Q4 2023 ICON PLC Earnings Call
To note that this call is webcast and that there are slides available to download on our website to accompany today's call.
Certain statements in today's call will be forward looking statements. These statements are based on management's current expectations and information currently available, including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business.
And listeners are cautioned that forward looking statements are not guarantees of future performance.
Forward looking statements are only as of the date. They are made and we do not undertake any obligation to update publicly any forward looking statements either as a result of new information future events or otherwise more information about the risks and uncertainties relating to these forward looking statements may be found in our SEC reports filed by the company, including the form 10.
As filed on February 24th 2023.
Good day, and thank you for standing by and welcome to the icon Q4, and full year 2023 earnings conference call.
This presentation includes selected non-GAAP financial measures, which Steve and Brendan will be referencing in their prepared remarks for our presentation of the most directly comparable GAAP financial measures. Please refer to the press release section titled condensed consolidated statements of operations.
At this time all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one and one on your telephone you will then have an automated message advising Johann just raised.
All non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures. We believe certain non-GAAP information is more useful to investors for historical comparison purposes.
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Please be advised that today's conference is being recorded.
Included in the press release and the earnings slides, you'll note a reconciliation of non-GAAP measures adjusted EBITDA adjusted net income and adjusted diluted earnings per share excludes stock compensation expense restructuring costs foreign currency gains and losses amortization and transaction related and integration related costs in their respective tax benefits.
I'd like to hand, the conference over to your first speaker today Kate Haven. Please go ahead.
Kate Haven: Good day and thank you for joining us on this call covering the quarter and full year ended December 31, 2023 also on the call today, we have our CEO, Dr. Steve Cutler and our CFO, Mr. Brendan Brennan I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call certain.
We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity for a brief follow up I would now like to hand, the call over to our CEO Dr. Steve Cutler.
Kate Haven: Statements in today's call will be forward looking statements. These statements are based on management's current expectations and information currently available, including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward looking statements due to risks and uncertainties associated with the company's business and.
Thank you Jay and good day everyone.
<unk> com delivered strong results in quarter pool and for the full year 2023, as our team successfully navigated a dynamic environment impacted by several macroeconomic and geopolitical challenges.
Kate Haven: Listeners are cautioned that forward looking statements are not guarantees of future performance.
Kate Haven: Forward looking statements are only as of the date. They are made and we do not undertake any obligation to update publicly any forward looking statements either as a result of new information future events or otherwise more information about the risks and uncertainties relating to these forward looking statements may be found in our SEC reports filed by the company, including the form.
Through consistent operational delivery increased scale.
<unk> suite of solutions, we were successful in securing new partnerships and expanding existing relationships across our customer segments and with the worlds top 20 pharma companies in particular.
Overall, we continue to experience positive demand trends in our industry.
Kate Haven: <unk> 20-F filed on February 24th 2023.
Fourth quarter, we did see some volatility in RFP activity across customer segments are small, but it was somewhat muted towards the end of the year with some companies continuing to be deliberate with their overall development spend decisions.
Kate Haven: This presentation includes selected non-GAAP financial measures, which Stephen Brendan will be referencing in their prepared remarks for our presentation of the most directly comparable GAAP financial measures. Please refer to the press release section titled condensed consolidated statements of operations.
With that said, we are encouraged by the improving sentiment among customers in quarter, one as well as underlying trends from a funding perspective that suggests a stabilizing market as we entered 2024.
Kate Haven: While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures. We believe certain non-GAAP information is more useful to investors for historical comparison purposes.
Stephen Brendan: Included in the press release and the earnings slides, you'll note a reconciliation of non-GAAP measures adjusted EBITDA adjusted net income and adjusted diluted earnings per share excludes stock compensation expense restructuring costs foreign currency gains and losses amortization and transaction related and integration related costs and their respective tax benefits.
Within the large pharma segment, we continue to see a strong level of opportunities anchored by the strength of our new and existing strategic partnerships.
Totality across all segments.
Overall trailing 12 month RFP activity increased in the high single digits in quarter, four consistent with quarter three.
Stephen Brendan: We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity for a brief follow up I would now like to hand, the call over to our CEO Dr. Steve Cutler.
This appears to be continuing or even accelerating early in 2024.
Given this backdrop and in line with our previous comments, we expect book to Bill to be in the range of one two to one three times on a quarterly basis in 2024 with an overall target of 125 times for the full year 2024.
Stephen Brendan: Sure.
Steve Cutler: Thank you Jay and good day everyone.
Steve Cutler: <unk> Com delivered strong results in quarter, four and for the full year 2023, as our team successfully navigated a dynamic environment impacted by several macroeconomic and geopolitical challenges.
In quarter, four net bookings increased 8% on a year over year basis, driving 10% growth in total backlog over quarter four 2022.
Steve Cutler: Through consistent operational delivery increased scale and our comprehensive suite of solutions, we were successful in securing new partnerships and expanding existing relationships across our customer segments and with the worlds top 20 pharma companies in particular.
We saw continued strength in demand across a large pharma segment for both full service and FSP solutions as well as excellent performance from our laboratory services business.
Steve Cutler: Overall, we continue to experience positive demand trends in our industry.
Our innovative and scalable offerings are resonating well with customers and strongly positions <unk> for further traction in new and existing customer accounts.
Steve Cutler: Fourth quarter, we did see some volatility in RFP activity across customer segments are small, but it was somewhat muted towards the end of the year with some companies continuing to be deliberate with their overall development spend decisions.
To this end in quarter four we were awarded a new full service strategic partnership with a top 20 pharma customer, creating significant new business potential in phase one to four studies across a number of therapeutic areas in their portfolio.
Steve Cutler: With that said, we are encouraged by the improving sentiment among customers in quarter, one as well as underlying trends from a funding perspective that suggests a stabilizing mark as we've entered 2024.
Our depth of experience and long standing and transformation of large pharma partnerships was one of the key criteria facility icon.
Steve Cutler: Within the large pharma segment, we continue to see a strong level of opportunities anchored by the strength of our new and existing strategic partnerships.
As well as our collaborative approach and achieving meaningful efficiencies in their development programs.
Yeah.
And reflecting back on our numerous accomplishments across our organization in 2023.
Steve Cutler: Totality across all segments.
Steve Cutler: Overall trailing 12 month RFP activity increased in the high single digits in quarter, four consistent with quarter three.
There are several in particular that highlight our commitment to operational excellence.
Our efforts in driving forward, our ambitious automation agenda resulted in the achievement of greater than 2 million hours automated activity in 2023 across a number of functions and processes.
Steve Cutler: It appears to be continuing or even accelerating early in 2024.
Steve Cutler: Given this backdrop and in line with our previous comments, we expect book to Bill to be in the range of one two to one three times on a quarterly basis in 2024 with an overall target of 125 times for the full year 2024.
We have set another goal for automation in 2024 driving to deliver significant further improvement in areas such as critical study startup activities further automation of our back office activities as well as processes, such as data ingestion and review with a target of three five.
Steve Cutler: In quarter, four net bookings increased 8% on a year over year basis, driving 10% growth in total backlog over quarter four 2022.
For the full year.
Steve Cutler: We saw continued strength in demand across a large pharma segment for both full service and FSP solutions as well as excellent performance from our laboratory services business.
At the time of the acquisition of PRA Health Sciences in July 2021, we set ambitious targets for both synergy realization and total debt paydown.
Steve Cutler: Our innovative and scaled offerings are resonating well with customers and strongly positioned icon for further traction in new and existing customer accounts.
The following two year period was characterized by unexpected macroeconomic pressures and challenges in our market.
Despite this dynamic we remained consistent planned actions and we're able to accelerate both the full cost synergy realization as well as our target leverage ratio.
Steve Cutler: To this end in quarter four we were awarded a new full service strategic partnership with a top 20 pharma customer, creating significant new business potential in phase one to four studies across a number of therapeutic areas in their portfolio.
Head of our initial timelines as we closed out 2023.
This was all possible of course through the efforts of our over 41000 employees across the world who have worked tirelessly to progress our customers' projects many of whom have been recognized with a prestigious industry awards for their efforts.
Steve Cutler: Our depth of experience and longstanding and transformation of large pharma partnerships was one of the key criteria facility Heiko.
Steve Cutler: As well as our collaborative approach and achieving meaningful efficiencies in their development programs.
Turning to review our financial performance in the quarter, our icon delivered a strong set of financial results with revenue growth of five 3% over quarter four 2022.
Steve Cutler: Yes.
Steve Cutler: And reflecting back on the numerous accomplishments across our organization in 2023.
Steve Cutler: There are several in particular that highlight our commitment to operational excellence.
Direct fee revenue growth continues to be robust and within the high single digits on a year over year basis, while pass through revenue was slightly below our expectations due to the wind down of Covid related trials in the quarter.
Steve Cutler: Our efforts in driving forward, our ambitious automation agenda resulted in the achievement of greater than 2 million hours automated activity in 2023 across a number of functions and processes.
Steve Cutler: We have set another goal for automation in 2024 driving to deliver significant further improvement in areas such as critical study startup activities further automation of our back office activities as well as processes, such as data ingestion and review with a target of $3 5 million.
With strong direct fee revenue growth and lower than expected pass through revenue. We saw a notable uptick in gross margin on a sequential and year over year basis, resulting in a 34% margin for quarter four.
On this note we do anticipate returning to a more normalized gross margin profile of approximately 30% for the full year 2024.
Steve Cutler: For the full year.
At the time of the acquisition of PRA Health Sciences in July 2021, we set ambitious targets for both synergy realization and total debt paydown.
On another positive note our iconic game delivered substantial growth on adjusted EBITDA in quarter four as SG&A expense was essentially flat on a sequential basis, resulting in a margin of 21, 7% well ahead of the midterm target we set back in early 'twenty.
Steve Cutler: The following two year period was characterized by unexpected macroeconomic pressures and challenges in our market.
Steve Cutler: Despite this dynamic we remained consistent planned actions and were able to accelerate both the full cost synergy realization as well as our target leverage ratio.
'twenty two.
Given the revenue mix shift in quarter four our full year 2023, adjusted EBIT margin of 29% with stronger than anticipated.
Steve Cutler: <unk> of our initial timelines as we closed out 2023.
Steve Cutler: This was all possible of course through the efforts of our over 41000 employees across the world who have worked tirelessly to progress our customers' projects many of whom have been recognized with a prestigious industry awards for their efforts.
190 basis point growth in adjusted EBITDA margin in 2023 on a year over year basis.
We expect an adjusted EBITDA margin expansion of circa 50 basis points on a full year basis in 2024.
Steve Cutler: Turning to review our financial performance in the quarter, our icon delivered a strong set of financial results with revenue growth of five 3% over quarter four 2022.
We continued to successfully execute our capital deployment strategy in the fourth quarter closing the previously announced acquisition of Phillips Pharma solutions in October.
Steve Cutler: Direct fee revenue growth continues to be robust and within the high single digits on a year over year basis, while costs through revenue was slightly below our expectations due to the wind down of Covid related trials in the quarter.
While this transaction is a small contributor to icons overall revenue it supplements, our current medical imaging capability and ads cardiac safety solutions to our service offerings, providing our customers with a more integrated service.
Steve Cutler: With strong direct fee revenue growth and lower than expected pass through revenue. We saw a notable uptick in gross margin on a sequential and year over year basis.
In addition earlier this year, we closed the acquisition of human first our cloud based technology company focused on accelerating and improving digital health technology selection in clinical trials.
Steve Cutler: <unk> and a 34% margin for quarter four.
The addition of human first will position us to become the industry leader in integrated clinical outcome assessment solutions, allowing customers to make evidenced based decisions to reduce patient burden and enhance that equivalent.
Steve Cutler: On this note we do anticipate returning to a more normalized gross margin profile of approximately 30% for the full year 2024.
Steve Cutler: On another positive note our iconic getting delivered substantial growth on adjusted EBITDA in quarter four as SG&A expense was essentially flat on a sequential basis, resulting in a margin of 21, 7% well ahead of the midterm target we set back in early 2000.
Separately, we have a number of capital projects that are in development to bring additional efficiencies to critical trial pain points and ultimately deliver more value to our customers.
We're well underway in developing a comprehensive planning and oversight capability for site selection and activation that is coupled with improved resource forecast.
Steve Cutler: 'twenty two.
Steve Cutler: Given the revenue mix shift in quarter four our full year 2023, adjusted EBITDA margin of 29% with stronger than anticipated and in <unk>.
Designed to deliver enhanced patient recruitment timelines.
In addition, we continue to progress our investments in AI and automation.
Steve Cutler: 190 basis point growth in adjusted EBITDA margin in 2023 on a year over year basis.
One example is the development of our Firecrest site and investigator database designed to provide in depth insights to address industry challenges such as investigator and site activity and the overall performance.
