昆泰 (IQV) 2022 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2022 Earnings Conference Call. (Operator Instructions) After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded. Thank you.

I would now like to turn the call over to Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, please begin your conference.

Thank you. Good morning, everyone. Thank you for joining our first quarter 2022 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Mike Fedock, Senior Vice President, Financial Planning and Analysis; and Bryan Stengel, Associate Director, Investor Relations.

Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call 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 will differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings.

In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. 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 Bousbib.

Thank you, Nick, and good morning, everyone. Thank you for joining today to discuss our first quarter results.

IQVIA has very strong financial results in the quarter, and that is despite the broader macro environment. On this note, regarding first, the tragic situation in the Ukraine, our thoughts and concerns from the beginning have been around the safety and wellbeing of our employees, the patients we support and all those affected by the ongoing events. We've been actively supporting our employees and their families on the ground with evacuation support, relocation services and financial assistance. For example, we accelerated bonus payments. And actually, we continue to pay our employees there regardless of their ability to perform any work.

In addition, IQVIA capabilities are being utilized to help support the resulting refugee crisis, for example. Ukrainian refugees are entering surrounding countries with medicines and prescriptions, and medical professionals in those countries are seeking to identify and convert product information on these prescriptions into their local equivalent. To help, we've established a free online service for medical professionals to search a product name, active ingredients and strength, and the tool generates a list of matching products in whichever the local country around Ukraine is.

Also, we've been working very closely with our customers, suppliers and clinical sites across the region to ensure continuity of our in-flight clinical trials and ensure, of course, that our clients are able to continue to support the effective delivery of medicines to vulnerable patients in the region who depend on these medicines. In Ukraine, we're providing support to ensure that trial patients who have begun receiving treatment to remain on their treatment protocols. We've established direct-to-patient shipments of investigational medical products and patient call centers in order to ensure patient care can continue.

In Russia, we are guided by ethical concerns to ensure the safety of patients already enrolled in clinical trials. We are utilizing our global logistics and procurement infrastructure to facilitate the movement of investigational medical products, lab kits and samples into and out of the country to minimize potential adverse impact to patient care.

For studies that are in startup or early phase in both countries, we are redirecting patient recruitment to other countries based on consultations with our customers. Even though a little less than 1% of our overall revenue and approximately 3% of our global patient recruitment come from the Ukraine and Russia, the operational disruptions I just described will have some financial impact, which we have incorporated into our updated guidance.

Now another key focus area for investors in the quarter, as you well know, has been the emerging biopharma funding environment. We received a number of questions on this topic since our earnings release in February, and we have addressed those in multiple forums. However, there have been some lingering questions on the same topic, and I want to take this opportunity once again to reiterate our comments with a specific focus, A, on the funding environment; and B, on our own company's exposure to this EVP segment.

I'll start by stating that the concern about EVP funding environment is overstated. I want to support the assertion with 4 key points. Number one, the industry has observed a slowdown in public funding compared to the record levels in '20 and '21, but the private venture capital markets have continued to be strong and funding in the first quarter of '22 was the third highest ever according to the International Venture Capital Association. I will also observe that these EVP firms are sitting on large amounts of cash from the very strong funding cycles in '20 and '21.

Number two, when there is a reduction in EVP funding, or the IPO market contracts, mid and large pharma companies often step up their acquisition activities of EVP companies and frankly, that benefits us as we have long-standing relationships with these customers. In fact you may have seen the recent acquisition of Checkmate Pharmaceuticals by Regeneron which illustrates this very point.

Number three, history tells us that when EVP funding slows, it does not have a significant effect on our business. For example, following the last EVP funding slowdown in 2015, '16, our IQVIA biotech unit saw no interruption in net new business and revenue growth nor any unusual increase in cancellations.

And finally, number four, when we look at either our pipeline or RFP activity, we have simply not seen any slowdown. No unusual cancellation activity, no unusual delays in decision-making. In fact, in the quarter, our overall R&DS RFP dollars were up 13% year-over-year and RFP dollars from EVP were up over 16%. The broader industry continues to show strength. We are seeing clinical trials start up 7% in the first quarter compared to last year, with a 14% increase in oncology trial starts, which is a therapeutic area, as you well know, that's predominantly sponsored by EVP.

