Thank you. Good day, and thank you for joining us on this call covering the quarter ended March 31, 2024.

Also on the call today, we have our CEO, Dr. Steve Cutler; our CFO, Brendan Brennan; and Senior Vice President of Corporate and Commercial Finance, Emer Lyons.

I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call. Certain statements in today's call will be forward-looking statements.

These statements are based on management's current expectations and information currently available, including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, and listeners are cautioned that forward-looking statements are not guarantees of future performance.

Forward-looking statements are only as of the date they are made and we do not undertake any obligation to update publicly any forward-looking statement either as a result of new information, future events, or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by the company, including the Form 20-F filed on February 23, 2024.

This presentation includes selected non-GAAP financial measures, which Steve and Brendan will be referencing in their prepared remarks. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release section titled Condensed Consolidated Statements of Operations.

While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes. Included in the press release and the earnings slides, you will note a reconciliation of non-GAAP measures.

Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share excludes stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction related and integration related costs, and the respective tax benefits. We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity for a brief follow up.

I would now like to hand the call over to our CEO, Dr. Steve Cutler.

Thank you, Kate, and good day, everyone. ICON's performance in quarter one marked a strong start to the year, combining solid financial results, an impressive uptick in business awards, and excellent adjusted earnings growth.

Net business wins were a record in the quarter, exceeding $2.65 billion, as our comprehensive scaled offering continues to fuel our leadership position in clinical development. The market trends we saw early in quarter one continued throughout the balance of the quarter, characterized by stabilizing demand within the biotech customer base, as well as a continuation of the robust demand we have consistently seen from large pharma customers.

Underlying demand drivers are incrementally more positive through quarter one, with biotech funding increasing over 50% on a year-over-year basis in quarter one, according to BioCentury. And large pharma R&D spend figures indicating low single-digit growth for the full year, in line with previous expectations.

Proposal volumes are at healthy levels, with overall RFP volume increasing low double digits on a trailing 12-month basis. In quarter one, net bookings grew 10% on a year-over-year basis, resulting in a book-to-bill of 1.25 -- 1.27 times in the quarter and increasing our trailing 12-month book-to-bill ratio to 1.24.

We had a robust business development performance across all operational segments, with notable strength in our large pharma full service solutions segment as well as in our laboratory business. While it's early in quarter two, to date we have seen a continuation of these trends across customer segments and we remain positive on the outlook for the full year.

We expect book-to-bill to be in the range of 1.2 times to 1.3 times on a quarterly basis, maintaining our previous target range and expectation for an average book-to-bill of 1.25 times for the full year 2024. One of our important strategic initiatives as we came into 2024 was the focused rebranding of our dedicated biotech solutions business, ICON Biotech.

We saw an opportunity to enhance our market position within the biotech segment with customers that historically associated ICON with a large pharma focus. ICON Biotech is the world's largest dedicated biotech CRO with approximately 8,000 staff that are exclusively committed to that segment and understand the unique needs of the biotech customers we support.

We are committed to optimally serving this key customer group and believe we can best do so through our current dedicated structure. Following the rebrand activity in quarter four last year, I am pleased to report that we are already seeing positive momentum in terms of customer receptivity and an increased win rate in this segment.

In addition to our focused efforts within the biotech segment, we continue to drive forward our leadership in large pharma. Growing strategic partnerships is a critical element to this strategy, which not only includes the execution of new strategic partnerships, but renewing and expanding existing customer relationships.

In quarter one, we were successful in renewing a longstanding Top 20 pharma partnership, primarily utilizing full service solutions. The renewal reinforces our strong delivery history of execution for this important customer and our collective team's collaboration to drive efficiency across their development portfolio.

Another important factor in ICON's ability to secure and grow our customer partnerships is through the development of innovative solutions across our portfolio. We are excited about the future potential of our comprehensive and cost effective offering in clinical trial tokenization.

This end-to-end approach follows patients longitudinally through their healthcare journey beyond their participation in a clinical trial. The surge in drug development in areas like diabetes and obesity has increased the need to collect and analyze long term follow-up safety, efficacy and health expenditure data.

We are anticipating greater market, regulatory and reimbursement requirements in the future, hence the need to deliver broader, more comprehensive insights that ultimately drive increased value for our customers. Turning to our financial performance in quarter one, our team delivered another period of strong results across a number of measures.

Total revenue increased 6% on a year-over-year basis. Gross margin of 29.9%, increased 10 basis points over quarter one 2023, and total SG&A expense decreased 90 basis points on a year-over-year basis to 8.7% of total revenue, driving a very strong adjusted EBITDA growth of 11.3% over quarter one 2023.

This resulted in an adjusted EBITDA margin of 21.2% in the quarter, up 100 basis points year-on-year. Given the performance on adjusted EBITDA growth and the continued paydown of our Term Loan B debt, we saw excellent year-over-year growth in adjusted earnings per share of 20%.

The execution of our capital deployment strategy continued as planned in the first quarter. We closed the previously announced acquisition of HumanFirst in January, a leader in the field of digital health technology selection.

This important capability is strategically aligned with our approach to providing an enhanced integrated offering. The combination of our leading clinical outcome assessment capabilities and digital health technology selection offers the ability for customers to optimize clinical trial design and enhance data collection quality.

As we previously noted, our capital deployment priority remains M&A, and we continue to actively evaluate assets that will strategically and operationally enhance the current areas of our service portfolio. After positive rating changes from S&P and Moody's in the back half of 2023, moving ICON back to investment grade status, we began the execution of the planned refinancing of our variable rate debt in quarter one.

This included a successful repricing of our existing Term Loan B in the quarter, reducing our interest rate by 25 basis points as well as the removal of our credit adjustment spread. In parallel, we improved the terms of our revolver facility and we are working closely with our banking partners to progress refinancing of our debt.

