ICON Public Limited Company (ICLR) Earnings Call Transcript & Summary

Well, great. Thank you all for joining us here at the Citi Conference. I'm Patrick Donnelly, I cover the tools, diagnostics and CROs here at Citi. Happy to have Brendan Brennan, the CFO of ICON with us. Kate Haven from the IR team is here as well. So Brendan, thanks for being here.

Maybe to start, obviously, you guys just reported the quarter. One of the big questions coming out of it was maybe a level of confusion around the midterm guidance commentary. So maybe I think it was mid-high single, it was formally high single on the revenue side. So maybe if you can start there, was it an intentional, conscious decision to adjust the long-term guidance or -- midterm guidance, apologies. Maybe just help us think through it because that's -- we certainly got a bunch of questions on that one.

Yes. Sure, Patrick, and thanks for the notes after the call and the clarifications. I do appreciate that for folks to help understand that one. I mean the mid to high, really the reference there is obviously in the current year, and we talked about that quite a bit in terms of why that was the case, and that certainly is as a result of a lot of the passthrough revenue that we saw that really bumped up the revenue in the first half of 2021. And that just makes for a slightly more difficult first half of '22. The direct fee revenue underlying that, of course, is still very, very strong in the growth progress of the organization, as you can be seen in the EBITDA and EPS and the very ambitious EPS goals for 2022 is still very much intact. As we think about and we look out beyond '22, our ambition is still to be very much in the high-single digits. That's where we think the market can sustain as if we look at, I suppose, the market fundamental growth levels of kind of -- in the kind of 6% to 7% range, we feel that we can take share and then continue to move on and be a really good competitor in the marketplace. So no, we're still thinking about high-single digits as we move out into the midterm beyond '22, so '23 out to '25 really. And that's how we're thinking about the marketplace. We believe we've got a good strong marketplace behind us. We believe we have got a great company to be able to capitalize on that marketplace. And so we're confident about the future. So any -- this was the talk and thinking around mid- to high really is more of that lapping the first half of '21. And even in the back half of '22, we'd like to see our numbers certainly moving back up to that kind of more into that trajectory of the -- certainly towards the higher end of mid- to high in terms of the progress as we make into Q3 and Q4.

Okay. Okay. So the out year is still the high single, so no change on that front.

No, I'll say. No.

Okay. Good to clarify that off the back. And then maybe diving in, not surprisingly, on the second topic, just a biotech funding world. That's obviously been a big focus for investors over the past few months, but particularly in the past week or 2. I thought you guys did a great job of giving some pretty clear transparent data in terms of your exposure. I think you talked about 45% kind of smooth biotech, biopharma and then about mid-teens to that really emerging biotech precommercial, if you will. So I guess, maybe talk through, I guess, what you're seeing from those customers. It's obviously been a big focus point. Are you seeing any changes in the funding? We all see the public data. I don't think anyone is expecting it to be great in 1Q. But your perspective on that would be great. I'm sure you're getting a ton of questions on it as well.

Yes. It's an interesting space. What we see in that marketplace is still an awful lot of opportunity, to put too fine a point on it, Patrick, we do see and having been exposed to a lot of really, really good science in our biotech partners, where you've got funding available for that good science and a good development. And okay, the origin of that funding may be slightly shifted from where it was in the past. But there's still a lot of private equity money, a lot of private investment money and a lot of partnership money coming from the big pharmas in terms of funding development for good biotechnology companies who have good science behind them. And the science, I suppose, has always been a thing I look for in terms of what encourages me in a marketplace or not because once you've got good science and you've got good drug development opportunities, they're going to get funded. And what we've seen in some of the interactions with some of the biotech partners, certainly that we have had and continue to have and only in the last couple of days, I had an opportunity to talk to one of those companies and try to understand from my own, [ on account of competencies ]. I was trying to understand the technologies involved in the biotech, how they're doing it. It really is very, very interesting work, and they're making significant strides. And these are companies that were -- that particular company was really well-funded balance sheet, no issues whatsoever, funding probably out for 2 to 3 years in terms of their development cycle and really wanting to get on with their drug development and the progress, how they're looking at that. So really, I mean, I haven't -- we haven't seen anything like a material change in that environment. The RFP flow that we saw in Q4 was very strong. We continue to see that as we've come into the first quarter of 2022. So that remains a really strong environment and we're pretty pleased about the kind of level of business we're seeing coming through there in -- even in the first small period of time during the course of this year. So it's been a solid environment. It continues to be a solid environment, albeit the sources of funding, I would agree, it's probably not an amazing time to be looking to IPO. But at the same time, good science is being funded and there's plenty good science to keep the flow of business going.

