IQVIA Holdings Inc. Price & Performance (IQV)

Good morning, everyone. Thank you for joining our earnings call. With me today are Ari Busby, Chairman and Chief Executive Officer, Ron Grohman, Executive Vice President and Chief Financial Officer Eric Sherbert, Executive Vice President and General Counsel, Mike Biedoff, Senior Vice President, Financial Planning and Analysis Gustavo Peroni, Senior Director, Investor Relations. Today, we'll be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com IQVIA. Before we begin, I'd like to caution listeners that certain information discussed by management during this conference call will include forward looking statements. Actual results could differ materially from those stated or implied by forward looking statements due to risks, and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10 ks and subsequent SEC filings. In addition, we will discuss certain non GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP.

A reconciliation of these non GAAP measures to the comparable GAAP measures is included in this press release and conference call presentation I would now like to turn the call over to our Chairman and CEO, Arun Visi. Thank you, Jerry, and good morning, everyone. Thank you for joining us today to discuss our and full year 2024 results. It was great to see many of you in person at our December Investor Day at [indiscernible] I hope this helps you appreciate the depth and breadth of our offerings. As we showcased product demos and tour some of our industry leading laboratories. In fact, a number of you commented to me afterwards that they left with a deeper understanding of the breadth and depth of our capabilities and how our strategy to improve patient outcomes is being executed. As we close 2024, we delivered solid full year results with revenue growth of 5.5% on constant currency, excluding the COVID revenue step down, Adjusted EBITDA earnings per share growing over 9% and free cash flow of $210,000,000,0.0 which represents growth of 41% versus last year as well as 104% of adjusted net income. I'm very proud of the results the IQVIA team was able to deliver in an industry that faced significant challenges in 2024.

We saw the consequences of the inflation reduction act which led to delayed customer decision making, reduced discretionary spend and portfolio reprioritizations, Additionally, we had a challenging macro environment that persisted with geopolitical unrest Continued high interest rates and inflation, foreign currency headwinds and questions about the impact of political elections in The U. S. And around the world all of which created tremendous amount of noise [indiscernible] In fact, [indiscernible] in our broader industry sector achieved positive growth and IQVIA really stood out as an outperform More specifically, in the we saw that we had strong operational results. Revenue came in above the high end of our guidance range representing about 4.5% growth excluding the impact of ForEx exchange.

And COVID related work. We delivered just under 10% growth in adjusted diluted earnings per share and we achieved a record quarter of free cash flow. On the clinical side, net new bookings for the quarter were over $250,000,000,0.0 And this all highlights the great work that was done by our RMBS team in securing new business contracts This helped mitigate the outsized level of cancellations that did materialize in the quarter just as we had anticipated. Now despite the tough macro environment, the R and D S business in 2024. We successfully renewed all of our large pharma strategic partnerships this past year even as many clients reevaluated and consolidated their alliances. In addition, we established new relationships displaced incumbents and expanded the scope of work in several partnerships positively positioning our business for future growth.

IQVena has partnerships with 22 of the top 25 pharma companies. We made significant advancements in our global health business. For example, we have the World Health Organization control virus outbreaks in Africa We collaborated with the Coalition for Epidemic Preparedness Innovations in Rhonda, so we were able to respond swiftly to a Melbourne virus disease outbreak Finally, we were selected by the Alon Bio Tech client to expedite a vaccine trial for MPOX in Sub Saharan Africa addressing a critical outbreak and unmet medical needs. This all comes to show that whenever there is a crisis, IQVIA is a company public health officials Now moving to TAS.

The growth trajectory materialized just the way we said it would. Low single digit growth in the first half and gradually ramping up [indiscernible] In fact, growth exceeded our expectations in the second half.

Obviously, this was helped by easier compares versus the second half of twenty twenty three but we also had stronger organic demand than expected across all sub segments with real world actually returning to double digit growth. We finished the year with constant currency growth of 5.7%, and about 6.5% excluding the COVID step down. Which was at the high end of our guidance. We expect to sustain this favorable trend into 2025. Reflecting on 2024, we're proud of what we achieved in TAS. A couple of business highlights. We introduced 60 innovations this past year, including 39 AI enabled applications. For example, we introduced IQVIA AI assistance our first ever Gen AI interface allows customers to interact with a growing number of our products and get answers to their questions almost instantly. We launched a number of AI enabled patient offerings including our Patient Relationship Manager, which has already been deployed at 8 clients including 3 top 10 pharma. Our digital business which after now was largely U. S, has begun expanding into Europe, but we've doubled the number of websites publishers and partners that are now integrated into our digital network.