Now, let me focus on our own exposure to this segment, specifically pre-commercial EVPs, which are those EVPs that have $0 revenue and are the most vulnerable and exposed to the funding environment. And here, I want to make another 4 points. Number one, as of March 31, pre-commercial EVPs represented just over 10% of our total R&DS backlog. Number two, less than 7% of our overall RFP dollars in the quarter came from pre-commercial EVPs. Number three, this exposure to pre-commercial EVP for IQVIA is not only minimal, but also, I want to point out and underline that our vetting process for taking on a pre-commercial EVP is extremely rigorous and thorough. The process includes, for example, a review of the clients' cash balances, payment history, the viability and quality of their science, and of course, progress with clinical development.

So again, said differently, not every EVP who knocks at our door with a molecule that they think is interesting, makes it into our backlog. Number four, I would simply remind you that this exposure primarily impacts our R&DS segment. Approximately 45% of IQVIA's total company revenue comes from our commercial businesses. And as you know, there is virtually 0 pre-commercial EVP exposure on the commercial side.

But we don't comment at background. Let me now delve into the first quarter results. Revenue for the first quarter grew 4.7% on a reported basis and 6.8% at constant currency. The $23 million beat above the midpoint of our guidance range was driven by strong operational performance across all 3 segments, and that was, of course, partially offset by foreign exchange headwinds. Compared to prior year and excluding COVID-related work for both years, our core businesses grew about 13% at constant currency on an organic basis. Ron will provide additional detail in his remarks, including COVID-adjusted numbers for each of our 3 segments.

First quarter adjusted EBITDA grew 9.1%, reflecting our revenue growth, as well as ongoing productivity initiatives. First quarter adjusted diluted EPS of $2.47 grew 13.3%. That was 4% above the midpoint of our guide which is -- with about $0.03 of the beat coming from operational improvements. And I'll provide an update on the business, and let's start with the commercial and technology side.

We've spoken before and you're familiar with IQVIA's Connected Intelligence framework, which leverages our advanced analytics, technology and domain expertise across the entire clinical and commercial portfolio, and has been critical in supporting the emerging needs of the pharma industry. I want to give a recent example of how these capabilities are being deployed. In the quarter, we entered into a multiyear agreement with argenx for the development and commercialization of new indications for their rare disease product currently approved for treatment of a rare autoimmune disorder affecting the muscles.

Our collaboration with argenx incorporates IQVIA's Connected Intelligence to support clinical development, real-world evidence, regulatory and commercial support to accelerate the development of this product for potential treatment of other severe autoimmune diseases and to expand globally. It's an exciting product with a lot of upside potential. It's currently approved to treat 6 indications, has the potential for up to 15 indications, plus this drug has already been launched in the U.S. and has plans to launch in Europe and in Japan in the next year.

Another example of a client selecting IQVIA's integrated capabilities to solve complex problems is Ferrer, a European pharma client recently selected IQVIA's Vigilance Platform and regulatory information management technology. This is an area that's a real headache for our clients, and our technology solutions simplify and streamline their processes. Ferrer will benefit from our technologies integrated AI, ML capabilities, automation of labor heavy activities and easy implementation. To date, over 150 clients have adopted 1 or more solutions within our safety, regulatory and quality suite of technology.

In real-world evidence, I'm sure you've seen that we were selected to support DARWIN, or data analysis and real-world interrogation network. DARWIN is a strategic initiative of the EMA. This is a major win for IQVIA as it draws on our proprietary technologies, methods and deep scientific and operational expertise. It will help us deepen our relationship with health care providers and sites across Europe.

Moving to clinical technology. IQVIA continues to lead the industry in decentralized clinical trials. Our end-to-end solution of integrated technology and services capabilities are being utilized on just over 1/3 of our full-service trials globally. To date, we've recruited over 300,000 patients across 80 countries covering over 30 indications.

Now whether for traditional or decentralized trials, demand for our suite of digital clinical technology offerings continue to increase in the first quarter. To date, over 400 clients have adopted 1 or more modules within our Orchestrated Clinical technology suite since launch. One of these key modules, for example, is our clinical trial payment solution. This technology ensures accurate, timely and transparent investigator payment processing. It's a key driver of both site and sponsor satisfaction. All of the top 10 and 25 of the top 30 pharma clients have now selected IQVIA's payment technology solutions for their trials. This includes a major award in the quarter with a top 10 sponsor to migrate their entire payment ecosystem across several legacy platforms to our technology. The scale of this technology migration is the largest of its kind in the industry and it encompasses 120 clinical studies across all phases with over 6,000 sites globally.

