IQVIA Holdings Inc. (IQV) Q4 2020 Earnings Call Transcript

IQVIA Holdings Inc. (NYSE: IQV) Q4 2020 earnings call dated Feb. 10, 2021

Corporate Participants:

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Ari Bousbib — Chairman and Chief Executive Officer

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Analysts:

Robert Jones — Goldman Sachs — Analyst

Tycho Peterson — JP Morgan — Analyst

Ricky Goldwasser — Morgan Stanley — Analyst

Eric Coldwell — Baird — Analyst

Dan Brennan — UBS — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]

After the speakers’ 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 turn the call over to Andrew Markwick, Senior Vice President, Investor Relations and Treasury. Mr. Markwick, please begin your conference.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Thank you. Good morning, everyone. Thank you for joining our fourth quarter and full year 2020 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; and Nick Childs, Senior Vice President, Financial Planning and Analysis.

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 in the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com.

Now you may have noticed that when we issued our press release this morning, we inadvertently missed the quarterly P&L due to an administrative issue. We apologize for this error. This P&L will be made available in our slide presentation and that will be posted to our website momentarily.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to 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.

Ari Bousbib — Chairman and Chief Executive Officer

Thank you, Andrew, and good morning everyone. Thanks for joining our fourth quarter and full year 2020 earnings call. We will review how we closed 2020 and discuss 2021 financial guidance.

I’m pleased to report, we finished the year with a very strong quarter. We delivered double-digit growth in all key financial metrics, and once again reported results above our financial targets. This is all the more remarkable since last year’s fourth quarter was so strong. As you know, [indecipherable] this difficult year and as we navigated through the pandemic, we tried to be as transparent as possible and provide you visibility to our expected financial performance. In such highly unusual circumstances, the default reaction would normally be to draw guidance and watch from the sidelines. But as you know, we tried our best to share with you what we saw. So we did the same at the end of the third quarter when we decided to provide 2021 outlook as soon as we had some visibility, which was a full quarter earlier than usual.

Today, this outlook has become clearer and we’ve decided to update and raise the guidance. Let’s start by reviewing our fourth quarter results. The revenue for the fourth quarter came in at $3,298 million, which was $108 million above the high end of our guidance range. A little over 70% of this beat came from strong organic performance, less than 30% from favorable foreign exchange. Revenue growth was 13.9% on a reported basis and 12.2% at constant currency.

Fourth quarter adjusted EBITDA of $735 million grew 14.5% reflecting our revenue growth and productivity measures. The $25 million beat above the high end of our guidance range was entirely due to the stronger organic revenue performance. Fourth quarter adjusted diluted EPS of $2.11 grew 21.3%. The beat here entirely reflects the adjusted EBITDA drop through. Our strong fourth quarter financial results were driven by numerous operating achievements during 2020. And a little bit more color on those achievements, starting with technology.

Demand for our technology offerings remain strong in 2020. 60 new clients decided to deploy OCE last year, bringing our total number of OCE client wins to 140 since launch. As you know at the beginning of 2020, a top 15 global pharma client begun deployment of OCE in the US. This client has now decided to begin global OCE deployment for their medical teams mainly their almost 2,000 medical science liaisons worldwide. The same client is also expanding its use of IQVIA technologies through our HCP Engagement Management platform.

We launched this platform during 2020. HCP Engagement Management works in conjunction with OCE to ensure global commercial activities are executed in compliance with all global regulations. In addition to HCP Engagement Management, you would have seen that during 2020 we also launched OCE Optimizer. OCE Optimizer is a real-time map-based territory and sales rep alignment solution, which helps our clients plan their sales rep activity and improve their marketing plans.

Switching to our Real World business. Our Real World business has been relatively well insulated from the impact of the virus, and it has strong growth for the year. The business is advanced in the use of secondary data, remote monitoring and virtual research approaches, which helped the team pivot quickly to working in the new remote world at the onset of the pandemic. Our rich clinical data assets are key to our real world differentiation. The team has continued to invest in these rich clinical data assets and these assets now include over 1 billion active non-identified patients globally. And the team is busy integrating these rich clinical data into research.

In 2020, we launched CARE, our COVID Active Research Experience registry to help communities and public health authorities better understand the impact of COVID-19 on the population. We are leveraging this platform along with our vast experience of registries and analytics, to partner with the FDA, to support a better understanding of how people are affected by exposure to COVID. This work will help identify which symptoms individuals experienced, the length and severity of symptoms, and were there any medications or supplements they are taking affect the severity of those symptoms. It’s a perfect application of our real world capability.