Now, looking at 2025, we are reaffirming the guidance we provided to you at the December Investor Day. On the tariff side, things have continued to recover as we anticipated. On the R and D side, we still have some volatility so we might see another quarter or 2 of fluctuating demand and elevated cancellations. [indiscernible] We think the box of the portfolio of prioritizations at Glauch Pharma has been completed. In fact, we feel good about the R and D as demand environment because leading indicators continue to be For example, Our RFP flow was up mid single digits little higher actually in the EDP segment. Our qualified pipeline is also up with positive growth across all segments. EVP funding, as you noted, was strong through 2024 full year biotech funding was over $100,000,000,000 which is 44% higher than it has been in 2023.

Now we did have much higher cancellations in 2024 than ever before. In fact, nearly 50% higher in 2024 than the average of the previous three years. But our gross new bookings before cancellations for 2024 we're even stronger and up mid single digits at constant currency versus 2023, which led to an end of year backlog of $3,110,000,000,0.0 which is again at constant currency 5.5% higher than a year [indiscernible] Turning to the results for the quarter. Revenue for the grew 2.3% on a reported basis and 3% at constant currency. Compared to last year, and excluding COVID related work from both periods, we grew the top line about 4.5% on a constant currency basis and that included in the quarter about 2 points of cost refunds from acquisitions mostly on the Tata side. Adjusted EBITDA increased 3.1% driven by revenue growth and ongoing cost management discipline, which resulted in 20 bps of margin expansion. Adjusted diluted EPS of $3,.12 increased 9.9% year over year. Let me now give you some color on business activity IQVIA's success is achieved by continuing to raise the bar in innovation every year and investing in highly differentiated capabilities. You saw the recent announcement of our collaboration with NVIDIA to transform healthcare and life sciences to advance AgenTec AI solutions.

AI has the potential to transform our industry. For example, by addressing lengthy and complex processes in clinical trials, or on the commercial side, by helping expedite our diagnosis, and improve treatment adherence by patients. Our collaboration with NVIDIA will help accelerate the introduction of AI agents within our workforce with AI agents essentially becoming digital companions to researchers, HCPs and patients.

Let me give you some more examples of was achieved in the quarter and let me start with TAS. The business is rapidly evolving as we see increasing demand for integrated solutions that combine information, analytics and services. This is enabling us to win much larger longer term deals with our clients because of our unique ability to deliver these combined offerings I'll give you a few examples. IQVIA was awarded a strategic partnership to deliver omni channel marketing solutions to promote a top 10 pharma client's established portfolio. [indiscernible] information, technology and commercial ROCE capability. IQVA is also partnering with a biotech company to launch a new treatment for ovarian cancer which will be our client's first product [indiscernible] This large deal leverages IQVIA's comprehensive commercial capabilities and expertise to execute regulatory process launch and commercial activities. Another EDP client asked IQVIA to support them in launching a new cell therapy for a severe pediatric condition. By providing the full comprehensive commercial infrastructure and that includes field sales, medical and commercial communications, compliance, and OCE. A large pharma client against IQVIA to simplify data management by integrating diverse sources from all over 3 country 30 countries reducing complexity and enhancing efficiency.

IQVIA will support the client's information strategy to streamline operations and centralize its global information into a single standardized system that we will be operating. Moving now to real world.

IQVIA is using advanced AI to support a top 10 pharma client to demonstrate efficacy for a gastric cancer treatment and gain approval in new markets. The top ten fifteen pharma clients chose IQVIA to help track disease and treatment efficacy in support of various regulatory submissions in Europe Let me move now to RDS. I earlier noted the success of our RDS team and want to highlight some notable wins that represent our capabilities across segments therapeutic areas and operational finance. Let me start with Lars Farmer. The top 5 pharma clients selected IQVIA to conduct a complex full service Phase 3 study addressing asthma and COPD patients. We won another full service global Phase III breast cancer study for a top 30 pharma. Another top 10 pharma client awarded IQVIA a large FSP contract. This award is notable because we displace 2 large long time incumbents CROs. [indiscernible] IQVIA was awarded a study to evaluate a novel medical device specifically targeting a cardiovascular [indiscernible] [indiscernible] few notable awards include a critical Phase III oncology study [indiscernible] on our strong data driven approach and ability to manage global complex trials Another global study full service study for another biotech clients for progressive pulmonary fibrosis disease which involves nearly one thousand patients in 26 countries, And again, we're able to win this based on our global footprint [indiscernible] a Phase II trial for rare CNS conditions with limited previous research.