Makes sense. And I guess, I know we've had conversations in the past about kind of looking at biotech balance sheets, that durability of cash. Obviously, again, the last 2 years of funding did happen, right? It feels like a bunch of years are condensed maybe into 2 and now the public market maybe it's soft, but the cash is there. So I guess from your perspective, I'm sure you guys have done some analysis of client, your client base, and what those balance sheets look like. I'd be curious to hear your perspective on how you view the cash levels. Are you seeing any change because the funding environment is a little soft? Is client's behavior changing, are they being more conservative?

Yes. Not significantly, Patrick, no. I mean we still see folks who have -- kind of have up to 2 to 3 years of cash funding on their balance sheet and coming into us with really, really strong balance sheets. And you see private companies walking in the door with close to $1 billion in cash in their balance sheet and they're really ready to go and develop their drugs. I think one of the other things, of course, it's worthy of mention is that in terms of -- folks have said, are they reprioritizing their dollars, that they didn't want to spend as much? And of course, even if they felt constrained to some extent, which I don't believe they do, but the development of their drugs is obviously a key element of how they're going to progress as an organization, either in terms of the next stage gate for them or in terms of what they might do in terms of their investment return or how they monetize the discovery that they're working on. So I think that's an important point as well that they do have cash on balance sheet. There's a lot of opportunity out there, and they're obviously still very focused on the development.

Yes. Yes. And I guess, kind of focusing on that mid-teens exposure to kind of the precommercial? I think you guys talked about, if I'm correct, under $100 million of R&D spend. Is that what's [ under ] in that bucket? That's obviously a diverse customer base as well, right? It's not just -- I would assume hundreds of companies. What's the right way to think about that customer base, again, maybe you have 1 or 2 that have some issues. But overall, I would think it's even in that small subset, relatively diverse and seeing some strength. But just curious how you think about that piece? And then again, what the qualification is to kind of fit into that, I guess that 15% you broke out on the call?

Well, to give credit where it belongs, I'm going to bring Kate into the conversation here to maybe take this one, because it was her hard yards that kind of helped us identify some of those companies and how we do that split. So Kate, do you want to take that one?

Yes, sure. So just in terms of addressing your question around how many companies actually fit within that, what we call small biopharma bucket, which is I guess, to be clear, is greater than just the 15% that are below less than $100 million in R&D spend. There's close to 1,000 companies that we have. If you look at across certainly our backlog that fit within small biopharma. And of that, there is that sort of mid-teens percentage of revenue, which we see for companies that have less than $100 million in R&D spend. So how we got to that was really thankfully, within that small biopharma bucket, there are actually a lot of publicly traded companies that we have good information around certainly balance sheets, revenue or sometimes lack thereof and R&D spend. And it felt to us to really sort of zeroed in on companies that may be more capital markets dependent or seeking funding in the near term would sort of fit in that category of less than $100 million in R&D spend. So that's where we made the distinction within that segment to try to give a sense, obviously, to externally where exposure might be there. But as Brendan said, I think a key part of that is that even within that subsegment, they are strong in terms of their cash positions.