Similarly, we have become the partner of choice around the world to receive various governments and healthcare authorities with large scale diagnostic testing and monitoring of COVID patients. These new series of offerings which leverages our connected capabilities, contributed incrementally to the strong sequential growth in our TAS segment.

Moving to R&DS. As you know the R&DS team responded quickly in 2020 to support our clients with the development of vaccines and therapies for COVID-19. We’ve been involved in more than 300 clinical trials and studies for the virus, including four of the five vaccine trials that made it through Phase III and were funded by the US Government in Operation Warp Speed. To help speed recruitment, we leveraged our direct-to-patient solutions, which include the use of patient registries and IQVIA sponsored advertisements. To-date, we recruited over 100,000 patients to COVID trials.

The pandemic has accelerated the need for remote and risk-based monitoring in clinical research, which in turn has accelerated the adoption of our Virtual Trials technology. In total, we’ve won over 60 new studies using our Virtual Trials solutions across 10 therapeutic areas, including awards with five top 10 pharma clients. The technology suite combined eConsent, telemedicine, eCOA and digital communication, and its platform on health cloud, the Salesforce platform that is purpose-built for healthcare and life sciences. This technology has been deployed to speed vaccine development, and was an important factor in helping the team secure the two Phase III full-service COVID trials that we are working on.

The environment for R&D and outsourcing remains very healthy. Biotech funding remains strong, with the National Venture Capital Association reporting a record number of deals for the year. The pipeline of late-stage molecules continues to expand, and is at an all-time high. It is these healthy environment combined with our differentiated capabilities that has resulted in strong new business awards for the R&DS team.

Our contracted backlog, including pass-throughs grew 18.5% year-over-year to $22.6 billion at December 31, 2020. As a result, our next 12 months revenue from backlog increased to $5.9 billion, up 13.5% year-over-year. We continue to build on our strong momentum in the fourth quarter, with the team delivering a contracted net book-to-bill ratio of 1.41, including pass-throughs and 1.42 excluding pass-throughs. We exited the year with an LTM contracted book-to-bill ratio of 1.53 including pass-throughs and 1.44 excluding pass-throughs.

We expect continued strong activity going forward as our pipeline of R&DS opportunities is growing double-digits in both volume and dollars across a very wide range of therapy.

I’ll now turn it over to Ron for more details on our financial performance.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Thanks, Ari, and good morning everyone. As Ari mentioned, this was a strong quarter to close the year. Let’s start by reviewing revenue.

Fourth quarter revenue of $3,298 million grew 13.9% on a reported basis and 12.2% at constant currency. Revenue for the full year was $11,359 million, which was up 2.4% reported and 2.3% at constant currency. Technology & Analytics Solutions revenue for the fourth quarter of $1,425 million increased 17.4% reported and 15.1% at constant currency. The sequential bump in growth this quarter versus the 9.2% growth in the third quarter was due to the COVID related work that Ari mentioned.

Full year Technology & Analytics Solutions revenue was $4,858 million, up 8.3% reported and 8.1% at constant currency. R&D Solutions fourth quarter revenue of $1,684 million was up 14.5% at actual FX rates and 13.2% at constant currency. Pass-throughs were a tailwind of 220 basis points to fourth quarter R&DS revenue growth due entirely to COVID work. But you should note that R&DS delivered double-digit organic growth on both the services and a fixed FX basis. Again, strong performance, especially considering the tough comparison to the fourth quarter of 2019, when organic service revenue also grew at a double digit rate.

For the full year, R&D Solutions revenue was $5,760 million essentially flat on both the reported and constant currency basis. Excluding the impact of pass-throughs, R&D Solutions’ full year reported revenue grew 2.2%. CSMS revenue of $189 million were down 10% reported and 11.9% on a constant currency basis in the fourth quarter. For the full year, CSMS revenue of $741 million was down 9% at actual FX rates and 9.2% at constant currency. Demand for field reps continues to be soft in the current environment. As a result, business development activity has slowed but the businesses performed modestly better than we expected as the clients have largely retained existing field reps.

