ICON Public Limited Company (NASDAQ:ICLR) Q4 2023 Earnings Call Transcript

ICON Public Limited Company (NASDAQ:ICLR) Q4 2023 Earnings Call Transcript February 22, 2024

ICON Public Limited Company isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to the ICON Q4 and Full Year 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I’d now like to hand the conference over to your first speaker today, Kate Haven. Please go ahead.

Kate Haven: Good day. And thank you for joining us on this call covering the quarter and full year ended December 31, 2023. Also on the call today we have our CEO, Dr. Steve Cutler; and our CFO, Mr. Brendan Brennan. I would like to note that this call is webcast and that there are slides available to download on our website to accompany today’s call. Certain statements in today’s call will be forward-looking statements. These statements are based on management’s current expectations and information currently available including current economic and industry conditions. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company’s business and listeners are cautioned that forward-looking statements are not guarantees of future performance.

Forward-looking statements are only as of the date they are made and we do not undertake any obligation to update publicly any forward-looking statement either as a result of new information, future events or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in SEC reports filed by the company including the Form 20-S filed on February 24, 2023. This presentation includes selected non-GAAP financial measures which Steve and Brendan will be referencing in their prepared remarks. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release section titled Condensed Consolidated Statements of Operations. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes.

Included in the press release and the earnings slides, you will note a reconciliation of non-GAAP measures. Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share exclude stock compensation expense, restructuring costs, foreign currency gains and losses, amortization and transaction-related and integration-related costs, and their respective tax benefits. We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity for a brief follow-up. I would now like to hand the call over to our CEO, Dr. Steve Cutler.

Dr. Steve Cutler: Thank you, Kate, and good day, everyone. ICON delivered strong results in quarter four and for the full year 2023, as our team successfully navigated a dynamic environment impacted by several macroeconomic and geopolitical challenges. Through consistent operational delivery, increased scale and our comprehensive suite of solutions, we were successful in securing new partnerships and expanding existing relationships across our customer segments and with the world’s top 20 pharma companies in particular. Overall, we continue to experience positive demand trends in our industry. In the fourth quarter, we did see some volatility in RFP activity across customer segments, as small biotech was somewhat muted toward the end of the year, with some companies continuing to be deliberate with their overall development spend decisions.

With that said, we are encouraged by the improving sentiment among customers in quarter one, as well as underlying trends from a funding perspective that suggests a stabilizing market as we have entered 2024. Within the large pharma segment, we continue to see a strong level of opportunities, anchored by the strength of our new and existing strategic partnerships. In totality, across all segments, our overall trailing 12-month RFP activity increased in the high-single digits in quarter four, consistent with quarter three, and this appears to be continuing or even accelerating early in 2024. Given this backdrop, and in line with our previous comments, we expect book-to-bill to be in the range of 1.2 times to 1.3 times on a quarterly basis in 2024, with an overall target of 1.25 times for the full year 2024.

In quarter four, net bookings increased 8% on a year-over-year basis, driving 10% growth in total backlog over quarter four 2022. We saw continued strength in demand across our large pharma segment for both full service and FSP solutions, as well as excellent performance from our laboratory services business. Our innovative and scaled offerings are resonating well with customers, and strongly positions ICON for further traction in new and existing customer accounts. To this end, in quarter four, we were awarded a new full service strategic partnership with a top 20 pharma customer, creating significant new business potential in Phase I-IV studies across a number of therapeutic areas in their portfolio. Our depth of experience in longstanding and transformational large pharma partnerships was one of the key criteria for selecting ICON, as well as our collaborative approach in achieving meaningful efficiencies in their development programs.

In reflecting back on the numerous accomplishments across our organization in 2023, there are several in particular that highlight our commitment to operational excellence. Our efforts in driving forward our ambitious automation agenda resulted in the achievement of greater than 2 million hours of automated activity in 2023 across a number of functions and processes. We have set another goal for automation in 2024, driving to deliver significant further improvement in areas such as critical study startup activities, further automation of our back office activities, as well as processes such as data ingestion and review, with a target of 3.5 million hours for the full year. At the time of the acquisition of PRA Health Sciences in July 2021, we set ambitious targets for both synergy realization and total debt pay down.