This will allow us to better utilize our balance sheet and provide more certainty on our annual interest expense. We continue to expect our full year interest expense will be in the range of $200 million to $230 million this year.

We are updating our full year 2024 guidance range to account for our financial performance in quarter one and the positive market environment we've seen so far this year. We expect revenue to be in the range of $8.48 billion to $8.72 billion, an increase of 4.4% to 7.4% over full year 2023.

Additionally, we expect adjusted earnings per share to be in the range of $14.65 to $15.15, an increase of 14.5% to 18.5% on a year-over-year basis. The new ranges maintain the midpoint of our previous guidance range, reflecting an outlook that is consistent in terms of overall market activity and our performance year to date.

Before I hand it over to Brendan for further detail on our financial performance, I want to provide a brief update on our previously announced CFO transition. As we indicated earlier this month, Brendan has decided to depart ICON after a long and very successful tenure in our finance organization at the company and importantly as our CFO for the past 12 years.

While we're sorry to see Brendan go, we understand his desire to take on a new challenge in his career, moving to a different industry and we are very grateful for his significant contributions to our organization over the past 18 years. As previously noted, we have commenced a process with a large global recruitment firm to identify our next Chief Financial Officer, which includes both external and internal candidates for the role.

We plan to provide additional updates on this process and the transition period as we progress. In the meantime, Brendan is firmly in his role as a CFO and we have not made any changes to our broader finance organization as a result of this announcement.

Finally, we are looking forward to our upcoming Investor Day, which will take place on May the 30th in New York City. The leadership team of ICON will be present at this important event and further details will be made available on our website in the coming week.

In closing, I want to thank all of our colleagues at ICON for their dedicated efforts in quarter one in continuing to support our mission in bringing new therapies to patients around the world. Brendan, I'll now turn it over to you.

Thanks, Steve. I appreciate the kind words and want to reiterate my commitment to ensuring a smooth transition with plans to work closely with Steve and our broader management team to accomplish this.

Turning to our financial results in quarter one. In quarter one, ICON achieved gross business wins of $3.11 billion and recorded $460 million worth of cancellations.

This resulted in a solid level of net awards in the quarter of $2.65 billion and a net book-to-bill of 1.27. With the addition of the new awards in quarter one, our backlog grew to a record $23.4 billion, representing an increase of 2.5% on quarter four of 2023, or an increase of 10.1% year-over-year.

Our backlog burn was 9.2% in the quarter, slightly down from the quarter four levels, and we anticipate similar levels through the remainder of the year. Revenue in quarter one was $2,090 million.

This represents a year-on-year increase of 5.7% or 5.4% on a constant currency basis. Overall, customer concentration in our top 25 customers decreased from quarter four 2023.

Our top five customers represented 26% of revenue in quarter one. Our top 10 represented 41.4%, while our top 25 represented 62%.

Gross margin for the quarter was 29.9% compared to 30.4% in quarter four 2023. Gross margin increased 10 basis points of a gross margin of 29.8% in quarter one 2023.

Total SG&A expense was $181.7 million in quarter one, or 8.7% of revenue. This was in line with the prior quarter on total percent of revenue.

In the comparable period last year, total SG&A expense was $189.6 million, or 9.6% of revenue. Adjusted EBITDA was $444 million for the quarter, or 21.2% of revenue.

In the comparable period last year, adjusted EBITDA was $399.1 million, or 20.2% of revenue, representing a very strong year-on-year increase of 11.3% and expansion of 100 basis points in margin. Adjusted operating income for quarter one was $411.4 million, a margin of 19.7%.

This was an increase of 11.6%. Adjusted operating income of $368.7 million, a margin of 18.6% in quarter one of 2023.

Net interest expense was $65.8 million for quarter one. We continue to expect the full year interest expense to total approximately $200 million to $230 million in 2024.

The effective tax rate was 16.5% for the quarter. We continue to expect the full year 2024 adjusted effective tax rate to be approximately 16.5%.

Adjusted net income attributable to the group for the quarter was $288.5 million, a margin of 13.8%, equating to adjusted earnings per share of $3.47, an increase of 19.7% year-over-year. In the first quarter, the company recorded $7 million of transaction and integration related costs.

US GAAP income from operations amounted to $285.5 million, or 13.7% of revenue during quarter one. US GAAP net income in quarter one was $187.4 million, or $2.25 per diluted share, compared to $1.41 per share for the equivalent prior year period, an increase of 60%.

Net accounts receivable was $1,146 million at the 31st of March 2024. This compares with a net accounts receivable balance of $1,088 million at the end of quarter four 2023.

DSO was 49 days at March 31, 2023, a decrease of five days from quarter one 2023. Cash from operating activities in the quarter was $327.1 million and free cash flow was $300 million in the quarter, an increase of 102% on a year-over-year basis.

While DSO increased sequentially, we continued to target mid-40s in terms of DSO on a full year basis, albeit we can have fluctuations on the timing of payments that can influence total DSO in any particular quarter. On March 31, 2024, cash totaled $398 million and net debt totaled $3.5 billion, leaving a net debt position of $3.1 billion.

This compared to net debt of $3.4 billion at December 31, 2023, and net debt of $4.2 billion at March 31, 2023. Capital expenditure during the quarter was $27.2 million.

From a capital deployment perspective, we made a payment of $275 million on Term Loan B facility in quarter one and ended the quarter with a leverage ratio of 1.8 times net debt to adjusted EBITDA. Given the successful repricing of our Term Loan B and our intention to refinance our existing debt, we do not anticipate making discretionary payments in quarter two at this time.