Now moving down to P&L, adjusted EBITDA was $735 million for the fourth quarter, which was growth of 14.5%. For the full year, adjusted EBITDA was $2,384 million. Fourth quarter GAAP net income was $119 million and GAAP diluted earnings per share were $0.61. For the full year GAAP net income was $279 million and GAAP diluted earnings per share was $1.43. Adjusted net income was $411 million for the fourth quarter and $1,252 million for the full year. Adjusted diluted earnings per share grew 21.3% in the fourth quarter to $2.11. Full year adjusted diluted earnings per share was $6.42.

Now as Ari highlighted, R&DS new business activity remains strong, backlog grew 18.5% year-over-year to close 2020 at $22.6 billion. We expect $5.9 billion of this backlog to convert to revenue over the next 12 months, which represent a year-over-year increase of 13.5%. And this provides the basis for our 2021 guidance, which I’ll be discussing shortly.

Now let’s go to the balance sheet. At December 31, cash and cash equivalents totaled $1.8 billion and debt was $12.5 billion. So, our net debt was $10.7 billion. Our net leverage ratio at December 31 improved to 4.5 times trailing 12 month adjusted EBITDA and that compares to a peak of 4.8 times at the end of the second quarter and 4.7 times at the end of the third quarter. And you’ll recall that we’ve committed to deleveraging between 3.5 times and 4 times net leverage as we exit 2022 and you can expect that we’ll make good progress towards this target in 2021 due to our double-digit adjusted EBITDA growth and improved free cash flow conversion.

The cash flow continues to be a bright spot, cash flow from operations was $750 million in the fourth quarter, up 29% year-over-year. Capex was $176 million, resulting in free cash flow of $574 million. For the full year free cash flow was $1.34 billion, up 61% year-over-year. We resumed share repurchase activity during the fourth quarter, repurchasing $102 million of our shares. Full year share repurchases were $423 million. We ended the year at 194.8 million diluted shares outstanding, and currently have $918 million of share repurchase authorization remaining under our program.

As a result of our strong free cash flow performance actions we took at the onset of the pandemic to access capital markets and capital allocation decisions during the year, we now have $3.3 billion of dry powder on our balance sheet between the undrawn revolver of $1.5 billion and the cash balance of $1.8 billion. We will continue to be judicious in how we use it for liquidity, consistent with our goal of reducing net leverage.

Okay. Let’s turn to guidance now. We’re raising our full year guidance by $250 million for revenue at the low end of the range and by $300 million at the high end of the range. The new revenue guidance is $12,550 million to $12,900 million, a little under half of that increase is driven by a stronger outlook for the business and the remainder is from favorable FX new events versus the guidance we provided on our third quarter call. I note that the revised guidance includes about 200 basis points of FX tailwind versus the prior year.

We’re also raising our full-year profit guidance. We’ve increased our adjusted EBITDA by $35 million at the low end of the range and by $40 million at the high end of the range, resulting in full-year guidance of $2,760 million to $2,840 million. The change in FX versus our prior guidance actually had a slightly negative impact on profit due to the unusual mix of currency fluctuations versus the historic norm. So the adjusted EBITDA increase that you see in our guidance is more than entirely the result of the stronger organic revenue outlook.

We’re raising our adjusted diluted EPS guidance by $0.12 at the low end of the range and by $0.13 at the high end of the range to $7.77 to $8.08. This represents year-over-year growth of 21% to 25.9%. And let me go little deeper to provide you with a color to help you with your models. First, when you’re modeling quarterly revenue, keep in mind that the second quarter will be easiest comparison and the fourth quarter will be the toughest comparison. And within our adjusted diluted EPS guidance we’ve assumed interest expense of approximately $415 million, operational depreciation and amortization of slightly over $400 million, other below the line expense items such as minority interest of approximately $50 million and a continuation of share repurchase activity.

Our guidance also assumes that the effective tax rate will remain largely in line with 2020. Our full-year 2021 guidance assumes that current foreign exchange rate remain in effect for the balance of the year. Now, before turning to first quarter guidance, let me give you a look at the segment growth rates for 2021. We currently expect Tech & Analytics Solutions reported revenue growth to be between 9% to 12%; R&D Solutions reported revenue growth to be between 14% and 17% which includes a 100 basis point headwind from pass-throughs; and CSMS reported revenue growth is expected to be down about 2% weaker earlier in the year and recovering later in the year.

Now, as in the past, we’re also providing guidance for the coming quarter and this assumes that FX rates remain constant through the end of the quarter. On that basis, first quarter revenue is expected to be between $3,150 million and $3,200 million representing reported growth of 14.4% to 16.2%. All three segments should deliver similar constant currency growth rates to what we saw in the fourth quarter.

