Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. As a reminder, this conference is being recorded. I would now like to turn the call over to Kerry Joseph, Senior Vice President, Industrial Relations and Treasury. Mr. Joseph, you may now begin your conference.

Thank you, Operator. Good morning, everyone. Thank you for joining our fourth quarter of the 2024 earnings call. With me today are Ari Boosby, Chairman and Chief Executive Officer, Ron Broman, Executive Vice President and Chief Financial Officer, Eric Scherger, Executive Vice President for General Counsel, Mike Fedok, Senior Vice President, Financial Planning and Analysis, and 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. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risk and uncertainty associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to, and not a substitute for, financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Bootsy.

Thank you, Jerry, and good morning, everyone. thank you for joining us today to discuss our fourth quarter and full year 2024 results well great to see you many of you in person at our december investor day at the innovation park headquarters 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% of cost on currency, excluding the COVID-19 step-down, adjusted the earnings per share growing over 9% and free cash flow of $2.1 billion, which represents growth of 41% versus last year, as well as 104% of adjusted net income. I'm very proud of the results the IPVN team was able to deliver in an industry that faced significant challenges in 2024. We saw the consequences of inflation reduction app which led to delayed customer decision making reduce discretionary spend and portfolio risk prioritizations additionally we had a challenging macro environment that persisted with geopolitical unrest continue the 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 and incremental uncertainty. In fact, very few companies in our broader industry sector achieved positive growth and IQVIA really stood out as an outperformer. More specifically, in the fourth quarter, you 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 foreign 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 critical side, net new bookings for the quarter were over 2.5 billion dollars and this all highlights the great work that was done by our rnbs team in securing new business contracts this helped mitigate the outside level of cancellations that did materialize in the quarter just as we had anticipated Now, despite the tough macro environment, the R&D's business had some significant achievements in 2024. We successfully renewed all of our large pharma strategic partnerships this past year, even as many clients re-evaluated 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. IQDNR has partnerships with 22 of the top 25 pharma companies. We made significant advancements in our global health business. For example, we helped the World Health Organization control poliovirus outbreaks in Africa. We collaborated with the Coalition for Epidemic Preparedness Innovations, CEPI, in Rwanda. So, we were able to respond swiftly to a Marburg virus disease outbreak. Finally, we were selected by a large biotech 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 the company public health officials turn to. 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 each quarter. In fact, growth exceeded our expectations in the second half. Obviously, this was held by easier compares versus the second half of 2023, 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 it allows customers to interact with a growing number of our products and get answers to their questions almost instantly we lost the number of ai enabled patient offerings including our patient relationship manager which has already been deployed at eight clients including three top 10 farmers our digital business which up to now was largely the us has begun expanding into europe where 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 desks. On the TAL side, things have continued to recover as we anticipated. On the R&DS side, we still have some volatility, so we might see another quarter or two of fluctuating demand and elevated cancellations. But we think the bulk of the portfolio reprioritizations at Large Pharma has been completed. In fact, we feel good about the R&D's demand environment because leading indicators continue to be favorable. For example, our Q4 RFP flow was up mid-single