Beyond these client highlights, our overall R&DS business continued to see strong momentum in the quarter, delivering over $2.5 billion of net new business, including pass-throughs. This included a record quarter of over $1.9 billion of services bookings, resulting in a first quarter contracted net book-to-bill ratio of 1.32x excluding pass-throughs and 1.31x including pass-throughs. Over the last 12 months, our contracted net book-to-bill ratio was 1.33x, excluding pass-through, and 1.32x, including pass-through.

Our contracted backlog in R&DS grew 9.1% year-over-year to a record $25.3 billion as of March 31, 2022. As a result, our next 12 months revenue from backlog increased to over $7 billion, growing 8% from a year ago. As you can see, there is a lot of strong positive momentum across the business regardless of the choppy macro environment.

On a final note, IQVIA was named the top CRO in overall reputation by clinical trial sites around the world in the 2021 CenterWatch Global Site benchmark survey. This is a big deal for us. This is a rigorous and independent survey that is highly respected in the industry. Over 60,000 investigators, trial coordinators, research nurses and other clinical professionals representing clinical trial sites from around the world were asked to rank and score 29 CROs across 35 performance-related attributes. We're proud to have been selected and named the top CRO in overall reputation, but specifically, we received high marks, especially high marks for our comprehensive decentralized trials, direct-to-patient recruitment and therapeutic clinical, regulatory and technology expertise.

I will now turn it over to Ron for more details on our financial performance. Ron?

Thanks, Ari, and good morning, everyone.

Let's start by reviewing revenue. First quarter revenue of $3.568 billion grew 4.7% on a reported basis and 6.8% at constant currency. In the quarter, COVID-related revenues were approximately $375 million which was down about 35% versus the first quarter of 2021. In our base business, that is excluding all COVID-related work from both this year and last, organic growth at constant currency was about 13%.

Technology & Analytics Solutions revenue for the first quarter was $1.439 billion, which was up 6.8% reported and 9.8% at constant currency. Excluding all COVID-related work, organic growth at constant currency in Tech & Analytics Solutions was just over 10%. R&D Solutions first quarter revenue of $1.934 billion was up 3.5% at actual FX rates and 4.7% at constant currency. Again, excluding all COVID-related work, organic growth at constant currency in R&DS was approximately 17%, which was consistent with our expectations. Contract Sales & Medical Solutions, or CSMS first quarter revenue of $195 million grew 1% reported and 5.7% at constant currency. Excluding all COVID-related work, organic growth at constant currency in CSMS was mid-single digits.

Okay, let's move down the P&L now. Adjusted EBITDA was $812 million for the first quarter which represented growth of 9.1% on a reported basis. First quarter GAAP net income was $325 million. That was up 53.3% year-over-year and GAAP diluted earnings per share was $1.68, up 54.1% year-over-year. Adjusted net income was $477 million for the quarter, up 12.2% year-over-year and adjusted diluted earnings per share grew 13.3% to $2.47.

Now as already reviewed, R&D Solutions delivered yet another outstanding quarter of net new business. Our backlog at March 31 stood at a record $25.3 billion, an increase of 9.1% year-over-year. Next 12 months revenue from backlog increased 8% year-over-year to just over $7 billion. And I would note that both the backlog and next 12-month revenue numbers I just quoted were affected by FX rates at quarter end. That is to say they were lower than they otherwise would have been due to the strengthening of the dollar during the quarter.

Okay. Moving now to the balance sheet. First quarter cash flow from operations was $508 million and CapEx was $177 million. That resulted in free cash flow of $331 million. And as a reminder, our free cash flow in the first quarter of each year is affected by the timing of annual bonus payments. At March 31, cash and cash equivalents totaled $1.387 billion and gross debt was $12.637 billion, which resulted in net debt of $11.250 billion. Our net leverage ratio at March 31 was 3.64x trailing 12-month adjusted EBITDA.

In the quarter, we repurchased $403 million of our shares, which leaves us with slightly over $2.1 billion of share repurchase authorization remaining under the current program.

Now to the guidance. For the full year 2022, our expectation remains unchanged, but organic revenue growth excluding COVID-related work, will be low to mid-teens at constant currency. Since February, FX fluctuations have caused an incremental full year revenue headwind of over $200 million as of yesterday's rates. In addition, we currently estimate the revenue disruption from the Russia-Ukraine crisis to be in the $40 million to $50 million range. Accordingly, we are updating our revenue guidance range to reflect these 2 factors.