Adjusted EBITDA is expected to be between $660 million and $675 million representing reported growth at 17.4% to 20.1%. And finally, adjusted diluted EPS is expected to be between $1.81 and $1.87 up 20.7% to 24.7%. So to summarize, we delivered strong fourth quarter results with double-digit growth in all key financial metrics, and that’s on top of a strong fourth quarter in 2019. We posted mid-teens revenue growth for both our TAS and R&DS segments. R&DS backlog improved to $22.6 billion, up 18.5% year-over-year. We posted strong free cash flow for the fourth quarter and the full year of $574 million for the quarter and $1.34 billion for the year. We closed 2020 with net leverage of 4.5 times trailing 12 month adjusted EBITDA in a very healthy liquidity position, including an undrawn revolver and $1.8 billion of cash. And as we look to 2021, we see double-digit revenue growth, margin expansion, adjusted diluted EPS growth of over 20%, continued robust R&DS bookings activity and a further reduction in our net leverage ratio.

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

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Robert Jones with Goldman Sachs. Your line is open.

Robert Jones — Goldman Sachs — Analyst

Great. Good morning, thanks for taking my questions. I guess maybe just on TAS, it seems like record constant currency growth in the quarter from the segment despite the event management business, I’m assuming not really coming fully back. And if I heard you correctly, or it sounded like a good portion of the acceleration was driven by real world evidence for the government. I’m just curious how sustainable some of that work might be into 2021 kind of what’s assumed in this — in this healthy guidance of 9% to 12% in TAS? And then just any thoughts on the other pieces of TAS outside of real world evidence in the guidance would be helpful.

Ari Bousbib — Chairman and Chief Executive Officer

Yeah. Thank you. Look, TAS in general has been more insulated from the impacts of COVID during 2020 than R&DS or CSMS, right. So our data analytics and consulting real world business were pretty much unaffected. And as you noted, the only buckets there that we have, where we had issues were the events management business, which essentially came to a halt.

Now in the fourth quarter, the underlying TAS business returned to normal growth rate. They have already returned to normal growth rates in the third quarter. I think we posted 9.2% of constant currency growth in the third quarter. This sequential increase in that growth rate in the fourth quarter, which is about, let’s call it 600 basis points was entirely new, as you noted, to the incremental work from COVID related activities.

So we expect these incremental contribution to continue about the same pace in to the first quarter. Now similar to R&DS, the COVID work in TAS has been faster execution and the guidance that we give you for 2021 does include the COVID work that we have visibility to. But I can tell you, there is no COVID work in the second half of 2021 that’s built into our guidance. It’s still early in the year. So this could change, while it is not going to stop abruptly, but right now the bulk of what we see in terms of COVID work in TAS for 2021 is in the first quarter, similarly as in the fourth quarter and a little bit of tail in the second quarter and that’s it.

What is that COVID work by the way? It’s mainly related to projects for governments, essentially using our people and analytics to support authorities in the management of the crisis. The real work — real world work for the FDA that I — that I described in my introductory remarks. We are also performing large scale diagnostic testing and monitoring of COVID patients for other governments, Europe and Asia around the world and we are assuming that’s going to go away certainly by the middle of the year in our guidance. But again that’s, that would be — that seems to be and I have and expectation, again it’s not built in to the guidance, but an expectation that we will continue to have similar type of work, as we’ve developed capabilities and reveal new set of offerings, which we intend to go to market going forward.

Robert Jones — Goldman Sachs — Analyst

No, that’s helpful, Ari. And then if I could just ask one on the R&DS side, similar question. I know the COVID work in the pass-through implications has been kind of a moving target. But just similar thoughts would be appreciated on how you’re thinking about COVID versus non-COVID related work in the R&DS guidance for 2021?

Ari Bousbib — Chairman and Chief Executive Officer

Yes. So again just as in TAS, COVID work did contribute significantly to R&DS growth obviously, I mean look mid double-digit growth in TAS is not the new one. We said TAS growth accelerated — they accelerated to the high single digit growth that we always anticipated pre-pandemic. If you go back to the guidance we gave — the long-term guidance we gave in June of 2019, we did expect TAS to reach high-single digit, 8%, 9% and eventually 10%, but that’s — that’s the underlying TAS growth business.