The following two-year period was characterized by unexpected macroeconomic pressures and challenges in our market. Despite this dynamic, we remained consistent in our planned actions and were able to accelerate both the full cost synergy realization, as well as our target leverage ratio, ahead of our initial timelines as we closed out 2023. This was all possible, of course, through the efforts of our over 41,000 employees across the world who have worked tirelessly to progress our customers’ projects, many of whom have been recognized with prestigious industry awards for their efforts. Turning to review our financial performance in the quarter, ICON delivered a strong set of financial results, with revenue growth of 5.3% over Q4 2022. Direct fee revenue growth continues to be robust and within the high-single digits on a year-over-year basis, while pass-through revenue was slightly below our expectations due to the wind-down of COVID-related trials in the quarter.

With strong direct fee revenue growth and lower than expected pass-through revenue, we saw a notable uptick in gross margin on a sequential and year-over-year basis, resulting in a 30.4% margin for Q4. On this note, we do anticipate returning to a more normalized gross margin profile of approximately 30% for the full year 2024. On another positive note, ICON again delivered substantial growth on adjusted EBITDA in Q4, as SG&A expense was essentially flat on a sequential basis, resulting in a margin of 21.7%, well ahead of the mid-term target we set back in early 2022. Given the revenue mix shift in Q4, our full year 2023 adjusted EBITDA margin of 20.9% was stronger than anticipated, an impressive 180-basis-point growth in adjusted EBITDA margin in 2023 on a year-over-year basis.

We expect an adjusted EBITDA margin expansion of circa 50 basis points on a full year basis in 2024. We continued to successfully execute our capital deployment strategy in the fourth quarter, closing the previously announced acquisition of Phillips Pharma Solutions in October. While this transaction is a small contributor to ICON’s overall revenue, it supplements our current medical imaging capability and adds cardiac safety solutions to our service offering, providing our customers with a more integrated service. In addition, earlier this year, we closed the acquisition of HumanFirst, a cloud-based technology company focused on accelerating and improving digital health technology selection in clinical trials. The addition of HumanFirst will position us to become the industry leader in integrated clinical outcome assessment solutions, allowing customers to make evidence-based decisions to reduce patient burden and enhance data quality.

Separately, we have a number of capital projects that are in development to bring additional efficiency to critical trial paying points and ultimately deliver more value to our customers. We are well underway in developing a comprehensive planning and oversight capability for site selection and activation that is coupled with improved resource forecasting, designed to deliver enhanced patient recruitment timelines. In addition, we continue to progress our investments in AI and automation. One example is the development of our Firecrest site and investigator database, designed to provide in-depth insights to address industry challenges such as investigator and site activity and their overall performance. We were very pleased with the upgraded credit rating we received from Moody’s in December, ICON’s second upgrade to investment-grade rating in the fourth quarter following the S&P Global Ratings upgrade in October.

This important milestone allows us the ability to refinance our variable rate debt and move forward toward a more favorable capital structure that will give us more flexibility from a capital deployment perspective, particularly in the second half of 2024. We have a definitive plan that has been approved by our Board and will be executed in the first half of this year, allowing us to achieve the targeted total interest expense reduction of approximately $100 million on a year-over-year basis from 2023. In line with our strategy, M&A remains the priority as the optimal way to deliver shareholder value and we fully intend to utilize the strength of our balance sheet to acquire companies that complement our current services and add to our ability to deliver faster and more efficiently for customers.

However, we have also secured approval to opportunistically spend up to $500 million on share repurchases over the next 12 months. Given the positive trajectory from our performance in quarter four and current market conditions in the start of this year, we are reaffirming the full year 2024 financial guidance we issued in January. We expect revenue to be in the range of $8.4 billion to $8.8 billion, an increase of 3.4% to 8.4% over full year 2023. Additionally, we expect adjusted earnings per share to be in the range of $14.50 to $15.30, representing an increase of 13.4% to 19.6% over full year 2023. I’ll now turn it over to Brendan for further details on the financial results. Brendan?

