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IQVIA Holdings Inc. (NYSE:IQV)
Q1 2021 Earnings Call
Apr 22, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to 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, Casey. Good morning, everyone. Thank you for joining our first quarter 2021 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; Nick Childs, Senior Vice President, Financial Planning and Analysis and new comer to this call Brian Stengel, Associate Director, Investor Relations and Brian has succeeded Jen Halchak.

Today we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results 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 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

Good morning, everyone and thank you, Andrew. Welcome and thank you for joining us today. This morning we reported first quarter results with strong double-digit growth in all key financial metrics. And as a result of this performance and an improved outlook for the rest of the year, we have once again raised our guidance. The 2021 guidance that we provided you last quarter was already within reach of our original pre-COVID plans for 2021. Our revised guidance today significantly exceeds those original plans.

In many ways 2020 was a reset year for our company and also for the industry. We've been saying for a long time that the traditional timelines for the development of new drugs are too long. The speed at which COVID vaccines were developed in 2020 has obviously raised the bar in terms of what expectation should be. The crisis accelerated the adoption of new technologies and we believe it will force a lasting change in how innovative medicines are developed and commercialized.

All of these has made IQVIA even more relevant to our clients and has highlighted the power of our differentiated offerings. The deep client engagements that we had during the pandemic demonstrated how uniquely positioned we are to bring new insights and expertise that can improve drug development and commercial timelines. What is also becoming clear is that there is a lot of pent-up demand due to one, the many trials that were slowed down or temporarily pushed to the right.

And two the trials that did not get started as they were crowded out by the COVID resolution efforts on which everyone was focused. This pent-up demand across therapy areas combined with record levels of biotech funding provide a very strong backdrop for our industry. As a result of these favorable conditions we started the process of revisiting our vision 2022 goals.

We plan to update you later this year on our vision '22 progress and lay the groundwork for the next phase of our journey. We may do this at an investor conference later this year, especially if we are able to hold one in person, so stay tuned for more information.

So now, let's review the quarter. Revenue for the first quarter grew 24% on a reported basis and 21% at constant currency was $209 million above the high end of our guidance range, but about half of this beat came from strong operational performance and half was from higher pass-throughs. First quarter adjusted EBITDA grew 32%, reflecting our revenue growth and productivity measures. The $69 million beat above the high end of our guidance range was entirely due to the stronger organic revenue performance. First quarter adjusted diluted EPS of $2.18 grew 45%. The beat here entirely reflect the adjusted EBITDA drop-through.

A little bit more color on the business. Our commercial technology presence continues to grow as we launch new offerings in the market. During the quarter, a top 10 pharma client deployed our next best action solution in 14 countries. This tool is a SaaS-based technology platform that optimizes our client's sales force effectiveness. It increases the success of their marketing activities by providing automated sales call recommendations to the field based on advanced artificial intelligence and machine learning algorithms.

Our base OCM -- CRM win rates remain strong. We added another 10 new clients this quarter and now have 150 clients deploying about 70,000 users. Our eCOA technology platform or Electronic Clinical Outcomes Assessment tool, which is used by our real world as well as R&DS team is also experiencing strong demand. This cloud-based platform utilizes a user-friendly interface to collect clinical data directly from patients. We launched this solution during 2019 and the team is seeing strong user acceptance. To-date, we've been awarded over 125 studies with over 300,000 patients enrolled and over 4 million surveys completed.

Moving now to R&DS. We continue to build on our strong bookings momentum in our R&DS business. In the first quarter, we achieved a contracted net book-to-bill ratio of 1.41, including pass-throughs and 1.41 excluding pass-throughs. At March 31st, our LTM contracted book-to-bill ratio was 1.52 including pass-throughs and 1.45 excluding pass-throughs. These numbers are although more impressive, obviously, given our strong revenue growth. Our contracted backlog in R&DS including pass-throughs grew 18.3% year-over-year to $23.2 billion at March 31, 2021. As a result, our next 12 months revenue from backlog increased by over $600 million sequentially to $6.5 billion, that's up 31.1% year-over-year.

The R&D team is building on the success we experienced in 2020 with our hybrid virtual trial offering or the term what is now decentralized trials. In the first quarter we won decentralized trials in new therapeutic areas, including cardiovascular and metabolic disorders. We are working with 5 of the top 10 pharma client and to-date we've recruited almost 170,000 patients using our advanced decentralized trial solutions.

Finally, you saw that on April 1, we completed the acquisition of the remaining interest in Q Squared Solutions from Quest Diagnostics. As you know Q Squared is an industry-leading laboratory service provider for clinical trials with global capabilities across safety, bioanalytical, vaccine, genomics, and bioanalytical testing along with best-in-class technology in bio specimen and consent lifecycle management. This transaction streamline strategic decision making for us and gives us the flexibility to build out greater bioanalytical, genomic and biomarker capability, as we see increased attractive growth opportunities in this expanding market.