Now with R&DS, it also of course will be misleading to look at the R&DS business and say that’s the new [indecipherable] mid double-digit growth. Obviously it’s hard to, it’s harder to determine what would have been without the COVID work because without the COVID work there would have been other business that has essentially be pushed to the right, right in R&DS as you can understand. But by the way even absence the large trials that we’ve been previous to work on, we would have had very strong underlying R&DS services growth in the fourth quarter as well.

Now we expect COVID work to be with us through 2021 and maybe also into 2022 because there is a need for vaccines from multiple manufacturers to meet global demand. There are new vaccines that are being developed for variants of the virus. There are alternative vaccines that are needed in case of adverse safety events or quality issues or manufacturing delays. There are novel treatment programs are targeted at specific populations and conditions, and of course there are post-approval commitments to regulate it all of which do require continued R&DS work.

Look, we have a large backlog to execute, $22.6 billion at the end of 2020. We are — look, we have to, we have got the ability to execute on this existing backlog and that ability we’ll continue to improve. Site stock up and patient recruitment continues to improve. The next 12 months revenue from backlog has increased. So all of these provides the basis for our 2021 R&DS revenue guidance. The pipeline of opportunities is very strong. If we exclude COVID opportunities, our pipeline is showing good growth.

For example the oncology pipeline is in the mid double-digit growth. The CNS pipeline is up low double digits towards this 12%, 13%. Cardiovascular and diabetes pipe is growing strong double digits, very, very strong double digits. So if your question is suggesting that, you know what happens post-COVID, we are not falling obviously, we have the vast majority of the backlog is not COVID, obviously. If you look at our bookings in 2020, every quarter except for the first quarter, obviously, COVID related work represented between 15% and 20% of our services bookings and for the year, I think it was exactly 15%, 15%. So we continued to book very, very solid good business across all therapy areas and we expect our strong growth in R&DS to continue even post-COVID. Thank you.

Robert Jones — Goldman Sachs — Analyst

Great, thanks, Ari.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

If we can move to next question in the queue, please, operator.

Operator

Your next question comes from Tycho Peterson with JP Morgan. Your line is open.

Tycho Peterson — JP Morgan — Analyst

Hey, thanks. Ari, to sort of follow up on the first question, but I think previously you talked about real world evidence actually picking up as the pandemic lingers just given that you need to understand why people have more severe symptoms, a lot of vaccines rush to market. So I’m just curious as to why you think that piece will drop off after the first quarter given there seems to be a growing need, most of your peers are talking about it being a pretty strong year for real world evidence.

Ari Bousbib — Chairman and Chief Executive Officer

Yeah, go ahead, Andrew. Yeah.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Yeah, I guess, I mean, Tycho, I think Ari was alluding to earlier I think he said, look, it’s still early in the year and this could change, and I think we want to get ahead of ourselves and bake anything into our guidance that we don’t have line of sight into our contracts, it’s obviously a fast-moving environment with the COVID work in a soft execution and we saw very good growth in the first quarter, and we expect that to repeat in the second quarter with TAS.

Ari mentioned in his prepared remarks at the beginning, obviously, we’re doing work with the FDA and we’re looking at how COVID is impacting the population, then, and what kind of treatments and therapies have people been on or drug regimens that people been on, their symptoms may beyond the severe is other patients and so we obviously got to see in the table here, we’re talking to government and I think that means we’re becoming kind of the company of choice with other governments around the world. But I think we just don’t want to get ahead of us down here and think of anything else —

Ari Bousbib — Chairman and Chief Executive Officer

Yeah, yeah, I would just add Tycho that we’ve included in our guidance, what we have direct visibility to. But this is a very fast-moving environment and things pop up all the time. So it could change. I mean, look, we just — we are delighted to have this COVID work right, I mean we are super excited because with the broader picture here strategically that this crisis as bad as it was for everyone, in terms of our company, we’ve been talking, it’s almost like this company existed for situations like this.

All of a sudden need sets of capabilities that we’ve spent so much effort and investment developing proved to be exactly what was needed to help our clients and to help governments, whether it’s on the commercial side, on the real world side or on the R&DS side. And our relationships with clients has been strengthened. Our sets of capabilities have been demonstrated, and we expect to continue to capture either bigger share of spend going forward into the very long-term in the life sciences industry. And we really are very excited by the pipeline of opportunities, again both on the commercial side and on the R&DS side.