For the full year, we now expect revenue to be between $14.450 billion and $14.750 billion, which represents year-over-year growth of 6.9% to 9% at constant currency and 4.2% to 6.3% reported both compared to 2021. Now as a reminder, in the revenue guidance we provided in our Q4 call in February, we absorbed a $70 million FX headwind versus the initial guidance we provided at our Analyst and Investor Conference in November. Our projected revenue growth includes just over 150 basis points of contribution from M&A activity.

Now despite the macro factors that affected our revenue guidance, we're reaffirming our full year 2022 adjusted EBITDA and adjusted EPS guidance ranges that we provided on our fourth quarter 2021 earnings call. This includes absorbing the earnings impact of loss revenue in Russia and Ukraine as well as the costs that remain there such as salaries and assistance provided to employees.

Accordingly, we continue to expect adjusted EBITDA to be between $3.330 billion and $3.405 billion, representing year-over-year growth of 10.2% to 12.7%. And we continue to expect adjusted diluted EPS to be between $9.95 and $10.25 or year-over-year growth of 10.2% to 13.5%. Now our full year 2022 guidance range is assumed that foreign currency rates as of yesterday, April 26, remain in effect for the balance of the year.

Moving on to second quarter guidance. I'll remind you that the first half of last year represented our peak for COVID-related revenues. And as a result of that, the second quarter should be the toughest year-over-year compare in terms of revenues. So for the second quarter, revenue is expected to be between $3.470 billion and $3.520 billion, representing growth of 4.6% to 6% on constant currency basis and 0.9% to 2.4% on a reported basis. Excluding COVID-related work, we expect organic revenue growth at constant currency to be in the low to mid-teens consistent with what we had in Q1 actuals and our projected full year revenue growth. Adjusted EBITDA is expected to be between $790 million and $805 million, up 9.4% to 11.5% and adjusted diluted EPS is expected to be between $2.35 and $2.42, growing 10.3% to 13.6%.

So to summarize, we've delivered very strong first quarter results on both the top and bottom line against what had been a very strong first quarter of 2021. Our base business maintained low teens organic growth at constant currency, excluding COVID-related work with double-digit growth on this basis in both TAS and R&DS. Our R&DS bookings -- excuse me, business recorded its largest ever quarter of service bookings. Contracted backlog exceeded $25 billion for the first time, rising over 9% year-over-year with over $7 billion expected to convert to revenue over the next 12 months. We maintained our net leverage ratio of 3.6x 12-month adjusted EBITDA on a trailing basis. And finally, and most importantly, despite the turmoil around us, we remain very confident in our outlook and accordingly have maintained our full year 2022 profit guidance.

So with that, let me hand it back over to the operator for our Q&A session.

(Operator Instructions) Your first question comes from the line of Eric Coldwell from Baird.

Two quick ones, both on geography. First, with Russia/Ukraine, I'm sorry if I missed it, but could you tell us the impact in Q1 and then how the $40 million to $50 million of annual impact is phased through the year. I guess I would assume the majority of that or a significant portion is in 2Q, but would love to get your sense on how you face that $40 million to $50 million projected impact.

And then secondarily, early in the pandemic, IQVIA was the first and perhaps most vocal company to talk about the impact of China and Asia Pac when COVID first broke out. Obviously, lot of conversation these days on the rolling lockdowns in China. I'd love to get an update on what you're seeing from the impact in that market and how you're operating across that region given the governmental actions ongoing today?

Eric, and thanks for your questions. On the first one, Ukraine -- look, Ukraine and Russia is like not even 1% or about 1% of our revenue.

A little less.

A little less, so call it, $130 million, $140 million, let's say. And obviously, there's been a significant displacement and the work that cannot be done primarily in R&DS. I might point out, some of that may come back. Some of the trial will obviously needs to continue and will be delayed. It just takes time and because of the disruption. You want to answer specifically the question on how much per quarter. We said it's -- we sized it at $40 million to $50 million.

Well, it's less than a proportionate impact in Q1, obviously, because the conflict didn't start until late February. So we had a few million dollars of impact in Q1, not a huge impact. You're right, Eric, that the -- it's probably -- the $40 million to $50 million is probably front-end loaded in the year because we should recapture a little bit as we get late in the year and we start shifting work. But that always takes longer than you think it's going to take. So we're not assuming a huge recovery of work in 2022. But ultimately, as we find new patients and move the clinical trial activity outside of Russia and Ukraine, we should recover all of that.