Lots of success in the marketplace with large pharma, [indiscernible] and EVP. Before passing the call over to Ram, for more detailed review of our financial results, I'd like to take a minute to acknowledge and congratulate our employees around the world for their extraordinary work this past year. It was challenging but we delivered.

A great team We also received amazing recognitions throughout the year. I just want to highlight a few. Frosted [indiscernible] Customer Value Leadership Award for Excellence in AI Quality and Regulatory Solutions in Healthcare. Acuvius SmartSol Enterprise QMS was recognized for best use of AI in healthcare by the MedTech Breakthrough Awards. [indiscernible] My GreenLab awarded IQVIA Laboratories the 2024 Race to 0 Leadership Award. For certifying 100% of our laboratory.

We received recognition as a leader in Forbes rules best healthcare and life sciences management.

And lastly, for the eighth year in a row, IQVIA was named 1 of the world's most admired companies in Fortune's annual survey and importantly for the fourth year in a row, IQVIA was named the number 1 admired company in our category of healthcare pharmacy and other services. In addition, HUGA earned number 1 ranking in the categories of innovation, global competitiveness, people management and use of corporate assets. Now Ron will give you more details on our financial results.

Thanks, Ari, and good morning, everyone. Let's start with revenue. Revenue of $39,580,000,00.,000 grew 2.3% on a reported basis and 3% at constant currency. In the quarter, COVID related revenues were approximately $10,000,000 which is down about $50,000,000 versus the Excluding all COVID related work both from this year and from last, constant currency growth was about 4.5%. And as Ari mentioned, acquisitions contributed approximately 2 points of this growth.

Technology and Analytics Solutions revenue for the was $16.58,000,000 dollars which was up 8.3% reported and 9.5% constant currency. R and D Solutions revenue of $2,000,000,001.02 $3,000,000 was down 1.3% reported and 1% constant currency But excluding all COVID related work, R and D S revenue grew over 1% at constant currency.

And finally, contract sales in Medical Solutions fourth quarter revenue of $177,000,000 declined 4.8% reported and 3.2% at constant currencies. Now for the full year, revenue was $154,050,000,00.,000 that's up 2.8% reported and 3.4% at constant currency. COVID related revenue totaled approximately $110,000,000 the year, Excluding all COVID related work from this year and last, constant currency growth and revenue was 5.5% for the year. Full year Technology and Analytics Solutions revenue was $6,150,000,000,.00 that was up 5.1% reported 5.7% at constant currency and 6.5% excluding all COVID related work at constant currency.

Full year revenue in R and D Solutions was $527,008,000 up 1.6% on a reported basis 2% at constant currency, excluding all COVID related work, growth in constant currency in R and D S was over 5%.

And finally, our full year CSMS revenue was $7.18,000,000 dollars down 1.2% reported but up 1.4% at constant currency. As already mentioned in his opening remarks, the 2024 growth trajectory in TAS played out as we anticipated. With improvements every quarter. And we had we experienced a softening in growth rate throughout 2023 due to cautious customer discretionary spending, and we predicted that 2024 would be a turnaround year based on our forward looking indicators in recent history.

In fact, that's what happened. In 2024, cash growth picked up significantly. Finishing the second half with high single digit growth driven by strong mid single digit organic growth.

As you know, TAS is a short cycle part of our business And as we've seen, 2023 gave us early insight into customer stem behavior during the downturn By the same token, we expect that the 2024 turnaround in TAS serves as a good leading indicator of the industry's recovery for 2025.

Smooth down the P and L adjusted EBITDA in the quarter was $996,000,000 representing growth of 3.1% Full year adjusted EBITDA was $36,840,000,00.,000 that's up 3.2% year over year. GAAP net income was $4.37,000,000 dollars in GAAP diluted earnings per share was $0,.42 For the full year, GAAP net income was $1,000,000,003.07 $3,000,000,000 or $7,.49 of earnings per diluted share. Adjusted net income was $5.64,000,000 dollars for the and adjusted diluted earnings per share was $3,.12 that for the full year brought adjusted net income to $2,420,000,000,.00 in adjusted diluted earnings per share to $11,.13 R and D's backlog is December '31 was $3,110,000,000,0.0 an increase of 4.4% year over year and 5.5%.