Okay. That's very helpful. Appreciate that. And then maybe turning to the business, actually a little bit funding chatter. Brendan, obviously, we're a couple of quarters into the PRA deal. The integration seems to be going well. I know you were out -- we had you out in New York and you were kind of visiting the sites here. Can you just talk about maybe an update on the integration segment. We can talk about the revenue piece first, and we'll dive into the cost side. But how things have tracked so far? I know you guys don't break out PRA specifically during the quarters. But how that's trended relative to expectations and what you've seen, I guess, through the first couple of quarters.?

I mean it's been -- fingers crossed, but it's been a great first 6 months. It's not that there hasn't been challenges. It's an integration of 2 massive organizations. But all of our legacy businesses have had a really strong 2021. And I suppose it comes back to some of the pieces that we talked about and why we brought the companies together at this point in time was because they was so well supported and these are quality organizations coming out. We have 4 predominant businesses now in our new ICON. That's our biotech business, our pharma business, which is kind of more of our large customers and they're both in Phase II to III. We have our Functional Services business, which is the staffing business. And then we have our Specialty Solutions, which is lab and early phases, data, insights and solutions. So they do -- they all had a really, really solid back half in the last 6 months of the year, all of them pretty much kind of -- have kind of strolled through their budgets and budget expectations for 2021. And it's been really solid. I think some of the -- and Steve made reference to it on the call, I think that the model of bringing through organizations has been really validated by some of the nice business wins and some of the strategic relationships. And I think he made reference to the one new specific strategic relationship that we've won in the last couple of months, which is a really significant new relationship to the combined organization. It speaks to the strength, depth, scale, therapeutic expertise of the combined organization now. So it's been a really positive experience. As I said, it's an integration of 2 massive companies. Okay, we've got a ton of work to do, and I don't want to like to belittle that in any sense of the word. But I think the formation of the organization has come together really well. I'm looking forward to having a chance to show up our new management team, combined management team on the 17th of March on Patrick's Day in our Blue Bell office. And I think you'll be able to see actually when you come to that meeting, how well our team has gelled together and how well it's working. So yes, we're really pleased with how things sort of progressed to date and how those businesses, both legacy ICON and PRA businesses have performed.

Yes. That's encouraging. And again, to your point, it was good to hear about some customer wins. I guess what are the conversations been like with some customers? I know one of the reasons was you wanted to get into some of the more kind of broad trials, obviously, a scale play to a degree, and it seems like a good time to lean into scale, obviously, with how healthy the market is. So yes. Maybe just kind of talk through the potential revenue synergies. I know the number wasn't the biggest on the [ provision ], just felt a little conservative. But what you've seen so far in terms of customer conversations and again, are you getting into some of those conversations that maybe ICON as a stand-alone wasn't because now you have this broad scale?