After successfully deleveraging over the past few years, as well as our return to investment grade rated company, we feel we are well positioned from a balance sheet perspective to deploy more capital opportunistically for M&A, as well as potential share repurchase. Our preferred use of capital remains M&A, and we have a number of opportunities in the pipeline that we are currently engaged on, which would add scale and capability to fast growing strategic areas of our portfolio.

Our key assumptions behind the full year guidance remain in place. An effective tax rate of 16.5%, free cash flow target of circa $1.1 billion, CapEx spend in the range of $150 million to $200 million, and interest expense in the range of $200 million to $230 million, all for the full year 2024.

Finally, I would also like to sincerely thank our ICON employees around the world for their hard work and dedication in delivering our strong performance in quarter one. Operator, we are now ready for questions.

Hi. Thanks.

This is Adam on for Charles. We've seen an uptick in emerging biopharma funding and wondering if you can give us a sense of what's usually the general timeframe for that to flow into RFPs' bookings and then ultimately revenue?

You guys noted seeing stabilizing biotech demand and wondering if you guys are already starting to see in the robust growth in net wins this quarter biotech contribute? Thanks.

Sure. So, overall, we've seen a solid increase in RFPs in the quarter, in the sort of low double-digit sort of area.

And the biotech funding, as you've noted, is certainly -- it's ticked up very nicely. We haven't seen that necessarily come through so much on the RFPs just yet.

And I would expect that's probably going to be delayed a quarter or two. So, we would expect somewhere in the second half of the year for the results of that biotech funding, assuming it continues, of course, to come through in terms of awards and then as we get towards the end of the year and even into next year to hit the revenue line.

So, I think, what we've seen -- we continue to see solid demand in the biotech, but the real uptick and the opportunity, I think, going forward is probably more weighted towards the end of the -- couple of quarters delay and then as we get into early next year on the revenue side of things.

That's helpful. Thank you.

Hey, everyone. Thanks for taking our questions.

Steve, you called out a continuation of positive trends here in the second quarter. Results were solid and you had a great quarter for bookings.

Given things seem to be moving in the right direction here, can you just walk through the rationale for taking down the high end of your guidance range for 2024?

Yeah, Max. It's still early in the year and of course we have -- I mean, we've narrowed the guidance, as you've noted, quite significantly now.

So, on both the EPS and the revenue side. Because it's still early in the year, we feel it's not appropriate necessarily to increase the midpoint of the guidance.

It was really just a matter of -- we're pretty confident about that midpoint as we announced it initially. And so we feel at this point the right thing to do is just to narrow that guidance.

We'll certainly be looking at what we'll be doing in the next couple of months, and as we get to the July call, we'll see where we are. But inevitably in our business there are puts and pulls things, some headwinds and some tailwinds.

And overall, as we're only three months into the year, from an announced results point of view, we felt it was the right thing to do was to narrow, because we're confident about the midpoint, but not to move that midpoint at this point.

Understood. Thank you for that.

Maybe just to clarify one quickly on RFPs, you just mentioned up low double digits in total. Do you have that breakdown or how that breaks down between biotech and large pharma?

And then how does each of those buckets compare to where they were at at the end of last year? And then it sounds like, based on your prior answer a few minutes ago, you would actually expect RFPs to get better from here, given the lag between funding and that ultimately showing up in RFP flow.

Just wanted to make sure I understood that commentary correctly? Thank you.

Yeah. I mean, well, to answer the second part of your question first, yeah, we do think there's a bit of a lag period there.

So, the better funding environment that we've all seen in the first quarter or so we talked about that, we think that's going to flow through probably in the second half of the year. So to be absolutely crystal clear on that.

There's a lag of at least a couple of quarters there. In terms of the -- we don't really split out too much the RFP data, but, qualitatively, certainly large pharma continues to be strong and we've seen that.

Biotech's also been solid, perhaps not quite as strong, but it does seem to be on the uplift. So, if I look at, as I say, low double digits, large pharma is well above that.

Biotech's probably more in the mid singles, if I had to put a number on it and it's, as I say, solid, strong. We're seeing some plenty of good opportunities in the biotech space.

We've been successful. Our win rate in that biotech space has gone up over the last quarter or so.

So, we feel good about the solutions and the propositions we're putting in front of customers and their receptivity to those. But, as I say, overall, very solid, very constructive environment on the RFP front and we feel good about where the market's heading overall.

Got it. Thanks again for taking our questions.

Good.

Great. Thank you for taking my questions.

So, your book-to-bill target for the year is 1.25 on average, the midpoint of that 1.2, 1.3 range. I know bookings fluctuate on a quarterly basis, but given the strong start to the year and the improving funding backdrop, do you think you can sustain quarterly bookings above that 1.25 number?

And then, on that point, from a quarterly phasing perspective, if we see similar bookings in 2Q here that we saw in 1Q above 1.25, is it fair to assume that there would be upside to the back half of the year?

Casey, we've had a good quarter on the bookings. It was very solid.

And then we're really pleased with the way that's -- the market is sort of moving. I'm not going to get ahead of ourselves in terms of going above the 1.25.

I think, that's a solid target that we have. We'll see how the biotech funding and environment sort of contributes to RFP opportunities in the back end, as we've talked about.

It's not out of the question. We could be above that, but I think at this stage we'll stick with our 1.2 to 1.3 and then -- and being somewhere in the middle of that on an average basis across the quarters.

That's the way we think about it. If we got above that, I'm not sure, revenue takes a bit of a while to flow through.

A lot of the work we're still winning is oncology. Our burn rates around 9.2.

I don't see that going up anytime soon. So, there may be some modest impact if we have a particularly strong second quarter on the business wins.

But I'm not certainly going to promise that at this stage. I think, we feel like the opportunity to flowing through nicely.

It's very early in the second quarter, but the opportunities are flowing through nicely. We have a good opportunity list and I feel confident about our performance in Q2, but it's very early days on that front.