digits, a little higher actually in the EBP segment. Our qualified pipeline is also up with positive growth across all segments. ebp funding as you noted was strong through 2024 four-year biotech funding was over 100 billion dollars which is 44 percent higher than it had been in 2023 now we did have much higher cancellations in 2024 than ever before in fact nearly 50 percent higher in 2024 than the average of the previous three years, but our gross new bookings before cancellations for 2024 were even stronger and up mid-single digits at constant currency versus 2023, which led to an end-of-year backlog of $31.1 billion, which is, again, at constant currency, 5.5% higher than a year ago. Now, turning to the results for the quarter. Revenue for the fourth quarter grew 2.3% on a reported basis and 3% at constant currency. Compared to last year, and excluding COVID-related water from both periods, we grew the top line about 4.5% on a constant currency basis, and that included in the quarter about two points of contributions from acquisitions mostly on the side. Fourth quarter adjusted EBITDA increase 3.1 percent driven by revenue growth and ongoing cost management discipline which resulted in 20 bips of margin expansion. Fourth quarter adjusted diluted EPS of $3.12 increased 9.9% year only. Let me now give you some color on business activity. My QVS 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 agentic 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 diagnosis and improve treatment adherence by patients. Our collaboration with NVIDIA will help accelerate the introduction of AI agents within our workflows, with AI agents essentially becoming digital companions to researchers, HCPs, and patients. Let me give you some more examples of what 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 omnichannel marketing solutions to promote a top 10 pharma clients established portfolio iqvia here we utilize analytics, information, technology, and commercial sourcing capability. IQVIA is also partnering with a biotech company to launch a new treatment for ovarian cancer, which will be our client's first product in market. 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 then gives IQVIA to simplify data management by integrating diverse sources from all over 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 gastric cancer treatment and gain approval in new markets. A top 10, 15 pharma client 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 dynamics. Let me start with large pharma. The top five pharma clients selected IQVIA to conduct a complex full-service phase three study addressing asthma and COPD patients. We won another full-service global phase three 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 displaced two large long-time incumbent CROs. Medtech, IQVIA was awarded a study to evaluate a novel medical device specifically targeting a cardiovascular condition. Biotech, few notable awards include a critical Phase III oncology study based on a strong data-driven approach and ability to manage global complex trials efficiently. Another global study, full-service study for another biotech client for progressive pulmonary fibrosis disease, which involves nearly 1,000 patients in 26 countries. And again, we're able to win this based on our global footprint and therapeutic expertise. A phase 2 trial for rare CNS conditions with limited previous research. lots of success in the marketplace with large pharma medtech and ebp now before passing the call over to ron 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. Frost and Sullivan awarded IQVIA the 2024 Global Customer Value Leadership Award for excellence in AI quality and regulatory solutions in healthcare. IQVIA's SmartSol Enterprise QMS was recognized for best use of AI in healthcare by the MedTech Breakthrough Awards. My Green Lab awarded IQVIA Laboratories the 2024 Race to Zero Leadership Award for certifying 100% of our laboratories. We received recognition as a leader in Forbes World's Best Healthcare and Life Sciences Management. And lastly, for the eighth year in a row, IQVIA was named one 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 one most admired company in our category of healthcare, pharmacy, and other services. In addition, IQVIA earned number one ranking in the categories of innovation, global competitiveness, people management, and use of corporate assets. Now, Ron will give you more details on our financials to place.