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

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Thanks, Ari, and good morning everyone. As already mentioned, this was a very strong quarter. We'd start first by giving you some more detail on revenue.

First quarter revenue of $3,409 million grew 23.8% on a reported basis. Analytics Solutions revenue for the first quarter was $1,348 million, which was up 20.7% reported and 17.1% at constant currency. R&D Solutions first quarter revenue of $1,868 million improved 29.6% at actual FX rates, and 28.1% at constant currency. Pass-through revenues were a tailwind of 770 basis points to the R&DS revenue growth rate in the quarter. CSMS revenue of $193 million was down 1.5% reported and 4.1% on a constant currency basis.

Moving down to P&L, adjusted EBITDA was $744 million for the quarter. Margins expanded 140 basis points despite significant headwinds from higher pass-through revenue and lower margin COVID work. GAAP net income was $212 million and GAAP diluted earnings per share were $1.09. Adjusted net income was $425 million for the first quarter and adjusted diluted earnings per share grew 45.3% between [Technical Issues] $2.18.

R&D Solutions delivered another exceptional quarter of net new business. Backlog was up 18.3% year-over-year to $23.2 billion at March 31. Next 12 months revenue as Ari mentioned from backlog grew significantly and currently stands at $6.5 billion, up 31.1% year-over-year. And of course this metric now includes the first quarter of 2022, which is a further indication that we see the momentum of the business continuing beyond this year.

Now let's review the balance sheet. At March 31, cash and cash equivalents totaled $2.3 billion and debt was $12.2 billion, resulting in net debt of $9.9 billion. Our net leverage ratio at March 31 improved to 3.9 times trailing 12 month adjusted EBITDA, marking the first time since just following the merger that this ratio was below 4 times. And this is particularly noteworthy, you may recall that in 2019, when we gave you our three year guidance, we committed to delever to 4 turns or below exiting 2022. We're pleased to have achieved this target entering 2021.

First quarter cash flow, free cash flow in particular was very strong. Cash flow from operations was $867 million, capex was $149 million, resulting in free cash flow of $718 million. We repurchased $50 million of our shares in the quarter, which leaves us with $867 million of share repurchase authorization remaining under the program.

Now let's turn to guidance. You'll recall that back on April 1, when we announced the acquisition of Quest 40% interest in our Q Squared joint venture, we raised our 2021 EPS guidance by $0.12 to reflect the elimination of Quest minority interest in the joint venture's earnings. We wrapped revenue and adjusted EBITDA guidance unchanged, of course because we already consolidated the -- or consolidated the financial of the joint venture prior to the transaction.

Well, today we're revising our guidance upward again as follows. We're raising our full-year 2021 revenue guidance, both at the low and high end of that range, resulting in an increase of $625 million at the midpoint of the range. The new revenue guidance is $13,200 million to $13,500 million, which represents year-over-year growth of 16.2% to 18.8%. This increased guidance range reflects the first quarter strength and the continued operational momentum that we see in the business. And also absorbed an FX headwind versus our previous guidance.

Now compared to the prior year, FX is expected to be a tailwind of about 150 basis point to full-year revenue growth. From segment perspective, we now expect full year Technology & Analytics Solutions revenue to grow at a low to mid-teens percentage rate and R&D Solutions to grow in the low to mid-20s. Our previous expectation that revenue in the CSMS business would be slightly down, remains unchanged.

We're also raising our full-year profit guidance as a result of stronger revenue outlook, we've increased it, increased adjusted EBITDA guidance at both the low and high end of the range, resulting in an increase of $133 million at the midpoint. Our new full-year guidance is $2,900 million to $2,965 million, which represents year-over-year growth at 21.6% to 24.4%.

Moving to EPS, I mentioned Q Squared transaction on April 1, as a result of that, we raised our adjusted diluted EPS guidance by $0.12 to a new range of $7.89 to $8.20. We're now raising both the low and the high end of that guidance range, resulting in a new adjusted diluted EPS guidance of $8.50 to $8.75 or year-over-year growth of 32.4% to 36.3%.

Moving to detail on P&L, interest expense is expected to be approximately $400 million for the year, operational depreciation and amortization is still expected to be somewhat over $400 million and we're continuing to assume an effective tax rate of approximately 20% for the full year. This guidance assumes that current foreign currency exchange rates remain in effect for the rest of the year.

Now let's turn to the second quarter guidance, assuming FX rates remain constant through the end of the quarter, second quarter revenue is expected to be between $3,225 million and $3,300 million, which represents reported growth of 27.9% to 30.9%. Adjusted EBITDA is expected to be between $690 million and $715 million, which represents reported growth of 42.9% to 48%. And finally, adjusted diluted EPS is expected to be between $2 and $2.10, up 69.5% to 78%.