Steve Cutler: We expect an adjusted EBITDA margin expansion of circa 50 basis points on a full year basis in 2024.
Steve Cutler: We continued to successfully execute our capital deployment strategy in the fourth quarter closing the previously announced acquisition of Phillips Pharma solutions in October.
We were very pleased with the upgraded credit rating, we received from Moodys in December.
Icon second upgrade to investment grade rating in the fourth quarter following the S&P global ratings upgrades in October.
Steve Cutler: While this transaction is a small contributor to <unk> overall revenue.
Steve Cutler: Supplement our current medical imaging capability and adds cardiac safety solutions to our service offering providing our customers with a more integrated service.
This important milestone allows us the ability to refinance our variable rate debt.
And move forward towards a more favorable capital structure that will give us more flexibility from a capital deployment perspective, particularly in the second half of 2024.
Steve Cutler: In addition earlier this year, we closed the acquisition of human first our cloud based technology company focused on accelerating and improving digital health technology selection in clinical trials the.
We have a definitive plan that has been approved by our board and will be executed in the first half of this year, allowing us to achieve the targeted total interest expense reduction of approximately $100 million on a year over year basis from 2023.
Steve Cutler: The addition of human first will position us to become the industry leader in integrated clinical outcome assessment solutions, allowing customers to make evidenced based decisions to reduce patient burden and enhance the equivalent.
In line with our strategy M&A remains the priority as the optimal way to deliver shareholder value and we fully intend to utilize the strength of our balance sheet to acquire companies that complement our current services and add to our ability to deliver faster and more efficiently for customers.
Steve Cutler: Separately, we have a number of capital projects that are in development to bring additional efficiencies to critical trial pain points and ultimately deliver more value to our customers.
Steve Cutler: We're well underway in developing a comprehensive planning and oversight capability for site selection and activation that is coupled with improved resource forecast.
We have also secured approval to opportunistically spend up to 500 million on share repurchases over the next 12 months.
Steve Cutler: Designed to deliver enhanced patient recruitment timelines.
Steve Cutler: In addition, we continue to progress our investments in AI and automation.
Given the positive trajectory from our performance in quarter, four and current market conditions and the start of this year. We are reaffirming the full year 2024 financial guidance, we issued in January.
Steve Cutler: One example is the development of our Firecrest site and investigator database designed to provide in depth insights to address industry challenges such as investigator and site activity and the overall performance.
We expect revenue to be in the range of $848 8 billion.
An increase of three four to eight 4% over full year 2023.
Steve Cutler: We were very pleased with the upgraded credit rating, we received from Moodys in December.
Additionally, we expect adjusted earnings per share to be in the range of $14 50.
Steve Cutler: Icon second upgrade to investment grade rating in the fourth quarter. Following the S&P global ratings upgrade in October.
To $15 30 reps.
Representing an increase of $13 four to 19, 6% over the full year 2023.
Steve Cutler: This important milestone allows us the ability to refinance our variable rate debt.
I'll now turn it over to Brendan for further details on our financial results.
Steve Cutler: And move forward towards a more favorable capital structure that will give us more flexibility from a capital deployment perspective, particularly in the second half of 2024.
Thanks, Steve.
In quarter, four icon achieved gross business wins of $2 99 billion and recorded $461 million order cancellations. This resulted in a solid level of net awards in the quarter of $2 $53 billion and a net book to Bill of one to two times.
Steve Cutler: We have a definitive plan that has been approved by our board and will be executed in the first half of this year, allowing us to achieve the targeted total interest expense reduction of approximately $100 million on a year over year basis from 2023.
Full year 2023, gross business wins were $11 $77 billion in cancellations were 182 billion.
Steve Cutler: In line with our strategy M&A remains the priority as the optimal way to deliver shareholder value and we fully intend to utilize the strength of our balance sheet to acquire companies that complement our current services and add to our ability to deliver faster and more efficiently for customers.
Resulting in the net business wins of $9 $95 billion and also a net book to Bill of one two times.
The addition of the New awards in order for our backlog grew to a record $22 8 billion.
Representing an increase of two 4% on quarter three of 2023 or an increase of 10% year over year, our backlog burn was nine 3% in the quarter slightly down from quarter three levels.
Steve Cutler: We have also secured approval to opportunistically spend up to $500 million.
Steve Cutler: On share repurchases over the next 12 months.
Revenue in quarter four was $2.066 billion. This represented a year on year increase of five 3% or four 1% on a constant currency basis.
Steve Cutler: Given the positive trajectory from our performance in quarter, four and current market conditions and the start of this year. We are reaffirming the full year 2024 financial guidance, we issued in January.
Full year revenue was $8. One 2 billion. This represented a year on year increase of four 9% or four 6% on a constant currency basis.
Steve Cutler: We expect revenue to be in the range of $8 four to $8 8 billion, an increase of three four to eight 4% over full year 2023.
Overall customer concentration in our top 25 customers increased from quarter three 2023, our top customer represented nine 5% of total revenue in quarter four our top five customers represented 27, 5%. Our top 10 represented 43, 8%, while our top 25 represented 66 eight.
Steve Cutler: Additionally, we expect adjusted earnings per share to be in the range of $14.50 to.
Steve Cutler: To $15 30 reps.
Steve Cutler: Representing an increase of $13 four to 19, 6% over the full year 2023.
Percent.
In the full year 2023, our top customer represented eight 9% of revenue our top five customers represented 26, 8% of revenue our top 10 represented 41, 4%, while our top 25 represented 62, 9%.
Steve Cutler: I'll now turn it over to Brendan for further details on the financial results.
Brendan Brennan: Thanks, Steve.
Brendan Brennan: For icon achieved gross business wins of $2 $99 billion and recorded $461 million order cancellations. This resulted in a solid level of net awards in the quarter of 253 billion and a net book to Bill of one to two times.
Gross margin for the quarter was 34% compared to 29, 8% in quarter. Three 2023 gross margin increased 50 basis points of gross margin of 29, 9% in quarter four 2006 to full year 2023 gross margin was 29, 9% and we anticipate this to be a similar level for the full year 2024.
Brendan Brennan: Full year 2023, gross business wins were $11 $77 billion in cancellations were $1 82 billion.
Brendan Brennan: Resulting in the net business wins of $9 $95 billion and also a net book to Bill of one two times with.
Total SG&A expense was $180 $2 million in quarter, four or eight 7% of revenue. So there is essentially flat on prior quarter.
Brendan Brennan: With the addition of the New awards in order for our backlog grew to a record $22 8 billion.
In the comparable period last year total SG&A expense was $192 2 million or nine 3% of revenue.
Brendan Brennan: Representing an increase of two 4% on quarter three.
Brendan Brennan: 2023, an increase of 10% year over year, our backlog burn was nine 3% in the quarter slightly down from quarter three levels.
Full year SG&A expense.
$732 7 million or 9% of revenue representing improvement of 80 basis points over full year, 2000, <unk> and a reduction in spend of $24 $7 million.
Brendan Brennan: Revenue in quarter four was $2.066 billion. This represented a year on year increase of five 3% or four 1% on a constant currency basis.
Adjusted EBITDA was $448 2 million for the quarter or 21, 7% of revenue comparable period last year, adjusted EBITDA was $405 million or 26% of revenue representing a year on year increase of 10, 7%.
Brendan Brennan: Full year revenue was $8 $1 billion to $1 billion.
Brendan Brennan: It represented a year on year increase of four 9% or four 6% on a constant currency basis.
Brendan Brennan: Overall customer concentration in our top 25 customers increased from quarter three 2023, our top customer represented nine 5% of total revenue in quarter four our top five customers represented 27, 5%. Our top 10 represented 43, 8%, while our top 25 represented 66.
Sequentially adjusted EBITDA margin improved 70 basis points of our quarter three margin of 21%.
Full year 2023, adjusted EBITDA was $1 $694 1 million or 29%, representing very strong growth of 14, 5% on a year over year basis.
Brendan Brennan: 8%.
Brendan Brennan: And the full year 2023, our top customer represented eight 9% of revenue our top five customers represented 26, 8% of revenue our top 10 represented 41, 4%, while our top 25 represented 62, 9%.
Adjusted operating income quarter, four was $414 4 million.
Our margin of 21%.
This is an increase of nine 7% over adjusted operating income of $377 7 million a.
A margin of 19, 3% in quarter four of 2022.
Brendan Brennan: Gross margin for the quarter was 34% compared to 29, 8% in quarter three 2023.
Full year 2023, adjusted operating income was $1 billion $568 million a margin of 19, 3%. This was an improvement of 14, 2% on full year 2022.
Brendan Brennan: Gross margin increased 50 basis points of gross margin of 29, 9% in quarter. Four 2000, <unk> full year 2023 gross margin was 29, 9% and we anticipate this to be a similar level for the full year 2024.
Net interest expense was $75 4 million for quarter for full year net interest expense totaled $315 $3 million in 2023 compared to $209 $6 million and the full year 2022.
Brendan Brennan: Total SG&A expense was $180 $2 million in quarter, four or eight 7% of revenue.
Brendan Brennan: This is essentially flat on prior quarter.
The effective tax rate was 15, 2% for the quarter. The full year 2023 effective tax rate was 15, 5% down from our full year 2022 effective tax rate of 16, 5%.
Brendan Brennan: In the comparable period last year total SG&A expense was $182 2 million or nine 3% of revenue.
Brendan Brennan: Full year SG&A expense was $732 7 million or 9% of revenue representing improvement of 80 basis points over full year 2002, and a reduction in spend of $24 7 million.
Adjusted net income attributable to the group for the quarter was $287 $5 million or margin of Turkey, and 9% equated to adjusted earnings per share of $3 46, an increase of $10 five 5% year over year.
Brendan Brennan: Adjusted EBITDA was $448 2 million for the quarter or 21, 7% of revenue in the comparable period last year, adjusted EBITDA was $405 million or 26% of revenue representing a year on year increase of 10, 7%.
Full year adjusted net income attributable to the group was $1 billion and $58 million equating to an adjusted earnings per share of $12 79, an increase of 9% year over year.
Brendan Brennan: Sequentially adjusted EBITDA margin improved 70 basis points of our quarter three margin of 21%.
In the fourth quarter. The company recorded $9 7 million of transit transaction and integration related costs full year transaction and integration related costs were $44 $2 million in full year restructuring costs were 45.
Brendan Brennan: Full year 2023, adjusted EBITDA was $1 $694 1 million or 29%, representing very strong growth of 14, 5% on a year over year basis.
$4 million.
U S. GAAP income from operations amounted to $265 6 million or 12, 9% of revenue during quarter four full year U S. GAAP income from operations amounted to $956 2 million or 11, 8%.
Brendan Brennan: Adjusted operating income quarter, four was $414 4 million a.
Brendan Brennan: Our margin of 21%.
Brendan Brennan: This is an increase of nine 7% over adjusted operating income of $377 7 million a.
GAAP net income in quarter, four was $216 4 million or $2 60 per diluted share compared to $1 42 per share for the equivalent prior year period.
Brendan Brennan: A margin of 19, 3% in quarter four of 2022.
Brendan Brennan: Full year 2023, adjusted operating income was $1 billion $568 million a margin of 19, 3%. This was an improvement of 14, 2% on full year 2022.
Full year U S. GAAP net income was $612 3 million or $7 40 per diluted share compared to $505 3 million or $6 13 per diluted share for the full year 2022.
Brendan Brennan: Net interest expense was $75 4 million for quarter for full year net interest expense totaled $315 $3 million in 2023 compared to $209 $6 million and the full year 2022.
Net accounts receivable was 1.088 billion at the 31 December 2023. This compares with a net accounts receivable balance of $1. One $2 9 billion at the end of quarter. Three 2023, DSO was 47 days at December 31, 2023, a decrease of two days from September 30 of 2023 cash.
The effective tax rate was 15, 2% for the quarter. The full year of 2023 effective tax rate was 15, 5% down from our full year 2022 effective tax rate of 16, 5%.
Brendan Brennan: Adjusted net income attributable to the group for the quarter was $287 $5 million a margin of 13, 9% equating to adjusted earnings per share of $3 46, an increase of $10 five 5% year over year.
From operating activities in the quarter was $440 $1 million.
Free cash flow was excellent in quarter, four increasing 24% sequentially and achieving our target of circa 1 billion for the full year. We were very pleased with the diligent efforts from our team and driving a seven day improvement in DSO over the course of the year. This now brings us back in line with our anticipated range based on our current mix of customers.
Brendan Brennan: Full year adjusted net income attributable to the group was $1 billion and $58 million equate.
Brendan Brennan: Equating to an adjusted earnings per share of $12 79, and.
Brendan Brennan: An increase of 9% year over year.