Thanks, Ari, and good morning, everyone. Let's start with revenue. Fourth quarter revenue of $3,958,000,000 grew 2.3% on a reported basis in 3% of constant currency. In the quarter, COVID-related revenues were approximately $10 million, which is down about 50 million dollars versus the fourth quarter of 2023 excluding all code related work both from this year and from last constant currency growth was about four and a half percent and as already mentioned acquisitions contributed approximately two points of this growth technology and analytics solutions revenue for the fourth quarter was $1,658,000,000, which was up 8.3% reported and 9.5% of constant currency. R&D Solutions' fourth quarter revenue of $2,123,000,000 was down 1.3% reported and 1% of constant currency, but excluding all COVID-related work, R&D's revenue grew over 1% at constant currency and finally uh contract sales and medical solutions fourth quarter revenue of 177 million dollars declined 4.8 percent reported and 3.2 percent of constant currency now for the full year revenue was 15 billion 405 million dollars that's up 2.8 percent reported and 3.4 percent of constant currency covered related revenue totaled approximately 110 million dollars for the year. Excluding all COVID-related work from this year and last, constant currency growth in revenue was 5.5% for the year. Full-year technology and analytic solutions revenue, $6,160,000,000. 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&D solutions with eight billion five hundred twenty seven million dollars up 1.6 percent on a reported basis two percent of constant currency excluding all covered related work growth in constant currency in rnds was over five percent and finally a full year csms revenue with 718 million dollars down 1.2 percent reported but up 1.4 percent of constant currency as already mentioned in In its opening remarks, the 2024 growth trajectory in TAS played out as we anticipated, with improvements every quarter. And we experienced a softening 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, TAS 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 the short-cycle part of our business, and as we've seen, 2023 gave us early insight into customer spend 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. Let's move down to P&L. Adjusted EBITDA in the quarter was $996 million, representing growth at 3.1%. Full-year adjusted EBITDA was $3,684 million. That's up 3.2% year over year. Fourth quarter GAAP net income was $437 million, and GAAP diluted earnings per share was $2.42. For the full year, GAAP net income was $1,373,000, or $7.49 of earnings per diluted share. Adjusted net income was $564 million for the fourth quarter, and adjusted diluted earnings per share was $3.12. That, for the full year, brought adjusted net income to $2 billion, $42 million, and adjusted diluted earnings per share to $11.13. R&D's backlog at December 31 was $31.1 billion, an increase of 4.4% year-over-year and 5.5% at constant currency. And to anticipate the question that I think we'll get about why backlog was flat sequentially versus Q3. Recall that the dollar strengthened considerably during the fourth quarter, and we have to retranslate the backlog at the end of each quarter for reporting to you, and that knocks about a half a billion dollars off the backlog, that retranslation alone. As of December For 31, cash-in-cash equivalents totaled $1,702,000,000 in gross debt was $13,983,000,000, resulting in net debt of $12,281,000,000. Our net leverage ratio ended the year at 3.33 times trailing 12-month adjusted EBITDA. fourth quarter cash flow from operations was eight hundred and eighty five million dollars in fatbacks was 164 million dollars resulting in free cash flow of 721 million dollars for the quarter a record for quarterly free cash flow so the full year free cash flow was 2 billion 114 million dollars as already set up 41 percent year every year now you note that in the quarter we repurchase $1,150,000,000 for our shares bringing our full-year share repurchase to $1,350,000,000. And just yesterday, actually, the IQV Board of Directors replenished the share repurchase authorization by $2 billion, which increases the total remaining authorization to approximately $3 billion. Let's turn to the 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 for share growth of 5% to 9%. This translates into total revenue between $15,725,000,000 and $16,125,000,000, dollars which includes just over a 100 million dollar step down in covid related work which is entirely in rnds and of which 75 will be in the first half and 25 percent the second half we expect 100 to 150 basis points of contribution from m a activity and an fx headwind should rates continue of approximately 150 basis points versus 2024. Our adjusted EBITDA guidance is $3,765,000 to $3,885,000,000, and adjusted diluted EPS guidance is $11.70 to $12.10. This includes about $675 million of net interest expense, approximately $575 million of operational DNA, an effective income tax rate of about 18.5%, and an average diluted share count of approximately 178 million shares. The guidance also assumes $2 billion 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, at the segment level, guidance is also unchanged for TAS, R&DF, and CSMS. No changes in any of the segments. We expect TAS revenue to grow 5% to 7% at constant currency, which translates into $6.3 to $6.5 billion. a note will have easier comps in the first half than the second half rnds revenue is expected to grow four to six percent of constant currency x covet which translates into 8.7 to 8.9 billion dollars of revenue this guidance includes over 100 million dollars of step down in covered related revenue that represents about 100 basis points of headwind rnds growth rate we anticipate that R&DF growth rates will be lower in the first half and improve sequentially thereafter. Finally, CSMS revenue is expected to be approximately $700 million and flattish year over year. Now, let's look at first quarter guidance. For the first quarter, we expect revenue to be between $3,740,000,000 and $3,790,000,000. dollars note that q1 has the largest impact in the year for both foreign exchange and covered revenue step down for a total of approximately 300 basis points of headwind adjusted evita is expected to be between 870 million dollars and 890 million dollars in the quarter and adjusted limited eps is expected to be between two dollars and sixty cents and two dollars and seventy cents And as mentioned, our guidance assumes that foreign currency rates of February 5 continue for the balance of the year. So, let's summarize. We delivered an excellent fourth quarter, which closed out a strong year. For the full year, revenue grew 5.5% of constant currency, excluded COVID-related work, adjusted EBITDA margin continued to expand, and adjusted the wind DPS was up 9.1%. Pre-cash flow was a record in the quarter of $721 million, bringing the full year to over $2.1 billion, up 41%. In the quarter, we repurchased $1,150,000,000 of our shares for the full year. Share repurchase was $1,350,000,000. Our board of directors increased our share repurchase authorization by $2 billion, which brings the remaining authorization to approximately $3 billion. 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 admired 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 above the 20 basis points, and adjusted diluted earnings for 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, Q&A.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then number one on your telephone keypad. We request that you limit yourself to just one question so that others in the queue may participate as well. We'll pause to compile the Q&A roster. Our first question comes from Shlomo Rosenbaum from Stiefel. Please go ahead. Your line is open.