Tycho Peterson — JP Morgan — Analyst

Okay, that’s helpful. And then just two quick follow-ups. I’m just curious on recovery trends you know where you stand in terms of site accessibility, I think it was 70% coming out of 3Q. So where does that stand today? And then secondly, I didn’t hear you mention OCT. I’m just curious how we should think about that rollout, any potential synergies with OCE? Thanks.

Ari Bousbib — Chairman and Chief Executive Officer

[Speech Overlap] Your first question was on site access. And site access actually remained fairly close to the 70% number, I mean just we learned ways to work around it. Although we would expect it to improve gradually. Yeah, I mean look in the, in the first, when in the trough in the, at the worst moment of the crisis, we were right, less than 20% of site access and that really created huge, huge headwinds for our R&DS unit as you know.

Second quarter earnings call, we told you that we have gone up to 53% site access and at the end of the third quarter, we were at about 70% site access and the kind of bad news, good news here that we have not improved that measure, it remained at 70%. However, we’ve learned to work around that and the reason, why it hasn’t been back to 100% frankly is because of all these new flare-ups, etc, but the good news here is that, I mean, it’s been alright because you know it’s not so much we found, the number of sites, but it’s really other metrics.

The main metric we look at the beginning of the pandemic was site access, because again without that you’ve got nothing but we found out that there is a critical mass of site access, which again we think is about the level where we are now. Whereby our remote monitoring capabilities [indecipherable] material disruption to the delivery of our services in general. We’ve got site network relationships we can work around, sites are not yet up and running for clinical research and today we can pivot much faster to remote monitoring versus when this pandemic came.

Now if you look at start-up activity, which is another important metric that we were looking at which have also come to a hold is now back to baseline levels, pre-pandemic and that’s extremely good news. And there hasn’t been any major change from these due to the increases in COVID cases or the new variants of the virus. So start-up activity, people have room to work with the virus and it’s essentially back to pre-pandemic levels and we don’t see that changing.

Patient recruitment, another very important metric. Obviously usually lags site start up but essentially, those trends are very strong and the patients are returning to sites essentially close to pre-pandemic level. So again we’re very encouraged by that. You had another question on —

Tycho Peterson — JP Morgan — Analyst

Orchestrated Clinical Trials, the OCT rollout and how do you think about that? Yeah.

Ari Bousbib — Chairman and Chief Executive Officer

Yeah, yeah. Well, I mentioned that in my prepared remarks that our virtual trials of technology has been really brought to the front here in the context of the — of COVID. If you step back and think about where OCT is, there is really four blocks. There is a digital suite, which focus on the — on the science side, payments, eTMF. Then there is a digital patient suite where the patient has to go through with eConsent, eCOA, that’s where the virtual trial essentially is the study hub. Then you have the digital trial management suite through the CTMS, risk-based monitoring and then you have the compliance suite with RIM Smart and Vigilance.

So the technologies in our site suite, the patients suite and the compliance suite went live during 2020 and the technologies in our trial management suites will be going live shortly most likely end of the first quarter, beginning of the second quarter of this year. So again of these four suites, the site, the patient and the compliance, they are all went live during 2020 and the trial management suite will be live — probably, March, April timeframe this year. And we’re seeing very strong interest from clients we have, that we’ve seen an increase in RFP activity for OCT platform, not just for individual suites or standalone products but for the whole platform. We are seeing interest from all customer segments, large need and EVP and stay tuned, we’ll report more on that.

But the answer to your question is we are live for most of the products and it will be fully live and operational by the beginning of the second quarter.

Tycho Peterson — JP Morgan — Analyst

Okay, that’s very helpful. Thank you.

Ari Bousbib — Chairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from Ricky Goldwasser with Morgan Stanley, your line is open.

Ricky Goldwasser — Morgan Stanley — Analyst

Yeah. Hi. Good morning. So backlog conversion clearly improved even when we back the COVID benefit — COVID project benefit. So when we think about 2021, when should we expect the backlog conversion to be back to that 7.6% over the pre-COVID level? Should we think about it as sort of second half of 2021 or more kind of like spilled to 2022? And then the second question, when Ari, you talked about patient recruitment and the fact that you’re starting to see patients are coming back to the sites at pre-COVID levels.