So to summarize, we delivered very strong first quarter results, once again reporting double-digit growth in all key financial metrics. This included revenue growth of over 20% in both our TAS and R&DS segment. R&DS backlog improved to $23.2 billion, up 18% year-over-year. Next 12 months revenue from that backlog increased to $6.5 billion, up 31% year-over-year. Free cash flow was strong again this quarter. Net leverage improved to 3.9 times trailing 12 month adjusted EBITDA. And finally, given the strong momentum we see in the business, we are once again raising our full year guidance for revenue, adjusted EBITDA and adjusted diluted EPS.

Before we open up the call up for Q&A, I'd like to make you aware of a couple of leadership changes within IQVIA finance organization. Andrew Markwick, who has led Investor Relations function for the past four years very capably, I think you'll agree, is moving on to become, CFO of the R&DS unit. Nick Childs, who currently runs our Corporate FP&A function will take-over as SVP of Investor Relations and Corporate Communications.

Nick has been in his role for over three years and has a very deep knowledge of the company and our financials. He will be succeeded by Mike Fedock who has served as CFO of the R&DS unit for the past few years. Finally those of you on the fixed income side know that Andrew who has also served as our Treasurer for the past couple of years and Manny Korakis who is our Corporate Controller will also assume leadership of the Treasury function going forward. Now, rest assured Andrew will stay around for a few days to finish up the quarter and take all your questions, and to ensure a smooth transitions to both Nick and Manny.

And with that, let me hand it back over to Casey, who will open the call for Q&A.

Questions and Answers:

Operator

[Operator Instructions] And your first question here comes from the line of Robert Jones from Goldman Sachs. Please go ahead, your line is now open.

Robert Jones -- Goldman Sachs -- Analyst

Great. Good morning, congrats to everyone and especially, Andrew. Hopefully, we'll still get to communicate. I'm sure you will miss having to talk to all of us all the time. I was going to ask Ari about the long-term guidance, but I think it sounds like, I can anticipate the answer will be wait till later this year. Obviously, the updated revenue guidance today, looks like it's cater of 9% and 10%, off of '19. So, it sounds like, if I heard you right, we'll get more on that later. So instead, maybe I'll just go back to a bigger industry question around M&A. Ron, you mentioned getting the leverage below the target that you guys had set out and clearly, there is a ton of activity in this space right now. So I'm curious, Ari, as you look at the business and you look at some of the movement around you in the space in what your competitors are doing. Do you feel like there are capabilities that you really need to go out and buy to enhance or build out what you're already doing? Or do you think IQVIA is in a pretty formidable competitive standpoint where it is today?

Ari Bousbib -- Chairman and Chief Executive Officer

All right, well, John, you're -- I'm sorry Robert, lots of questions here. And I would not mind your long-term question, either. But the reason why we think we need to update our long-term guidance, as you will recall in June 2019 we shared our three year planning process and the goals that we set for ourselves. We called both on the top line and on the productivity measures and the continued efforts to reengineer the company and make it more efficient. And we set some targets in terms of top line and bottom line growth at the time.

Now, obviously, lot has happened, 2020 as I said in my introductory remarks was largely a reset year and therefore, we feel it's appropriate to pause and update you on the progress we've made. And look, -- I think I'm not going to shock anyone to say that and we think that those targets are no longer relevant. And we're going to likely grow through those numbers in 2022. To give you some more precision, we feel that we need to complete our planning process and then when we are ready later this year we will hopefully have an investor conference, similar to what we had in June '19 and then update '22 and obviously try to give you the sense for the new, maybe 2025 target. So that's for the long-term strategy and goals.

With respect to M&A activity in the sector. Look, we're not surprised, since the merger that we -- the IMS and Quintiles back in '16 is now -- we are approaching the fifth year anniversary, a lots of activity has occurred. We believe strongly it's in reaction to what we did, we disturbed and disrupted the industry, which was the goal of the merger. We believe we are accomplishing the goals we had set for ourselves at the time, we believe the strategy was right. The strategic rationale was right and hence the flurry of activity to try to acquire those capabilities anyway possible. And that barring the ability to acquire those technology, data and analytics capabilities, then CROs are compelled to either sell themselves or merge and that's all I'd say on what's happening.