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 4Q. We had some discussion about reassessing of vendor relationships kind of ending or the expectation it would end in the fourth quarter and some of that reprioritizing 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 fourth quarter, or is there any change about that? And as part of that, maybe you could talk about, is there any change in your expectation in those divided contracts that you discussed last quarter?

Thank you, Shomon. Well, no, look, we spoke not that long ago in December 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. That is, it was a difficult operating environment for all the reasons we mentioned then and I reiterated in my introductory remarks, the macro environment. consequences of the IRA, a bunch of, you know, unexpected large cancellations due to utility reasons we had last year, and then the two large fast-burning trials that we had just started that for reasons independent of Accuria were just delayed, and because of the nature of these projects, you know, they basically pushed back to the back end of 2025. Nothing's changed here um you know we think the bulk of the cancellations and reprioritizations has occurred um we said then i'll repeat now we're still going to have 100 quarters of uh some volatility and i you know start sitting here i can tell you what it's going to be first quarter or second quarter uh in december we were closer to the end of the quarter so i with visibility frankly you know after one month in a quarter you can never tell you know what are we going to book what are we going to sell um you know which uh 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, January, you know, not much happens. So, yeah, I mean, I would say, you know, what is it, two-thirds, maybe 70%, 75% of the, somewhere there, you know, obviously two-thirds, 75% of the reprioritization that we know of at large pharma, essentially is our order. So there may still be a little bit of fluctuation here in the next quarter or two, but I can't tell for certain what may or may not happen. And with respect to these two trials that were delayed, which was your second question, you know, nothing changed. They're still on. The clients very much want to do them. It causes us to have to maintain some costs, you know, through the year, and that's kind of affecting a limited gross margin because we have this shredded cost, but that's okay. We will manage that, and we feel good about that. And those will happen, as we said, no change back in other years. Thank you.

Our next question comes from Elizabeth Anderson from Evercore ISI. Please go ahead. Your line is open.

Hi, Ari. Hi, everyone. Thanks so much for the question. I was wondering if you could give a little bit more color on two 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 RFP 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 acceleration are.

Okay. so look the um the biotech funding which uh it's a sort of a leading indicator of um what uh what is going to happen in terms of the booking environment for that segment has been strong okay we consistently use the same um you know stats and uh according to those stats it's over 100 billion dollars 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 20 and 21 which were i think 130 and 120 respectively but i mean last year what was the number last year guys for uh it was like in the 70 million dollars 70 million 20 71 billion dollars last year okay so uh significant um growth in funding now as we said before just because biotech gets funding today doesn't mean that it translates into uh the clinical trial awards the next day okay it takes time and you know six months every year but it's a good strong leading indicator and we saw funding start to pick up already a year ago and therefore you know we're still we're starting to see this rfp flow as i said was up mid single digit for us uh 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 yeah, so that's about the environment. So I think we feel good about the EVP segment, lots of opportunity, and we're chasing all of that.

Our next question comes from Anne Hines from Mizuho. Please go ahead. Your line is open.

Hi, good morning. Just on cancellations, I know going into Q4, you thought it would be a billion dollars. Did it come into that billion dollars or was it higher? And then I know you said that you successfully renewed all your RFP activity. Can you just talk about pricing on those renewals and how that's playing out from a competitive Well, first of all, I never said the word a billion.

And I said that, historically, the average quarterly cancellations is about half a billion dollars a quarter in, quarter out. I mean, I'd defy anyone to predict what the cancellations would be in a given quarter, ever. You know, that's, you know, it's a flow. And, you know, there were quarters where we had 300 million, where there were quarters where we had 600 million. But on average, that's kind of the number, okay? And if you take a look at the past, and so what I said was, you know, given the amount of work that large pharma is doing and the scrutiny that they are placing on those programs and the increased level of cancers we saw through the years, I was suggesting that it wouldn't be surprising if the fourth quarter was double that. And it basically was that it wasn't a billion, but it was way above the higher end of what we could have imagined, so it was somewhere around that. Not far from the end, but not quite a billion. 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, let's take the last three years, for example, it's just somewhere close to a couple of billion, a little bit under $2 billion. right for the year okay consistent with experience this year it was almost 50 higher meaning this year 2024 was 50 higher than that and despite 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 I look at the surprises there it came in essentially as we expected and um you know I think you I just don't know what they're going to be next quarter or two but you know we we are going to navigate that environment we feel good that the bulk of that is behind us you asked about the pricing environment also right yeah so yeah i mean yeah i mean look in the current environment you would expect and anticipate that pricing is going to be more difficult because uh you know it's tough competition uh there are lots of cro's out there i mean people tend to forget you know, there are 4,000 CROs out there, okay? So, you know, they don't all participate in every single bid, but it's not unusual that when EVPs go around and shop their deal around, you know, they talk to a lot of people. And on the large pharma side, as we mentioned, You know, they decided last year to reopen all their partnerships and, you know, thankfully, we won. We re-signed with all these partners and, in fact, expanded our portfolio. Last time, I wanted to consolidate the spend and we were on the winning side of that exercise. That was very good and it both were for the future.