Brendan Brennan: Thanks Steve. In quarter four, ICON achieved gross business wins of $2.99 billion and recorded $461 million worth of cancellations. This resulted in a solid level of net awards in the quarter of $2.53 billion and a net book-to-bill of 1.22 times. Full year 2023 gross business wins were $11.77 billion and cancellations were $1.82 billion, resulting in the net business wins of $9.95 billion and also a net book-to-bill of 1.22 times. With the addition of the new awards in quarter four, our backlog grew to a record $22.8 billion, representing an increase of 2.4% on quarter three of 2023 or an increase of 10% year-over-year. Our backlog burn was 9.3% in the quarter, slightly down from quarter three levels. Revenue in quarter four was $2.66 billion.

This represented a year-on-year increase of 5.3% or 4.1% on a constant currency basis. Full year revenue was $8.12 billion. This represented a year-on-year increase of 4.9% or 4.6% on a constant currency basis. Overall customer concentration in our top 25 customers increased from quarter three 2023, our top customer represented 9.5% of total revenue in quarter four, our top five customers represented 27.5%, our top 10 represented 43.8%, while our top 25 represented 66.8%. In the full year 2023, our top customer represented 8.9% of revenue, our top five customers represented 26.8% of revenue, our top 10 represented 41.4%, while our top 25 represented 62.9%. Gross margin for the quarter was 30.4%, compared to 29.8% in quarter three 2023. Gross margin increased 50 basis points over gross margin of 29.9% in quarter four 2022.

Full year 2023 gross margin was 29.9% and we anticipate this to be a similar level for the full year 2024. Total SG&A expense was $180.2 million in quarter four or 8.7% of revenue. This is essentially flat on prior quarter. In the comparable period last year, total SG&A expense was $182.2 million or 9.3% of revenue. Full year SG&A expense was $732.7 million or 9% of revenue, representing improvement of 80 basis points over full year 2022 and a reduction in spend of $24.7 million. Adjusted EBITDA was $448.2 million for the quarter or 21.7% of revenue. In the comparable period last year, adjusted EBITDA was $405 million or 20.6% of revenue, representing a year-on-year increase of 10.7%. Sequentially, adjusted EBITDA margin improved 70 basis points over quarter three margin of 21%.

Full year 2023, adjusted EBITDA was $1,694.1 million or 20.9%, representing very strong growth of 14.5% on a year-over-year basis. Adjusted operating income for quarter four was $414.4 million, a margin of 20.1%. This is an increase of 9.7% over adjusted operating income of $377.7 million, a margin of 19.3% in quarter four of 2022. Full year 2023, adjusted operating income was $1,568 million, a margin of 19.3%. This was an improvement of 14.2% on full year 2022. Net interest expense was $75.4 million for quarter four. Full year net interest expense totaled $315.3 million in 2023, compared to $209.6 million in the full year 2022. The effective tax rate was 15.2% for the quarter. The full year 2023 effective tax rate was 15.5%, down from our full year 2022 effective tax rate of 16.5%.

Adjusted net income attributable to the group for the quarter was $287.5 million, a margin of 13.9%, equated to adjusting earnings per share of $3.46, an increase of 10.5% year-over-year. Full year adjusted net income attributable to the group was $1,058 million, equating to an adjusted earnings per share of $12.79, an increase of 9% year-over-year. In the fourth quarter, the company recorded $9.7 million of transaction and integration-related costs. Full year transaction and integration-related costs were $44.2 million and full year restructuring costs were $45.4 million. U.S. GAAP income from operations amounted to $265.6 million or 12.9% of revenue during quarter four. Full year U.S. GAAP income from operations amounted to $956.2 million or 11.8%.