And I think, Patrick, there's a good clarification that needs to be made there. When we talked about the $100 million, which we talked about as revenue synergies, what we meant by that was real cross-sell synergies. So existing customers in either of our portfolios being sold additional services that we now have as part of the incumbent organization with really the Specialty Services being a big part of that to play. So whether that be a biotech company looking for a lab, a central lab offering, now, of course, we have that. Whether it's one of our large customers looking for early phase, we have a much bigger scale in early phase now. So really, when we targeted that $100 million, it wasn't so much about the compelling logic of coming to a larger ICON, it was much more about existing customers using services that just weren't available to them before. So that's -- I think that's -- in that context, $100 million probably makes a little more sense. But we're ambitious about hopefully breaking through that. It will take a little bit of time because you got to get the business wins [ and then ] convert to revenue. So by time it gets to the revenue, it takes a little bit of time. I think when we think about the major strategic relationships or the much broader relationships that come about as a response to the scale of the organization in a different bucket. And we think about that more from -- not a synergy perspective, but just as a result of the combination. And some of the things -- as kind of we've said and chatted about it in a couple of different meetings, we had great opportunity to get out there and wave the banner of the new ICON to all of the large pharmas and all of the big players in the space post the 1st of July. And we had -- we got some really interesting feedback out of that. A lot of folks wanted to have the conversations. And as I said, we developed this 1 relationship, which is now signed, and we're looking to ramp over the course of the next year and years indeed where it was a customer of both organizations, but not in the top 10 of the other organization. And now that's going to really ramp and we're going to be their predominant CRO partner and we're very much hopeful that we'll see them actually impact maybe even enter into our -- certainly into our top 10 and maybe even into our top 5 as a customer. So and when we talk to that customer, they kind of said, -- and again, in terms of why now as opposed to why before now, why was it important to see the combination. They said, listen, for us, it's about experience with you guys, which they had developed with both legacy organizations. They said, what was really important as well is that the feeling as one of the largest pharma companies in the world that we have a counterpart who gives really the depth of experience, the geographical penetration, the therapeutic experience and the operational experience to really be a serious partner to us. And while we like you guys individually, it's only in combination that we really feel that you take those boxes from a counterparty risk perspective, for us. And so that was a great, great experience for us and something, again, that we're looking to obviously capitalize on and move ahead in that relationship. But also then to really try to hopefully replicate that [ depth ] relationship in other large pharma relationships we have -- we haven't have had as much of a penetration into before. I think it's important, just a final point on this is that, obviously, we have a lot of existing, really big, great relationships, and it's about making sure that we continue to develop those and embed ourselves those relationships as well. So it's the usual thing of changing the tire while the car is going down the motorway, you need to service and deliver for your existing customers while integrating while also building out your customer base. You do all those 3 things, everything else will be fine.

Yes. I guess kind of thinking about the different business buckets here, whether it's central lab or full-service FSP, have you seen any big differences relative -- as the integration has played out, anything to call out in terms of areas of strength or focus as we kind of go forward here?

I think, I mean, listen, in terms of the cross-selling piece, I mean, central lab has done really well. I think people are looking for optionality on central lab. And I think our labs have done really well in developing some bigger relationships over the last 18 months, particularly during COVID, and that's been something that we're hoping to capitalize on. Our early phase business is doing really well at the moment as well as a lot of demand in that space. And within our early phase business, we have our bioanalytical labs as well. So those -- both of those labs as I speak, Central Lab, Specialty lab or biological labs, are all doing very, very well at the moment. So yes, they're all hot spaces we'd look to eventually, obviously, a little bit further down the road, think about continuing to build them out, surely But that is a very, very hot space. But [indiscernible] in what is a good market, they've done particularly well. That is for sure.

Okay. And yes, maybe on the cost side, labor has been in focus for everyone. Obviously, you're at a deal-in it probably gives a little bit of anxiety a few months ago. It feels like the way you guys are talking, at least the worst is kind of behind you. You feel pretty good on stable footing gear in terms of churn, retention, whatever it might be. But any metrics you have, anything you want to say in terms of how that has paced since the deal closed? Obviously, it's natural to have some churn. How did that pace relative to your expectations? And where do we stand now do you feel like, again, the worst is behind us and now we're in a pretty good spot?

I don't know if we'd be ambitious to say a pretty good spot. But certainly, I do think we've definitely gone to a better place than we were in autumn time, maybe even in late summer last year. I think as you came into November, December, we definitely saw that stabilizing. We still see that trend continuing as we come into '22. So it certainly -- I think that what we have seen is that the level of uptick that we were seeing in summer autumn stabilized in the winter, and that certainly has continued to be the case as we've come through into '22. So I definitely think there's -- it's moving in the right direction. It's still not back to historical norms. Let's be clear, we're still -- it's still a hot market in a lot of places. And it is peculiar to certain geographies as well. I think we've spoken about this, Patrick, before. But North America is still a really hot market; Latin America, less so, but probably the next 1 in the kilter; and then APAC and Europe much more stable from a turnover perspective. So I think it is still a hot market in North America. I think we're -- listen, we're looking at it from all of the aspects. We're looking at it from how do you retain staff from a career development perspective, how do you make sure that -- we're looking at those staff who have been in 1 role for 3 years and making sure that they're progressing in terms of peer progression. And that's really what we see. If you can hold on to a staff member for that 3-year period, the turnover rates really drop after that. So it's about making sure you're getting people in, you're getting them involved in the culture of the company, and you're making sure that you're progressing them from a career development perspective. You can do those things, I think that's a large part of the battle. Of course, we're delighted to be the only CRO recognized in the 2021 Forbes list for best large companies for -- as an employer. So that was something that really speaks to us. And obviously, we're making a big comment about that because I think it is very, very good. And obviously, that's voted on -- Forbes go independently to employees to get that feedback. So that was a real great validation, and we're looking to playing on that and make sure that folks are aware of that in the industry.