Great.

Thanks. Our next question comes from David Winsley from Jefferies. please go ahead. Your line is open.

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 pressure, as you just kind of highlighted generally, but that pricing pressure also in FSP with these partnership reprocurements. And then, you know, 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 pressures? And then just more simply in the navigation on gross margin versus S&A and EBITDA, And are we seeing some of that business mix shift toward FSP and the P&L already, like in the fourth quarter? Thank you.

Thank you, Dave. Well, you know, as always, you're right on the mark and you are highlighting essentially the tasks that we have day in and day out. You know, how do we offset, you know, all of those headwinds? Yes, you are absolutely correct. You expressed surprise how we're able to still grow margins. I mean, bear in mind, since the merger at the end of 2016, we've grown our margins. I mean, we had a decoder with over 25% adjusted a bit of 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 expanded margins a lot more. Now, obviously, it's harder. But that is what we do here. We try our best to grow our margins and try to grow our profits faster than our revenue. That's how we're operating mode here. How do we do that? Yes, you're right. The mixed influences can influence the gross margin. I don't think that that was the case in Q4. Yeah, I think we see, you can see on gross margin was a little, you know, impressed in form, but I don't think it is a reflection of the higher FSP mix. You know, the higher FSP mix is in the bookings, it's going to take time, okay? It's not yet in the P&L, to be precise and answer your question. It's more, you know, quarter in, quarter out, you know, if you look at Q3, for example, of last year we had gross margin expansion so it's really the given mix of revenue that you recognize in a quarter um you know plus obviously the taz business uh also influences that um for example within taz um i can tell you that real world is a little lower margin than the rest by the lower margin than data, lower margin than analytics, and lower margin than tech. And in the fourth quarter, real world was very strong, really strong. I mentioned it was back to double digits. And so that, of course, affects the mix. And then I'll remind you that from the fourth quarter, we had this high level of stranded costs from those two mega trials That also affected our gross margin. But we pull the usual levers. And, you know, 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, restructure, flatten the organization. We constantly lever IT infrastructure. And for the past year, 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 workflows, 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 that these are the levers 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. Those are very helpful.

Our next question comes from Charles Rees from TD Cowan. Please go ahead. Your line is open.

Yeah, thanks. Thanks for taking the question. Hey, Ari, I just wanted to go back maybe then to the TAF segment. And I think earlier 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, you know, kind of the outlook for each of those relative as we think about the mix going forward.

Yeah, well, thank you for the question. Yeah, I mean, look, the TAS business should be, should have been and should remain a very resilient business with very consistent type of growth. So, info, as you know, is a low single digit, right? It's about a 1% grower that did not change through the period. That's a very sticky, you know, subscription-based repetitive business. the analytics and consulting is where we had seen a dramatic impact of the cautionary spending trends we saw end of 23 and early 24 because some of that the significant part of that is discretionary spend and that essentially got shut down so we had negative quorls in analytics and consulting uh earlier in the year and it as we evolved through a year it went back towards these mid single digit kind of mark it was the end of the of the of the quarter here and the higher growth businesses which had been higher growth real world and tech um basically for the full year um essentially went back to high single digits um and in the quarter uh back into double digits so that's what we saw now because we anticipated this why did this happen and why were we confident in the recoveries because a lot of work um in real world tech and also also some in analytics and consulting, are must-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, 24 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, et cetera, et cetera. Supporting the efficacy demonstrations and safety demonstrations and supporting pricing for the drugs. All of that is always included in our analytics business and in our real-world business. And so those needed to be done, and clients delayed that, but eventually they had to do it, and that's why we saw a strong return of the business in the second.

Great. Thank you. We appreciate it.

Our next question comes from Jack Meehan from Nefron Research. Please go ahead. Your line is open.