Are you seeing any impact on how on trial designs, I mean, clearly right now still a relatively low percentage of the population is vaccinated. But as we see more people vaccinated would that impact how you think about trial design and potentially the pace of recruiting new patients to trial.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

So, Ricky, the line was pretty bad there. We were struggling to hear you a little bit. I think your second part of the question was around patient recruitment and are we seeing — expecting I guess pick up in terms of the population getting back and people returning to sites. I think, from what we are seeing…

Ricky Goldwasser — Morgan Stanley — Analyst

So, actually the question is, if we think about it, are — is individuals are vaccinated. If that’s sort of changed how you guys think about designing trials? If someone has a COVID vaccine, does this mean that they might be compromised and can’t participate in trials?

Ari Bousbib — Chairman and Chief Executive Officer

No, I don’t think so. No.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

No. I think it’s all part of the general recovery that we’re seeing and…

Ari Bousbib — Chairman and Chief Executive Officer

Yeah. No.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

But the way we are seeing.

Ari Bousbib — Chairman and Chief Executive Officer

It doesn’t change anything to the design of the trials. I mean, it’s just another element that allows a patient to access offices, sites or interact with healthcare professionals. But would be — would have been the same with a negative test or a — or somebody with antibodies. I mean, that doesn’t change anything to the design, no. And then the second — the first…

Ron Bruehlman — Executive Vice President and Chief Financial Officer

What was first part of the question, Ricky, I was — we were really struggling to hear on our side?

Ricky Goldwasser — Morgan Stanley — Analyst

So the first one was, if you think about backlog conversion, clearly backlog conversion — in the quarter even when we excluding COVID. So when do you expect to return to the pre-COVID levels that 7.6%, is — should we think about it when we model the second half of 2021 or in early 2022 time — timeline?

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Look, like, the backlog conversion is a really tough statistic to model out, because it depends on backlog burn, because it depends on how much we’re adding to the backlog in any quarter. So what we’ve tried to do is provide guidance to tell you how much we think it’s going to burn during the course of the year, the next 12 months revenue and allow you to take it from there.

Yes, the COVID work does burn quicker than the other work. There’s no question about that. But we don’t guide to a particular backlog conversion rate, because it’s just too difficult to do, because it depends also on how much you happen to be booking, if you’re booking a lot, like, we have been recently then obviously the backlog goes up and the burn rate goes down. But that’s not a bad thing. So, yes, I would expect you would see a faster burn of the COVID-related work, which we mentioned was about 15% of our service bookings in 2020 and a more normal rate of burn on the rest of the backlog. And I think it still remains to be seen how much additional COVID-related work we’re going to book as we go through 2021. That’s still a question mark.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Thanks. Thanks, Ricky. I think if we can move to the next question in the queue, please.

Operator

Your next question comes from Eric Coldwell with Baird. Your line is open.

Eric Coldwell — Baird — Analyst

Thanks very much. I have one technical question and then more strategic one. So, first off, I’m getting a couple of inbound asks on the FX update. I’m just curious if you could maybe clarify, be more clear for us people who missed it. The FX guidance for 2021, is it plus 200 bps tailwind for the full year in total or was the update today that that’s an incremental 200 bps since you first gave 2021 guidance a few months ago?

Ron Bruehlman — Executive Vice President and Chief Financial Officer

So when you look at the year-over-year FX impact, when you’re looking at the growth rate, ultimately, if you’re trying to take our reported guidance and get to a constant currency guidance, it’s…

Eric Coldwell — Baird — Analyst

Yeah.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

— 100-basis-point tailwind year-over-year. Similar to that in TAS and CSMS and a little bit lower in R&D, maybe about 100 basis points in R&D.

Ari Bousbib — Chairman and Chief Executive Officer

No. He is asking versus the previous guidance…

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Versus the previous…

Eric Coldwell — Baird — Analyst

Yeah. That would be the follow on is, what was embedded in the guidance a few months back, so we could just see the delta?

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Previous guidance was 100 bps. [Speech Overlap]

Ari Bousbib — Chairman and Chief Executive Officer

Yeah.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yeah. Yeah. So, previous guidance on 100 basis points and this will goes to the 200 basis points tailwind.

Eric Coldwell — Baird — Analyst

Perfect. Thank you very much for that. A little more interesting question, really positive trends here in the cash flow and I know it’s been — Ron, I know, it’s been a big focus for you. We’ve seen some nice improvement here over the last few quarters. I’m just — I am hoping you can maybe break this into two pieces. First off, could you give us anything a little more specific or precise on what’s really driving the improvement operationally, number one?