And we feel as that plays out, we'll come to July and we'll adjust our forecast and where we're going. So, overall, positive, strong, constructive, but we're not ready to declare victory and to push too fast ahead despite what you'd like us to do.

Got it. That's helpful.

And then maybe just a quick follow up. Can you talk about your win rate in the quarter?

And maybe elaborate on how much of the bookings growth you saw was a result of share gains versus trial growth coming back? Thank you.

Our win rate was consistent with where it's been. Certainly, the large pharma win rate has been very positive and been consistent -- that's been consistent.

Biotech certainly came back in the quarter very well. So, we feel we're making a lot of progress in the biotech space with the opportunities that we pitched, and we've got some good opportunities in the hopper for the second quarter.

So, we feel that we're on our game nicely with the biotech. That story, the rebranding that we put in place towards the end of last year is really starting to gain some traction with customers.

We have a number of very significant opportunities. Some of these biotech opportunities are really large -- really large trials, really large programs, and we've been successful on a number of them.

So, we feel we're in a good place. And the hit rate, strike rate, call it what's like, it's not as high, of course, in biotech as it is in large pharma, where we tend to have the strategic partnerships, but we are -- we compete very strongly and increasingly strongly in that space.

And we feel the rebranding approach is really starting to pay dividends along with the good people and the good team we have on the biotech space.

Hi. Good morning.

You both mentioned M&A as a priority in your prepared remarks. Can you just remind us what type of services or needs that you think ICON is missing?

And then secondly, your DSOs down year-over-year, but they did pick up sequentially. If you can provide some more data on that, that would be great?

Sure. I'll take the M&A, and then I'll let Brendan handle the DSO question.

And we've been fairly clear in the path. M&A is a priority and it is around adding capabilities to services and functions that we currently have in the organization.

So, we're looking to uptick. It could be in the laboratory space, it could be in the site space, it could be in the other parts of the business devices.

There's a number of areas that we feel we could move that sort of functional service area within our organization up to being either one or two in the market. Overall, of course, we feel we're equal number one, or even a little ahead in some areas.

Certainly on the FSP space, we're by far the number one player. On the full service space, we're very close to being the number one player, if not the number one player.

But there are areas within that business, as I said, laboratories, sites, devices that we feel that are within our bailey week and within our wheelhouse, but that could be upticked from a revenue and operational point of view to help us to really provide a little more scale in some of those areas. So, those are the sorts of areas we're focused on.

We have a number of those opportunities in the hopper. And as you've seen, our finances and our balance sheet now lend themselves much more effectively to making those transactions.

We've done a couple relatively recently with HumanFirst and Biotel. They were relatively small.

We're looking to continue that, but uptick in terms of the revenue and EBITDA contribution that these new ones would make to the overall P&L. Brendan, do you want to take DSO?

Yeah. Thanks, Ann.

I was still heartened, I suppose, by the level of cash from operations and free cash flow, which is very strong in the quarter. So, I'm very happy that we're making a lot of progress from where we were in the past, albeit, yes, we did see a two-day attenuation in the DSO from Q4 to Q1.

I don't think there's anything particular there. We said we would continue to focus on being in the mid-40s for the full year, so that's obviously our goal.

We know we had -- unfortunately, Easter just happened to have hit -- that Easter holiday period happened to hit at the exact end of the quarter, 31st of March. Easter was early this year, so that didn't help.

But it's a couple of days, so that's something I think we can recoup as we go through the course of the year and still overall happy with the cash flows, which were very strong in the quarter.

All right. Thanks.

Thank you. Stephen, I was hoping maybe you could elaborate a bit further on your improved win rate in biotech.

Dan, I could give you a million reasons why we've improved that. It's a multifactorial thing.

We've had some great opportunities. And the team, I think we have new leadership in in the biotech space and they're doing a good job in bringing our organization really through in that in terms of our customers and biotech traction and understanding of what our offering is.

We have, as I said, 8,000 people in that. That story is resonating well with the biotech customers.

They recognize -- I mean, as you all know, it's typical for biotech customers to at least have some sort of consideration for smaller CROs, because they believe they can be more fast and agile. At the end of the day, we have 8,000 people dedicated to running the biotech.

And they can -- they have, with their new leadership, have an autonomy and an ability to move that business and to make decisions in that business in a quick and an agile manner. And so we've addressed that, albeit within the framework of a large and very financially stable and viable company.

And so, that's the benefit that we're trying to give both to our biotech customers, and that's resonating very well. I've had a couple of discussions with them myself and they understand what we bring now to the biotech space, that dedicated resource, and that financial stability and ability to bring innovation and creativity and agility to their projects.

So, as we have our senior managers sort of double down and focus in on these key opportunities in terms of engaging with customers, talking to them, understanding their needs, putting to them the various innovations and solutions that we can as an organization present, it's starting to really resonate nicely and it's, as I say, turned into a -- it gave us a nice uptick on the win rate. There's no one reason that this sort of thing happens, but it is, I think, a trend, and I do believe it will continue.

Thank you. And a related follow up.

I just want to make sure I understand better the biotech rebrand. A couple of years ago at your Analyst Day, you talked about your dedicated business units for biotech, 8,000 employees and such.

So, what exactly changed at the end of the year?

I don't know that much changed operationally from our point of view. What I think we've done now is to communicate that better to customers and to engage our -- as I said, we have new leadership in there and they've done a really nice job in making that connection with customers personally and on a face to face sort of basis.

So, there's an element of ICON being known, I think, as the larger pharma CRO in the past. And that's quite valid and continues, as you well know.

But we also do a significant amount of work. About 30%, 35% of our work is in the biotech space.

And that's -- so, it's a very important segment for us. As you all know, there's a lot of innovation in drug development comes out of the biotech and certainly drug research comes out of the biotech.