And their payment terms, we will continue to stay focused on bidding levels and cash collections as we progress through this year.
Brendan Brennan: In the fourth quarter. The company recorded $9 7 million of trends transaction and integration related costs full year transaction and integration related costs were $44 $2 million in full year restructuring costs were 45 4 million.
At December 31, 2023, cash and cash equivalents totaled $380 1 million and that totaled $3 $78 billion, leaving a net debt position $3 $4 billion. This compared to a net debt of $3 73 billion at September Natasha <unk> history, and net debt of $4 36 billion at December 30 <unk>.
U S. GAAP income from operations amounted to $265 6 million or 12, 9% of revenue during quarter four full year U S. GAAP income from operations amounted to $956 2 million or 11, 8% U.
First 2022 capital expenditure during the quarter was $52 7 million.
Brendan Brennan: U S. GAAP net income in quarter, four was $216 4 million or $2 60 per diluted share compared to $1 42 per share for the equivalent prior year period.
From a capital deployment perspective, we made a payment of $250 million of our term loan b facility in quarter, four and ended the quarter, whereas.
Ratio of two times net debt to adjust EBITDA, we made payment on our terminal b facility of $950 million in full year 2023.
Brendan Brennan: One of your U S. GAAP net income was $612 3 million or $7 40 per diluted share compared to $505 3 million or $6 13 per diluted share for the full year 2022.
Steve mentioned, we are pleased to receive the upgrades in our credit ratings from both S&P global ratings and Moody's in the fourth quarter with a return to an investment grade rating. We now have the ability to more favorably refinance our debt and in turn free up more capital to deploy opportunistically for M&A as well as potential share repurchase.
Brendan Brennan: Net accounts receivable was $1.088 billion at 31 December 2023. This compares with a net accounts receivable balance of $1 $102 9 billion at the end of quarter. Three 2000 trades tree DSO was 47 days at December 31, 2023, a decrease of two days from September 30 of 2023.
Our preferred use of capital remains M&A and we have a healthy pipeline of opportunities. We are currently engaged on that are focused on adding scale and capability to strategic areas of our portfolio.
Brendan Brennan: Cash from operating activities in the quarter was $441 million.
Finally, a key assumptions behind our full year guidance remain in place an effective tax rate of 16, 5%.
Brendan Brennan: Free cash flow was an excellent quarter for increasing 24% sequentially and achieving our target of circa 1 billion for the full year. We were very pleased with the diligent efforts from our team and driving a seven day improvement in DSO over the course of the year.
Free cash flow target of circa $1 1 billion capex spend in the range of $150 million to $200 million and interest expense of $200 million to $240 million or for the full year 2024.
Brendan Brennan: That brings us back in line with our anticipated range based on our current mix of customers and their payment terms. We will continue to stay focused on bidding levels and cash collections as we progress through this year.
Before we move to Q&A, we wanted to commend the dedicated employees of icon for their efforts in delivering another year of solid performance and continuing to support our mission and bringing new therapies to patients around the world. Operator, we are now ready for questions.
At December 31, 2023, cash and cash equivalents totaled $380 1 million debt totaled $3 seven $8 billion, leaving a net debt position $3 $4 billion. This compared to a net debt of $3 73 billion at September towards yes.
If you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced until withdraw. Your question. Please press star one on one again.
Brendan Brennan: <unk> has three and net debt of $4 36 billion at December 31, 2022 capital expenditure during the quarter was $52 7 million.
Thank you, we'll now take our first question.
Please standby.
First question is from the line of Justin <unk> from Deutsche Bank. Please go ahead.
Brendan Brennan: From a capital deployment perspective, we made a payment of $250 million of our term loan b facility in quarter, four and ended the quarter, whereas.
Okay.
Hi, good morning, everyone.
Could you just remind us what the.
Brendan Brennan: Ratio of two times net debt to adjust EBITDA, we made payment on our terminal b facility of $950 million in full year 2023.
Net service fee level revenue growth was in the quarter and then more broadly is there a <unk>.
Or services that we can use to help better understand.
Brendan Brennan: <unk> mentioned, we are pleased to receive the upgrades in our credit ratings from both S&P global ratings at Moody's and the fourth quarter with a return to an investment grade rating. We now have the ability to more favorably refinance our debt and in turn free up more capital to deploy opportunistically for M&A as well as potential share repurchase.
Yeah.
Sort of like what what the topline headwind is.
From a shift to FSP.
That's the first question.
I know you have sewer, suggesting but.
Brendan Brennan: Our preferred use of capital remains M&A and we have a healthy pipeline of opportunities. We are currently engaged on that are focused on adding scale and capability to strategic areas of our portfolio.
Okay.
We're worried about around about 8% I think we said high single digits.
The number on a directory basis. So we feel good about that we had slightly lower.
Brendan Brennan: Finally, a key assumptions behind our full year guidance remain in place an effective tax rate of 16, 5% free.
Pass throughs during the quarter, so that pushes back overall.
Brendan Brennan: Free cash flow target of circa $1 1 billion capex spend in the range of $150 million to $200 million and interest expense of $200 million to $240 million or for the full year 2024.
So the five in terms of top line impact of FSP, that's hard to it's really hard to quantify that at this stage. This is a very gradual approach fsp's is.
Speaker Change: Before we move to Q&A, we wanted to commend the dedicated employees of icon for their efforts in delivering another year of solid performance and continuing to support our mission and bringing new therapies to patients around the world. Operator, we are now ready for questions.
A relatively still a relatively modest part of our business hold our important part of our business and it contributes to the bottom of the contribution level law, that's not too different ultimately.
To a full service work so while it might have some modest impact on overall margins.
Speaker Change: Thank you if you would like to ask a question you will need to press star one on your telephone and wait for your name to be announced until withdraw. Your question. Please press star one on one again.
As it increases and we will talk a bit about that as we go through the call that the trends on FSP.
It's not as I think we talked about two or three.
Speaker Change: Thank you, we'll now take our first question.
Two to 300 bps.
Speaker Change: Please standby.
A number in terms of impact on a headwind basis over over the longer term.
Speaker Change: First question is from the line of Justin <unk> from Deutsche Bank. Please go ahead.
Yes, it really depends upon the customer and upon the particular contract.
Speaker Change: Okay.
Hi, good morning, everyone.
Yes and of course, as we think about it we talked about the fact that we saw that mix.
Justin: Could you just remind us what the.
Justin: Net service fee level revenue growth was in the quarter and then more broadly is there a rule of thumb or services that we can use to help better understand.
Their last year I think we started off this year with very strong indications that are full service organization is going to grow in terms of business wins this year. So.
And certainly at Johnson of course, it's included in our in our guidance is given uncertainty the midpoint. There would include the mixed shift if you like to the extent, we say that during the course of the current year.
Justin: Yeah.
Justin: Like what what the topline headwind is.
Justin: From a shift to FSP.
Justin: That's the first question.
I'm sure that that's what I wanted to jump back in queue.
Speaker Change: I think thats too are suggesting but.
Justin: Correct.
Thank you.
Justin: We're worried about.
We will now take our next question.
Justin: And about 8% I think we said high single digits.
And this is from the line of Chilean dressing from insurance Securities. Please go ahead.
Justin: Number on a directory basis. So we feel good about that we had slightly lower.
Thank you and good morning, everyone. So I wanted to follow up on your macro commentary it seems youre encouraged by data points and trends you've seen in Q1, thus far but you're maintaining your outlook, which assume slower theato industry growth. So is it fair to say that youre not reflecting recent trends in your outlook and if these trends continue would you say that would be.
Pass throughs during the quarter, so that pushes back overall.
Justin: In terms of top line impact of FSP, that's hard to it's really hard to quantify that at this stage.
Justin: It's a very gradual approach fsp's is.
Justin: Relatively still a relatively modest part of our business hold our important part of that business and it contributes to the bottom of the contribution level and it's not too different ultimately <unk> to a full service work so while it might have some modest impact on overall margins.
Kind of upside to expectations for the year.
Yes.
Or is it this way Joe Andrew that I think as we said early in January.
On the RFP front biotech was a little a little more muted large pharma was strong as we've gone into the first half of the first quarter of this year, we've probably seen the rfps.
Justin: As it increases and we will talk a bit about that as we go through the call that the trends on FSP.
Up.
Justin: It's not as I think we talked about.
The environment sort of move up or not so.
Justin: Three.
Justin: Two to 300 bps.
Overall in terms of Rfps in the first quarter again, the first half of the first quarter. So we're not ready to declare victory and I am not reporting the first quarter today, but we're seeing sort of mid teens growth on the RFP opportunity a lot of that through strengthening large pharma some of the strategic partnerships. We've talked about are bearing fruit in two.
Justin: A number in terms of impact on a headwind basis, however over the longer term, but thats, where it really depends upon the customer and upon the particular contract.
Justin: Yeah and of course, as we think about it we've talked about the fact that we saw that mix.
Justin: Last year I think we started off this year with very strong indications that are full service organization is going to grow up in terms of business wins this year. So.
Of opportunities, but we're also seeing a modest uptick around mid single digits in the biotech space as well. So we've talked about biotic stabilizing and improving and that seems to be playing out in the first business day of the first very early part of this year. So we're encouraged by that we're not quite ready to go.
Justin: Certainly agile and of course, it's included in our in our guidance is given uncertainty the mid points. There would exclude the mixed shift if you like to the extent, we say that during the course of the cards here.
Speaker Change: Appreciate it that's why I wanted to jump back in queue.
To change guidance or two to get further to get too bullish on that at this point, but we're certainly very encouraged about the positive environment that we see in the first part of quarter one.
Speaker Change: Thank you.
Speaker Change: We will now take our next question.
Chilean Dressing: And this is from the line of Chilean dressing from tourists Securities. Please go ahead.
Okay and then my quick follow up on the gross margin. It looks like of course do you expect that to be flat at 30% year over year I just want to understand the puts and takes there are you seeing any pricing pressure from your clients, which might be impacting trends clearly shifting to more FSP what is a headwind, but it's a very gradual any offsetting factors you can highlight just give us more.
Chilean Dressing: Thank you and good morning, everyone. So I wanted to follow up on your macro commentary it seems youre encouraged by data points and trends you've seen in Q1, thus far but you're maintaining your outlook, which assume slower the auto industry growth. So is it fair to say that youre not reflecting recent trends in your outlook and if these trends continue would you say that would be.
Granular details about the gross margin trends this year.
Chilean Dressing: <unk> kind of upside to expectations for the year.
Yes, I'll take that one in terms of the margin progress in profile. Obviously, we were very happy with how we how we ended up the year and yes, we think that the announced secretary. He is probably the right way to think about.
Speaker Change: I'd characterize it this way Joe lender in that I think as we said early in January.
2024, there are of course mix shifts.
Speaker Change: RFP front biotech was a little a little more muted large pharma was strong as we've gone into the first half of the first quarter of this year, we've probably seen the rfps.
Absolute levels of business and to your point, they're quite quite gradual in terms of really having a significant margin profile impact, but you know we do a lot of work as we've talked about in the past in terms of making sure. We're an efficient organization and that runs from making sure that all of our projects are highly utilized by our staff right down to the concepts of how we use our technology.
Pick up.
Speaker Change: The environment sort of move up in north so.
Speaker Change: Overall in terms of Rfps in the first quarter again, the first half of the first quarter. So we're not ready to declare victory and I am not reporting the first quarter today, but we're seeing sort of mid teens growth on the RFP opportunity a lot of that through strengthening large pharma some of the strategic partnerships. We've talked about are bearing fruit.
<unk> to continue automation and the use of robotics in our organization and of course that impacts not only on our gross margin, but on our SG&A as well and so we look to continue that investment and Steve made reference to that in his prepared comments as we go through the course of 2023, I suppose archives ready for us.
Speaker Change: In terms of opportunities, but we're also seeing a modest uptick around mid single digits in the biotech space as well, so we talked about biotic stabilizing and improving.
All of that gives us confidence that even with the shifting dynamics in our in our mix of business between full service and FSP, we should be in a good place to be able to maintain that 30% gross margin as we talked about that as our kind of in our more of our medium term target as well. So we feel good about that and I think it's that diligence from our project manage perspective and that use of technology that really gives us.
Speaker Change: It seems to be playing out in the first business day of the first very early part of this year. So we're encouraged by that we're not quite ready to.
Speaker Change: To change guidance or two to get further to get too bullish on that at this point, but we're certainly very encouraged about the positive environment that we see in the first part of quarter one.
The comfort on that particular point.
Great. Thanks, guys.
Thank you.
I will now take our next question.
Speaker Change: Okay and then my quick follow up on the gross margin. It looks like of course do you expect that to be flat at 30% year over year I just wanted to understand the puts and takes there are you seeing any pricing pressure from your clients, which might be impacting trends clearly shifting to more FSP, what because a headwind, but it's a very gradual any offsetting factors you can highlight just gave us.