And number two, perhaps parse out from that if maybe some of the timing on the COVID vaccine work and the higher pass-through tailwind that you did finally get here in the fourth quarter, was that — how much of a contribution was that versus, let’s say, core underlying fundamental improvement?

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Look, it’s good question. The — as you can see from our cash flow statement, the principal driver, in fact, pretty much the whole driver of our improvement in cash flow — free cash flow in 2020 was due to improved collections performance. And that’s a combination of collecting quicker, but also billing in a more timely fashion and structuring our contracts, so that we built earlier. And part of our collections effort, which we put a lot of focus on was bringing down our overdue receivables.

We took our eye off the ball on that a little bit and put a lot of focus on that and we’re able to substantially put a dent in our overdue receivables, which has helped quite a bit. And I think a lot of the processes we put in place, all of them should persist in the 2021. We have to continue to put emphasis on it. But we’ve improved our processes and we expect that to continue.

Now you did identify something that’s important, which is that the COVID-related work did bring some benefit in terms of customer advances and being able to bill in advance that helped our 2020 cash flow. I would — so when you look at our 2020 cash flow, as a percentage of adjusted net income, it was unusually high. We target more in the 80% to 90% free cash flow as a percentage of adjusted net income in a normal year. But cash flow is very lumpy, so it bounces around.

We had a very strong year in 2021 amidst as a percentage of net income, excuse me, 2020 as a percentage of net income that probably won’t be quite as strong in 2020. But fundamentally, we’ve improved quite a lot in terms of cash conversion and you should see continued benefit from that going into the future.

Eric Coldwell — Baird — Analyst

That’s very helpful. Thanks, guys.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Thanks. I think we are coming out close to the hour. But if we can take one more question, please.

Operator

Absolutely. Your last question comes from Dan Brennan with UBS. Your line is open.

Dan Brennan — UBS — Analyst

Great. Thank you. Thanks for taking the question. I guess a two-part question. One was on OCE, Ari. So, obviously, continued progress there. I’m just wondering when do we begin to see OCE show up in revenues and then you talked about the timetable that was just deployed and then you begin to generate traction on that with 140 wins to-date, any color about what’s baked in the 2021 guidance and if not kind of when do we see it?

Ari Bousbib — Chairman and Chief Executive Officer

Yeah. So, again, we continue to see very good traction in the marketplace. Obviously it takes time to deploy. We had 60 client wins in 2020 and I should point out, obviously, despite the difficult environment created by the pandemic, we continued to sell. Total 140 clients wins since launch. We keep winning two out of three times against competition. We are deploying large clients which we disclosed before. We have a global deployment with Roche. We have global deployment with Novo Nordisk International Operations, AstraZeneca US deployment as well. We have another top 15 pharma deployment for a country in Asia and other top 15 pharma companies that’s globally deploying for the medical teams.

So we already have, I mean — I’m not sure if we should disclose this number, but we do have tens of thousands of users already. Now that did moved the needle on $12.9 billion revenue company, no, not in 2021, but it is providing very significant growth. And certainly, it is an area where we expect strong margin drop through over time as we complete implementations. As you know, it’s a — the drop through becomes much more attractive when revenue is license driven and we’re starting to see that, but it will continue to increase as we complete deployments and implementation.

Now, we continue to sell. So that also will require implementation. And the strategy overall is the same as for any technology company, which is the land and expand model, and as you know, we resolved the HCP engagement management, I mentioned it. We saw the HCP compliance. We are launching additional modules and continue to expand. So it’s not just OCE, OCE was kind of the centerpiece and then it continues to grow. Ron, anything?

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yeah. Yeah. I just wanted to say, I think, sometimes investors have a tendency to equate our tech business with OCE, because we’ve all talked about it a lot and we have a competitor in that space that talks about it a lot as well. But we have a much broader tech business, as Ari was saying, than just that. I mean, across performance management, compliance, information management, social media, we — your payer provider and then we have a growing clinical tech segment. So, just want to emphasize that the tech is a lot more than just OCE for IQVIA.

Ari Bousbib — Chairman and Chief Executive Officer

Yeah. Thank you.

Andrew Markwick — Senior Vice President, Investor Relations and Treasury

Thanks very much, Dan. So we’re at the top of the hour now. So thanks, everyone, for taking the time to join us today and we look forward to speaking with you again on our first quarter 2021 earnings call. And we’ll be available for the rest of the day to take any follow up questions that you might have. Thank you everyone.

Operator

[Operator Closing Remarks]