A lot of the new drugs, I think something like 40% of new drugs that got to market last year through FDA were originated in the biotech space. So, they make a huge contribution to the drug development landscape and being a key provider and a key partner of that segment is really important.

So, I think, they better understand that now. We've been able to communicate that better.

Our marketing message is getting out there. But probably more important than marketing messages is our key senior leaders in that team have been out talking with customers and having them understand what it means to have 8,000 people available to them and for them to be able to put the innovation with that level of financial viability.

It's a communication thing and I think we're really starting to get on top of that now.

Yeah. And I think it's an important point, Dan, that you made that structurally, actually, it isn't different than what we presented at the Analyst Day in terms of having a dedicated segment to biotech with those dedicated resources.

It's really around that customer perception and making sure people understand that, which is what we're redoubling efforts on and not making the structural changes there.

Appreciate that. Thank you, both.

Good.

Great. Thanks for taking the question, guys.

And Brendan, I want to say congrats and wishing you the best going forward. I know you'll still be here for the next couple of calls, but still it's good working.

Thanks, Michael.

Yep. I want to focus a little bit on the big pharma segment a little bit or customer group a little bit.

I think, in your prepared remarks, you called out continuation of robust demand and you talked about R&D for the group for 2024 seems to be pretty stable, in line with prior. I just want to get a sense of how much of that has already locked in when we think where we are in the year in April.

Is there a risk of that changing as you go forward? I know budgets can be set, but there's also news this morning of Bristol announcing job cuts, 2,200 layoffs.

There's still some things that are fluid in that end market. Just curious how those conversations have evolved year to date and sort of upside/downside risk for the rest of the year?

Yeah, right. Mike, I'll take it.

And Brendan might want to jump in. As we said, we've seen pretty strong demand in the large pharma space.

And it's not just this quarter. It's been really over the last 12 months, 18 months.

Nothing has changed in that respect. Have some of the larger companies changed their models or adjusted their budgets?

And the absolute answer is yes to that. We've seen a -- we've certainly seen some of that in the first quarter where revenues have gone down and up in different areas.

We're very encouraged by -- we're encouraged by the overall growth of the organization, because certainly outside our top 10 on a year-on-year basis, we've seen significant revenue uptick and growth. And that's not necessarily all sort of smaller customers.

The biotech customers, some of them are quite large for us, but so it doesn't exactly equate when you go outside top 10 or outside top 25 to be smaller or biotech customers. But that segment has certainly increased.

And there's one or two in the upper echelons of our revenue group that have come down a bit, because of things that you just mentioned, budget cuts and some challenges they have with patent extensions, et cetera, et cetera. So, it's -- quarter-to-quarter, it can go one way or the other.

Sometimes we finish a significant project at the end of last year and then the revenue falls off a little bit for the first quarter, that sort of thing happens. Overall, we see a very stable and very strong demand in the large pharma.

And as -- I think, I talked about sort of 3% to 4%, but we believe we're taking market share in that space and a good part of our growth is due to our strong operational delivery in that space. And so, it's a strong and a continuing market for us.

And we believe while there will be puts and pulls, and ups and downs, and some customers will have greater budget challenges, many of them have some significant patent life challenges or loss of exclusivity issues coming up over next -- that's a relatively common theme. It's a constant thing that they deal with on a regular basis.

It means they have to do more R&D to bring new compounds through. So, yeah, overall, we feel good about that space.

No, I think just reflecting on it, one of the things that we talked about at the start of our call was, we have actually seen pretty decent traction from the large pharma group and probably more on the full service side of the house as well as we've come into 2024. And that's been heartening.

But you also see in our statistics that we continue to diversify as a customer base. The customer base continues to diversify.

And so that large concentration, it's always going to be there as part of our piece. It's always part of how the CROs are built, but it continues to diversify.

And to Steve's point, some go up, some go down. What we're focused on as an organization is that in holistic terms, we're moving in the right direction.

And I feel we have a market both in pharma and biotech that really does support that. So, yeah, that's what we want to see continuing, is that diversification increasing over time.

Okay. That's helpful.

And I appreciate that. If I could squeeze in a quick follow up, going back to the CFO transition, sounds like you never know, but you might not be able to announce a successor until later in the year.

But you've got the Analyst Day coming up in May. So, anything you can say in terms of what we should look forward to from the event?

Thanks.

Well, you can look forward to our plans for the next few years, Mike, and where we are and what our innovation is and how we're going to move the organization forward in terms of the Investor Day anyway. But we will -- certainly we will provide an update on our CFO transition at the Investor Day.

We'll have some further information on it, I think, at that time, although it's still relatively early days. Having said that, we're moving fairly quickly.

We've engaged a global recruitment firm. We already have interests from some very good candidates.

No one, of course, who's going to approach Brendan's abilities.

Thank you. Thank you, Steve.

But unless we can call clone him in the next six months, well, we do have to replace him. And, of course, as I mentioned, we wish him all the best.

But we have already some interest with some very good candidates, candidates who run public companies. And so, we feel good about the position we're in.

And, as I say, we'll -- the Investor Day is not far away. It's only, what is it, a month away or so.

So, we won't have any sort of definitive announcement for you at that point, but I'll certainly give you an update on where we are. And we have, as I say, some fairly tight timelines in terms of long lists and short lists and making appointments.

And we do anticipate that we'll have somebody on board within the course of this year. That's the expectation.

And I do hope they'd be able to overlap with Brendan and learn a little from him as he heads out the door. So, that's where we are.

We feel that we're in a reasonable place given fairly early on in the search.

That's great. Thanks.

Appreciate all the color.

Thanks very much. I wanted to go back to the biotech rebranding and the improved win rate and your double down focus there.