At constant currency And do you anticipate the question that I think we'll get about the why backlog was flat sequentially versus Recall that the dollar strengthened considerably during the and we have to retranslate the backlog at the end of each quarter for reporting to you. And that knocked about $50,000,000,0.0 off the backlog that retranslation As of December '31, cash and cash equivalents totaled $17,020,000,00.,000 and gross debt was $139,830,000,00.,000 resulting in net debt of $122,810,000,00.,000 Our net leverage ratio ended the year at 3.3x trailing twelve month adjusted EBITDA.

Cash flow from operations was $8.85,000,000 dollars and CapEx was $164,000,000 resulting in free cash flow of $7.21,000,000 dollars for the quarter. A record for quarterly free cash flow. For the full year of free cash flow, was $2,140,000,000,.00 as already set up 41% year over year. Now you note that in the quarter, we repurchased $11,500,00.,000 of our shares bringing our full year share repurchase [indiscernible] the ITB Board of Directors replenished the share repurchase authorization. By $2,000,000,000 which increases the total remaining authorization to Let's turn to guidance. For the full year, we're reaffirming our 2025 outlook, which is for revenue growth at constant currency ex COVID of 4% to 7% adjusted EBITDA margin expansion of up to 20 basis points, and adjusted diluted earnings per share growth of 5% to 9%.

This translates into total revenues between $157,250,000,00.,000 and $16,150,000,000,.00 which includes just over $100,000,000 step down in COVID related work which is entirely in R and D and of which 75% will be in the and 25% second half.

We expect 100 to 150 basis points of of contribution from M and A activity and an FX headwind should rates continue of approximately 150 basis [indiscernible] versus 2024.

Our adjusted EBITDA guidance is $3,000,000,007.06 $5,000,000,000 to $38,850,000,00.,000 and adjusted diluted EPS guidance is $1,1.7 to $1,2.1 This includes about $6.75,000,000 dollars of net interest expense approximately $5.75,000,000 dollars of operational D and A, an effective income tax rate about 18.5% and an average diluted share count of approximately 178,000,000 shares.

The guidance also assumes $2,000,000,000 of cash deployment split between acquisitions and share repurchase, And finally, the guidance assumes that foreign currency rates as of February '5 continue for the balance of the year. Now in segment level, guidance is also unchanged for TAS, RDS, We expect TAS revenue to grow 5% to 7% at constant currency, which translates into $630,000,0.0 to $650,000,0.0 I note we'll have easier comps in the first half than the R and Ds revenue is expected to grow 4% to 6% at constant currency ex COVID which translates into $870,000,000,0.0 to $890,000,000,0.0 revenue this guidance includes over $100,000,000 of step down in COVID related revenue that represents about 100 basis points of headwind to R and D growth rate. We anticipate that R and D S growth rates will be lower in the and improve sequentially thereafter.

A final CSMS revenue is expected to be approximately $700,000,000 and flattish year over year. Now let's look at guidance. For the we expect revenue to be $3,000,000,007.4,000,000,000 dollars and $3,790,000,000,.00 Note that had the largest impact in the year for both foreign exchange and COVID revenue step down for a total of approximately 300 basis points of headwind. Adjusted EBITDA is expected to be between $8.70,000,000 dollars and $8.90,000,000 dollars in the quarter and adjusted diluted EPS is expected to be between $2.6 and $2.7 And as mentioned, our guidance assumes foreign currency rates of February '5 continue for the balance of the year. So let's summarize, we delivered an excellent which closed out a strong year. For the full year, revenue grew 5.5% at constant currency excluding COVID related work. Adjusted EBITDA margin continued to expand and adjusted diluted EPS was up 9.1% Free cash flow was a record in the quarter of $7.21,000,000 dollars bringing the full year to over $210,000,000,0.0 up 41%.

In the quarter, we repurchased $11.50,000,000 dollars of shares for the full year share repurchase was $13.50,000,000 dollars Our Board of Directors increased our share repurchase authorization by $2,000,000,000 which brings the remaining authorization to approximately $3,000,000,000 During the year, we introduced 60 innovations including 39 AI enabled applications, And the momentum continues to build with our recently announced collaboration with NVIDIA IQVIA was named a Fortune's List of World's Most Admire Companies for the eighth consecutive year and earned first place ranking in our industry group for the fourth consecutive year And lastly, we reaffirmed our full year 2025 revenue growth guidance at constant currency of 4% to 7% adjusted EBITDA margin expansion of up to 20 basis points and adjusted diluted earnings per share growth of 5% to 9%.