And this is from the line of Luke got from Barclays. Please go ahead.
Great. Thanks, guys just to follow up on that pricing.
Hear about.
The competitive dynamics in the market.
You always talk about.
The pharma industry always sharpening their pencils, but as you guys have shifted more towards large pharma.
Speaker Change: More granular details about the gross margin trend this year.
Speaker Change: Yes, I'll take that one in terms of the margin progress in profile. Obviously, we were very happy with how we have ended up the year and yes, we think that they announced secretary. He is probably the right way to think about.
Given the lack of biotech funding and Rfps out there.
So the large <unk> are competing on fewer projects are you guys seeing fewer projects across large pharma and then how does that pricing environment. Among these projects and as anybody kind of getting a little aggressive on the pricing dynamic.
Speaker Change: 2024, there are of course mix shifts and the absolute levels of business and to your point, they're quite quite gradual in terms of really having a significant margin profile impact, but you know we do a lot of work as we've talked about in the past in terms of making sure. We're an efficient organization and that runs from making sure that all of our projects are highly utilized by <unk>.
Yes, Thanks Luke.
We're certainly seeing more opportunities in large pharma no question about that the RFP dollars that are coming through.
Speaker Change: Staff right down to the concepts of how we use our technology to continue automation and the use of robotics in our organization and of course that impacts not only on our gross margin, but on our SG&A as well and so we look to continue that investment and Steve made reference to that in his prepared comments.
A very solid and in driving that.
Decided at early 'twenty four mid teens increase in RFP on a trailing 12 month basis.
And we are seeing more opportunities as well I think thats, partly because of the number of strategic partnerships. We have across the industry I think it's partly because of the number of because of the fact that we are now.
Speaker Change: As we go through the course of 2023, I suppose opportunities really for US is that all of that gives us confidence that even with the shifting dynamics in our mix of business between full service and FSP, we should be in a good place to be able to maintain that 30% gross margin and as we've talked about that as our kind of in our more of our medium term target as well. So we feel good about that and I think.
A significantly scaled organization, we're a major player in the.
In the development space now we're.
Part of the conversation every time, even if we're not specifically a strategic partner with <unk>.
Large pharma, we get we get that opportunity.
Speaker Change: Diligence from a project manager perspective, and that use of technology that really gives us the comfort on that particular point.
So we're seeing more we're seeing more dollars.
It's always a very competitive pricing environment, we have to sharpen our pencils, we have to be smart in the way we structured project teams in food.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: I will now take our next question.
<unk> together and we do that we do that pretty well, so I would say the pricing environment Hasnt changed dramatically I would say that in.
Speaker Change: And this is from the line of Luke <unk> got from Barclays. Please go ahead.
Luke: Great. Thanks, guys just to follow up on that pricing.
With our opportunities because we are strategic with a number of these customers. Our win rate is tends to be higher than that in that part of the market as well. So we win a greater proportion of those dollars than we do in other parts of the market, where we're competing with a number of different organizations and their different perspectives on large versus small cro's et cetera et cetera. So.
Luke: We hear about.
Luke: The competitive dynamics in the market.
Luke: You always talk about.
Luke: The pharma industry always sharpening their pencils, but as you guys have shifted more towards large pharma.
Luke: Given the lack of biotech funding and Rfps out there.
We certainly like that that large pharma space.
Luke: So the large <unk> are competing on fewer projects are you guys seeing fewer projects across large pharma and then how does that pricing environment. Among these projects and as anybody kind of getting a little aggressive on the pricing dynamic.
Cost is always some challenges on pricing, but we believe we are well positioned to be able to accommodate them.
Great and then I guess a follow up there is kind of on the same vein there.
You guys put out.
Yes, Thanks Luke.
The 125 book to Bill Guide I don't remember you guys, putting usually are.
Luke: We're certainly seeing more opportunities in large pharma no question about that the RFP dollars that are coming through.
Our target like that so whats, giving you the visibility is it something from.
Luke: A very solid and in driving that.
The customer class like you said like you can have a visibility on the biotech funding coming back or or large pharma or some therapeutic index just give us.
Luke: As I say that early 'twenty four mid teens increase in RFP on a trailing 12 month basis.
Some type of idea of where youre getting that visibility.
Speaker Change: We are seeing more opportunities as well I think that's partly because of the number of strategic partnerships. We have across the industry I think it's partly because of the number because of the fact that we are now.
Well I think first of all it's a target rather guide.
Alright <unk> scenario.
Speaker Change: A significantly scaled organization, we're a major player in.
That's what we're shooting for that's what we believe the market will support.
Speaker Change: In the development space.
Speaker Change: Part of the conversation every time, even if we're not specifically a strategic partner with large pharma, we get we get that opportunity.
So so.
Basing that on the opportunities, we see coming in the door.
Speaker Change: So we're seeing more we're seeing more dollars.
On the build that we have on a more strategic level with some of these mid size and large pharma customers with basing it on the stabilization and the improvement as we see in the biotech funding space and our opportunity to win business. There is theres a number of things that we feel we're in a good place to be able to benefit from from those opportunities we see.
Speaker Change: Is the.
Speaker Change: Always a very competitive pricing environment, we have to sharpen our pencils, we have to be smart in the way we structured project teams.
Speaker Change: Projects together and we do that we do that pretty well so.
Speaker Change: The pricing environment Hasnt changed dramatically I would say that in there.
Speaker Change: With our opportunities because we are strategic with a number of these customers our win rate is tends.
The companies.
Moved along nicely, we've made a lot of progress.
Speaker Change: <unk> tends to be higher than that in that part of the market as well. So we win a greater proportion of those dollars than we do in other parts of the market, where we're competing with a number of different organizations and there are different perspectives on large versus small cro's et cetera et cetera.
With the with the integration and Union with PRA.
Much of that is behind US now and we feel very constructive about the long medium and longer term future of the organization and the industry for that matter.
Great. Thanks.
Speaker Change: So we certainly like that that large pharma space.
Sorry, I'll, just maybe just tack on quickly in terms of the <unk>. That's really the average target that we're thinking about for the full year. So that's not on every quarter as noncore.
Speaker Change: There's of course, there's always some challenges on pricing, but we believe we're well positioned to be able to accommodate those.
Speaker Change: Great and then I guess the follow up there is kind of on the same vein there.
Necessarily to say, it's <unk> five on the mark, but it still that the range between one two to one 3% for the full year, which of course averages of 95.
Speaker Change: You guys put out.
Speaker Change: 125 book to Bill Guide I don't remember you guys, putting usually.
Speaker Change: Our target like that so whats, giving you the visibility is it something from.
Okay, great. Thanks.
Thank you we will now take our next question.
Speaker Change: The customer class like you said like you can have a visibility on the biotech funding coming back or or large pharma or some therapeutic index just give us.
And this is from the line of Eric Coldwell from Baird. Please go ahead.
Speaker Change: Some type of idea of where youre getting that visibility.
Thank you good morning, I wanted to hit on.
Speaker Change: Well I think first of all it's a target rather guide.
Staffing and Resourcing I'm curious with the mid single digit revenue growth. This year, what kind of hiring needs you might have.
Speaker Change: Sorry.
Speaker Change: Great footwear at scenario.
Speaker Change: That's what we're shooting for that's what we believe the market will support.
How does that look on a gross and net basis Ies is turnover improving can you.
Speaker Change: No.
Speaker Change: So so.
Can you get more with less if you will and then.
Speaker Change: Basing that on.
No you've done a couple of a couple of smaller deals here recently what.
Speaker Change: The opportunities, we see coming in the door.
Speaker Change: On the build that we have on a more strategic level with some of these midsize and large pharma customers with basing it on the stabilization and the improvement as we see in the biotech funding space and our opportunity to win business areas. There is a number of things that we feel we're in a good place to be able to benefit from from those opportunities.
Where do you think you'll end up the full year, including the M&A in terms of head count thanks very much.
Sure Eric.
So overall head count was we didn't.
Will increase this year, we were able to get the the.
Growth through improvement in efficiency.
So the 41 very dedicated employees that we have in the organization part of it.
Speaker Change: The companies.
Speaker Change: Moved along nicely, we've made a lot of progress.
Speaker Change: With the with the integration and Union with PRA.
About the hours on the automation 2 million hours when you lay that certainly helped us.
Speaker Change: Much of that is behind US now and we feel very constructive about the.
Planning more of that.
Speaker Change: The long medium and longer term future of the organization and the industry for that matter.
So resourcing was.
With solid retention has been very good in fact, we've seen retention improve month to month quarter to quarter really for the last couple of years now so were well above our retention levels pre COVID-19 now and we feel so the pressure in terms of Resourcing is lower than it was that's helping us from a SG&A.
Speaker Change: Great. Thanks.
Speaker Change: Sorry, I'll, just maybe just to tack on quickly in terms of the <unk>, that's really the average.
Speaker Change: That we're thinking about for the full year. So that's not on every quarter.
Speaker Change: <unk> necessarily to say, it's <unk> five on the mark, but it still that the range between one to two to one 3% for the full year, which of course averages 125.
Our point of view.
We feel.
The workforce is engaged and enabled and really making very positive so.
Speaker Change: Okay, great. Thanks.
I would say, we're a more efficient organization that we were certainly two years ago and we continue on that on that pushes I said that the target was to move automation too.
Speaker Change: Thank you we will now take our next question.
Speaker Change: And this is from the line of Eric Coldwell from Baird. Please go ahead.
Those are the $3 5 million hours, which represents a significant number of people. If you convert that to the hours, but that's the way we see absolutely a workforce growing mainly through through automation.
Eric Coldwell: Thank you good morning, I wanted to hit on.
Eric Coldwell: Staffing and we're sourcing I'm curious with the mid single digit revenue growth. This year, what kind of hiring needs you might have.
And process improvement then through actually adding hiccups, having said that.
Eric Coldwell: How does that look on a gross and net basis Ies is turnover improving can you can.
With the growth projections, we have for this year, we will be inevitably adding people.
Eric Coldwell: Can you get more with less if you will and then I know you've done a couple of a couple of smaller deals here recently.
But probably at a lower right until it's certainly at a lower rate than then we add revenue. So if you can look at and those sort of terms.
Eric Coldwell: Where do you think you'll end up the full year, including the M&A in terms of head count thanks very much.
We think we can continue with the efficiencies and with the improvement in the efficiencies, but utilization of automation.
Speaker Change: Sure Eric.
Rest of it.
Speaker Change: So overall head count was we didn't.
As we as we get back and step back in the M&A market clearly, we'll be bringing on people as we acquire.
Eric Coldwell: Will increase this year, we were able to get the.
Speaker Change: The growth through improvement in efficiency.
As we acquire organizations and acquire companies and we will.
Speaker Change: As I say the 41000 very dedicated employees that we have in the organization part of it.
Work that through and we'll work them into the organization, but there'll be again I think we can say that we will be increasing revenue.
Speaker Change: I talked about the the hours on the automation 2 million hours. When you lay that certainly helped us in planning.
At a greater rate than we will be increasing head count while the cost of head count as we go forward.
Speaker Change: Planning more of that.
That's great if I could just.
So resourcing was.
Throw in one follow up here or different question.
Speaker Change: Solid retention has been very good in fact, we've seen retention improve month to month quarter to quarter really for the last couple of years now so were well above our retention levels pre COVID-19 and we feel so the pressure in terms of Resourcing is lower than it was that's helping us from a SG&A.
The one two to one three book to Bill range is consistent with what you've said in the past.
I'm curious with this new.
Publicly known contract with BARDA or opportunity with BARDA.
Do you have expectations in your annual book to Bill related to that.
Speaker Change: Point of view we.
Speaker Change: The workforce is engaged and enabled and really making very positive so.
I assume they're fairly modest if so but I'm just curious how much of that is.
I hate to use the term legacy or core because I think these are all core contracts, but non BARDA work how much of.
Speaker Change: I would say, we're a more efficient organization that we were certainly two years ago and we continue on that on that pushes I said that the target was to move automation to the closer to the $3 5 billion hours, which represents a significant number of people if you convert that to <unk>.
The net book to Bill goal is.
But I guess traditional work versus this unique government opportunity.
I'll wrap it up there thanks.
Speaker Change: Hours, but thats the way we see absolutely.
Okay.
Speaker Change: Of course growing mainly through through automation.
Yes.
We see the occasional BARDA contract coming along Eric, but theres nothing in Q4, and although there might be some opportunities in the pipeline.
Speaker Change: Process improvement then through actually adding hitting us having said that.
Speaker Change: With the growth projections, we have for this year, we will be.
Speaker Change: Inevitably adding people.