I'm curious if you could share with us the number of small biotechs that you work with, whether you want to call that emerging biopharma pre-revenue clients, however you wish to define them, and then how that number has changed? And then also what that is as a percent of revenue and/or backlog.

I think a couple of years ago it was laid out as somewhere around, if I remember, about 16% of revenue, the way you used to define it. So, if you could give us an update on that?

And then with this focus, is it on the really small, really early stage biotech clients, or is it more mid and large biotech where you're just looking to further penetrate a more mature biotech segment. I'm curious on how broad the focus is, how deep you're going in terms of the nascency of some of these clients, their size, et cetera?

Thank you.

Okay. I mean, there's a lot in that question, Eric, so I'll try to unpick it a little bit.

The biotech rebrand, we think of biotechs overall, as I indicated, sort of low 30% of our revenues in that sort of number. The number I think we've talked about a few years ago was on our capital market dependent type biotechs, the ones that really require to go out and raise money, and that's around 15%.

So, we work with a variety of biotechs in the vicinity of, I'm not even sure exactly how many, but it's around the 500 sort of number. It's a lot.

And we do anything from small consulting projects with them to very, very large scale Phase 3s in the hundreds of millions of dollars with some of them. They're an entity in themselves.

They work in a different way to large pharma and hence having a different focus on them, or having a group of people who focus on them differently in terms of their ability to engage, in terms of our opportunity to input on their trial design, on their development programs. It's a very different market, quite frankly, and one that our people, I think, are increasingly working in extremely well.

And I think, as I said, with the rebrand, the customers are understanding that and appreciating that. And also while they recognize our expertise and resources, they also recognize our financial viability and stability, which I think is something that's very important when these customers want to take a drug right through the market, rather than just to partner up with a large pharma.

So, we offer them a different strategic option, these companies, going forward, and that's, I think, extremely valuable to them and we've been able to sort of communicate that to them and market that to them. I hope that gives you a little bit of a flavor for what that group of customers is.

Thank you. If I could just throw one more in and then I'll jump off.

Headcount's been flat over the last year. You are growing in the mid-single-digits.

I'm just curious what your thoughts are on labor productivity, retention and then also hiring demands as 2024 progresses and maybe moving into 2025 if current trends continue?

Sure. Well, you're right.

We have -- we haven't increased headcount dramatically. It's been very flat over the last 12 months or so, and yet we have been able to increase revenue.

A good part of the reason is our strategy around our efficiency. We've been able to bring in and use the bots.

Machine learning/AI has been a significant contributing factor. Our IT group has done an excellent job in bringing that in.

I think, we talked about 2 million hours of time last year and we've got a target of something like 3.5 million for this year. So, that's a really important part of it.

The optimization of the location of our workforce is also an important part of it. We have a terrific team here at ICON, who work really hard and who are very efficient and who understand the need to continue to be more efficient.

And that's a really important part of what we do. And I think the other part of it is the systems and technology that we're continually able to deploy around the organization has given our smart people the opportunity to be more efficient and to operate and to get more done within the same amount of time.

So, all of those things, I think, have helped us to keep our headcount pretty flat. I think, it's gone up 100 or so over the year, and it's really allowed us to be continually more productive.

We have to do that. We set ourselves a goal of being -- of increasing at least several percent in productivity each year to allow us to be -- to continue to be the efficient organization we can be.

The other part of it, I think, that helped is on the retention. Again, the team and the managers in the organization have done a terrific job in continuing to engage people in a way that's brought our retention up to -- it's in the high-80s now, where I don't know there's a time we've had better retention in the organization.

It's quite extraordinary, really, the way it's improved on a quarter-by-quarter basis, really over the last couple of years post-COVID. So, we're well -- we're in much better retention than we had pre-COVID and probably better retention than we've had at any time in our history, I would have thought.

And, again, I guess, it's a tribute to the managers and the leaders of the organization who created an environment around here that people want to work in and people feel engaged in. So, I'd give them the credit on that front, but it's all helped us to become more efficient and hence to avoid having to increase our headcount in line with our revenue.

Hey, guys, thanks for taking the questions. Maybe on the back of that last one on the headcount piece, it's probably one for Brendan.

Just on the margin side, obviously SG&A has been a nice lever. Can you talk about -- is that still heading towards 8% here in the relative near term?

And obviously you guys are talking about 50 bps overall. But can you just talk about the margin dynamics?

FSP, that shift has seemed to quiet down a little bit, I guess, it's just because service has been strong for you guys, better margins on that front. But again, can you just talk about, I guess, the SG&A levers?

Is it still right to think about that 8% near term? And then again, that FSP shift, it feels like you guys have that well under control, [let’s not] (ph) talk to that as well?

Yeah. Patrick, well, I think from the -- just maybe starting off with the gross margin piece and I think we kind of clearly indicated coming into this year that we still are targeting to be in around where we were in the current quarter in around that 30% mark for the full year.

And that's -- obviously, there's lots of moving parts underneath that. Steve made reference to our efficiency as an organization.

You made reference to the fact that we were talking a little bit more last year about FSP, albeit full service has been much more impactful so far this year. And that obviously has a little bit of shift in the margin profile, but it's taken account of in terms of our forecast gross margin there in around the 30% mark.

So, yeah, those pieces are kind of baked in, if you like, in terms of margin shift, and we feel that we can sustain that 30% gross margin in that profile. As I kind of mentioned on numerous of calls in the past, our leverage that we expect, we talked about 50 bps of expansion in 2024 is predominantly on SG&A.

I think you can see we're making good progress on that. I had referenced that was where we expected to see the margin leverage this year.

And yeah, we always, we're assiduous cost managers, as you well know, and we look to building efficiency using the same pieces that Steve referenced in terms of our gross margin efficiency. So, our technology, the use of systems and the use of machine learning, AI and robotics to ensure that we're as efficient as an organization.

