&D environment, just given your RFP commentary.
Looking back we had two banner years of funding in 2020 in 2021 things have obviously slowed down here in the public markets in 2022.
You look at the things you are bidding on now do you have a sense for when they were funded I guess I'm just trying to get a sense for where you think we are kind of in its funding cycle and it's showing up.
For late stage work.
Okay, well, thank you and good morning.
This is.
Obviously, a good question again I mentioned before for the commercial side I do the same on the clinical side I am almost daily.
Asking a number of people to monitor activity.
Again, I wouldn't be saying this LIFO at a certain level of company that so far.
Late last night.
Can assure you there simply is no sign.
That.
The pipeline.
Very early indicators is slowing down.
The RFP volume is slowing down.
And this is across the board in every segment.
No.
The second quarter was another quarter.
Quarter of record bookings that can tell you I think the awards.
Volume was the second highest quarter ever.
So we just not seen it.
I know there are concerns any of these true.
Volume of funding.
<unk> has gone down it's just not translating into the slowdown in either.
The strength and growth of our pipeline has never has never been as large record.
Growth.
And volume both dollars and numbers.
Or.
The RFP volume or the awards or the bookings now.
You are asking a very very prescient question, which is.
No the clients, whether EVP midsize and large pharma who are.
They're requesting.
Proposals or.
We are in the pipeline.
What where do they get their funding and you are absolutely correct.
Takes maybe three years I'm going to say.
For the funding raised today is actually spent in is actually spent so.
A lot of work is going to be disbursed by these companies that have booked with whom we've booked business. This quarter is cash that was raised in prior periods. So.
You wanted to try to say well funding is low now and therefore two years three years from now.
Maybe bookings you can go down.
That's just not the experience historically.
Again our.
Our business is not dependent on secondary.
Public offerings from pre commercial.
EVP is is just not.
And secondly, a lot of things that are going to happen over the next few years.
Where.
That's the benefit of scale remember we are all over the world we have the largest.
<unk>.
Volume of business, so any CRO in the world, we are not exposed to one client to clients and clients segment, another segment or geography in other geography.
Any given point in time, we are working on well over 2500 trials.
We are a big ship and like every big shipments very hard we're not going to you're not going to see from us 50% growth in a quarter, but on the other hand.
The converse is also.
Never going to happen I mean, we are a very big shift.
And these disturbances in our long cycle businesses do not affect the direction of our business.
Other comments you want to make.
Thank you for the coverage is good.
Next question.
Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead. Your line is open.
Hi, This is Adam on for Shlomo what was the difference in FX headwind for 2022. The company is facing today versus what we're expecting on the first quarter earnings call.
It was $125 million of the FX headwind on revenue on a full year versus what we guided in April with guidance in the second half what is the question.
Yes, what was the FX headwind I understand so the FX headwind on our full year guidance of on road revenue 20.
$25 million.
About 90 basis points worse than last quarter.
Okay. Thank you.
Our next question comes from Teahouse Savant from Morgan Stanley . Please go ahead. Your line is open.
Hey, Good morning, just just a couple of quick follow ups here.
And then I apologize for beating the R&D backlog to <unk> again, but.
We've heard some estimates of up to a third of these pre commercial companies, possibly needing to raise capital at some point in 'twenty three does that sort of at the margin change your calculus at all in terms of who you choose to work with on a go forward basis or do you have perhaps higher risk adjustment in regards to your backlog.
Some of these companies get closer to meeting our funding raised and then if you could also comment separately on the M&A landscape.
And how you're sort of thinking about that I know last quarter, you had said sort of repo as being the near term priority, but just curious as to your take on on asset valuations.
Well, okay. Thank you very much and good morning.
Hello again.
Your question on the pre commercial EVP as needing more funding and having issues.
Good feel ethical question correct, one for the industry, we're just not exposed to those folks.
We have very little of our backlog that's in that's pre commercial EVP those pre commercial EVP have been carefully vetted because that's our process long predating.
The current decline in biotech funding.
We never take on a molecule that doesn't have a very solid science behind it that our scientific.
Experts.
<unk> and believe in that in and of itself is a guarantee that the science will be developed and that the clinical trials will go on independently of the funding because worst case scenario that science will be purchased by large pharma youre seeing today, you're seeing a number of.