And that concludes our formal remarks. Let me hand it back over to the operator to open up the call to Q and A. Thank you. To just 1 question so that others in the queue may participate as well. We'll pause for Our first question comes from Shlomo Rosenbaum from Stifel.

Hi, thank you very much. Ari, I wanted to just ask you to dig back in a little bit more on how the operating environment progressed through the quarter and relative to what you were expecting in We had some discussion about reassessing of vendor relationships kind of ending the expectation it would end in the and some of that re prioritizing work ending. But we're still talking about some potential volatility for the next one to two quarters. Is that kind of the way you were expecting it coming into the or is there any change into [indiscernible] as part of that, maybe you could talk about is there any change in your expectation in those to value the contracts that you discussed last quarter?

Okay. Thank you, Sean. Well, no, look, we spoke not long ago in Dec. 0 in a rally and we shared there our sentiments with respect to the operating environment. Not much has changed versus what we told you then it was a difficult operating environment for all the reasons we mentioned then and I believe reiterated in my introductory remarks the macro environment consequences of the IRA, a bunch of unexpected large cancellations due to future visits we had last year and then the the 2 large fast burning trials that we had just started that for reasons in the panel of IQVIA were just delayed And because of the nature of these projects, they basically push back to the back end of twenty twenty five. Nothing's changed [indiscernible] We think the bulk of the cancellation, the reprioritizations has occurred. We said then I'll repeat now, we still don't have 140 some volatility and sitting here, I can't tell you what's going to be or In Dec. 0, we were closer to the end of the quarter, so there was no visibility. Frankly, after one month in a quarter, you can never tell. Tell what are we going to book, what are we going to sell, which deals are going to come in this quarter or going to be pushed up to the next quarter.

Which cancellations may or may not occur this quarter, we have no idea. I just always shocked when people are able to predict what their bookings, the net bookings will be in a given quarter. I have no idea as I stand here one month into the quarter, especially first month of the year, Jan. 0, not much happens.

So yes, I mean, I would say [indiscernible] almost in 2 thirds, 75% of the reprioritization that we know of at large pharma essentially is our old So there may still be a little bit of fluctuation here. In SCORRU2, but I can't tell for certain what may have been happening. And with respect to these 2 trials, our delay, which was your second question, nothing changed, they're still on, the clients very much want to do that. It's causes us to have to maintain some costs through the year and that's kind of affecting a little bit of gross margin because we have this stranded cost, but that's okay. We'll manage that. And we feel good about that. And those will happen as we said, no change back in on the year. Thank you. Our next question comes from Elizabeth Anderson from Evercore ISI.

Hi, Ari. Hi, Ron. Thanks so much for the question. I was wondering if you could give a little bit more color on 2 things. I think you've been given some nice pharma color. I was wondering if you could talk a little bit more about the biotech environment, how that's going, how you're sort of seeing RFPs flow? Are you seeing any kind of unlocking of some of the funds that were raised last year but not spent? And then also talk a little bit more about what you think the drivers on the real world evidence Okay. All right. So look, the biotech funding, which is sort of a leading indicator of of what is going to happen in terms of the booking environment for that segment has been strong. Okay. We consistently use the same [indiscernible] and going through those stats, it's over $100,000,000,000 for 2024. That's been fluctuation quarter in quarter out, but that's the number. And that's a huge number. That's a record number ever if you exclude the two years of 2020 and 2021 which were I think 01/30 and 01/20 respectively, but I mean last year what was the number last year guys?

For was that in the $6,000,000 $70,000,000 $70,000,000 $71,000,000 last year. Okay. So significant growth in fungible. Now as we said before, just because biotech gets funding, today doesn't mean that it translates into a clinical trial awards the next day, okay, it takes time. And six months, every year, but it's a good strong learning indicator and we saw funding start to pick up already a year ago and therefore we're starting to see these RFP flow as I said, was up mid single digit for us. Across the portfolio, which again in the current environment is very, very good. And EVP was higher than that. Okay, higher than the 5%. And yes, so that's about the environment. So I think we feel good about the UVP segment. Lots of opportunity and we're chasing all of that.

Our next question comes from Ann Hynes from Mizuho. Please go ahead. Your line is open. [indiscernible] Hi, good morning. Just on cancellations, I know going to you thought it would be $1,000,000,000 Did it come in into that $1,000,000,000 or was it higher? Then I know you said that you, Texas successfully renewed all your RFP activity. Can you just talk about pricing on those renewals and how playing out from a competitive landscape? Thanks.