We don't think theyre going to materially.
Speaker Change: But probably at a lower rate and certainly at a lower rate than then we add revenue. So if you can look at and those sort of terms, where we think we can continue with the efficiencies and with the improvement in the efficiencies, but utilization automation over the rest of it.
<unk> impact on our book to bills across the across the year I might have some impact as I come in on a quarterly basis, but across the year.
Terms of the aspiration of the target we have.
New business Awards.
Speaker Change: As we as we get back and step back in the M&A market clearly, we will be bringing on people as we acquire.
It will be very modest or minor so while they are important for our business and obviously.
Speaker Change: As we acquire organizations and acquire companies and we will we'll work that through and we'll work them into the organization, but there'll be again I think we can say that we will be increasing revenue.
They tend to be vaccine related studies, and they gave us an opportunity to grow revenue faster than some of the other projects, we do and so from that point of view, particularly they have some benefit for our organization.
Speaker Change: At a greater rate than we will be increasing head count will the cost of head count as we go forward.
I don't think they are going to be particularly material on an annual basis and not necessarily going to drive that.
Speaker Change: That's great if I could just.
Speaker Change: Throw in one follow up here or a different question.
Materially drive that book to Bill number.
Thanks very much.
Speaker Change: The one two to one three book to Bill range is consistent with what you've said in the past.
Hi, Sir thank you.
We will now take our next question.
Speaker Change: I'm curious with this new.
And that is from the line of Patrick Donnelly from Citi. Please go ahead.
Speaker Change: Publicly known contract with BARDA or opportunity with BARDA.
Hey, guys. Thanks for taking the questions.
Speaker Change: Do you have expectations in your annual book to Bill related to that.
Steve I wanted to pick up on the burn rate that you just mentioned there in terms of just what's in the pipeline, obviously I know it varies between things like oncology. Obviously, you mentioned BARDA. There can you just talk about how youre thinking about that burn conversion rate this year and where that trend line is going.
Speaker Change: I assume they're fairly modest if so but I'm just curious how much of that is.
Speaker Change: I hate to use the term legacy or core because I think these are all core contracts, but non BARDA work how much of.
Speaker Change: The net book to Bill goal is.
Maybe Brendan I'm sure you can chime in as well, but just curious on how youre thinking about that please.
Speaker Change: More trip I guess traditional work versus this unique government opportunity.
Yes.
Speaker Change: I'll wrap it up there thanks.
I'll give you a bit of.
Speaker Change: Yeah.
Opinion on that and then Brendan can give you some more detail.
Speaker Change: Yes.
Speaker Change: We see the occasional BARDA contract coming along Eric, but theres nothing in Q4, and although there might be some opportunities in the pipeline.
Then about the $9 three this quarter, it's down a little down.
20 bps from.
From last quarter.
It's probably not going up anytime soon I would say given the portfolio mix that we have as we've moved away from those those.
Speaker Change: We don't think theyre going to materially.
Speaker Change: <unk> impact on our book to bill across the across the year I might have some impact as I come in on a quarterly basis, but across the year.
Those vaccine trials COVID-19, so, we're probably going to possibly going to trend down 10 bps or so.
Speaker Change: In terms of the aspirational target we have.
Speaker Change: New business Awards.
We're obviously working ways to avoid that to speed up the current trials, we've done and we've had some success in doing that but.
Speaker Change: <unk> will be very modest or minor so while they are important for our business and obviously.
Speaker Change: They tend to be vaccine related studies, and they gave us an opportunity to good revenue.
The trend is probably marginally flat or down I would say in the in the sort of medium short to medium term yes.
Speaker Change: Foster than some of the other projects, we do and so from that point of view, particularly as I have some benefit for our organization.
Yes, no I think that's exactly it I don't know that its probably as we go through 2024, we probably think of it more in that 90% 93 range and that's probably where we'll be and to Steve's point of course those opportunities. If we can get more of that vaccine work in the door that might have.
Speaker Change: I don't think they are going to be particularly material on an annual basis and not necessarily going to drive that.
Speaker Change: Materially drive that book to Bill number.
Speaker Change: Thanks very much.
Speaker Change: Hi, Sir thank you.
A little bit of a help us a little bit of a tailwind in the back half of the year, but at this stage, we're very much looking at the ranges as outlined.
Speaker Change: We will now take our next question.
Speaker Change: And that is from the line of Patrick Donnelly from Citi. Please go ahead.
Okay. That's helpful. And then maybe just following up on one of the earlier questions. Steve I know you said.
Patrick Bernard Donnelly: Hey, guys. Thanks for taking the questions.
Rfps I think it was mid teens, so far this quarter I mean, it's.
Patrick Bernard Donnelly: Steve I wanted to pick up on the burn rate that you just mentioned there in terms of just what's in the pipeline, obviously I know it varies between things like oncology. Obviously, you mentioned BARDA. There can you just talk about how youre thinking about that burn conversion rate this year and where that trend line is going and maybe Brendan I am sure you can chime in as well, but just curious on how you are.
Clearly sounds a little more constructive than you sounded at J P. M in January.
Can you just talk about I guess, what you saw over the last month month, and a half kind of I.
I guess would come out with a little more constructive tone, there and again it sounds like that that would shape up well in terms of just how to think about the book to bill for <unk>, I guess being squarely in that 1213 range, but just wanted to talk through what youre seeing over the past month month and change there.
Patrick Bernard Donnelly: Thinking about that piece.
Brendan Brennan: Yes, Pat I'll give you.
Speaker Change: Bit of a.
Speaker Change: Opinion on that and then Brendan can give you some more detail.
Yes, Pat.
Steve Cutler: Then about the $9 three this quarter, it's down a little down.
I think we have to be a little carefully rfps.
Our biomarker for new business wins, but they're not a perfect marker we will bill now.
Speaker Change: 20 bps from.
Speaker Change: From last quarter.
Speaker Change: It's probably not going up anytime soon I would say given the portfolio mix that we have as we've moved away from those those.
That.
But having said that what we've seen as I said over the first.
Seven or eight weeks of the year.
Speaker Change: Those vaccine trials at Covid, So, we're probably going to possibly going to trend down 10 bps or so.
<unk> is a nice uptick on a trailing particularly on a trailing 12 month and year on year comparison basis as I said mid teens across the portfolio, but the majority of it is in the large pharma space.
Speaker Change: We're obviously working ways to avoid that to speed up the current trials. We've done we've had some success in doing that but.
That to US is good because as I mentioned, we have a better win rate in that number.
Speaker Change: The trend is probably marginally flat or down I would say in the in the sort of medium short to medium term yes.
More dollars more opportunities and a better win rate.
We feel good about where the large pharma space, having said that we're also seeing a more modest but certainly an uptick.
Speaker Change: No I think that's exactly it I don't know that its probably as we go through 2024, we probably think of it more of that 92% 93 range and that's probably where we'll be and to Steve's point of course theres opportunities. If we can get more of that vaccine work in the door that might have.
In our project opportunities and Thats thats exciting for us as well as we.
As we kind of really making a push on our on our biotech profile in the industry about 7000 people focused on biotech and I actually do focus on but it's not a smoke and mirrors thing with US. We have these people have totally dedicated to the space and so we're doing a bit more talking about that with our customers and I think thats starting to get some.
Speaker Change: A little bit of a help us a little bit of a tailwind in the back half of the year, but at this stage, we're very much looking at the ranges as outlined.
Speaker Change: Okay. That's helpful. And then maybe just following up on one of the earlier questions. Steve I know you said the Rfps I think it was mid teens. So far this quarter I mean, it's clearly sounds a little more constructive than you sounded at J P. M in January.
Traction.
And so overall, we feel we've kind of almost past.
<unk> was the fourth quarter and we're starting to move we've upped it a notch I think and it certainly feels to us like we're.
Steve Cutler: Can you just talk about I guess, what you saw over the last month month and a half.
Steve Cutler: I guess would come out with a little more constructive tone, there and again it sounds like that that would shape up well in terms of just how to think about the book to bill for <unk>, I guess being squarely in that 1213 range, but just wanted to talk through what youre seeing over the past month month and change there.
We're moving trying to move away from the station and we're starting to gain a bit of price in that area. So overall.
Pretty constructive about it.
Understood. Thank you so much.
Thank you.
We will now take our next question.
Steve Cutler: Yes.
Steve Cutler: I think we have to be a little carefully rfps.
This is from the line of Jack Meehan from Nephron Research. Please go ahead.
Steve Cutler: The market for <unk>.
Steve Cutler: New business wins, but they're not a perfect marker.
Steve Cutler: And out of that.
Thank you good morning, and good afternoon.
Steve Cutler: So, but having said that what we've seen as I said over the first.
Wanted to ask about some of the customer disclosures you provide so just recently.
Steve Cutler: Seven or eight weeks of the <unk>.
Steve Cutler: Yes.
Recently <unk> had pretty good growth from your largest customer I was wondering if there are any like themes you would call out or therapeutic areas. Just how should we think about the durability of growth from here.
Steve Cutler: Is a nice uptick on a trailing particularly on a trailing 12 months of the year on year comparison basis as I said mid teens across the portfolio, but the majority of it is in the large pharma space.
Yes, I think as you can see from the numbers, we reported the largest customer they grow that was.
Steve Cutler: That to US is good because as I mentioned, we have a better win rate in that so more dollars more opportunities and a better win rate.
Specifically related to a couple of large projects that move forward pretty quickly in the in the quarter.
Steve Cutler: We feel good about where the large pharma space Scott, having said that we're also seeing a more modest but certainly an uptick.
And so on.
We haven't necessarily seen that as a sustained trend.
Steve Cutler: In our biotech opportunities and that's that's exciting for us as well as we.
Alternatively.
To five dropped a little bit again.
Steve Cutler: As we've kind of really making a push on our on our biotech profile in the industry about 7000 people focused on biotech and I actually do focus on but it's not a smoke and mirrors thing with US. We have these people have totally dedicated to the space and so we're doing a bit more talking about that with our customers and I think that's starting to get some <unk>.
As it relates to one particular customer in there with the mix shift was was changing a bit. So yes. These things change a little bit on a quarter to quarter basis, Jack I wouldn't get too.
I wouldn't get too focused in on that as those as sort of long term trends. We feel we're in a good place without without top 10 top top 20 customers and Theyre all.
Steve Cutler: <unk>.
Steve Cutler: And so overall, we feel we've kind of almost past.
Apart from one or two that they are growing and the ones that aren't growing as its more a mix shift change rather than anything else and then even even though we're seeing more of the of the business that they wanted to go into albeit.
Steve Cutler: <unk> was the fourth quarter and we're starting to move we've upped it or not I think and it certainly feels to us like.
Steve Cutler: We're moving trying to move away from the station and we're starting to get kind of bit of pace in that area. So overall.
At a different revenue flow.
Overall, we feel we feel good I've said it a number of times, we've we've made progress on the strategic front.
Steve Cutler: Pretty constructive about it.
Speaker Change: Understood. Thank you so much.
With a couple of customers and even and even others in the large pharma space, where we haven't necessarily become a strategic partner with them, we're talking to them about some significant opportunities some of them or not.
Speaker Change: Thank you.
Speaker Change: We will now take our next question.
Speaker Change: This is from the line of Jack Meehan from Nephron Research. Please go ahead.
Some challenges as we all know and.
Jack Meehan: Thank you good morning, and good afternoon.
That has led to probably more strategic discussions around what we can do and how we can help them to get through some of the short or medium term pain that they have to do so.
Jack Meehan: Wanted to ask about some of the customer disclosures you provide so just.
Jack Meehan: Recently <unk> had pretty good growth from your largest customer I was wondering if there are any like themes you would call out or therapeutic areas. Just how should we think about the durability of growth here.
I know, we often think about win.
Customers are having a hard time sort of financially that they necessarily cut cost cut spending.
They can spend in different ways in my experience and some sometimes that can be a significant benefit for us in terms of what they do versus when the running and growing in their revenues are going up as well so hard times produce opportunity for us and Thats certainly proving the case in.
Speaker Change: Yes, I think as you can see from the numbers, we reported the largest customer did grow that was.
Speaker Change: Specifically related to a couple of large projects that move forward pretty quickly in the in the quarter.
Speaker Change: And so on.
Speaker Change: It wouldn't necessarily seeing that as a sustained trend.
Speaker Change: Alternatively.
And one or two areas on the on the significantly large pharma space.
Speaker Change: To five dropped a little bit again.
Great and one follow up.
Speaker Change: As it relates to one particular customer in there with the mix shift was changing a bit. So yes. These things change a little bit on a quarter to quarter basis, Jack I wouldn't get too.
The latest tone, you're hearing around the IRA.
I think there was a lot of.
Maybe concern or uncertainty around that last year do you feel like.