With respect to our own M&A activity, we've said before that we were interested in deploying capital to acquire strategically compelling company that added capabilities. We've done that mostly in the technology area to accelerate the growth of our technology business and the acquisition of those capabilities. We will of course look every time that in assets that is within our businesses is put out for sale and you probably all know what those have been or are, and we look and we do the work in every case we past so far. So that's all I will say. I mean, we've said before that we have a lot of liquidity, right. We have now between the $2.3 billion at the end of the quarter and $1.5 billion of untapped revolver capacity that's $3.8 billion. Obviously, we used $760 million of that on April 1 for the acquisition of the minority stake in the lab business, which we are very, very excited about. And so we have 3 -- a little over $3 billion of cash on deployable and we draw the spending, A, on internal developments. B, on strategic acquisitions and then barring all of that we would invest the balance of available cash by redistributing to shareholders via share repurchase as we've done historically. Thanks, Robert.

Robert Jones -- Goldman Sachs -- Analyst

Thanks, Ari.

Operator

Your next question comes from the line of Eric Coldwell from Baird. Please go ahead, your line is now open.

Eric Coldwell -- Baird -- Analyst

Hey, thanks very much. Good morning. A lot of things we could hit on here, but I know I'm going to get inbounds on the COVID stats for the quarter and the year. If you'll bear with me on this, I know it gets laborious, but would it be possible if you -- if I -- sorry if I missed it, to update the number of the trials you've been awarded to-date in COVID, any insights into the percent of revenue in Q1 or your outlook for the year related specifically to COVID vaccines or therapeutics? Maybe something on the percent of backlog that is represented by COVID or any comments on the pipeline of activity around COVID studies, that would be great. Thank you so much.

Ari Bousbib -- Chairman and Chief Executive Officer

Thank you, Eric. So look on the number of trials, I have no recollection of the number of trials. I can tell you, look, the most relevant impact from COVID are obviously the COVID vaccine trials, which are large and fast burning, as you know, and so that's really what moves the needle. We've got lots of small COVID related activity all around the company, but that doesn't move the needle. What moves the needle are these COVID vaccine trials. And as you know, of the file Phase III large vaccine trials funded by Operation Warp Speed, we've had work on four of them now. Now, we haven't done the full clinical trial on all four of them, we've done it on two of them. And the other ones, on the third one, we've got the pharma covigilance work and on the other one, we have the lab work. So those are the ones that have had the most impact.

With respect to the impact on the first quarter, excluding these work, R&DS revenue grew mid-teens. So that's the impact in the first quarter. What was your other question, now you also should point out that the COVID work has had an impact on the first quarter growth for TAS, as well. As you know, we've said that on previous earnings calls, we've had demand from governments around the world in the U.S., the FDA, in Europe, in Asia as well, and those have also provided high growth in the first quarter without those activities, the TAS revenue growth would have been in the high-single digits. So roughly, I think you could say that COVID contributed all these large fast burning COVID work and the TAS work contributed about half of the total company revenue growth.

What was your question on the -- I guess on the R&DS backlog you asked what it is as a portion of the backlog. If I recall, Andrew, correct me if I'm wrong. If we look at the service...

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

Yep.

Ari Bousbib -- Chairman and Chief Executive Officer

Backlog in R&DS, it's in the high-single digits.

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

Yes, that's correct.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah. So that's what it represent. Now, it does have a much longer-tail than we would have thought. It certainly is going to remain with us through 2021 and well into 2022. There are many reasons for that. There are many vaccines from multiple manufacturers that are being developed to meet global demand. We are still responding to RFPs for vaccines around the world in many other countries that want to develop their own vaccines. There are follow up studies for adapting the vaccines for the mutations of the virus. There are alternative versions of the vaccine that would be needed in case of adverse safety events or in case of quality or manufacturing issues and then there are bunch of novel treatment programs that are targeted at specific population, specific condition. And then there is a lot of safety monitoring work that is also in the pipe.

So again, the first point that I understand in the context of your question is that COVID related work is not going away anytime soon, and it's here for a while. And we're very happy that we have our fair share of that market. What I also should say, because I know if you didn't ask the question, you're going to ask it soon, that the RFP pipeline across the board is very strong, well beyond COVID. In fact, our pipeline of qualified RFPs is approaching $25 billion, if I remember correctly?

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

$23 billion.

Ari Bousbib -- Chairman and Chief Executive Officer

$23 billion. Okay. It's over $23 billion and it's growing double-digits, both in volume and value. Again, bear in mind, as I said in my introductory remarks that the work that should have happened in 2020 on all of those other trials that were either about to start, or starting or in flight lots of it was kind of slowed down or push to the right. So because of that we've got that pent up demand that's coming out. And number two, a lot of projects that normally would have come in were displaced, crowded out by the efforts that everyone put on trying to resolve the COVID situation. And so all of that is coming through, and we are confident that both because the COVID work is not going away in a sharp manner, and number two, because we've got all of these other activity that has been doubling up, we are confident in our guidance for this year and continued strong momentum for the business well beyond COVID.