Right. Well, first of all, I never said the word $1,000,000,000 I said that historically the average order cancellations is about $50,000,000,0.0 of order quarter in quarter out. I mean, identify anyone to predict what the cancellations would be in a given quarter. [indiscernible] That's it's a flaw. And there were calls where we had $300,000,000 where there were quarters where we had $600,000,000 But on average, that's kind of the number. Okay?

And if you take a look at the past so what I said was given the amount of [indiscernible] the scrutiny that they are placing on those programs and the increased level of cancers we saw for the years, I was suggesting that it will be surprising the was down or bad. And basically was that he wasn't a billion, but he was way above the higher end of what we would have imagined. So it was somewhere around not far from here, but not quite to be So it was very high. In fact, for the year, and I think that's an interesting I think I mentioned it in my introductory remarks, if you look at the average cancellations in a given year take let's say, the last three years, for example, It's just somewhere close to a couple of million, a little bit under $2,000,000,000 right for the year.

Okay, consistent with what you've experienced. This year, it was almost 50% higher meaning this year, 2024 was 50% higher In spite that, we grew our backlog grew and that's because we were able on the gross level to book even more business than last year, offsetting more than offsetting the higher level of cancellation. So on the demand side, things are good. The cancellations were very elevated as we're getting [indiscernible] essentially as we expected And the CPU, I just don't know who they're going to be next 2, but we are going to navigate that environment. We feel good that the bulk of that is behind us. Asked about the pricing environment of it, right? Yes. So I did yes, I mean, yes, I mean, look, in the current environment, you would expect and anticipate that pricing is going to be more difficult. Because it's tough competition There are lots of CROs out there. I mean, people tend to forget There are 4000 CROs out there [indiscernible] [indiscernible] [indiscernible] that when EVPs go around and shop their deal around, they talk to a lot of people.

And on the large pharma side, as we mentioned, They decided last year to reopen all their partnerships and thankfully we won. We re signed with all these partners and in fact expanded our portfolio Last summer wanted to consolidate the spend and we were on the winning side of that exercise that was very good and it bodes well for the future.

Our next question comes from David Windley from Jefferies.

Hi, good morning. Thanks for taking my questions and a good segue from the last. Ari, you've talked a fair amount about the push toward FSP. You've talked about pricing pressures you just kind of highlighted generally, but but that pricing pressure also In FSP with these partnership re procurements And then you've also talked about carrying costs for these mega trials. I was actually surprised at the Investor Day that you could expand margin at all. And so my question is, what are the cost levers that you're pulling to be able to eke up your margin just a little bit in the face of all those And then just more simply in the navigation [indiscernible] Are we seeing some of that business mix shift toward FSP in the P and L already like in the Thank you, Dave. Well, as always, you're on the mark and you are highlighting essentially the tasks that we have day in and day out. How do we offset All of those headwinds, yes, you are absolutely correct. It's [indiscernible] grow margins. I mean, bear in mind, since the merger and end of we've grown our margins. I mean, we added the quarter with over 25%, correct?

Adjusted EBITDA margins. In those days, you might recall we were more in the 20% kind of range. So we expanded margins now.

In the early years, we extended margins a lot more. Now, obviously, it's harder what we do here. We try our best to grow our margins [indiscernible] try to grow our profits faster than our revenue. That's That's how we're operating mode here. How do we do that? Yes, you're right, the mix influences can influence the gross margin. I don't think that that was the case In yes, I think we see you could see on gross margin was a little First, in but I don't think it is a reflection of the higher FSP mix. The higher FSP mix is in the bookings, it's going to take time, okay? It's not yet in the P and L to be answer your question. It's more quarter in quarter out If you look at for example, of last year, we had gross margin expansion. So it really the given mix of revenue that you recognize in a [indiscernible] Plus, obviously, the TAS business also influences that. For example, within TAS, I can tell you that real world is a little lower margin than the rest. Right? It's lower margin than data lower margin and analytics and lower margin than tech.

And in the [indiscernible] Really strong. I mentioned it was back to double digits. And so that of course affects the mix. And then I'll remind you [indiscernible] from the we had this high level of stranded costs on those 2 megatrends.