Speaker Change: I wouldn't get too focused in on that as those as sort of long term trends. We feel we're in a good place without without top 10 top top 20 customers. They are all well.
Customers have a greater handle around how that's impacted your R&D spend plan.
I haven't heard a lot has changed since last year.
Apart from one or two that they are growing and the ones that aren't growing as its more a mix shift change rather than anything else and then even even though we're seeing more of the of the business that they wanted to go into albeit it's.
I think there's some genuine concern from from customers around how the organizations are going to handle that.
We have a meeting in a couple of weeks with.
Speaker Change: At a different revenue flow.
Speaker Change: Overall, we feel we feel good I've said it a number of tons. We've we've made progress on the strategic front.
With some of our largest customers.
On the agenda to talk.
Through which we have some external people coming in so we'll get a better handle for thin, but I don't think things have changed dramatically I know thats moved forward in negotiating the pricing we haven't seen it yet.
Speaker Change: With a couple of customers and even and even others in the large pharma space, where we haven't necessarily become a strategic partner with them, we're talking to them about some significant opportunities some of them are not.
Havent seen I don't think thats been necessarily a reason for any budget challenges.
Speaker Change: Some challenges as we all know and.
Speaker Change: That has led to probably more strategic discussions around what we can do and how we can help them to get through some of the short or medium term pain that they have to do so.
At this point. This is either these are changes that are going to take some years to work in and so.
Short entity question Jack is not much change really they remain I think concerned and somewhat challenged spot, but theyre looking at different ways of developing drugs and we've talked about doing it in concurrent doing these developments concurrently rather than in series or a net.
Speaker Change: I know, we often think about win.
Speaker Change: Customers are having a hard time sort of financially that they necessarily cut cost cut spending.
Speaker Change: They can spend in different ways in my experience and some sometimes that can be a significant benefit for us in terms of what they do versus when the running and growing in their revenues are going up as well so hard times produce opportunity for us and Thats certainly proving the case in.
Gives us an opportunity to.
To expand the opportunity to get into market faster in multiple indications versus just waiting and doing it and as I say sequentially. So again, sometimes these these things often these things give us opportunity because we represent.
Speaker Change: And one or two areas on the on the significantly large pharma space.
A possibility of doing things in a different way.
Speaker Change: Great and one follow up.
Thanks, Steve.
Speaker Change: The latest tone, you're hearing around the IRA.
Thank you.
We will now take our next question.
I think there was a lot of.
Speaker Change: Maybe concern or uncertainty around that last year do you feel like.
And this is from the line of Elizabeth Anderson from Evercore ISI. Please go ahead.
Speaker Change: Customers have a greater handle around how that's impacted your R&D spend plan.
Hi, guys good morning, and thanks for the question.
I was hoping to follow up on.
Speaker Change: I haven't heard a lot has changed since last year.
Demand questions have been asked I think obviously one thing you will continue to be worried about.
Speaker Change: Do you think there's some genuine concern from from customers around how the organizations are going to handle that.
The overall pharma spending environment, whether it's.
Specifically related or something else.
Speaker Change: We have a meeting in a couple of weeks with.
Yes.
You had that.
Speaker Change: With some of our largest customers.
This is a partnership that night.
Speaker Change: On the agenda to talk.
Can you talk about sort of the level of visibility on your strategic partnerships with large pharma and how kind of.
Speaker Change: Through which we have some external people coming in so we'll get a better handle for it then but I don't think things have changed dramatically I know thats moved forward in negotiating the pricing we haven't seen it yet.
<unk> help you get a sense of sort of.
Where their pipelines are going to help give people a little bit more confidence in the trajectory there. Thank you.
Speaker Change: Havent seen I don't think thats been necessarily a reason for any budget challenges.
Yes.
Yes.
Speaker Change: At this point. This is either these are changes that are going to take some years to work in and so.
I think with our strategic partners Elizabeth we do get some visibility on their pipelines.
Speaker Change: Sure the entity question Jack.
Outages of that partnership we know what's coming down the Pike, we know what therapeutic area, we need to do.
To ramp up in <unk>.
And through.
<unk> and <unk>.
Series Senior steering committee meetings, we're able to.
Yes.
Work out where we need to be as a partnership.
Im not hearing again at this stage any any further concerns on.
On funding or on your R&D spend if anything.
Based on the RFP opportunities, we've got over the last couple of months.
And even last quarter last year in the second and third quarter was strong as well, we're seeing more opportunities.
I guess I keep saying it but.
If their budgets become perhaps a little bit more constrained or they watch where they're spending their dollars.
They do appear to becoming more open to.
Outsourcing and outsourcing EBIT more than they're doing at the moment.
I can't add much in terms of where that where the budgets are and whether it's an increase or decrease we see.
We read the same data you do in terms of modest increases in R&D spending over the.
The medium to long term, but it's how the how that money is allocated is really what's important Watson.
Jack Meehan: Nice to see can you talk about sort of the level of visibility on <unk> on your strategic partnerships with large pharma and how kind of you <unk> you BB. They help you get a sense I've sort of where their pipelines are going and help give people a little bit more more confidence in the trajectory there. Thank you.
Anything I think we're seeing more opportunity in terms of the dollars that are outsourced and the opportunity to penetrate further the debt.
That market.
Got it that's super helpful. Thank you very much.
Okay.
Thank you.
Speaker Change: [noise], Yeah, you know.
Well now move to the next question.
Please standby.
Speaker Change: I think with a strategic.
Jack Meehan: Elizabeth we do get some visibility on on the plotlines.
This is from the line of David Windley from Jefferies. Please go ahead.
Hi, Hi.
Jack Meehan: <unk> partnership, we we know what's coming down the Pike, we know what therapeutic care of we need to to ramp up in.
Good morning, good afternoon, Thanks for taking my questions I wanted to explore.
Margin a little bit first just talking about.
Jack Meehan: Through you know <unk> <unk> theory send you a steering committee meetings were able to.
The FSP shift.
<unk> highlighted that it is very gradual I get that.
My sense is that.
Jack Meehan: To work out where we need to be as a as a partnership.
And at least what I'm aware of is that at the gross margin level.
Jack Meehan: I'm not hearing again at this stage any any further concerns on the on on funding or on the on the around the spent if anything based on the RFP of opportunities. We've got over the last couple of months, there's even lost <unk> lost you in the second and third call. It was strong as well.
Margin difference between full service and FSP would be.
Quite a bit wider and then it maybe at the EBITA margin level, you get to that two to 300 basis points of margin difference because the SG&A load on FSP is lower you could correct me if I'm wrong there so.
Yes, I wanted to understand maybe if you could quantify from a percentage of revenue basis, how gradual is this shift.
Speaker Change: You know, we're seeing more opportunity. So you know I I guess I keep saying it but you know as their budgets become perhaps a little bit more constrained or they watch where they're spending their dollars. They they.
FSP such that.
Speaker Change: Do appear to becoming more open to you know to out sourcing and that sort of thing even more than they are doing at the moment. So you know as I said I I can't add much in terms of what where the where the budgets are and whether it's an increase or decrease we see that we read the same day that you do in terms of modest increases in R&D spending over.
Or you still think you can keep the gross margin at around 30%.
Well I'll leave it there.
Come back with a follow up.
Hey, Dave.
A crack at that one to start off with.
As you said it is a gradual process.
As we think through the impact of.
Speaker Change: The medium to long term, but it's how that how that money is allocated is really what's important to us and if anything I think we're seeing more opportunity in terms of the dollars that are outsourced and the opportunity to penetrate full of the the vet Mark.
Yes.
Let's be honest as well and before we.
We said in the start of this year actually if anything the scales probably shift more towards the full service piece in terms of the opportunity that's out there. So I don't think I'd start off by saying, we've seen trends moving from full service to FSP in the past I don't know if this is structurally any different from the trends we've seen in the past where some folks move in one direction.
Speaker Change: Yeah, that's super helpful. Thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: But now to the next question.
Speaker Change: Okay standby.
Speaker Change: The system the line of David wouldn't leave from Jeffrey <unk>.
Moving the other direction. So that's probably the first important point to make I think your commentary is not incorrect in terms of by the time you get to EBITDA, It's minimized and we've talked about the fact that in excess of 20% of our business is in that kind of FSP.
Speaker Change: [noise] Hi, good morning. Good afternoon. Thanks for taking my questions I wanted to explore.
Speaker Change: Margin a little bit first just in talking about the.
Speaker Change: The F. S. P shift you've highlighted that it is very gradual I get that.
Share of our revenue portfolio.
Speaker Change: I my sense is that.
We don't see it moving materially enough as opposed to really shift the gross margin piece, there and certainly in terms of what we can do as we've talked about the efficiency as we drive through good utilization of our workforce through the use of automation in terms of balancing out of that any any kind of mix shifts that we have there. So I think we're good.
Speaker Change: At least what I'm aware of is that at the gross margin level the.
Speaker Change: The margin difference between full service and F. S P would be.
Speaker Change: Quite a bit wider and then it maybe at the the EBITDA margin level, you get to that two to 300 basis points of margin difference because he SG&A load on F. S. P is lower you can correct me if I'm wrong there so.
The organization, we've been doing FSP for a long time I think.
Speaker Change: I guess I I wanted to to understand maybe if you could quantify from a percentage of revenue basis. How gradual is this shift.
<unk> at how we deliver on our FSP contracts to the point that we can manage this and manage that growth.
But I do think it's important to note that I don't think I mean, I'm not even sure we'll see a material shift.
Speaker Change: F S P such that.
In terms of the percentage year over year from $23 24 in terms of the FSP FSP business.
Speaker Change: You're you know you're still thank you can keep the gross margin at around 30%.
Speaker Change: Well I'll I'll leave it there and come back with a follow up.
It is gradual and it will take time and as I said, we've got other people going the opposite direction as well we've got people moving away from FSP towards full service. So obviously not going to be that maybe the granularity you'd like but I do think we're very comfortable with as we get through the course of this year being able to maintain those gross margin profiles overall and being efficient as.
Speaker Change: [laughter].
Speaker Change: Take a crack at that one to start off with as you said it is a gradual process you know and as we think through the impact of in this and let's be honest as well in the <unk>.
Speaker Change: We sat in the start of this year I actually if anything discounts probably tipped more towards the full service piece in terms of the opportunity. That's out there. So I don't think I'd I'd I'd start off by saying, we've seen trends and moving from full service FSP in the past I don't know if this is structurally any different from the trends we've seen in the past where some folks movement.
An organization and very accustomed devote models to be able to drop that margin improvement that we talked about 50 bps to the EBITDA line.
Got it okay.
And I did note that you said that the incremental partnership was full service so that probably factors in.
My follow up question.
Is around the automation I mean in in so much as.
Speaker Change: Directions of those live in the other direction. So that's probably the first important point to make I think of your your commentary is not incorrect in terms of by the time he gets EBIT diets.
Notwithstanding your answer this trend of.
Multiyear trend toward FSP.
Speaker Change: Minimize and we've talked about the fact that you know in excess of 20% of our businesses and that kind of you know FSP.
Offsetting that with automation teams.
Particularly important in the improvement in your hours of automation seems pretty strategic and critical to your margin expansion strategy over the long term so kind of a two parter here.
Speaker Change: Sure of our of our revenue portfolio I mean, we don't see it moving materially enough as opposed to really shifts the gross margin peace. Sir certainly in terms of what we can do as we've talked about the efficiencies. We drive through you know good utilization of our workforce through the use of automation in terms of balancing outside.
One could you give us a sense of the cost of an automation hour versus the cost of labor hour and two in so much as you finished the fourth quarter of 'twenty three higher than you expected and so the full year U in air quotes kind of.
Speaker Change: Any kind of mixed shifts that we have there. So I think we're good organization, we've been doing half as P. For a long time, I think we're efficient and how do we deliver on our FSP contracts to the point that you know we can manage this and manage that growth.
Pulled forward 20 basis points of margin expansion to 23 to the full year of 'twenty three.
Speaker Change: But I do think it's important to note that I don't think I mean, I'm not even sure was immaterial shift.
Getting to 50 basis points is really more aggressive than our more aspirational than when you gave that guidance for the first time in maybe give us the comfort that you still think that 450 basis points is achievable. Thank you.
Speaker Change: In terms of the percentage a year over year from 23 24 and in terms of the FSP non FSP business and so it is gradual and it will take time and and as I said, we've got other people going the opposite direction as well, we got people moving away from FSB towards full service. So obviously not going to do it maybe the granularity like but I do think we're very comfortable.
I'll start and maybe Dave.
The way we measure those hours that were talking about the equivalent hours that people would do so.
Speaker Change: With.
Speaker Change: As we get through the course of this year being able to maintain those gross margin profiles overall and being efficient as an organization and very accustomed to boat models to be able to drop that margin improvement that we talked about 50 <unk>.