And probably back end of the year or early next. Now with respect to China, just to situate the conversation. China is about 2.5% of our global revenues?

Yes.

And that's about half and half, R&DS and Commercial. Now to take the Commercial side, first, we saw virtually no impact even at the worst of the COVID crisis when everything was shut down in China on our Commercial business. Obviously, some of the business that requires some face-to-face interactions like PMR, consulting and so on, obviously, went to 0. But the rest of the business, the Technology & Analytics services continued pretty much intact. So we have no concerns there.

On the R&DS, the obvious concern if there were lockdowns is -- our ability to access sites. Now right now, it's a fluid situation. We're tracking closely what's happening on the ground. We're seeing some disruption to site access and patient visits. Again, mostly in Shanghai because that's where the lockdown has been limited to so far. It's hard to imagine that these are going to be prolonged for a very long time or expanded to all China. But again, we -- no one can tell. So that's where we are.

We -- again, we are relatively confident outside China that when these things happen now, we've learned how to deal with it with our remote capabilities and our exerted development of decentralized trials, et cetera, we've become more adept and we are prepared to address those situations. We believe with the same will be true if, God forbid, in China, the situation was to deteriorate. But frankly, at this point, we haven't seen much -- again, it's de minimis, and we haven't taken any adjustments or anything like that in our forecast for China. Any other comments, guys?

No.

Your next question comes from the line of Shlomo Rosenbaum from Stifel.

A quick question just is the year's revenue and profitability pacing the way that you expected as you entered the year? I mean, obviously, a little bit of a change with Russia and stuff like that. I just -- the second quarter guidance is a little bit lower than what the Street expected. Obviously, the Street doesn't have the insight into the pacing that you guys have at that level of detail. And it could be that we just didn't get the same kind of COVID headwind roll off year-over-year? And I just want to kind of start with that question, and then I have one follow-up.

Well, Shlomo, thank you for your question. Look, I think Ron mentioned in his introductory remarks that last year's first half included the highest -- the peak revenues from COVID. The second quarter will be the toughest compare year-over-year with COVID end, right? The biggest step-down year-over-year of COVID revenue will be in the second quarter. That's one factor.

Secondly, on a reported basis, if you look at -- again, assuming FX rates remain where they are for the balance of the year, the worst comparisons year-over-year in terms of FX impact are in the second quarter. Okay? But the underlying businesses, when you take this out, COVID and FX, you guys help me out with the numbers here, second quarter is consistent with the rest of the...

Yes, very consistent. And that's why we're giving you ex-COVID, constant currency, organic because that cleans out a lot of the items that caused the volatility that you're seeing in really across the quarters of 2022, when you look at it on that basis, very consistent growth rate.

So again, I mean, in [tiles], I can tell you the -- our -- what's built in our forecast that is reflected in our guidance is due to constant currency organic growth, excluding COVID-related work, will be high single digits. So very [statistic] gain in the first quarter. R&DS, due to constant currency organic growth excluding COVID-related work, will be upper teens. And CSMS will be low single digits, excluding COVID-related work at, again, constant currency organic growth. So you're right. On a reported basis, the number with the actual COVID work included, it looks a little choppy sequentially. But the reality is the underlying base business is pretty consistent -- pretty strong.

Yes. And the other thing I would say is that's pretty much in line with our guidance that we gave. I mean, the -- that has been the area on how it's progressing over the quarter is exactly what we were expecting.

Okay. Perfect. And this is another one for you, Ari. Just you have a really good history of being aggressive on share repurchases when the stock gets -- and the stock has pulled back a lot. And at the Analyst Day, you communicated being -- and just actually, more recently of having a lower leverage target for a longer period of time. But would you consider taking up the leverage to take advantage of the stock price given the fact that it seems like the trends in the business really haven't changed despite the changes in the stock price?

Look, my personal inclination would be to do that. But frankly, we're not going to do that. We can buy -- thankfully -- there's the third factor in what you're articulating, which is our cash flow generation. And as you've seen, it's been pretty strong. And that allows us more flexibility and affords us the ability to do both. That is to maintain a lower leverage ratio and aggressively pursue share repurchases. You saw we bought over $400 million in the first quarter. Frankly, there are time windows or we cannot buy reported earnings, I think, in February 15.