U.S. GAAP net income in quarter four was $216.4 million or $2.60 per diluted share, compared to $1.42 per share for the equivalent prior year period. Full year U.S. GAAP net income was $612.3 million or $7.40 per diluted share, compared to $505.3 million or $6.13 per diluted share for the full year 2022. Net accounts receivable was $1.088 billion at the 31st of December, 2023. This compares with a net accounts receivable balance of $1.129 billion at the end of quarter three, 2023. DSO was 47 days at December 31, 2023, a decrease of two days from September 30, 2023. Cash from operating activities in the quarter was $440.1 million. Free cash flow was excellent in quarter four, increasing 24% sequentially and achieving our target of circa $1 billion for the full year.

We were very pleased with the diligent efforts from our team in driving a seven-day improvement in DSO over the course of the year. This now brings us back in line with our anticipated range based on our current mix of customers and their payment terms. We will continue to stay focused on billing levels and cash collections as we progress through this year. At December 31, 2023, cash and cash equivalents totaled $380.1 million and debt totaled $3.78 billion, leaving a net debt position of $3.4 billion. This compared to a net debt of $3.73 billion at September 30, 2023, and net debt of $4.36 billion at December 31, 2022. Capital expenditure during the quarter was $52.7 million. From a capital deployment perspective, we made a payment of $250 million in our Term Loan B facility in quarter four, and at the end of the quarter, we had a leverage ratio of 2 times net debt-to-adjusted EBITDA.

We made payment on our Term Loan B facility of $950 million in full year 2023. As Steve mentioned, we are pleased to receive the upgrades in our credit ratings from both S&P Global Ratings and Moody’s in the fourth quarter. With a return to an investment-grade rating, we now have the ability to more favorably refinance our debt, and in turn, free up more capital to deploy opportunistically for M&A, as well as potential shareable purchase. Our preferred use of capital remains M&A and we have a healthy pipeline of opportunities we are currently engaged on that are focused on adding scale and capability to strategic areas of our portfolio. Finally, our key assumptions behind the full year guidance remain in place an effective tax rate of 16.5%, free cash flow target of circa $1.1 billion, CapEx spend in the range of $150 million to $200 million, and interest expense of circa $200 million to $230 million, all for the full year 2024.

Before we move to Q&A, we want to commend the dedicated employees of ICON for their efforts in delivering another year of solid performance and continuing to support our mission in bringing new therapies to patients around the world. Operator, we are now ready for questions.

See also 20 Most Valuable Digital Health Companies In The US and 25 Most Valuable Luxury Companies in the World.

Q&A Session

Operator: Thank you. [Operator Instructions] Thank you. We’ll now take our first question. Please stand by. First question is from a line of Justin Bowers from Deutsche Bank. Please go ahead.

Justin Bowers: Hi. Good morning, everyone. Can you just remind us what the net service fee revenue growth was in the quarter, and then more broadly, is there a rule of thumb or heuristic that we can use to help better understand sort of like what the topline headwind is from a shift to FSP? That’s the first question.

Dr. Steve Cutler: I think that’s two, actually, Justin, but on a direct fee basis, we’re about 8% — around about 8%. I think we did high-single digits, that’s the number on a direct fee basis, so we feel good about that. We had slightly lower pass-throughs during the quarter, so that pushed us back overall to the five. In terms of topline impact of FSP, that’s hard to — it’s really hard to quantify that at this stage. This is a very gradual approach. FSP is a relatively modest part of our business, although an important part of our business, and it contributes, at the bottom of the contribution level line, it’s not too different, ultimately, to our full service work. So while it may have some modest impact on overall margins as it increases and we’ll talk a bit about that as we go through the call and the trends on FSP, it’s not as — I think we talked about 200 or 300 – 200 bps to 300 bps as a number in terms of impact on a headwind basis over the longer term.

But that’s — it really depends upon the customer and upon the particular contract.

Brendan Brennan: Yeah. And of course, as we think about it, we talked about the fact that we saw that mix there last year, I think, we’ve started off this year with very strong indications that our full service organization is going to grow well in terms of business wins this year. So, and certainly, Justin, of course, it’s included in our in our guidance as given and certainly the midpoint there would include the mixed shift, if you like, to the extent we see that during the course of it.

Justin Bowers: Appreciate it. That’s what I wanted to, so I will jump back into.

Operator: Thank you. We’ll now take our next question and this is from the line of Jailendra Singh from Truist Securities. Please go ahead.