This was a.
<unk> work, we're talking about removing those hours from the organization. So when we talk about it like the $2 million, we're talking about 2 million hours of kind of labor time removed from the organization I don't know if I have.
Speaker Change: Got it Okay and I did note that you said that the the incremental partnership was full service so that probably factors in.
<unk> IRR.
<unk> ratio for you that I can quickly gave unfortunately, but what we're talking about is.
Very substantial amount of hours all of our average labor costs removed from the organization and that's the target we think about it in terms of how we measure that as an organization and then also how we set a target I mean, obviously 2 million hours of People's Labor time, even if you say take a blended rate and look at our different geographies around the world and even if you said that this was occurring in lower cost geographies is where you take the <unk>.
Speaker Change: My follow up question.
Speaker Change: Is around the automation I mean in in so much as.
Speaker Change: Notwithstanding your your answer this trend of of multiyear trend toward FSP.
Speaker Change: Offsetting that with automation seems.
Speaker Change: Particularly important and the improvement in your hours of automation seems.
Automation out even if you made all those caveats youre talking about very substantial savings as a result of this type of automation and so we do think youre absolutely right. It is an important and strategic element of our gross margin development.
Speaker Change: Pretty strategic and critical to your margin expansion strategy over the long term, so I've I've kind of a two parter here one could you give us a sense of the cost of an automation hour versus the cost of labor hour and two in so much as you finished the fourth quarter.
Something that we will be continuing to focus on over time on the second bit and then I'm sure Steve will want to chime in as well, but on the second piece I.
I think you know us well enough Dave at this point to note that we generally don't talk about targets that we feel we kind of hit.
Speaker Change: Of 23 higher than you expected and so the full year.
We still do think that 50 bps is right you are quite right. We ended up better than we thought we would.
Speaker Change: You you and air quotes kind of pulled forward 20 basis points of margin expansion to twenty-three to the full year of twenty-three.
And so that's a more ambitious target as I've said earlier in the call I think it's more around kind of keeping that gross margin in that Turkey ballpark.
Speaker Change: Getting to 50 basis points is really more aggressive than are more aspirational. Then when you gave that guidance. The first time and maybe give us the comfort that you still think that full 50 basis points is achievable. Thank you.
Im seeing continued leverage on our SG&A and is of course.
You saw in absolute dollar decrease in 'twenty two to 'twenty three of $25 million on our SG&A. So we have we've got a great experience there and an amazing team that helps us deliver that leverage and it's that kind of leverage we're looking for not quite that level of leverage we don't need to absolute dollar drop as we go into 'twenty four, but we certainly need to see the <unk>.
Speaker Change: I'll I'll start maybe Dave I suppose the way we measure those hours they were talking about their the equivalent hours that people would do so if if if this was a a job of work we're talking about removing those hours from the organization. So when we talk about it like the 2 million, we're talking about 2 million the hours all of this kind of labor time removed from the.
Majority of the leverage on the 50 bps coming from SG&A over the course of the year and I think we've got a good plan to achieve that and I'll stay with you on that.
Speaker Change: Organization I don't know if I have.
Hello.
Speaker Change: A boss or you know ratio for you that I can quickly.
Alright. Thank you I do know you to be very good at that Youre right.
Speaker Change: Slightly but what we're talking about is Ah.
You bet.
Speaker Change: Very substantial amount of hours all of our average labor costs removed from the organization and not the Tiger, we think about it in terms of how we measure that as an organization and I'd also how we set a target I mean, obviously too many in areas of People's Labor time, even if you say take a blended race and look at our different geographies around the world and even if you said that this was occurring in lower cause Starbucks is where he was like the autumn.
Thank you.
We will now take our next question.
And this is from the line of Max <unk> from William Blair. Please go ahead.
Hey, good morning, good afternoon, and thanks for taking our questions. Just a couple of quick ones from me here. So on directly versus passenger revenue I think it's been a couple of quarters now we're past the revenue has been a pretty meaningful headwind on the top line. Just wondering if you can give us direct fee revenue growth in total for 2023 versus pass throughs and then what you have embedded for each of these buckets in the topline guide for <unk>.
Speaker Change: <unk>, even if you made all those caveats you are talking about very substantial savings as a result of this type of automation and so we do think you're absolutely right. It is an important strategic element of our gross margin development and something that we will be continuing to focus on overtime on the second bit and then I'm sure Steven wanted unlimited as well, but I'm a second piece.
24, now let's go ahead and ask my follow up since its related how much of the margin improvement. This year came from that mix shift to direct fee revenue and then how are you thinking about the impact to margins from this potential mix shift in 2024. Thank you.
Speaker Change: You know I think he knows well enough Dave at this point to know that we generally don't talk about the topic.
Speaker Change: What's that we feel we kind of hit [laughter]. So we still do think the 50 bps is right you're quite right. We ended up better than we thought we would and so that's that's a more ambitious target as I've said earlier in the gall I think it's more around kind of keeping that gross margin and that Turkey.
Max I'll, maybe give a crack in terms of the 22 or 23 piece I'm, obviously, you talked about the right fee being more in the high single digits.
As you can say well you obviously can read what we did from a pass through inclusive number for the full year. So yes, there was.
A continued headwind from pass throughs, we came through the course of 2023.
Speaker Change: Park, and seeing continued leverage on our SG&A in it of course, but you know you you saw in absolute dollar decrease in 22 to 23 $25 million on our SG&A. So you know we have we've got a great experience there in an amazing team that helps us deliver that leverage and it's not going to leverage we're looking for not quite that level of <unk>.
That has been somewhat of the consequence of the kind of vaccine and then moving more towards.
Our more traditional let's call it a therapeutic mix of of more oncology more orphan type therapies have longer durations.
And so we've seen that at the hydro and over the last couple of years.
Speaker Change: We don't need to absolute dollar drop as we go into 2004, but we certainly need to see the vast majority of that average on the 50, that's come from SG&A over the course of the year and I think we've got a good plan to achieve that and I'll stay with you on that that'd be good.
<unk> to 'twenty three.
We do feel like we're coming.
We're getting to the shorter guards on that we talked about our.
Yes.
The mix of that probably still being to some extent that headwind as we go into 'twenty four but not to the same extent.
Speaker Change: You're right. Thank you I do know you to be very good at that you're right [laughter].
As we've seen in 2023, particularly and we've also talked about our expectation around our coal with non Covid mix, it's probably not dissimilar in the 2% to 4% range vote in 'twenty three 'twenty four.
Speaker Change: Thank you well.
Speaker Change: Now take our next question.
Speaker Change: And that's just from the line of Max Smart from William Black. Please go ahead.
Yes, we would like to think it will step down a little bit in terms of a headwind as we go into 'twenty four but of course, we'll see how that plays out during the course of the year and we'll give you more granularity on that as we go through the second part of the question, sorry, I didn't screw with them.
Max Smart: Hey, good morning. Good afternoon. Thanks for taking my questions. Just a couple of quick ones for me here. So underactive versus passenger revenue I think it's been a couple of quarters now or pass through revenue has been a pretty meaningful headwind on the top line. Just wondering if you can give us directly revenue growth in total for 2023 versus pass throughs and then what you haven't been in for each of these buckets on the top line guide, which one.
Mix shift we've talked about yes, exactly we will give you I think as we go through the course of the year that mix shift will give you a bit more granularity.
Speaker Change: 24, and then I'll just go ahead and ask my follow up since it's related how.
Sounds good thank you.
Speaker Change: How much of the margin improvement this year. It came from that next shift to direct the revenue and then how are you thinking about the impact margins from this potential make shift in 2024. Thank you.
Thank you.
We will now take our next question.
And this is from the line of Ann Hynes from Mizuho Securities. Please go ahead.
Speaker Change: <unk> I'll I'll, let me give it a crack in terms of the 22 over 23 piece I'm, obviously, we talked about the right Phoebe more of the high single digits.
Hi, Good morning, I, just wanted to focus on capital deployment.
Prepared remarks, you talked about M&A do you have in announced M&A and your guidance would be my first question.
Speaker Change: And as you can see you obviously can read what we did from a passenger intrusive number for the full year. So yeah that was that was it.
Speaker Change: And continued headwind from pass through as we came through the course of 2023.
Second question would be any types of assets youre looking for that maybe.
Speaker Change: You know that that has been somewhat of the consequence of the kind of vaccine and then moving more towards Ah are more traditional let's call. It a therapeutic mix of of more oncology more often type therapies have longer durations and that's all we have seen that as a hydro and over the last couple of years, you know, it's something peculiar to <unk>.
Need to bulk up and then with the share repo that's I know that's not in guidance.
How do you balance M&A versus share repo for the sure.
Okay.
The answer to your question is no and the first question anyway, we don't have any.
M&A in our guidance.
Just to be clear on that.
Speaker Change: 83.
In terms of your M&A.
Speaker Change: We do feel like we're coming.
Alright.
Speaker Change: Getting to the shorter yards on that we talked about our.
M&A, the previously announced M&A, obviously isn't there from pillar and Thats right, Yes, yes, yes, that's in there.
Speaker Change: The mix of that probably still being to some extent the headwind as we go into 24, but not to the same extent as we've seen in 2023, particularly and we've also talked about our expectation around or cold with non Covid makes it is probably not dissimilar in the 3% to 4% range voting twenty-three on in 24.
Previously announced yet, but there is nothing new in that.
In terms of how we're looking at share buyback, we're in kind of a pivotal point with the organization. We've done I think a very good job.
And paying down our debt or two times adjusted EBITDA now that's a good place to be and quite frankly, we want to be we want to remain within kind of one five to $2. Five so so as we we have some potentially we're still going to make another payment this quarter in terms of.
Speaker Change: So yeah, we would like to think it will step down a little bit in terms of a headwind as we go into 2004, but of course, we'll see how that plays I've turned the corner of the year and we'll give you more granularity on that as we go through the <unk>.
Speaker Change: Second part of the question, sorry, I didn't screw up with them.
Our debt will.
Speaker Change: Let me shift we talked with yeah exactly will give you I think as we go through the course of the year that make shift will will give you a bit more granularity.
We will be working hard to restructure that and get ourselves into a situation of certainty on what our interest payments will be and we talked about the $100 million improvement a reduction in interest rate spreads.
Speaker Change: Sounds good thank you.
Speaker Change: Thank you.
Speaker Change: Well now take our next question.
Rights fees from 2024 versus 2023.
Speaker Change: And this is from the line of <unk>. Please go ahead.
And as we as we do that was removed and particularly as we get towards the second half of this year. The M&A area is going to be is becoming much more important. So we are actively looking at the moment because these things take a little time at a number of areas on the M&A front, we've talked about being getting building out a <unk> network.
<unk>: Hi, Good morning, I, just want to focus on capital of the appointment.
Speaker Change: Sandra Block you talked about M&A do you have an announced M&A and your guidance would be my first question.
Spring stronger in that space.
<unk>: My second question would be maybe types of assets you are looking for that maybe they need to bulk up.
The labs represent an opportunity for us whether it be in the specialty labs or the central lab.
Our lab is not within the top three at the moment wed like to be within the top three and so we see some opportunity there and then there were some other brand sites and patients.
<unk>: And then with a Chevy piled up now I know that sign guidance.
<unk>: How how do you balance M&A versus Shaneyfelt for this year.
<unk>: Okay.
Services around pumps considered services around so even even areas like devices. There are a number of areas. We're looking at very hard from an M&A that remains as we get and restructure our debt and move forward with that the M&A becomes our priority for capital deployment the share buyback is there and we've received authorization.
Christians: Christians know in your first question anyway, we don't have any any any M&A.
Christians: <unk>.
Speaker Change: Just to be clear on that.
Speaker Change: In terms of your lemonade Alright Disneyland.
Speaker Change: The previously announced M&A, obviously isn't there from the camera and.
Speaker Change: That's right, yes, yes, yes, that's in there.
From the board to do that and we will deploy that we'll use that as and when we see fit opportunistically and particularly if we don't find anything.
Speaker Change: Previously announced yes, but there's nothing new in this.
Speaker Change: In terms of how we are looking at.
Speaker Change: Back where a ton of a pivotal point with the organization. We've done I think a very good job and and paying down at dead or two times adjusted EBITDA now that's a good place to be and quite frankly, we want to be you know we want to remain within 1.5 to 2.5. So it so as we we have some.
On the M&A front.
We feel we can execute effectively.
At a reasonable price, but at the moment.
We feel there are some opportunities out there.
Bye.
Organizations and capabilities that really fit with our organization to fit with our capabilities and really allow us to prosecute clinical trials faster better and more efficiently for customers and that remains the absolute priority.
Speaker Change: We you know we still get to make another payment. This quota in terms of the amount that we.