Okay. And maybe staying on the deal side, the synergy piece on the cost synergy side. I mean you guys have come across pretty confident in hitting some of those numbers. Can you just talk about, I guess, the levers? Again, obviously, there's some stuff, whether it's inflation or whatever it may be, that you need to offset. So again, your ability to pull some of those cost synergy levers, again, the guidance, it felt like there was good upside. I think you guys are tracking quite well to it. But maybe just talk through as we go through '22, what we should expect on the cost synergy side and then again, the confidence level and kind of hitting and maybe even exceeding some of those initial ones.

Yes, Patrick. Well, we kind of -- we laid out a $150 million at the start in terms of cost synergies. We said coming into this year, we had actioned about 50% of that, so that $75 million of that cost savings is effectively in our run rate for 2022, which is obviously probably much faster progress. I think we [ have ] about 4 years to get to those numbers in terms of the full $150 million. We'll be ambitious about trying to get after the rest of that synergy in short order as well. So we are hopeful on that. But certainly, as I said, $75 million in the current year. I mean the action items there is still making sure we're built efficiently as an organization that we're served from the right locations. We've talked about the fact that we're very centralized from a support services organization perspective. We're very harmonized in terms of systems we use and bringing that discipline across the entire organization is a big part of that. Obviously, a big part of it has been facilities. And all of these folks who are sitting in offices like myself, but also it's a very different normal now, and there's a lot of folks working from home, and that's worked very, very well, and we have to look critically about what the right facility footprint is, and we've been doing that not just in terms of the combination, but in terms of what the right footprint is, generally speaking, for office capacity as we go forward. So that's certainly been an area of significant savings. And that will be something that we'll be continuing to look at as we go through the course of '22. But those business have been the biggest pieces. I do think probably it's not -- I wouldn't say all of that $75 million is down in SG&A, but a good chunk of it is in, in all honesty, Patrick. And I think where we see margin progression during the course of this year is, again, probably not dissimilar to some of the conversations you've heard me talk about before in margin progression terms. Gross margin, a little more stable in that kind of 28% range that we left Q4 2021 in. So I think that's at kind of the bottom end of the 28% range from 28% to 28.5%. And then SG&A really kind of stepping down during the course of the year to be under 10% as we kind of exit the year. So that's kind of our feeling and very much not a dissimilar story from an EBITDA client perspective in terms of that, that's about 1% increase year-over-year.

Right. Okay. That's helpful. And then maybe just a couple of other points on the deal side. Obviously, the tax side and then the leverage. Maybe just update us on the thinking on the tax rate? And then leverage, it seems like you guys are going to exit this year, maybe even under 2.5x, which is pretty encouraging. So maybe just update on those ones and confidence level. And I know as a CFO, it's on you to kind of hit those ones.