Eric Coldwell -- Baird -- Analyst

Thanks, Ari. Thank you. I appreciate it.

Operator

Your next question comes from the line of Shlomo Rosenbaum from Stifel. Please go ahead, your line is now open.

Shlomo Rosenbaum -- Stifel -- Analyst

Hi, thank you very much. Ari, if you don't mind, I'm going to try and slip in a few. First, I want to ask you, if you could talk a little bit about the real world evidence trends and update us, and how that's going, that's been a very strong grow in the past. Number two, just want to ask you for a little bit more detail on how you accelerate the growth in that Q2 business by owning all of it? And then finally, I mean how do you do an encore for a quarter like this? I mean, can you talk about the discussion about the business momentum continuing, it's such a strong quarter. It's hard to believe that you'll be able to improve upon this, and I know I've asked a lot, but going to kind of put them out there.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah. Thank you. Shlomo. Well, look, I mean, I'm not -- we're not suggesting. we're going to have 25% growth or whatever we showed here on an ongoing basis, that's not our new normal, obviously, and I explained why, in response to Eric's question was the impact of that large fast burning vaccine work for COVID had on our business.

Now, excluding all of that, the business has strong momentum. You will recall, we gave guidance for where we wanted to get as a company by the end of 2022 when we said high-single digits was going to be our new normal. Well, we believe we are going to be above that, excluding all of the disruption and the unusual bubbles. So, again, excluding that fast burning work that we had in the first quarter, the R&DS business grew mid double-digits and the TAS business grew high-single digits, excluding the COVID related work. So that we're very, very comfortable with. The rest of the year, obviously will be higher than that, again because we have the trailing impact of COVID, we think well into '22 and the pent-up demand that needs to be caught up. So all of that helps build momentum.

With respect to your specific question on real world. It is strong double-digit growth in Q1. I mentioned the -- all the -- we spoke last time about the CARE registry for the FDA. We spoke about the patient monitoring efforts, the deployment of our advanced -- we now have over 1 billion patient lives in our database and we continue to deploy E360 platform for clients, we're deploying our eCOA platform, which helps collect clinical data directly from patients. We are seeing extremely strong demand on Real World, obviously, this is just getting started now, though, we are seeing demand to track patient populations in terms of people who had the virus, in terms of surveilling patient that actually took the vaccines and monitoring for potential adverse effects, etc. So all of that plays right smack in the center of what our capabilities are in Real World. Thank you, Shlomo.

Operator

Your next question comes from the line of John Kreger from William Blair. Please go ahead, your line is now open.

John Kreger -- William Blair -- Analyst

Thanks very much. Hey, Ari, just maybe a follow-up. I think last quarter you talked about your assumption within TAS, you assumed RWE COVID work would really sort of fall off, I think in the second quarter. Do you still feel that way or do you think this is going to continue to be strong throughout the year?

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, I mean, look, it's going to continue longer than we expected. That's why I said, in response to an earlier question, we were not assuming that we would continue at the time and that was the basis of our guidance for the year. The reason we are updating the guidance and increasing it so much is, A, to reflect the performance in the first quarter, the over performance, but also to reflect our revised expectation that this work is going to continue for the balance of the year. It will not be at the same level as it was in the first quarter or the fourth quarter, and will gradually start declining, but it is still significant for the balance of the year and importantly into 2022.

John Kreger -- William Blair -- Analyst

And, Ron, a question for you. I believe gross margin year-over-year was down something like 90 basis points. Was that all driven by the higher pass-throughs in R&DS?

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Yeah, it's two things. It's a higher pass-throughs in R&DS and some of the COVID work is inherently a little bit lower margin than some of the other work. So those are the two reasons.

Ari Bousbib -- Chairman and Chief Executive Officer

But our operating margins are up.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Yeah, our operating margins are up. Our EBITDA margins up 140 basis points in the quarter. So despite that, overall very strong performance, obviously, we have the leverage of the higher volumes and we didn't increase cost accordingly.

John Kreger -- William Blair -- Analyst

Great, thank you.

Operator

Your next question comes from the line of Tycho Peterson from JP Morgan. Please go ahead, your line is now open.

Tycho Peterson -- JP Morgan -- Analyst

Hey, thanks. Ari, I want to go back to one of the original questions just on the M&A in the space. You've got three competitors now all tied up with mergers. I'm just curious, what are you hearing from customers, how do you think about the opportunity to maybe pick up share in an environment where there is a lot of distraction in churn? Can you maybe just talk to those dynamics?