Jailendra Singh: Thank you, and good morning, everyone. So I wanted to follow-up on your macro commentary. It seems you are encouraged by data points and trends you’ve seen in Q1 thus far, but you’re maintaining your outlook, which assumes slower CRO industry growth. So is it fair to say that you’re not reflecting recent trends in your outlook, and if these trends continue, would you say that will be kind of upside your expectations for the year?

Dr. Steve Cutler: Yeah. I’d characterize it this way, Jailendra, and that — I think as we said early in January on the RFP front, biotech was a little a little more muted, large pharma was strong. As we’ve gone into the first half of the first quarter of this year, we’ve probably seen the RFPs tick up and the environment sort of move up a notch. So, overall, in terms of RFPs in the first quarter, again, the first half of the first quarter. So we’re not ready to declare victory and I’m not reporting the first quarter today, but we’re seeing sort of mid-teens growth on the RFP opportunity. A lot of that through strength in large pharma. Some of the strategic partnerships we’ve talked about are bearing fruit in terms of opportunities.

But we’re also seeing a modest uptick around mid-single digits in the biotech space as well. So we talked about biotech stabilizing and improving, and that seems to be playing out in the first, as I say, the first very early part of this year. So we’re encouraged by that. We’re not quite ready to change guidance or to get further, to get too bullish on that at this point, but we’re certainly very encouraged about the positive environment that we see in the first part of quarter one.

Jailendra Singh: Okay. And then my quick follow-up on the gross margin. Looks like, of course, you expect that to be flat at 30% year-over-year. I just want to understand the puts and takes there. Are you seeing any pricing pressure from your clients, which might be impacting trends? Clearly shift to more FSP work is a headwind, but it’s very gradual. Any offsetting factors you can highlight? Just give us more granular details about the gross margin trends this year.

Brendan Brennan: Yeah. I’ll take that one in terms of the margin progress and profile. Obviously, we were very happy with how we ended up the year. And yeah, we think that circa 30% is probably the right way to think about 2024. There are, of course, mixed shifts in the absolute levels of business. And to your point, they’re quite gradual in terms of really having a significant margin profile impact. But we do a lot of work, as we’ve talked about in the past, in terms of making sure we’re an efficient organization and that runs from making sure that all of our projects are highly utilized by our staff right down to the concepts of how we use our technology to continue automation and the use of robotics in our organization. And of course, that impacts not only on our gross margin, but on our SG&A as well.

And so we look to continue that investment and Steve made reference to that in his prepared comments as we go through the course of 2023, I suppose, or 2024 I should say. All of that gives us confidence that, even with shifting dynamics in our mix of business between full service and FSP, we should be in a good place to be able to maintain that 30% gross margin, and as we talked about, that is our kind of more of our medium-term target as well. So we feel good about that and I think it’s that diligence from a project management perspective and that use of technology that really gives us the comfort on that particular point.

Jailendra Singh: Great. Thanks guys.

Operator: Thank you. We’ll now take our next question and this is from the line of Luke Sergott from Barclays. Please go ahead.

Luke Sergott: Great. Thanks guys. Just to follow-up on that pricing. We hear about the competitive dynamics in the market. You always talk about the pharma industry always sharpening their pencils. But as you guys have shifted more towards large pharma, given the lack of biotech funding and RFPs out there, the large CROs are competing on fewer projects. So are you guys seeing fewer projects across large pharma and then how is that pricing environment among these projects, and is anybody kind of getting a little aggressive on the pricing dynamic?

Dr. Steve Cutler: Yeah. Thanks Luke. What we’re certainly seeing more opportunities in large pharma. No question about that. The RFP dollars that are coming through are very solid and driving that, as I say, that early 2024, mid-teens increase in RFP on a trailing 12-month basis and we are seeing more opportunities as well. I think that’s partly because of the number of strategic partnerships we have across the industry. I think it’s partly because of the number of — because of the fact that we are now a significantly scaled organization, we’re a major player in the development space now and we’re part of the conversation every time now, even if we’re not a specifically a strategic partner with a large pharma, we get that opportunity.