So well, I mean, that's -- I was just going to qualify your remarks and say, we're looking to, I suppose, ambitiously get to 2.5x by the end of this year. I'm definitely not going to promise you I can get on to 2.5x. I mean just done a deal 6 months ago, so I am not [ letting it equate ] to that one yet. We said we'd definitely be under 3, and we were targeting about 2.5. So that's still what we're thinking about. So we've seen really strong cash generation in the first couple of quarters as a combined entity which is great to see, right, any old accountant will tell you that P&Ls and balance sheet are fine but cash generation is what makes a company move. So it was really great to see that and our own projections are still very solid as we go through the course of this year. So we're very hopeful about that, and we'll do our [ best ] to make that target, if possible. I think on the tax rate, it's been. Wow, it's been an eventful couple of months in terms of tax rates between changes to [indiscernible] base rate rules, also around the global minimum tax rates, that kind of 15% that we're seeing coming in now, and that will certainly impact us. We would have been had traditionally in Ireland. There's going to be some advantage for the rate we get, and it was the tax rate from a corporate perspective. So having that 12.5% effective tax rate, it was that piece. We'll be moving up to 15%. So that's kind of the new floor, if you like, in terms of where we can get to. 16.5%, we're not a million miles off that, that's what we guided to in 2022. I think that's a good rate to think about. We obviously exited '21 closer to about 17% rate. So we think 16.5% evenly over the course of the year. I think it's probably the way to think about that at this stage. I think we're probably kind of in terms of where we're going to from there. As I said, 15% is now the new floor. So the question is, can you get from 16.5% down to 15%. I think we'll have to see how different tax rules or if there will be any tax changes to the U.S. provisions around corporation tax play out at this stage. We're still, obviously, at this stage, kind of accepting that there won't. And so there may be a route to that lower tax rate in around that 15%. But I think that's something that we're still going to keep a close eye to. So certainly, we'll be updating in terms of our thinking. We think -- I think 16% is probably a very safe number as we think about going forward. So it's really that last 1%, I think, Patrick, that's still something that we're looking at hard. But 16.5%, very much a solid number for the part.

Okay. That's great. That's helpful. And then maybe shifting over -- COVID, I think you guys gave some great detail on the call as well. It seems like it peaked in the first half of last year, kind of worked its way lower, exited maybe mid-single on the backlog with expectations to be kind of below [ 5 ] for '22 here. So I guess, how should we think about pacing again? Obviously, the comps are a lot harder than the first half. Maybe just talk through kind of the cadence throughout the year due to COVID and then also that margin impact of it as we go through the year.

Yes. I think, I mean, as I said, from I suppose from a margin impact perspective. Fortunately, most of the hard work in terms of coming off the COVID, dollars were done by the time we got to Q4. So the margin profile, as I kind of mentioned in the past that Q4 -- those Q4 numbers not a bad jumping off point in terms of how we think about margin as we move in through '22. So gross margins, as I mentioned, in that kind of 28% and change territory and then EBITDA, hopefully coming down -- or sorry, EBITDA going up. SG&A coming down over the course of the year to the tune of about 1%. I think from the COVID piece, obviously, the difficult quarter is -- the difficult quarters in terms of lapping those big lots of pass-through revenue. And it's that because the direct fee revenue is still moving strongly in the right direction, and you'll see that from EBITDA and EPS performance. But you've obviously got a probably a tough comp in the first quarter because we were doing a lot of COVID work. But the toughest comp in the year is really the second quarter, Patrick. So that was a big quarter for the combined organizations, both ourselves and our legacy friends at PRA, we were doing some significant work in COVID in Q2, particularly in '21. So that number is definitely -- and even, if you look at the combined company margins back then, they were much, much lower than they're going to be this Q2. So yes, that's our toughest comp. That is our toughest comp by no doubt. We're, certainly, solidly mid-digits in the first quarter, tough comp in Q2. I'm not going to try to dress it up with certainly then resurging hopefully, back up into those high singles as we get into Q3 and Q4, and we really started to lap big impact of COVID. But Q2 is certainly the ones to watch. I think the consensus numbers that are out there, probably aren't a million miles off at the moment in terms of quarter 1 and quarter 2. But you can see, I suppose, if you compare that quarter 2 to where we were last year at the same quarter, which on a combined company basis is about [ '19/'19 ] That's obviously a tough quarter in terms of that sequential piece or year-over-year piece, I should say. But direct fee revenue is still very strong. You'll see it on EPS. You'll see it on EBITDA percentage. You'll see it on all of those measures in terms of Europe, Europe was very, very strong in all of those metrics, and that's really driven by that direct fee piece.