Ari Bousbib -- Chairman and Chief Executive Officer

Okay. Look, whatever I said here is just opinions and little bit of an educated set of observations based on, as you said inputs from clients and being -- having our fingers on the pulse of the industry. Look, we were already gaining share and we're not counting on others to be weaker than they were in order to gain share. We are largely -- our market share gains, which I think are evident, are the result of our unique differentiated capabilities and offerings. So that's number one.

We don't spend that much time looking at what other people do in the industry. We focus on our strategy and building out our capabilities and trying to persuade customers that they should go with us and we are successful doing that. Now, if I look out, obviously, I can't miss the activity. You will recall that INC Research and inVentiv merged in order to form Syneos, LabCorp bought Chiltern, PRA bought Symphony Health, ICON is emerging with PRA, PPD selling itself to TMO, what else, LabCorp is exploring strategic alternatives, whatever that means. So lots of activity and I probably missing some but generally when you -- I -- in the CRO business, there are very few cases where there is synergy between two CROs, very few cases.

Now if someone is largely present in Phase I or preclinical and Phase I, or someone is stronger in Phase II, Phase III that maybe you could say it is complementarity and value, someone is very strong in the U.S., very weak in Asia and someone else is very strong in Asia, very weak in U.S. then you can say there is geographic complementarity and there is value. But in most cases they're are serving the same client base and in many cases, including for the people that I just mentioned who are merging there are clients where they, the two of them are the preferred providers for a client.

So what do you think is going to happen? The client is not going to remain with one provider. So we now are going to have negative synergy, dis-synergy on the revenue side. Yes, you always have costs benefits because you don't need two CEOs, two CFOs. two General Counsels, etc., etc. But largely, this is a project-based business. You still need a different team for every project. So the level of scalability as a result of the merger and the efficiency because you put two CROs together is extremely limited.

So I don't see that much value there and then don't come back to me, if I ever -- we ever buy a CRO and tell you why we're buying a CRO. Again, that could be cases where it doesn't make sense. Again, because the complementarity are indeed complementary or because the customer coverage is complementary, etc. So again, we want to focus on what we do. Clearly, a company in a merger situation is weakened. We experience it ourselves, despite the fact that we were doing a merger between two totally different companies that were bringing very rich capabilities to each other. But the merger no doubt about it, is disruptive. The sale is disruptive. Talent, please. We've experienced it. So we know what is going to happen. Obviously, it's an opportunity for us. Again, we're not counting on that. We are gaining share, regardless. Thank you.

Tycho Peterson -- JP Morgan -- Analyst

Okay. And then one follow-up, speaking of things you are buying on the Q2 Solutions, I just would like a little more color. I mean, you mentioned it streamlines decision making. You can build out greater bioanalytical capabilities. But can you just talk a bit more on the rationale for bringing that back in-house? And I know you got a question earlier on how you can scale it up. I didn't hear an answer to that as well.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, I mean, look, it's a -- we owned 60%. It was managed jointly, we had a Board, it's joint venture, but mostly was -- I think it has been run largely by our side in terms of the management, it's fit into the clinical trial process. It was but -- the coverage were put together originally both were relatively weak in the space. It was turned around, improved. It's a strong business, those capabilities are extremely sought after. The market is becoming more and more attractive, there has been back to the M&A question, a number of very attractive highly specialized biologic, genomics related labs that came up for sale, and we were unable to proceed decision making, ability to focus, etc. And all of that I think will be facilitated going forward. So it's a business that we like. It's a growth business. It's an attractive business and we want to invest in it. And when and if there are acquisition in this space, we will seriously look at them and be able to move faster. Now also compelling in passing I might say it was a financially no brainer kind of transactions for us.

Tycho Peterson -- JP Morgan -- Analyst

Thanks, Ari.

Operator

Your next question comes from the line of Patrick Donnelly from Citi. Please go ahead, your line is now open.

Patrick Donnelly -- Citi -- Analyst

Hey, guys. Thanks for taking the question. Ari, maybe just on the OCE business. I know, it's not the biggest piece of revenue yet, but a nice growth opportunity. I think you talked about 10 adds, this quarter. Can you just talk about how that business is looking in the face of the pandemic? What you're expecting as we go through the rest of the year? And just the competitive environment there?

Ari Bousbib -- Chairman and Chief Executive Officer

Well, look, we continue to lead the marketplace at about the same pace. I mentioned, we had 10 clients wins so far in 2021. We had 150 since launch. The large client deployments are going very well. Implementations went well despite the COVID environment last year there were barely any slowdowns. In fact, some performance have seen accelerated timelines, everything is on schedule. I don't know, if we disclosed the names of the clients or not in this business. I'm not sure the feedback is very positive. Generally, the field reps are very engaged. Your way of course of the rush global deployment, the Novo Nordisk international operation, the AstraZeneca U.S. deployment all of that is largely on target, very good positive feedback.