Thank you, and good morning. I had a couple of questions for Ron, just on the income statement. First was the gross margins in the fourth quarter. I was wondering if you could just walk us 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 two 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&A on our income statement back to our adjusted EBITDA, there's a difference right there because those are reported, not adjusted 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 have strong growth, like the real-world business, can be lower-margin businesses for us. So there's a mixed 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 one for Ari, just on the policy front, we're in, you know, a couple weeks, you know, into the new administration here. Just any thoughts on, you know, how just implications, you know, for pharma biotech customers? And then second, one question we get is just any exposure to NIH funding or anything related to that would be great. Thank you.

I mean, the short answer to that question is zero. Zero impact, zero NIH, nothing. The longer answer is, I think overall it's going to be a more business-friendly environment. That's clear. The new administration apparently, from what we've gathered, is maybe open to just some of the aspects 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. You know, there could be, you know, some reforms have been discussed on the PDM side, on reimbursement side, and so on. But, I mean, again, all of that is net positive for us, frankly. And, yeah, I mean, we don't... I think there's a strong possibility the administration will embrace life sciences, innovation sector more positively relative to other, you know, competing economies like China or Europe, and support more ongoing investments of U.S.-based research, manufacturing, et cetera, I think there are a lot of positives here, and I don't see any of the noise around the specific nominations affecting us at all, frankly. I think that that's just basically noise. What we see and our dialogue so far has been actually very constructive and very positive. We're very pleased with the nominations at head of the FDA and head of NHS. All of those are very, very good. We have good relationships. And they're also both strong evidence-based science, which is exactly the business we're in. You know, the M&A environment would be more favorable. I think all of that are net positives.

That all sounds good.

Our next question comes from Michael Riskin from Bank of America. Please go ahead. Your line is open.

Thanks for taking the question. Ari, I want to go back to something you touched on earlier. You made some comments in the prepared remarks in terms of pharma reprioritization, sort of working through it. still expect maybe a couple 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 to put it blindly. I mean, we've had some announcements just in the last 24 hours, and it just seems like there's still, you know, you never know. Companies could come back and decide they're going to do more in a second cut and a third cut and a fourth cut.

So just what are the conversations you're having with the pharma companies especially you know your top 20 yeah i mean you know thank you thanks for the question you know when i said uh earlier you know two through 77 maybe 75 so i saw carrie put his head in his hands because he told me don't give them a number because someone's going to tell you uh 70 71 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 dash programs that are kind of where they haven't made a decision and that's where i say you know maybe a quarter to a third of those uh you know more to go but you know that's an estimate. Again, I repeat, I have no idea what will get canceled and even called or what 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 pipe 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 best based on these analyses and that's my best guess for now i mean i would caution you always not to focus on a given core okay i mean i see you know someone reports that that that uh you've heard me before i'm going on another tangent here but you know whine about this obsessive focus on what's the what are the bookings in a quarter what's the book to build that that infamous number what what is it and then you derive implications for an entire industry from what one company reports um you know you just can't do that it's a long cycle business. One quarter is a window. There's been some volatility. There might be some volatility. I just don't know. Also, frankly, you have very little visibility on the sector. I said before, there are 4,000 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 no margins no bookings no backlog certainly no book to be so we have no idea you have no idea we have no idea there are only four publicly traded cro's 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 derive what they report what's going to happen to us i saw that before earlier in a few past quarters just because one of our competitors says something all of a sudden our stock goes up or down it's ridiculous if everyone is extremely different you just cannot extrapolate plus frankly it's causing issues with our customers someone was asking before about customers and pricing you know that obsessive quarterly focus on this book-to-bill ratio causes our clients know that, at Latch Pharma, they love that. So at the end of the quarter, they handle another 10 million here, another 12 million there. That affects pricing, it affects our bottom line long term, and it's detrimental to investors. So there is a somewhat obsessive focus on this quarterly numbers in a long cycle business that are not upgrade. Plus, again, I remind you, we are a large company. We are not just a Seattle. The Seattle business is just over half of our business. And to infer any thesis about what's going on in the industry from a quarter or two of cancellations or book to business or what have you is intellectually flawed. I can have my people here you know you know agitated but okay i'll end with that i'm sorry for for the hunting that's helpful okay all right so we have another question or we're done here we're done okay fine yeah okay thank you thank you guys uh thanks for taking the time to join us today and look forward to speaking with you again on our first quarter of 2025 earnings call.

The team will be available the rest of the day to take any follow-up questions you might have. Thank you.

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