Yes, all makes sense. And then maybe 1 just on the backlog conversion rate. What's the right way to think about that as we, again, kind of get through the integration here and work into '22. Are you seeing some improvement in the conversion rate of the backlog? And how should we expect that to progress as the year goes?

Yes, we've, I suppose, a different traditional mix than we would have had in ICON. There's probably more FSP work as part of the overall business. So that would have led to -- I mean, we would have been down in the kind of into the 9s and ICON stand-alone, obviously, we have popped up when we combined with PRA. And we're looking to say, certainly on the right side of 10% in terms of conversion rates as we go through the course of this year. I think it's still, as sponsored growing COVID work comes off, you get much more into the more traditional oncology, CNS and that means your backlog by nature longer burn trials. But I think with the mix of business and as I said, the mix of segments in terms of FSP work, we're still targeting to be plus 10% on the burn rates, probably not hugely plus 10%, but certainly keeping up over those double-digit, Patrick, is how we think about it as we go through the course of the year.

Okay. Perfect. And then maybe just site accessibility and decentralized trial kind of combo of those 2. I guess where are you seeing site access now. I know you kind of gave some metrics on the call. And then at the same time, I know you've talked about decentralized trials is a pretty big emphasis, an area where you guys have some competitive advantages. So maybe you could talk a little bit about that on the back of site accessibility.

Kate, do you want to take the site access piece, and I'll come back in on the DCT.

Yes. So as we said on the call, Patrick, we saw site access really around that 15%-ish level that in terms of sites that are impacted. So it's not that they aren't open or conducting monitoring there just having some impact for on-site visits for patients. So that's pretty consistent with what we had seen through the quarter. A little sifting around with Omicron but not -- thankfully, we've really just seen some resilience, I think, over the course of the 2 years, right, where sites have really adapted to a bit of the new normal, unfortunately. So thankfully, we do not see a big impact in terms of that accessibility due to [ COVID ].

Yes. Is that 15% impacted? I mean that certainly seems like a sufficient level for you guys to be able to kind of execute on the back of. It doesn't seem disruptive at this point to your point, it's not new, obviously, and you guys have found ways to kind of officially work through it. Is that fair?

Yes, for sure.

Yes. And then, Brendan, maybe just on the decentralized trials point.

Yes, it's an interesting area. And every trial, I think, nowadays that we look at has an element of decentralized trials. Now -- and that's not to say every trial is a complete decentralized trial, it just means there's an element in there. I think one of the real strengths of the combined ICON organization is we have the experience, strength and depth from running DCT trials, but we also have all the technology elements that you need and all of the home and site support elements that you need in terms of running decentralized trials. I think one of the things about actually knowing what you're doing in decentralized trials is actually crafting the right model for the customer when they come in through the door. So actually saying this will work in some decentralized trials. This will work for some therapeutic areas, but it won't work ubiquitously. There are some therapies where you're going to have site visits is kind of -- that's just part of the gig. And maybe a proportion of your trial can be decentralized, but again, you have to be experienced and be able to design those pieces and have all the pieces around technology working in those aspects as well. I mean you see a handful of, Patrick, to be honest, you see a handful of trials that are completely decentralized. I mean I think the only 1 we made reference to it in the call, I think we're the only organization in the world with one of our pharma partners to publish a completed decentralized trial and actually talk about the CHIEF study that we talked about in the call. So it's a new area. People are looking at it. They're excited about it. Everyone's get involved, but it is -- it covers a very, very broad spectrum in terms of the different types of trials that we're looking at, at the moment and how much of it is actually decentralized at this time and place. I think we're going to see it more ramping significantly over time, but it still is in its early stages.

