ICON plc Q4 FY2024 earnings call

• Introduced newly appointed COO Barry Balfe. - Q4 and full year 2024 performance in line with expectations; reaffirmed full year guidance. - Opportunity flow improved in Q4, broadly based. Biotech market had careful capital allocation with awards but slow trial starts. Large pharma had mixed picture with some customers having R&D growth and others budget pressures. - Strong demand from strategic alliances, pipeline for new partnerships. Gross bookings $3.06 billion, up 8% q-o-q, 3% y-o-y, but offset by cancellations. Backlog $24.7 billion, up 1.4% q-o-q, 8.3% y-o-y. - Digital innovation strategy, automation exceeding targets, cost management measures. - Full year 2024 saw revenue growth 2%, adjusted EPS 9.5%, free cash flow $1.1 billion. Lab and early phase business moving well, therapeutic areas like cardio-metabolic and oncology growing.

In Q4 2024, revenue was $2.04 billion, a year-on-year decrease of 1.2%. For the full year 2024, revenue was $8.28 billion, an increase of 2% over 2023. Gross margin in Q4 was 29.6% and 29.7% for the year. Adjusted EBITDA in Q4 was $423 million (20.7% of revenue) and $1.74 billion (21% of revenue) for the full year. Adjusted net income in Q4 was $282 million (13.8% margin) and full year adjusted earnings per share was $14, an increase of 9.5% over 2023. Net accounts receivable was $1.07 billion at December 31, 2024, with DSO at 47 days.

• Reaffirmed full year 2025 guidance range. - Target book-to-bill ratio of at least 1.2x trailing 12 months. - Pass through revenue mix expected to increase in H1 2025, pressure EBITDA margin. - Active share repurchases, with $750 million authorization added to current $1 billion authorization.

• Market volatility, cautious capital allocation in biotech, budget pressures in large pharma, cancellations impacting revenue and margin. - Uncertainty around FDA headcount reductions and regulatory changes. - Potential impact of policy uncertainties on customer pipeline progression.

Q: Discuss the demand environment and how that's evolving for both large pharma and biotech customers?

A: Steve Cutler said RFP numbers have been solid, biotech has careful capital allocation with awards but slow trial starts; large pharma has mixed picture with some customers having R&D growth and others budget pressures Q: Can you talk about pricing trends in both segments, biotech and large pharma, just competitive pricing trends?

A: Steve Cutler said it's early to be bullish on gaining share in biotech, and Barry Balfe mentioned pricing is competitive, with quality of strategy, experience, and predictability being bigger factors than price in biotech; in large pharma, competition on price is at periodic refresh points for preferred providers Q: What's your visibility into the 2025 revenue forecast in terms of revenue coverage and book-to-bill?

A: Nigel Clerkin said there's increased uncertainty and volatility, so they gave a wider guidance range; Steve Cutler mentioned targeting a book-to-bill ratio of at least 1.2x trailing 12 months Q: How much of the BARDA COVID contract is in backlog and how is it baked into revenue?

A: Steve Cutler said BARDA work is in backlog at low single digits; one study is moving ahead, the other delayed but still in backlog; Nigel Clerkin said COVID related business in 2025 is expected to be low single digits in totality Q: How are you thinking about the trade-off on cost-cutting versus growth?

A: Steve Cutler and Barry Balfe said they are managing cost base to align with demand, investing in growth opportunities where they exist and managing costs appropriately