That also [indiscernible] gross margin. But we pulled the usual levers and you've been covering us for a while, you know what we do. We constantly evaluate how to optimize the average labor rate across all of our geographies We constantly explore opportunities to increase our economies of scope that is restructured, flattened the organization We constantly lever IT infrastructure and for the past [indiscernible] we've accelerated the deployment of AI tools within our own processes. I mentioned before that the next big thing certainly operationally within our own [indiscernible] is to leverage AI tools as much as can be and we start to see some impact of that and we plan to continue use and deployment of those. And these are the [indiscernible] That help us mitigate all the cost pressures that you just highlighted So it's a day in day out deep in the trenches, strong operational discipline and a relentless focus on continuing to optimize our costs.

Good for you for that.

Thank you very much. It was very helpful.

Our next question comes from Charles Rhyee from TD Cowen. Please go ahead. Your line is open. Yes. Thanks for taking the question.

I just wanted to go back maybe then to the TAS segment. I think early you just mentioned, obviously, Real World Evidence had sounded like you said double digit growth in the quarter. Maybe can you give us a sense for sort of the trends you're seeing across between both RWE, analytics and consulting and maybe technology platforms And give us a sense for within the 25% outlook, how you see those kind of separate parts of it, kind of the outlook for each of those relative as we think about the mix going forward?

Yes. Well, thank you for the question. Yes, I mean, look, the TAS business should have been and should remain very resilient business with very consistent type of growth. So In full as you know, is a low single digit, right? It's about 1% Grower that did not change. [indiscernible] That's a very sticky subscription based repetitive business. The analytics and consulting is where we had seen a dramatic impact of the cautionary spending trends we saw and Because some of that the significant part of that is discretionary spend and that essentially got shut down. So we had negative quarters in analytics and consulting earlier in the year and it as we evolved earlier, it went back towards this mid single digit kind of mark. Towards the end of the core year. And in the higher growth businesses, which had been higher growth, real world and take Basically for the full year, essentially went back to high single digits And in the quarter, back into double digits.

So that's what we saw.

Now because [indiscernible] and why we're confident in the recoveries because a lot of the work real world tech and also some in analytics and consulting are most do activities for our clients When our clients get the drug approved, and as you know, in 2023 was a record year, I think we had 55 approvals in 2023. By the way 2024 was also good. I think it was about 50. Approvals. These are very high numbers. If you look back historically, these approvals typically within six to nine months you've got to launch the project and that's where we come in. This is where our services play. It's in launching the drug, promoting the drug, commercializing the drug, pricing the drug, etcetera, etcetera. Supporting the efficacy demonstrations and safety demonstrations and supporting pricing for the drugs. All of that is also included in our analytics business and in our real world business. And so those needed to be done. And France delayed that but eventually they have to do it and that's why we saw a strong return of the business in the second Great. Thank you. I appreciate it. Our next question comes from Jack Meehan from Nephron Research.

Please go ahead. Your line is open.

Thank you and good morning. A couple of questions for Ron just on the income statement.

First was the gross margins in the I was wondering if you could just [indiscernible] Through the dynamics there. They were down a little over 100 bps year over year, but you had lower pass throughs. So was this the trapped cost related to those 2 trials or just any other color would be great? Well, the first thing I would caution is when you're looking at gross margins, you're looking at reported and not adjusted. So if you're trying to tie the gross margins and SG and A on our income statement back to our adjusted EBITDA, there's a difference right there. Because those are reported non adjusted numbers. But having said that, Ari did already give you some insight into that. We have stranded costs associated with those trials that got delayed. Certain of our businesses that had strong growth like the real world business can be lower margin businesses for us So there's a mix impact in there certainly. But again, anytime you're looking at the reported numbers, remember that things like restructuring or other adjustments that get added back can affect the percentages that you're calculating straight off the income statement. Got it. Okay, that makes sense.

And 1 for Ari, just on the policy front, we're in a couple of weeks into the new administration here.

Just any thoughts on [indiscernible] just implications for pharma biotech customers then second 1 question we get is just any exposure to NIH funding where Anything related to that would be great. I think the short answer to that question is 0. [indiscernible] [indiscernible] The longer answer is I think overall it's going to be a more business friendly environment. That's clear. [indiscernible] apparently what we've gathered is maybe open to adjust some of the assets of the IRA looking into differences between small and large molecules and a number of adjustments and we are in dialogue at the appropriate levels That could be some reforms that have been discussed on the PBM side, on reimbursement side and so on. But mean, again, all of that is net positive for us, frankly, And yes, I mean, we sign. I think there's a strong bus possibility the new administration will embrace life sciences innovation sector more positively rather to other Competing economies like China or Europe, and support more ongoing investments of of U. S.-based research, manufacturing, etcetera, I think there are a lot of positives here and I don't any of the noise around the specific nominations affecting us at all. [indiscernible] I think that that's just basically noise. [indiscernible] What we see and our dialogue so far has been actually very constructive and very positive or pleased with the nominations of Head of the FDA and head of NHS, all of those are very, very good.