Okay. And are you guys seeing a big change in pass-throughs related to that? Obviously, we saw another CRO kind of cite that as a reason for a pretty large write-down on the backlog. Is that something we should expect from you? Are you seeing it -- doesn't seem like...

I think in terms of historical backlogs, we haven't seen a significant need to decrease the contracted demand of backlog but we do have that's pass-through that's site related, that's specific to investigator payments. A lot of pass-through payments is investigator payments, so site payments to doctors that we administer on behalf of our pharma customers. We haven't seen -- we haven't had a great need to write that down. I think it depends on how you manage your backlog. I think we're quite assiduous about making sure that we're not -- making sure that we're being prudent in what we put into the backlog in the first place, particularly in terms of pass-through. I think it's well known in the industry that if there is going to be padding in the budget from a pharma or a biotech partner, it's probably going to be a pass-through. So I think we are very, very careful about what we put in there in the first place. So we haven't seen any great need to write that down at this point. And certainly, we don't feel that DCT is moving the dial, at this point, to have those need to do an adjustment.

Yes. No, that's helpful. And then maybe just on the pricing side, obviously, you guys are dealing with inflation and wage inflation as much as anyone. It seems clearly by your margin guidance, it's not going to be a big impact. How much price are you able to pass on to customers? Are those conversations easier, given how acute and visible the inflation side is? Or are they just never easy, but they kind of at least go through now.

It's never easy to announce for an increase, Patrick. We do have those conversations pragmatically with our customers every year. I think probably the fact that it has been so obvious has been -- it's been a lot harder for some of our procurement friends and colleagues to kind of stick your hand in sand a little bit and say what, what inflation, don't know what you're talking about. So that's been a conversation we've been at -- there have been some traction, I would say. And we have seen good engagement with our partners. It's in relation to inflationary increases. And they -- I mean, we articulated in the sense of we want to have the best people on your projects. You want us to have the best people on your projects. We need to pay those people appropriately. And so there has to be an element of that quid pro quo. So I think they've been understanding of that. They've worked with us through that. And as I said, it's been probably an easier year in terms of some of those conversations than we've had in the past.

Okay. And maybe last one, I know we're almost up on time. Just on the balance sheet side, obviously, debt paydown is a big priority, but you guys also announced a new share repo. The stock has pulled back along with the rest of the group. How opportunistic should we expect you guys to be? How active should we expect you to be given what seems like a dislocation in terms of the fundamentals, which you're kind of talking about being quite strong and the stock obviously not maybe appropriately reflecting that.

Yes, I think that's fair to say, Patrick, that I think it's probably a good time at the moment to be opportunistic, right? I think we'll look at that hard. It's certainly something that we will deploy and we feel there's great value in the stock right now. And that's why we decided to do this and that's why we had the conversation with the Board to do it, we felt even though we've got a big chunk of debt to pay down to your point, and that's something we will certainly prioritize doing this relatively small in terms of the context of the overall company and its overall P&L account, a chunk of $100 million of buyback, which made a lot of sense with the valuation rates or where they are and some of the dislocation and some of the nervousness that's naturally in the marketplace. And I'm not going to try to gloss over that, but we do feel that we got a really good strong company, really good, strong offering, really well supported by a decent marketplace, and there's opportunity there for growth. And I'm not sure that's fully reflected in the price at the moment. So yes, we'll certainly be in there in the market looking to deploy that $100 million pretty quickly.

Great. All right. Well, a lot of ground covered. There's a lot to talk about. I certainly appreciate your time, Brendan and Kate. Looking forward to seeing you on St. Patrick's Day. Unfortunately, not in Ireland. Pennsylvania will do. Looking forward.

We'll bring the [indiscernible], Patrick.

Here we go. I look forward to you, guys, and thanks again for the time.

Thank you, cheers.

Take care.