You know that OCE is rather revolutionary compared to other offerings in the market. It's just -- it's not just a CRM, it's platformed on force.com and the lightning platform. It's a very collaborative tool utilizes AI and machine learning to integrate various functions within the pharma companies' commercial operations, enables faster integration of data and therefore faster deployments. It links the healthcare providers and the suite data for a better view of the doctor and all of that again optimizes our client sales force effectiveness.

And then since then, obviously, we are adding modules that are based on the OCE platform, we've got HCP engagement management, we've got OCE optimizers, we've got next-best actions. All of those are enhancing functional capabilities that our clients are buying and that helps grow the business even faster.

Patrick Donnelly -- Citi -- Analyst

Great. Thanks, Ari.

Operator

Your next question comes from the line of Sandy Draper from Truist Securities. Please go ahead, your line is now open.

Sandy Draper -- Truist Securities -- Analyst

Thanks very much. Just maybe one quick clarification and then a broader one. First one, the comments you made about the growth rates by segment, was that constant currency or is that reported?

Ari Bousbib -- Chairman and Chief Executive Officer

Okay. In the year.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Yeah, Sandy, yeah, the growth rates were given for the guidance on a reported basis.

Sandy Draper -- Truist Securities -- Analyst

Okay. So like the low-teens and mid-20 so those are reported. Okay, great.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Yeah, the FX impact is slightly positive during the course of the year, but it isn't a big driver and if you -- as the year goes on at current rate.

Sandy Draper -- Truist Securities -- Analyst

Super. That helps. And then maybe more broadly for whoever wants to take it. Obviously, business is going really well. As you said Ari, looks like the targets in a hurry, it seems to me may be one of the biggest challenges, you're going to have, because you said a lot of this is the service business and obviously some of the software, if software can scale, but how do you think about -- do you have to change anything about hiring? Think about where you're going for people? Are you worried about wage pressure? But it's clearly you're going to have to add a lot of people to continue to build -- to get to the growth you're doing. So would just love your thoughts on hiring wage inflation and how you manage adding that many people? And what's a very positive, but also competitive labor market? Thanks.

Ari Bousbib -- Chairman and Chief Executive Officer

It's a great, great question. You're touching on one of the -- obviously the biggest operational challenges we have. And that's a natural challenge when you're growing and you're in a service industry and you're right the software-based business or the data subscription business, they are growing, but not at the base of that the services business is growing in aggregate in relative terms, we still going to need to hire people.

Now two observations. Number one, in early 2020 -- end '19, early 2020 in anticipation of continued growth we already had hired a lot of people. We did not restructure people in 2020 we kept people. And even when they weren't working and we paid them. They are here and they are now working and delivering. So we haven't had to hire more people, as much as you might think relative to our workforce last year and it's part of the reason why we're having nice margin expansion here.

Second observation is, we talked before about merger of competitors, obviously, this is going to lead to some talent bleed and availability. And we are in fact being approached and talent is there, but yeah, I mean, wage inflation that's true industry -- across industries and certainly in our industry as well. So we have to deal with that. You know that we have a program to continue to seek efficiencies, scale whether it's through consolidation of activities using our offshore centers, automation of processes, etc. And we have a lots of programs to create cost efficiencies that again the purpose of which is to continue to be able to deliver margin expansion, even as we've got wage inflation. There is one more thing, Sandy, the anticipated wage inflation is fully factored into our guidance. Yes.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Sorry Sandy, go ahead.

Sandy Draper -- Truist Securities -- Analyst

I just said thanks for taking the questions. That's it.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Okay. Thanks Sandy. Pleasure.

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

I think, we've got time for probably just one more question before we get to the top of the hour.

Operator

Great, thank you. Your next question comes from the line of Elizabeth Anderson from Evercore ISI. Please go ahead, your line is now open.

Elizabeth Anderson -- Evercore ISI -- Analyst

Hi guys. Thanks so much for the question and squeezing me in. Obviously, free cash flow was very strong in the first quarter. I just wondered how you thought that would continue to pace across the year? I mean, obviously, last year was extraordinary for a variety of reasons, including on the free cash flow front. So I just wanted to see sort of how you guys are thinking about the pacing of that as we move through the rest of the year? Thanks.

Ari Bousbib -- Chairman and Chief Executive Officer

Ron?

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Hi Elizabeth and thanks for the question. Look, we did have very strong cash flow. It's not a coincidence, since the start of the pandemic, we've been focusing a lot on that when collections not letting accounts receivable past due. We've been successful in working down our overdues and negotiating contracts with better billing terms with customers and we're also seeing, although there has been pressure from the industry from clients to extend billing term, that's kind of winding down, there is a one-time impact and then you hit steady state.