We have good relationships. They also both strong evidence based science, which is exactly the business we're in.

The M and A environment, would be more favorable. I think all of that are net positives. That all sounds good. Thank you. Our next question comes from Michael Ryskin from Bank of America.

Great. Thanks for taking the question. Ari, I want to go back to something you touched on earlier. You some comments in the prepared remarks in terms of pharma reprioritization sort of working through it, still expect maybe a couple of quarters of some volatility going forward, but thinking you're mostly through it. I think you said something about 70% to 75% of the rate prioritization is done. Just wondering sort of how you're arriving at that number? Just put it bluntly, I mean we've had some announcements just in the last twenty four hours and we just seems like there's still you never know companies could come back and decide they're going to do more in a second cut in third cut and the fourth cut. So just what are the conversations you're having with the fauna companies especially your top 20 top 5? Yeah. I mean, thank you. Thanks for the question. When I said earlier, 2 thirds of 70%, maybe 75%, so I saw carry put his head in his hands because he told me, Don't give them an number because someone is going to tell you what is seventy, seventy one, maybe 65, maybe 76, So look, we're trying to give you a sense, okay, how do I know because we speak to our clients, okay, day in and day out, and we know what they're looking at.

So if they're done, they're done. It's not like they're going to go back.

Okay. So we know that there are still a few BaaS programs that are kind of where they haven't made a decision. And that's where I say maybe a quarter to a third of those more to go, but that's an estimate. Again, I repeat, I have no idea what will get canceled and even more orders will get booked. I just don't know.

Okay. I'm basing myself on conversations that we're having with clients at every level. We know what their pie is. We know what the programs that they have are we know what they're prioritizing, and they tell us what they are looking at. In fact, in many cases, we help them review these programs and reanalyze them. So that's how we know.

But it's all based on these analysis and that's my best guess for now. I mean, I would caution you always not to focus on a given core [indiscernible] Mean, I see [indiscernible] you've heard me before, I'm waiting on another pension here, but why about this obsessive focus on what's the what are the bookings in the quarter, what the book to bill that infamous number. What is it? And then there are implications for an entire industry from what 1 company reports. You just can't do that. It's a long cycle business. 1 quarter is a window. There's been some volatility. There might be some volatility. I just don't know Also, frankly, we have very little visibility on the sector. I said before, there are 4000 CROs out there. You have no idea what their numbers are. Actually, our next best largest competitor is part of a larger company and they report nothing. About this competitor of ours, nothing, no revenues, [indiscernible] no bookings, no backlog, certainly no book to bill. So we have no idea. You have no idea, we have no idea. There are only 4 published CROs each and every one of them is extremely different from the others.

You cannot derive what we report from what we report what's going to happen to them? We cannot even when they revolt, what's going to happen to us? I saw that before earlier in the past quarter just because 1 of our competitors say something all of a sudden, our stock goes up or down. It's ridiculous. Everyone is extremely different. You just cannot extrapolate plus frankly, it's causing issues with our customers. Someone was asking me before about customers and pricing. That obsessive ultimately focus on this book to bill ratio causes our clients to know that at last Pharma, they look that.

So at the end of the quarter, they had another $10,000,000 a year, another $12,000,000 there. That affects pricing. It affects our bottom line long term and it's actually matters to investors. So there is somewhat obsessive focus on this quarter in numbers in a long cycle business that are not that great. Plus, again, I remind you, we get a large We are just at Seattle. The Seattle business is just over half of our business. And to refer Any pieces about what's going on in the industry for the quarter or 2 of cancellations or book to bill or what have you, [indiscernible] my people here agitated, but okay, I'll end with that. I'm sorry for the That's helpful. I'm sorry. Okay. All right. So we have another question or we're done here? We're done. Okay. Fine. Thank you, guys. Thanks for taking the time to join us today and look forward to speaking with you again on our earnings call. The team will be available the rest of the day take any follow-up questions you might have. Thank you.

This concludes today's conference call. You may now disconnect.