And people spend their time working on value added work as opposed to route or things that can be automated. So, that's where we continue to look at.

And I think that will probably predominantly be the large way we will be leveraging our margin and cost base, not just this year but into the future. So, yeah, we're making good progress and would like to see that progress continue.

Hi. Good afternoon/morning, everyone.

So, we'll stick with large pharma here. Can you talk a little bit about the philosophy of decision making amongst the large pharma clients with respect to either new programs or the outsourcing approaches relative to last year and some of the concerns there?

And then just with respect to outsourcing penetration, I think, historically we thought we've seen the industry grow, let's say, one or two points per year there. Is that still intact for 2024 and the next couple of years?

Sure. Sure, Justin.

I mean, I'll answer your second part first. Penetration year, 1% to 2% a year, 1 to 2 -- 100 to 200 bps, I think, is the way to think about it and that's what we think about it.

We think there's still plenty of upside over the next decade or two. Maybe there's no doubt.

A ceiling maybe at 70%, 75%, but we're probably only at sort of 50%, 55% now. So, I think, there's still plenty of room for upside on the penetration side.

And, of course, it varies depending on which company you're at. In a large pharma, it's going to be lower than it is in the biotech, where we'll typically do pretty much everything for them.

In terms of velocity decision, I don't think we see any particular change in the velocity decision. Things can take some time, and sometimes they happen very quickly.

A rescue project can be made, a decision can be made in a week. If it's a large development program with a new asset in a significant indication, that could take three months to six months, really, depending on the individual customer, on their circumstances, on whether they're raising money or not.

I don't see any much difference between large pharma and between biotech. Sometimes the biotechs take a fair bit of time on these things.

Possibly they're a little faster in terms of making decisions. But I'm not sure I noticed too much of a difference on that front.

And I certainly haven't noticed any elongation of decision velocity over the last quarter or two. I think, that's continued at about the same rate as normal.

Understood. Yeah.

I was just thinking in terms of the IRA -- impact of the IRA and the rate environment last year and how that changed so quickly, but I'll take the rest offline. Appreciate the question.

Okay. Thanks, Justin.

Hi. Thanks for getting me in.

My first question, Steve, you've both mentioned a couple of times about large pharma and FSO being strong to start off the year. You also mentioned the client renewal on that front.

I wondered if those are one in the same, or if the large pharma and FSO uplift is broader than just that one client renewal. Maybe you could give us some color around that?

Well, David, the particular renewal that we've had is particularly in full service, so that's certainly the case. But I think the -- I think, it goes the full service sort of comeback, if that's the way to put it, goes a bit beyond that one customer.

Typically, in our industry, we see a little bit swings and roundabouts and the pendulum goes one way and comes back the other. I think a year or so ago, we were seeing pushed more towards functional.

I think, that's now starting to come back and we're seeing maybe a little bit more of a -- I wouldn't say it's a tidal wave or a tsunami, but there is probably an attenuation of that push towards FSP and perhaps it's coming back a little bit on the full service. What we probably are seeing more than anything is an increase in these, what we call, these blended models, where particularly large pharma, of course, want to do, or want to have the facility to do both, both a more functional approach and a more full service approach, if that makes sense.

So, on a project, they might do their data management and medical writing or stats or whatever through a functional service agreement, but the clinical and the project management for the particular trial of the particular program would be more on a full service basis. So, those -- and we feel like we're very well positioned to be able to accommodate those sorts of solutions.

We are the biggest on the FSP provider and we obviously have a very significant footprint in full service as well. So, our ability to put those models together is, I think, unprecedented in the industry.

And so, we add that -- and we add our technology and our site networks to it, we can put together a really compelling offering for these large pharma customers.

Great, thanks. And then switching subjects, following up on some comments around data strategy.

And you talked about tokenization. I guess, I'm thinking about your internal Symphony asset, but probably also reliance on external data assets.

And maybe you could just comment on your current thoughts on data strategy and then also kind of how critical is data versus maybe the analytics, what you do with the data, how you bring the data to the sites, things like that, and maybe put -- talk about what is your data strategy currently? And then how important is the data strategy in the context of actually delivering at the site level?

Thanks.

Sure. Let me start with the tokenization.

The Symphony business that we have within the organization is a critical part of our business from the tokenization level. And I think -- I'm really excited about this tokenization, because I think it gives us the ability to follow to up patients in a very cost effective manner for an extended period of time, well beyond the clinical trial.

So, if you think about as we get into more of these obesity type trials, where we have to treat thousands of patients over an extended period of time, and the ability to collect data very cost effectively with them, I think, offers us a huge opportunity and offers our customers a huge opportunity. You think if back in the day, when those of you few old enough to remember the Vioxx challenges around cardiovascular events in the painkillers.

If they'd been able to tokenize a lot of those patients, they'd have had been able to put in context those cardiovascular events and potentially had a different outcome. And that's the way I'm thinking about the ability for us to tokenize patients in the -- in this obesity space, in the diabetes space, where we're doing back again to some of these really large scale clinical trials.

We've been away a bit from these large scale clinical trials in the industry. We got into rare diseases and very specific, small 100 patient studies were big studies.

Now, I think the opportunity going forward is to get into some of these really large ones. And I think our ability to tokenize these patients and to follow them up and to provide that data to customers on a long term basis is really exciting.

In terms of our data strategy, we continue to not necessarily want to own all of the data. We own -- we obtain data from a number of different sources.

Symphony is really important part of that. But we have our lab, we have our lab data.

We have a number of external sources of data around from site line and organizations like that. We have our clinical -- our trial management system.