Large pharma companies buying out pre commercial EVP, because those three commercial adp's, maybe running into funding issues, but the science is good. Therefore, the trial will continue no matter what so thats number one number two we are not going to take into our backlog.
Company that doesn't have funding.
It hasn't happened for us, we do a thorough financial vetting of the.
The project before we put into our backlog. So we want to have that exposure our business model is different than perhaps some other smaller.
Cro's that essentially team up with pre commercial EVP and go around to raise funding.
And they put that to good our backlog we don't do that so this is the reason why we're not seeing anything.
Different to again, neither the pipeline nor the.
RFP volume, nor the awards, nor the bookings again I've got to see a slew of numbers I'm looking at the very fine level of granularity year.
Look at oncology, if we look at our qualified pipeline, we choose that Judy Lou.
With a very very fine com oncology pipeline, we use there are lots of.
Pre commercial EVP and Thats Im.
<unk>.
Speaking about the qualified pipeline that's really really.
High probability.
In the quarter, 17%, one seven year over year, you look at internal medicine, where there's a lot of rare disease stock.
14% up to 45 pipeline you look at.
The pipeline in general for EVP.
Pipeline the pipeline is 18% up year over year in the quarter.
I am looking at numbers that are literally record numbers, both in growth and in dollars and in volumes. So I wouldn't be speaking confident reefer didn't have these numbers right tomorrow without wake up tomorrow and the world is falling apart I don't know, but thats.
<unk>.
If I believe that we can cross the street.
I'm looking at numbers the rest is.
You had another question.
What was the second question, David and our thoughts on it was on an M&A and just prioritizing vis vis request. Thank you Eric.
Yes, yes, M&A, what as you saw we purchased almost $1 billion in the first.
Yeah.
Half of the year and.
Sure.
Shares.
We did very little M&A, not because we didn't want to.
We at any given point in time, we've always had a lot I mean, I mean lots hundreds of potential acquisitions.
Small mid large and that's our job we know we've got.
Corporate development activities, we really execute on those.
Whether it's for strategic reasons or.
Or for financial reasons, sometimes as you said valuations have been a little bit out of whack you always takes time for those valuation expectations to come down and adjust to public market valuations and the environment I think we're seeing a little bit more of that so perhaps we will have more opera.
<unk> to execute.
In the second half I, just don't know acquisitions are binary.
But we don't have.
The acquisition makes sense it fits in our strategy.
And Theres nothing big here or out of whack with anything that we've done in the past you know what we do we're very disciplined.
And if it fits in our strategy on the commercial side or the clinical side. Then we'll go ahead and do it if the valuation makes sense. Thank you for your question.
Our last question will come from Jon <unk> from UBS. Please go ahead. Your line is open.
John <unk> here from UBS Your line is open.
Hi can you hear me.
Yes, yes, we can hear you great.
So I know, it's a little early to comment on the 23 guidance, but when you think about the headlines from biotech funding and then on the other hand, the company has $1 billion in Covid Rds headwinds this year potentially easing comps for next year do you think that the 23 Rds growth is going to be in line with that long term low double digit guidance that was provided last year at the Investor day.
Okay. Let me give you 23 guidance I was just kidding.
I don't know.
So a little bit early.
Yes.
We discussed over the course of the best our lives some macro dynamics and so on so forth, we're not going to.
South venturing there is basically nothing different today.
From what we told you.
At the end of last year.
And they are lying dynamics and fundamentals of our businesses strategically or operationally.
What's changed in the financial environment, and the dynamics of risk because of the Russia, Ukraine because of the energy prices and so on so forth.
But that doesn't affect as we said over and over again, the underlying dynamics and fundamentals of our business and as I sit here today. Those are the same as they were when we gave you long term guidance back in November .
Thank you for your question.
Yes.
Yes.
We are out of time for questions today, Mr. Charles I'll turn the call back over to you.
Okay. Thank you Erin for joining us today, we look forward to talking to you after the call and on our next call.
At the end of the third quarter.
So if anyone has any other follow up questions, we'll be happy to take them. Thank you all for joining.
This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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