And then we're approaching the end of the quarter, so we don't have a lot of time. And now we're already April 27. But yes, you can expect that we will be in the market at the levels or at any level, frankly. So again, the answer to your question is, yes, we will do aggressive share repurchase, but no, we will not increase the leverage ratio.

Your next question comes from the line of Jack Meehan from Nephron Research.

One of the big debates from the CRO industry has also been labor. How did your wage and turnover trends compared versus prior periods? Can you just comment on how you're managing through that?

Yes. Well, look, it's interesting. We've -- we're obviously experiencing the same trend that we've talked about before, which is given the strength of the industry backdrop, there's obviously competition for TAS. And we are really, really actively recruiting and hiring to meet the incremental demand. We also saw, like the rest of the industry, attrition pick up towards the end. I think it has stabilized, I would say, over the past few weeks. We track this very carefully. I look at it on a weekly basis. And it seems to have kind of plateaued and these attrition levels have plateaued and maybe even start to come down a little bit.

Look, we have approximately 82,000 employees and we recruit thousands of employees a year. So we do have the talent acquisition capabilities to be able to meet this increased demand. And we have -- we're actually fascinating -- back to the Ukraine situation, we are actually looking now at repositioning individuals from these countries, Russia and also Ukraine, in different geographies and utilize them in other places. So we are really -- literally, our global footprint allows us a little bit more initiatives.

We are seeing some margin pressure from labor cost increases. But as we have the flexibility, again, because of our global footprint, to do some arbitrage and moving things around the world to optimize our cost structure. We, of course, have our ongoing -- that's part of our DNA. We are continuing -- that's what we do day in, day out, productivity initiatives and cost optimization actions. Look, we've also increased rate cards on existing RFPs, and we are looking for ways to pass along some of those cost increases into pricing where we can.

So the combination of all of that. Obviously, this is easier to do. The pricing level is easier on short-cycle businesses and on the longer-cycle businesses where we -- we've already priced in some price escalations with that. They don't always reflect the wage inflation that we actually see in the market. But again, the combination of all of these levers allows us to manage that situation fairly effectively. And by the way, all these cost pressures that we're talking about are already factored in our guidance.

I also -- I want to point out -- I mean, maybe that's -- I don't know if I should say this or not, but we paid in aggregate the highest ever level -- dollar level of bonuses for 2021 to our employee population. In aggregate, we continue to pay, I would say, at a very respectable high level bonuses to our employees even during the worst of the pandemic. And I think we've seen in our employee survey, which we do very frequently higher and higher satisfaction levels and loyalty to our company, my understanding is not every one of our peer has done that and in fact we know specifically other peer that has paid $0 or very little bonuses last year. So that also has created some employee excellence at some other peer companies, and we're benefiting from that as well.

So it's a complex situation. Wages are going up. There is attrition and so on and so forth. But there are a lot of moving parts here, including competitive ones. And we feel confident that we can address this issue without changing anything in our guidance.

Your next question comes from the line of John Sourbeer from UBS.

I was wondering if you could just talk a little bit on the real-world evidence business growth in the quarter? And is this still going to be a double-digit grower this year, even if maybe some of the COVID work going away throughout the year?

Okay. Well, look, real-world evidence, we saw strong growth. You saw that in TAS in general, organic constant currency revenue growth excluding COVID was just over 10% in aggregate. And the high-growth segments, as you point out, are real-world evidence. And of course, as you all know, commercial tech, which continue to be strong drivers of growth. And I gave several examples -- specific client examples of how in the commercial world and the technology space and real world evidence, we are utilizing our unique capabilities. So real-world evidence is -- do we disclose the numbers here or not?

I mean I could say it continues to be a...

High teens...

High teens growth driver, excluding any COVID impact. So the numbers we've been giving for real-world have excluded that from the beginning. So that business has been consistently in the high to upper teens growth rates, and we see that continuing.

Yes. Yes, exactly, John. We see that continuing to your last question outlook.

Look, with respect to the COVID takedown in revenue, which we've been talking about for a while now, we've always said during the height of the pandemic that in H2 for real-world is true for commercial and certainly, it's extremely (inaudible) business. COVID works essentially crowded out the rest of the business. Refocused their dollars on COVID, whether it's vaccines or therapeutics or what have you. (inaudible) side government work to track and monitor commutations, et cetera. And they turn to us. As you know, we had a very strong market appropriately.