So we’re seeing more, we’re seeing more dollars. It’s price — it’s always a very competitive pricing environment. We have to sharpen our pencils. We have to be smart in the way we structure project teams and put projects together and we do that pretty well. So, I’d say the pricing environment hasn’t changed dramatically. I would say that in our — with our opportunities, because we are strategic with a number of these customers, our win rate tends to be higher in that part of the market as well. So we win a greater proportion of those dollars than we do in other parts of the market where we’re competing with a number of different organizations and there are different perspectives on large versus small CROs, et cetera, et cetera. So, we certainly like that large pharma space.

Of course, there’s always some challenges on pricing, but we believe we’re well positioned to be able to accommodate those.

Luke Sergott: Great. And then I guess the follow-up there is kind of on the same vein there. You guys put out the 1.25 book-to-bill guide. I don’t remember you guys putting usually a hard target like that. So what’s giving you the visibility? Is it something from the customer class, like, you said, like you can have a visibility in the biotech funding coming back or large pharma or some therapeutic index, just give us some type of idea of where you’re getting that visibility?

Dr. Steve Cutler: Well, I’d say, first of all, it’s a target rather than a guide. That is a fact…

Luke Sergott: Sorry, I didn’t mean to put the words in your mouth.

Dr. Steve Cutler: Let’s be clear, that’s what we’re shooting for. That’s what we believe the market will support. So we’re basing that on, the opportunities we’re seeing coming in the door on the build that we have on a more strategic level with some of these midsize and large pharma customers. We’re basing it on the stabilization and the improvement as we see in the biotech funding space and our opportunity to win business there. There’s a number of things there. We feel we’re in a good place to be able to benefit from those opportunities. We feel the companies moved along nicely. We’ve made a lot of progress with the integration, the union with PRA. That’s much of that is behind us now. We feel very constructive about the long-medium and longer term future of the organization and the industry for that matter.

Luke Sergott: Great. Thanks.

Kate Haven: Sorry. I’ll just maybe just tack on quickly in terms of the 1.25 times, that’s really the average target that we’re thinking about for the full year. So that’s not on — every quarter is not going — isn’t necessarily to say it’s 1.25 times on the mark, but it’s still that the range between 1.2 times to 1.3 times for the full year, which of course averages 1.25 times.

Luke Sergott: Okay. Great. Thanks.

Operator: Thank you. We’ll now take our next question and this is from the line of Eric Coldwell from Baird. Please go ahead.

Eric Coldwell: Thank you. Good morning. I wanted to hit on staffing and resourcing. I’m curious with the mid-single-digit revenue growth this year, what kind of hiring needs you might have? How does that look on a gross and net-based, i.e., is turnover improving? Can you get more with less, if you will? And then I know you’ve done a couple of smaller deals here recently. What — where do you think you end up the full year, including the M&A, in terms of headcount? Thanks very much.

Dr. Steve Cutler: Sure, Eric. So, overall, headcount-wise, we didn’t really increase this year. We were able to get the growth through improvement in efficiency of, as I say, the 41,000 very dedicated employees that we have in the organization. Part of it was I talked about the hours on the automation, 2 million hours went in there. That certainly helped us and we’re planning…

Eric Coldwell: Right.

Dr. Steve Cutler: … more of that. So resourcing was solid. Retention’s been very good. In fact, we’ve seen retention improve month-to-month, quarter-to-quarter, really, for the last couple of years now. So we’re well above our retention levels pre-COVID now and we feel — so the pressure in terms of resourcing is lower than it was. That’s helping us from an SG&A point of view. We feel the workforce is engaged and enabled and really making it very positive. So we are — I would say we’re a more efficient organization than we were certainly two years ago and we continue on that push. As I said, the target was to move automation to closer to the 3.5 million hours, which represents a significant number of people if you convert that to hours.

