IQVIA HOLDINGS INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Delivered strong revenue and profit results, with total revenue above the high end of guidance. Adjusted EBITDA increased 2.4%, and adjusted diluted EPS was $2.70, up 6.3% year-over-year.
• Market Landscape: TAS continued recovery, but R&D faced delayed decision-making by customers due to macroeconomic and industry sector caution. U.S. administration initiatives (tariffs, agency actions, drug pricing) impacted the industry, but IQVIA's direct exposure was limited.
• Business Activity: TAS won partnerships with clients launching new products, and R&D achieved notable wins, including contracts from strategic partnerships with large pharma clients. Progressed with AI agent deployment, with over 20 agents in production.

Segment Performance

• TAS (Technology & Analytics Solutions): Revenue was $1,546 million, with 6.4% reported growth and 7.6% constant currency growth, contributing over 40% of total revenue. Real-world evidence drove double-digit growth.
• R&D Solutions (R&DS): Revenue was $2,102 million, up 0.3% reported and 1.1% constant currency. Backlog at March 31 was $31.5 billion, a 4.8% year-over-year increase. Next 12 months' revenue from backlog is $7.9 billion.
• Contract Sales & Medical Solutions: Revenue was $181 million, down 4.2% reported and 2.1% constant currency.

Guidance

• Raised full-year revenue guidance by $275 million to between $16,000 million and $16,400 million, reflecting favorable foreign currency exchange rates. This represents year-over-year growth of 3.9% to 6.5% reported or 5.2% at midpoint.
• Reaffirmed adjusted EBITDA guidance of $3,765 million to $3,885 million and adjusted diluted EPS guidance of $11.70 to $12.10.
• Second-quarter guidance: Revenue expected between $3.925 billion and $4 billion, adjusted EBITDA between $895 million and $915 million, and adjusted diluted EPS between $2.72 and $2.83.

Risks

• Impact of U.S. administration tariffs, including potential industry-specific tariffs that could affect customers.
• Uncertainty from agency actions like NIH funding caps and FDA restructuring, though IQVIA's exposure was minimal.
• Drug pricing initiatives with unclear specifics, but potential positive impacts on the need for real-world evidence.

Q: Given the uncertainty what you saw in R&DS, I’m just surprised that you didn’t see that in more of the short cycle business in TAS. Like you kept the guidance and I guess the assumption is things are going to continue. But do you think that there’s risk that that could spill over into some of the uncertainty into some of those areas in TAS like consulting or some of the analytics or some of the areas like that? And could it potentially result in further reprioritization even in the R&DS business?

A: Ari Bousbib noted TAS hasn't seen spillover yet due to pent-up demand for necessary activities. Uncertainty could cause delays in R&DS decision-making but reprioritization from IRA is largely complete.

Q: Just wondering if there’s any change in the quarter given all the macro uncertainty. And, again, this is more specific to R&DS.

A: Ari Bousbib stated no change in pricing environment as negotiations were already set during strategic partnerships last year.

Q: Given all the recent macro development and uncertainty you flagged, and thanks for all the color you gave Ari. Are you guys seeing any change in the RFP or new bookings mix in terms of FSO versus FSP? And one another follow-up quickly, if I can ask. What’s the latest two mega trials that were delayed? Are they expected to resume in second half?

A: Ari Bousbib mentioned FSP bookings as a percentage of total declined, with signals of a potential reversal. Mega trials: One expected to start in second half, the other pushed out of the year with no change to guidance.

Q: I was going to ask about the impact on guidance from FX. And the question was, was there any other change to the guidance or directionality of the guidance excluding FX? What I’m getting to is during the prepared remarks or maybe the Q&A, Ron said that the year-over-year gross margin reduction in Q1 was primarily FX, but FX has now turned from a big headwind to a moderate tailwind. So I’m questioning how much EBITDA and EPS were protected by the FX shift, i.e., would you have needed to maybe reduce the range on EBITDA and EPS if it weren’t for FX?

A: Ron Bruehlman stated EBITDA is largely independent of FX ranges, with FX impact on EBITDA muted.

Q: Hey, guys. Thank you for the time here. So, I’ll ask a quick two-parter. Ron, any comments on the stranded costs associated with the mega trial that you said is now pushed to 2026? And is there any risk that the second trial, which you just got confirmation on, could slip again in that sort of 4Q timeframe into 2026 as well? And then, Ari, one for you on real-world evidence. You called out some of the unique sort of policy driven opportunities for that business over the medium-term. Is there anything you’re doing either organically or perhaps from an M&A standpoint that could position you to fully capitalize on some of these opportunities that are coming up?

A: Ron Bruehlman said stranded costs from delayed trial were minor. Ari Bousbib stated IQVIA is well-positioned in real-world evidence and intends to capitalize on policy-driven opportunities organically.