And the concerns that some of you had expressed at the time is, well, when that goes away, then what happens. Well, we told you that when that would go away, the base business would come back because we knew that there were a lot of projects that were -- had been essential and that there was a lot of pent-up demand that needed to be addressed, and that's exactly what is happening, exactly what is happening. And it's true certainly in R&DS.

And then just maybe one follow-up. As you're approaching around that 3.5x levered, any thoughts on M&A and what areas or potential businesses would you be looking at if they were to be built?

Well, look, we always said we've done -- and that's been consistent by the way. You can look at our record is between 1 and 2 points of our revenue for the long term has been supplementing our organic growth. We make acquisitions within our core businesses strategic and add capabilities or allow us to enter adjacent markets where we think we can add value. We have walked away -- we do walk away from, I want to say, 90-plus percent of the companies we look at in the market. I mean I always felt that valuations were very frothy, and we did not want to -- despite the rate, we did not want to pay for assets more than what they were worth.

And unfortunately, for those who visit you now find (inaudible) taken a bidding. And now we've got a lot of private equity-owned businesses that are very attractive that we would like to buy. The point for those current owners at the time the (inaudible) acquisition was very high. And so I just don't know how that -- it's going to take time. That I am suggesting that we are going to -- if we were always cautious, we are going to continue to be cautious.

Now, we will step up to the [play] when the acquisition is extremely attractive, extremely accretive to our operations and our financials. And we've done that in the quarter. Actually, we bought a significant lab business which is very attractive. And I believe that's the bulk of our acquisitions spend, is that in end quarter.

Yes. Yes.

And we like very much the lab business, as we discussed before, these are very strong and necessary capabilities and our lab business have been doing spectacular. We obviously will look at CROs when they come up. But again, the valuation premiums on those assets have been out of reach for us. On the commercial side, we've bought technology companies, and we will continue to look at the digital space. We've got, as you know, a strong interest in growing -- continue to grow on the commercial side.

The commercial side is becoming increasingly sophisticated with the go-to-market strategies of our clients becoming a lot more akin to how larger consumer-oriented businesses look at the world with much better -- you see what our OCE suite, our OCE ecosystem does with a lot of embedded intelligence. It's no longer -- we're not talking about a simple CRM point solution as is the case for most of the competition. Our system is an ongoing live with sophisticated AI analytics that enable the users to make decisions on a timely basis with respect to targeting the right customer at the right time with the right message.

And so anything that complements or advances our position in the U.S. digital and European digital commercial spaces where it's most advanced, we will look at, and we will be aggressive enough to enter those spaces and complement our capabilities. So that's for the -- I just gave you my overall strategic panorama here in terms of acquisitions.

Your next question comes from the line of Luke Sergott from Barclays.

Just a couple of cleanups. On the COVID step-down in 2Q, can you remind us -- I might have missed this one. Can you remind us what you guys did in 2Q last year and by the segments, just so we have an idea how that phases out?

We had a combination of projects in the TAS segment. You'll recall we did a lot of government work, which is stepping down as we go through this year. In the R&DS segment, we are working on some mega COVID vaccine studies and safety monitoring work and also therapeutics. But we were involved in hundreds of different COVID-related projects. So...

Are you asking what type of work are we doing or...

No, no. Just revenue, I'm just trying to get a sense. I don't know if I missed it.

Yes. Yes.

The numbers -- I told you was we did about $375 million in -- now you're talking in Q2 or Q1 now?

Q2 of last year -- I'm just trying to get a sense of the step-down because you have the whole $1 billion where we are, right?

Well, wait. Q2 was the highest last year. And you can infer from the numbers we gave you on the conference call what Q1 was last year, which was over $550 million and Q2 was slightly larger than that last year.

That's helpful. That's exactly what I was looking for. All right. So -- and then something here a little more strategic as you think about it. So I mean, Ari, when you guys came on after the merger, you started going after the fat tails of biotech, right, and going after all the bookings. And so now when you're getting up to record booking levels, 1.9 plus, are you guys at capacity of what your business can handle? And I guess it's more of a sense of -- I understand it's hard just to add additional bodies given the tight labor market. So give us a sense of the type of work you're now taking on, how that's changed. And if we should expect the overall bookings to continue to climb or if this is kind of peak at your capacity right now?