But that’s the way we see our workforce growing, mainly through automation and process improvement than through actually adding headcount. Having said that, with the growth projection we have for this year, we will be inevitably adding people, but probably at a lower rate, and certainly, at a lower rate than we add revenue, so if you can work it in those sort of terms. We think we can continue with the efficiencies and with the improvement in the efficiencies, be it utilization, automation, all the rest of it. And as we get back and step back in the M&A market, clearly we’ll be bringing on people as we acquire organizations and acquire companies, and we’ll work that through and we’ll work them into the organization, but that will be — again, I think, we can say that we’ll be increasing revenue at a greater rate than we’ll be increasing headcount or the cost of headcount as we go forward.

Eric Coldwell: That’s great. If I could just throw in one follow-up here or a different question, the 1.2 times to 1.3 times book-to-bill range is consistent with what you’ve said in the past. I’m curious with this new publicly known contract with BARDA or opportunity with BARDA, do you have expectations in your annual book-to-bill related to that? I assume they’re fairly modest, if so, but I’m just curious how much of that is, I hate to use the term legacy or core, because I think these are all core contracts, but non-BARDA work, how much of the net book-to-bill goal is more, I guess, traditional work versus this unique government opportunity and I’ll wrap it up there. Thanks.

Dr. Steve Cutler: We see the occasional BARDA contract coming along, Eric, but there’s nothing in Q4, and although, there may be some opportunities in the pipeline, we don’t think they’re going to materially have a major impact on our book-to-bills across the year. They may have some impact if they come in on a quarterly basis, but across the year, in terms of the aspiration, the target we have for new business awards, it’ll be very modest or minor. So while they’re important for our business, and obviously, they tend to be vaccine-related studies, and they give us an opportunity to earn revenue faster than some of the other projects we do and so from that point of view, particularly, they have some benefit for our organization. We don’t think they’re going to be particularly material on an annual basis and not necessarily going to drive that – that — materially drive that book-to-bill number.

Eric Coldwell: Thanks very much.

Dr. Steve Cutler: Thanks, Eric.

Operator: Thank you. We’ll now take our next question and this is from the line of Patrick Donnelly from Citi. Please go ahead.

Patrick Donnelly: Hey, guys. Thanks for taking the questions. Steve, I wanted to pick up on the burn rate that you just mentioned there in terms of just what’s in the pipeline, obviously, I know it varies between things like oncology. Obviously, you mentioned Sparta there. Can you just talk about how you’re thinking about that burn conversion rate this year and where that trend line is going? And maybe Brendan, I’m sure you can chime in as well, but just curious on how you’re thinking about that piece.

Dr. Steve Cutler: Yeah. Pat, I’ll give you a bit of an opinion on that. Then Brendan can give you some more detail. I mean, we’re at about the 9.3% this quarter. It’s down a little — it’s down 20 bps from last quarter. It’s probably not going up anytime soon, I would say, given the portfolio mix that we have as we’ve moved away from those vaccine trials at COVID. So we’re possibly going to trend down 10 bps or so, that — we’re obviously working ways to avoid that, to speed up the current trials we’ve done, and we’ve had some success in doing that. But the trend is probably marginally flat or down, I’d say, in the in the sort of medium- – short- to medium-term. Brendan?

Brendan Brennan: Yeah. No. I think that’s exactly it. I don’t know how to put that, it’s probably as we go through 2024, we probably think about more in that 9.2%, 9.3% range, and that’s probably where we’ll be. And to Steve’s point, of course, there’s opportunities that if we can get more of that vaccine working in the door, that might have a little bit of a — help us with a little bit of a tailwind in the back half of the year, but at this stage, we’re very much looking at the ranges that they’ve outlined.

Patrick Donnelly: Okay. That’s helpful. And then maybe just following up on one of the earlier questions, Steve, I know you said, the RFPs, I think, it was mid-teens so far this quarter. I mean, it clearly sounds a little more constructive than you sounded at JPM in January. Can you just talk about, I guess, what you saw over the last month, month and a half to kind of, I guess, come out with a little more constructive tone there, and again, it sounds like that would shape up well in terms of just how to think about the book-to-bill for 1Q, I guess, being squarely in that 1.2 times, 1.3 times range. But just wanted to talk through what you’re seeing over the past month and change there.