Now having said that, look cash flow is lumpy. So I'm not going to promise that we're going to add $700 million of free cash flow every quarter. It tends to go up and down, but we have fundamentally shifted our emphasis on improving cash flow, and you've seen that over the past year. Just as a general guidance, help on the guidance you would expect free cash flow in an average year, it would be between 80% and 90% of adjusted net income. And keep in mind that our adjusted net income is growing quite strongly. So our cash flow will grow on that basis. But in any given quarter or any given year even, it may differ from that. Cash flow is not like earnings, it isn't as smooth, it goes up and down. But yes, we have seen improvement and we expect continued strong cash flow going forward. But expect a normal volatility that any company is going to have in cash flow...

Ari Bousbib -- Chairman and Chief Executive Officer

Quarter-to-quarter.

Ron Bruehlman -- Executive Vice President and Chief Financial Officer

Quarter-to-quarter, correct.

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

I think, let's try and squeeze in one more quick one as well, before we end.

Operator

Thank you. Your next question comes from David Windley from Jefferies. Please go ahead, your line is now open.

David Windley -- Jefferies -- Analyst

Hi, thanks for squeezing me in. I appreciate it. Ari, I thought maybe the most impressive important number in the quarter was the $6.5 billion in next 12 months backlog. That's such a big sequential increase, I think it's the biggest since you merged. And I know you said earlier in the call that -- it's clearly bookings were very strong, that layers in. You're rolling forward to the next quarter [Technical Issues] it's an outsized improvement and gives us great visibility for the next 12 months. And I wondered if there was also something to be read into that either that sites and patient recruitment are opening up and there is a greater comfort level that is materially improving in terms of your clients willingness to move forward and sites cooperation on that and/or some of your tools for patient recruitment, that are having that impact. And I wondered if you could just add some color to how that outlook is improving so dramatically.

Ari Bousbib -- Chairman and Chief Executive Officer

Thanks very much for that question. And, yes, you're absolutely right. And your observation is correct, there has been a dramatic sequential improvement in our next 12 months revenue growth outlook for the R&DS business by over $600 million this is the result of our continued strong net new bookings performance as well as, again, as you point out correctly, steadily improving clinical trial recovery landscape. Now, by the way, this metric of next 12 month now includes the first quarter of 2022, which is again an encouraging sign, as you also point out of continued strength well beyond this year.

Now, in terms of the improvements that we think in terms of accessibility to sites and so on so forth. Recall that, we had in the Q1 earnings call just a year ago, 20% access to our-- to the sites. 20% of all sites were accessible. In the Q2 call, it was 53%, Q3 was about 70%, Q4 was slightly above 70% and now it's higher than that and trending up as well. I think it's in the 75%, 76% range. Our guidance for 2021 takes many factors into account. With respect to next 12 months N&B -- I'm sorry, next 12 months revenue from the backlog, we do this project-by-project, right. It's a bottom-up process where we evaluate the expected revenue burn for each project for the next 12 months. So it's an extremely precise exercise and I think a very relevant measure and indication of the visibility on our business going forward.

But beyond access to site, look, the site start-up activity is essentially -- is actually above the 2019 levels. So site start-up activity is a very strong indication of revenue burn going forward and that's above pre-pandemic levels. Patient recruitment is close to pre-pandemic levels and we see trending up and probably above in not too distant future. Patient visits, same thing, very close to pre-pandemic levels and trending up.

So, bottom line these metrics provide a strong confidence that the trial pipeline and I'm talking now about the non-COVID trial pipeline. The one that's being awarded or that was awarded and pushed to the right is starting to be delivered with sites enrolling, patients enrolling and patients visits. So you're absolutely correct. And thank you for bringing up the question. I hope that you're going to draw the conclusion, Dave.

David Windley -- Jefferies -- Analyst

Yeah, thanks. I appreciate you squeezing me in. And I appreciate you're past time a little bit, but that's very, very helpful. Thank you.

Ari Bousbib -- Chairman and Chief Executive Officer

Thank you, Dave.

Andrew Markwick -- Senior Vice President, Investor Relations and Treasury

Thanks for the question, Dave, and thank you everyone for joining us today. We look forward to speaking with you again on our second quarter 2021 earnings call. The team will be available to take any follow-up questions you might have for the rest of the day. Thank you, everyone.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call 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

Robert Jones -- Goldman Sachs -- Analyst

Eric Coldwell -- Baird -- Analyst

Shlomo Rosenbaum -- Stifel -- Analyst

John Kreger -- William Blair -- Analyst

Tycho Peterson -- JP Morgan -- Analyst

Patrick Donnelly -- Citi -- Analyst

Sandy Draper -- Truist Securities -- Analyst

Elizabeth Anderson -- Evercore ISI -- Analyst

David Windley -- Jefferies -- Analyst

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