Well, first of all, capacity always is people-driven in this business, as you know. But I would say, if anything, certainly since the merger, our ability to take on more work with the same amount of people has increased significantly because of our decentralized clinical trials capabilities. The increase in technology content, in data analytics, in process improvements that we've done since the merger is really dramatic. So our ability to take on more work with the same amount of people is significantly enhanced.

So I don't see, frankly, us turning away work because somehow we don't have the capacity. We just don't do that. Again, with the minor exception of what I described before, in my introductory comments for pre-commercial EVPs that knock at our door for assistance and that don't qualify based on our rigorous vetting process. With that minor exception, we are able, willing, eager to take on any and all work.

So certainly, I hope that we continue assuming the underlying dynamics of the market continue to grow, which is I think a very, very value assumption and a completely conservative expectation and assuming that we continue to gain market share, which is also, I think, a conservative expectation, you should expect our bookings to continue to grow over the long term, no question about it.

Your next question comes from the line of Patrick Donnelly from Citi.

Ari, I just wanted to circle back on EVP, a really helpful commentary during the script. I mean it sounds like even if you did see some softening, your business was diversified enough where the impact would be pretty negligible. But to date, you haven't seen anything. And just to clean up, I guess, why you wouldn't be seeing it versus some competitors, like one yesterday, you called it out. Is that coming down to your vetting process you're maybe not taking on high-risk trials that others are? Do you think it comes down to kind of that process internally?

Look, I don't know -- I'm not going to speak for other competitors. I obviously, people in the industry know or have knowledge of what their peers focus on in terms of market segments. Look, from the beginning of this merger, we said we were going to be a lot more thorough in terms of what gets into our backlog. If you recall, we switched from awarded business "to contracted business". We became a lot more rigorous in terms of the specific booking analytics.

I mean, again, I don't want to -- I -- certainly but you will never ever hear from us, God forbid, that we are making an adjustment to our bookings because we had some kind -- some meteorite came from the Cosmos and hit our backlog. You haven't heard that from us, quite the opposite. And so we tell you what the numbers are and those numbers are thoroughly and rigorously scrubbed. I repeat, we're not going to take -- there are many -- believe there are many clients that call or companies that call or venture, VC firms or -- there are a lot of biotech stuff all over the world with high hopes, and they love to have us help them and support them. And they sometimes even want to leverage the fact that they are supported by IQVIA in order to raise money.

And of course, we just don't do that. That's not our business. There could be -- it is often the case that an EVP at a very early stage with one molecules and high hopes and a nice-looking management team go around raising money and they come in with at least an assertion that there is a CRO already involved and that has affected their -- the scientific basis, et cetera. And the more credible the CRO, the better chance they have of raising money.

Now we don't do that, simple. Others do. So that there are significant differences between how we book business. Someone asked earlier about capacity, and I said there is not going to be a capacity issue for us. But look, it's not like we are desperate for business. We have business. So we're not going to take on any less. So I think that may be one difference. And is a market segment focus. Mike, do you have any other comments to make?

Yes. I was just to build on Ari's comments, in addition to the vetting on both the financial and scientific basis, the nature of work that we typically take in is in the later-stage clinical time frame whereby there's a lot more, I think, historical data versus whether you're dealing in EVPs mainly in the preclinical or first-in-human space. So I think that's another benefit to this (inaudible)

Very important.

Yes. That's really helpful. Appreciate it.

And your first comment, frankly, was the right one, which is it's a very small part of our overall business, our company.

Right. Yes. Understood. And then just a quick one, Ari, on the pricing environment. What are you seeing there? I know that's a concern as biotech falls off, maybe pricing softened. It sounds like you guys have nice power there. And on the back of that, any delay in terms of getting reimbursed on some of the shipping trials in Russia/Ukraine? Just wondering, as you put in a change order, is there near-term margin pressure that then alleviate as you go through the year and get reimbursed? Just trying to figure that piece out as well.

Yes, yes, of course. But again, it's a small, small piece of the overall. And we are absorbing that cost. So we haven't changed our profit outlook, and we don't plan to do that for now. There's no reason to do that. We can absorb it. We have enough initiatives. We are large enough, diversified enough that we can handle the Russia-Ukraine situation and disruption on our clinical trials, also longer than -- that it is what it is now.

Thank you all for joining us today. We look forward to speaking to you again on our next earnings call. Myself and the team will be available for the rest of the day for any follow-up questions. So feel free to reach out and look forward to talking to everyone again soon. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.