And what we're bringing together from a number of different sources is an ability through our technology then to identify patients for trials and to find those patients and get those patients into clinical trials. One of our initiatives on the innovation space is through an organization called Veradigm, where we can actually utilize their electronic medical records and go out and find patients and bring patients in and have patients referred to our clinical trials.

That's early days on that one. We're trying that out on a number of trials, particularly on some of these more rare disease trials.

But the ability for us to access data that we don't necessarily own, but we have access to, and we can bring together and collate through our systems through our One Search system, which you've seen, no doubt, at the Investor Day, and you'll see some more of this technology at our Investor Day in New York in next month will show you what we've been doing and what we're able to do in terms of bringing these disparate sorts of data together, presenting them in a way that allows us to take actions and take -- and make insights into where we find patients for clinical trials. It's -- for us, it's all about delivering patients into clinical trials and doing that in a really cost effective and a timely basis, and our whole data strategies align towards that.

I know, it's a bit of a high level answer. We'll be able to give you a bit more information on this, David, at the Investor Day in New York in a month's time.

Thanks very much. And Brendan, congrats on your career at ICON.

Appreciate working with you. Thank you.

Thanks, David. Appreciate that.

Hi, guys. Thanks so much for the question.

Maybe pivoting off of what Dave just asked, how do we think about the current market for real world evidence? I mean, I think that there's like some -- maybe two phenomenon going on, maybe some sort of cyclical element on it, and also maybe some sort of structural changes as we've seen obviously the rise in AI and that kind of thing impacting the market.

Could you sort of give us what you sort of view as what's going on there with your business and sort of where you see the competitive landscape shaking out over the next year or two? Thanks.

Elizabeth, yeah, we continue to see real world as an important -- really important part of the landscape, and what we need to do -- Symphony is a part of that. And we have other sources of real world evidence, as I mentioned, the Veradigm opportunity.

So, we see continued interest in there. We see opportunity for growth in there, particularly as we get -- as I say, these larger scale trials, I think, the real world is going to be continuing and going to grow significantly.

So, there's a lot there. I don't think we see any sort of major shift right now, but I think as the obesity drugs really start to be developed, although the new round of them start to be developed, we'll see increasing -- an increasing role for real world evidence and the ability to access it and to take insights from it.

So, I could rave on for hours about real world. I won't do that.

But again, you'll hear more about that at our Investor Day in a couple of weeks.

Great. Thanks so much.

And congrats, Brendan. It's been a pleasure.

Thanks, Elizabeth. Cheers.

Hi. Thanks for squeezing me in.

Just one question. In the past in the deck, you've also given us the contribution from the number one customer as well.

Was just curious how they're doing? What was their contribution in the quarter?

Thanks.

Yeah. Hi, Jack.

It's Brendan here. It was similar to last quarter in that kind of 8% to 9% range.

I think, we wanted to move away from being overly focused on one customer. I think, I made the point earlier in the call that we are seeing a more diversified company as we go forward and it aligns again with our quarterly filings with the SEC, that we would care about one to five.

That's the way we'll be showing that as we go forward.

Great, thanks. Can you talk about the -- like, the pass throughs that -- the trends that you're seeing here in the current quarter and the elevated booking -- your bookings that you had for this quarter, anything to step up there?

We're just trying to find anything, I guess, to pick at or find issue with?

No. No luck there, Luke.

Brendan here. Obviously, that -- we had a very solid quarter in terms of bookings, but that wasn't based on elevated pass-throughs or anything like that.

We had a very solid direct fee book-to-bill as well. Not dissimilar.

So, no, nothing there to particularly get you guys worried about. It was a very solid quarter across the organization and very much in terms of direct fee also.

Great, thanks. I vote for Winley to throw his hat in the ring, Brendan.

For the gig? Yeah.

Yeah.

Of course. Of course.

Put them in.

We need to talk, Luke.

I won't describe you Steve's face right now, Luke, anyway.

Hi. This is Mitch on for Jack.

Thanks for taking my question. Most of mine have been asked and answered, but maybe just one on therapeutic mix.

Is there anything to note in regards to changes in mix in the first quarter or in the pipeline? Thanks.

Mitch, no, not really. We continue with a good 40% of our work in the oncology space, and then the rest of them are sort of between 10% and 15%.

Anti-infectors, vaccines, CNS, cardiovascular, it might mix. It might go up and down a little bit on a trial if a big trial comes in.

But really, still the most -- some more than 50%, but about 40% works in oncology and rare disease. And so that tends to dominate our portfolio.

Thank you. And thanks for squeezing me in.

And congrats Brendan as well. Just wanted to ask about BIOSECURE Act and what you guys are hearing from your global pharma customers.

And even this act passes, if you see this act having any implications for the CRO industry and global CRO players like ICON?

Yeah. Jailendra, I won't profess to be an expert in the implications of the BIOSECURE Act, but there are potential issues.

I think, it's probably more for our pharma -- it's more a question for our pharma customers in terms of their access to CDMOs and those sorts of organizations. And the potential, particularly, I think in China, for some challenges in terms of supply.

And, I guess, if it's supply of their drug product, there may potentially be some implications for supply of clinical trial supplies. But, really, our pharma brethren are pretty smart people and they plan very well for these sorts of things.

So, I'd be very surprised if we saw any really material impact. I know, there are some concerns about it, they've expressed those to the government.

But I think the supply chain challenge, I think, has been ongoing now for several years. And I think they're thinking, and I think they've already thought very hard about where they get, particularly the manufacturing of their drug and their APIs done.

And so I don't see much implication for us, certainly in the short term.

Thank you.

Okay. So, I think we're at the end of the question.

So, thank you, operator. We will -- I want to thank you all for joining our call today and for your continued interest in ICON.

We look forward to seeing many of you at our upcoming Investor Day in New York City, and providing you with an opportunity to spotlight the important work we do here at ICON. Thank you, all, and have a good day.