Okay and just on your revenue guidance there is a wide range.
Speaker Change: You'll be working hard to restructure that and get get ourselves into a situation of certainty on what our interest payments will be and we talked about $100 million improvement <unk>.
Can you just go through what gets you to the low end and what gets you to the high end part of that debate.
Various factors.
Speaker Change: A reduction in interest rate.
Yes.
Speaker Change: Fees for 2024 versus 2023, and as we as we do that with removes particularly we get towards the second half of this year the the <unk> area.
I'll take that on.
There is a wide range and will be narrowing that as we go through the course of the year.
And we may even think about that in quarter one quarter two.
I think we're still looking at a market.
Speaker Change: Is becoming much more important and so we're actively looking at the moment because these things take a little time at a number of areas on the M&A front, we've talked about.
Certainly when we set the guidance that we had some some element of uncertainty in it.
We were trying to really reflect that there are obviously some opportunities Steve made reference to the fact that there could be some additional vaccine work that could burn quickly through that and that might help us to get up into the higher end of the range.
Speaker Change: Getting building <unk> network, but he was being stronger than that sponge.
Speaker Change: The labs represent an opportunity for us whether it be in the specialty labs or the central lab.
Speaker Change: So.
Likewise, there's always the risk of cancellations in this nature of the business. That's just the nature of the world right. So as we get more certainty certainly will be narrowing that range as we get into and through the year, but certainly I would always say to people. When asked mid point is as good a place as any right. So if youre trying to do your modeling thats, what I intended to.
Speaker Change: Our lab is is not within the top three at the moment, we would like to be within the top through so we see some opportunity and then there was some other little grand sites and patience.
Speaker Change: Services around pumps concierge services around so even even areas like the boss is there are a number of areas. We're looking at very hard from an emmet.
Speaker Change: Reminds as we get and restructure audit move forward with that the M&A becomes our priority for capital deployment does she had bought back is there and we've as I received authorization from the board to do that and we will deploy that will use that as and when we see fit opportunistically, particularly if we don't find anything.
Okay, great. Thank you.
We will now take our next question.
This is from the line of Jack <unk> from Guggenheim Partners. Please go ahead.
Hey, Thanks for taking my question I'll keep this brief I was just wondering given the.
Market dynamics to the pressures facing your customers, particularly the largest one so if there is any incremental appetite utilizing risk based monitoring.
Speaker Change: On the M&A from that we that we can still we can execute effectively in at a at a reasonable price, but at the moment.
Speaker Change: We feel there are some opportunities out there to buy.
We'll follow up to that if some of your investments in AI that could be an accelerant to that thank you.
Speaker Change: Translations and capabilities that really fit with our organization fit without capabilities and really allow us to prosecute clinical trials foster better and more efficiently for customers and that reminds the absolute priority.
Okay. So Jack <unk> is there any incremental appetite for risk based monitoring based on some of the financial challenges I mean, I wouldnt necessarily associate risk based monitoring with financial challenges I mean risk based monitoring is part of what we do on a normal on a normal basis now.
Speaker Change: Alright, and just hang around your guidance there is a wide range and can you just customer what gets you to the low end and what gets due to the high end or that doesn't pay varying factors.
Focus our attention and our resources on site, so patients or areas of the data collection process that has the greatest risk.
Speaker Change: Yeah, I'll I'll take a.
Speaker Change: There is a wide range and will be narrowing that as we go through the course of the year with whatever and we may even think about that in a corner. One. According to you know I think we we're still looking at a market certainly when we set the guidance.
We use, particularly offsite and ROIC.
Technology, some of our newest RC technology to identify.
Data.
Perhaps needs further scrutiny.
It is a more efficient way of doing it so to that extent you are getting.
Speaker Change: Had some some element of uncertainty in it and we were trying to really reflect that there are obviously some opportunities you know Steve made reference to the fact that there could be some additional vaccine worked I could burn quickly through that and that might help us to get up into the higher end of the range and likewise, there's always the risk of cancellations in this nature of the business. That's just the nature of the world right. So.
We're spending our customer's dollars more effectively and more efficiently.
A it in those terms rather than as a cost reduction why it's doing is it's just a more effective way of.
Deploying dollars around the clinical monitoring processes.
To put it.
Does that answer your question on the risk Yeah, no that does I appreciate it. Thank you.
Speaker Change: As we get more certainty certainly will be narrowing that range as we get into into the year, but certainly I would always say to people. When asked midpoint is as good a place as any right. So if you are trying to do your modeling, that's where I'd I'd send it to.
Yes.
Thank you.
We'll now take the next question.
Your line of Dan Leonard from UBS. Please go ahead.
Speaker Change: Okay, great. Thank you.
Speaker Change: Mm Bye now take our next question.
Thank you just a couple of cleanups first off on the Covid work can you remind me what percentage of your backlog at this point is COVID-19 and how you expect sales to trend in 2024.
Speaker Change: This is from the line of <unk> partners, Please give a heche.
Speaker Change: Okay. Thanks for taking my question I'll keep this brief I was just wondering given the.
Hey, Dan their bottom line in terms of the backlog.
Speaker Change: Market dynamics to the pressures facing your customer, particularly the largest one so if there's any incremental appetite utilizing gridspace monitoring and if.
Percentage of revenue in that range of 3% to 4% for the full year.
Thank you and the other clean up could you give us an acquisition sales contribution figure in the quarter. If you did I missed it from the deals you've already announced and then how much is in that 2024 guide.
Speaker Change: The follow up to that is that some of your investments in AI that could be an accelerant for that thank you.
Speaker Change: Okay. So <unk> is there any incremental appetite for risk based monitoring based on some other financial challenges I mean, I wouldn't necessarily associate risk place monitoring with financial Joneses <unk> monitoring is part of what we do on a normal on a normal basis now where we folk.
It's not huge I mean circa 10 in the quarter it'll be in that ballpark for the full year in terms of 10 a quarter.
Earl.
Thank you.
Thank you.
We'll now take the next question.
Speaker Change: Our attention and our resources.
This is from the line of debit to Bruin from Bank of America. Please go ahead.
Speaker Change: So patients all areas of the data collection process that has the greatest risk.
Hi, Thanks for taking the question. This is micro skin on for Derek.
Speaker Change: And we use particularly offside.
Speaker Change: C technology, some of our newest artsy technology to identify.
A couple of minor cleanups.
One is just could you clarify exactly what the pricing assumption is for 'twenty four I know you talked about price quantitatively, but if you could quantify it and then also on the interest expense the $100 million.
Speaker Change: Data that perhaps need further scrutiny.
Speaker Change: And it is a more efficient way of doing it so to that extent you know you're getting you were spending customers dollars more effectively and more efficiently.
Year over year, all of that makes sense and you talked about some of the payments coming in over the course of the year, but just anything on on pacing as we go through the year just from modeling when should we when and how should we paced out through the year.
Speaker Change: Think of it in those terms rather than as a cost reduction why it's doing it's just a more effective way of of deploying dollars around the clinical monitoring process is would put it.
Speaker Change: Does that antique with on the risk yeah, no that does I appreciate it. Thank you yeah.
On the pricing piece, Mike it very much depends there's no straight answer to that one of course, we have inflationary increases in most of our contracts and we have those negotiations with our customers to start the year. They obviously follow kind of CPI index in terms of inflationary pieces. So that's a conversation that happens every year.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Take the next question.
Speaker Change: In the line of <unk>. Please go ahead.
Speaker Change: Thank you just a couple of cleanups first off on the Covid work can you remind me what percentage of your backlog at this point is COVID-19 in how you expect sales to trend in 2024.
Aggressive around this time of the year again, but each new business will depend on the individual customer on on the on the 100 million of that I mean, I would say probably more back ended we wanted to try to get.
Speaker Change #100: Hey, Dan their their bottom line in terms of the backlog in a percentage of revenue in that range of three to four per cent for the full year.
All of this sorted out in H H.
H, one so I would say stepping down quarter by quarter, but probably more dramatically in the second half.
Speaker Change #101: Thank you and the other clean up can you give an acquisition sales contribution figure in the quarter. If you did I missed it from the deals you have already announced and then how much is in that 2024 guide.
Thanks, guys.
Thank you.
And we have one more question.
This is from the line of Casey Woodring from Jpmorgan. Please go ahead.
Speaker Change #102: Oh, it's not huge I mean.
Great Hi, Thank you for squeezing me in.
Speaker Change #102: 10 in the quarter it'll be in a bulb.
Lots been asked but wanted to follow up on the strategic partnership questions. Just wondering how many of those types of partnerships you have now.
And is there a way to size this new opportunity that you called out this quarter and then the total opportunity of those partnerships in aggregate and then also just what gives you a full service offering a competitive advantage in winning those types of partnerships.
Yes.
Just to just a minor question at the end of the.
Casey as a competitive advantage of us as an industry.
Let me start with the strategic partnership Bob Yes.
Not ready to sort of.
Sort of size it.
We think of these things as being at least.
Timidly at least at the sort of $200 million in revenue annually.
Our expectation is as you become a strategic partner with a with a top 20 top 30 pharma company I don't have a number for what the entire strategic partnerships.
Give us a bit.
On the top of my head.
We are what we would call strategic with.
A significant majority of the top 20 pharma companies.
And I think we talked about when we put together with PRA 18 months ago 20 months ago, I think we have 13.
We've advanced that by several now it's something like 16 also so we've made some significant progress and importantly, there are a number of companies. While we haven't necessarily signed an MSI will become we are talking to them and we are getting opportunities from them. So often this is a process that can take.
A year or two not just.
To win the partnership would to be to be considered a strategic partner, but ultimately as the business ramps up with it. So I think these are things that aren't going to have a sort of an immediate impact on our on our revenues, but we are seeing certainly opportunities.
To be quite honest starting to drive those RFP improvements.
That I talked about.
In terms of competitive advantage.
Whereas we're a scale player now and our union with PRA and Thats now, let's say 20 months.
Go is or that was more like 30 months ago.
A 21 is made.
Made a major contribution to that I would say the people that we brought on have made a major contribution to our organization.
As a as a scaled player within the clinical development space. We have the technology, we have that those resources that depth and breadth of the capability we have.
The platforms the.
Decentralized platform.
And that really gives us a ticket to the table pretty much every time there. So there were very few of these with the partnership discussions were excluded from whereas.
Our consumer group by five years ago, and say, we probably didn't make it to the table.
In a number of instances and so.
That's that's changed now in terms of specific advantages over our bigger competitors.
I would say our site network is is one that gives us.
Some opportunity.
And I think the <unk>.
Technology that we have and that we've been able to deploy around our site network. We had one one search.
Some of the technology that we've been public about as well is also giving us some advantage over it and then and then you look at the mix of services, we have a functional services group is a significant one.
Full service is a significant one the focus that we have in the biotech segment versus the all of those things I think are important as we contemplate strategic partnerships with.
With large companies and as we compare ourselves against.
Our competitors are larger competitors, everyone has something.
And at our business, it's a multifactorial. So there's no one sort of key advantage that puts your head with no intellectual property or anything like that for us. Unfortunately, we have to we have to rely on our whitson our brines in the.
As we make on the <unk>.
Number of factors, even down to the project manager, who runs who runs the project.
So there are lots of things that.
Important for us as we as we go up whether it be a strategic partnership.
A normal project.
They're all important and we think we compete very well in that space now.
Thank you.
Okay.
Okay. So I think thank you operator, I think we're done with the questions appreciate it.
Questions from everyone. So thank you for joining the call today.
Continued interest in your NPL continued interest in Icahn. We're excited certainly very excited for the opportunity ahead. We believe we're in a really pivotal point in our company's development now and I think thats been evidenced by some of the things. We've some of the comments we made today around those strategic partnerships and the opportunities that we have.
Going forward. So thank you for the.
For the questions and have a good day.
So real so that there's no one sort of key advantage that put your head no intellectual property or anything like that for us. Unfortunately, we have to we have to rely on our whitson our brines in the <unk>.
Decisions, we make on a number of factors even down to the project manager who runs it runs the project.
So there are lots of things that that are important for us as we as we go up whether it be a strategic partnership or a normal project.
All important we.
We think we compete very well in that space now.
Thank you.
Okay.
Okay. So I think thank you operator, I think we're done with the questions appreciate it.
Questions from everyone. So thank you for joining the call today. Your continued interest and your NPL continued interest in <unk> and we're excited certainly very excited for the opportunity ahead. We believe we are at a really pivotal point in our company's development now and I think thats been evidenced by some of the things with some of the comments, we made today around our strategic partnerships and the APA.
<unk> is that we have going forward. So thank you.
For the questions and have a good day.
Thank you. This concludes our conference for today. Thank you for participating and you may now disconnect speakers. Please standby.
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