Simon Holmes – Executive Vice President, Investor Relations and Corporate Development Ciaran Murray – Chief Executive Officer Brendan Brennan – Chief Financial Officer Steven Cutler – Chief Operating Officer.

Jeff Bailin – Credit Suisse Douglas Tsao – Barclays Tim Evans – Wells Fargo Dave Windley – Jefferies Donald Hooker – KeyBanc Adam Noble – Goldman Sachs Todd Van Fleet – First Analysis.

Good day and welcome to the ICON Full Year and Q4 2014 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Simon Holmes. Please go ahead..

Good day ladies and gentlemen. Thank you for joining us on this call for the quarter and full year ended December 31, 2014. Also on the call today we have our CEO, Mr. Ciaran Murray; our CFO, Mr. Brendan Brennan; and our COO, Dr. Steve Cutler.

I would just like to note that this call is webcast and 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.

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.

The company’s filings with the Securities and Exchange Commission discuss the risks and uncertainties associated with the company’s business. This presentation includes selected non-GAAP financial measures.

For a presentation of the most directly comparable GAAP financial measures, please refer to the press release statement headed Consolidated Income Statements unaudited U.S. GAAP.

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.

We will be limiting the call today to one hour today and therefore ask participants to keep their questions to one each with an opportunity to ask one related follow-up question. I would now like to hand over the call to our CFO, Mr. Brendan Brennan..

Thank you, Simon. Net revenue in Q4, 2014 was $390 million. This represents year-on-year growth of 13%. On a constant dollar organic basis year-on-year revenue growth was 9%. For the full year ’14 net revenues were $1,503 million, up 12.5% compared to 2013. On a constant dollar organic basis full year revenue growth was 8%.

For the full year ‘14 our Top clients represented 31% of revenues, compared to 26% for the full year ‘13. Our Top 5 clients represented 53% the same as last year. Our Top 10 represented 64% and the same as last year, while our Top 25 clients represented 79%, compared to 78% last year.

We achieved further headcount leverage in the quarter and ended the year with approximately 10,600 staff. The gross margin expansion that we’ve consistently driven over the past number of years continued in the quarter. Group gross margin for the quarter was 41.1%, which compared to 40.7% in Q3, 37.7% in the comparable quarter last year.

For the full year ‘14, group gross margin was 39.9%, up 320 bips from the 36.7% in the full year ’13. SG&A as reported was 21.9% of revenue, this compared to 21.8% last quarter and 23% in the comparable period last year. For the full year 2014, SG&A reduced to 22.4% of revenue, compared to 23.5% for the full year 2013.

Operating income for the quarter, excluding restructuring charges was $60.4 million, and operating margin of 15.5%. This compared to the 15.3% last quarter and 11.2% in the comparable quarter last year. For the full year 2014, operating margins were 14%, compared to 9.7% for the full year 2013.

The net interest income for the quarter was $204,000, and the effective tax rate was 11%. Net income for the quarter, excluding restructuring charges was $54 million, a margin of 13.8%, equating to earnings per share of $0.87. This compares to earnings per share of $0.79 in Q3 and $0.53 in the comparable quarter last year.

EPS in the quarter benefited by $0.07 due to the 11% tax rate and the lower share count that resulted from the $140 million share buyback program that was completed during the quarter. On a full year basis, earnings per share were $2.87, a 62% increase over last year.

DSOs in the quarter were 40 days, which compared to 38 days in Q3 and 32 days in the comparable quarter last year. At the end of December 2014, we had net cash of $216 million, compared to $249 million at the end of September 2014. With all that said, I'd like to hand you over to Ciaran..

Thank you, Brendan, and good morning everyone. I’m happy to report that 2014 was another year of progress for ICON. We booked $1.8 billion worth of business, grew our backlog by 16% to $3.6 billion and grew our revenues by 12.5% to over $1.5 billion.

By continuing to improve our operational performance and expanding our margins we increased earnings per share by 62% to $2.87 during the year. All of this created value for our investors.

I’m encouraged that we added a number of new accounts to our client roaster in the second half of 2014 and increased our presence in the mid-market and biotech sectors as they look to harness the development to expertise and global capabilities of larger CROs, which will help drive future growth and provide better balance to our business.

A key element of this success was our continuing strategic focus on promoting operational excellence and quality and bringing innovative solutions to our customers. These solutions have been enabled by our market leading Iconic, Firecrest, and ADDPLAN technologies all of which received strong market recognition during 2014.

Based on our Iconic technology ICON was the only CRO to receive Informatica’s Innovation Award for solutions that improved decision making and healthcare. TransCelerate members recognized that our Firecrest to GCP module reflects their best practices for training, while Firecrest also won the global award for the quality of its multi-media content.

During 2014, Pfizer, Roche adjoined our ADDPLAN consortium where they will work with existing members Novartis, Janssen, and Eli Lilly to develop adaptive design and methodologies that improve decision-making in exploratory studies.

We are integrating these differentiated solutions into a next generation informatics hub that will harness clinical and real world data from both existing and new sources.

To support the development of this informatics hub and to drive future innovations of development we recently announced the creation of our global innovation center based in Ireland.

The center will foster the development of new technologies and clinical trial processes to enable faster access and better insights from the increasingly large volumes of data being collected during drug development.

All of ICON’s innovation is ultimately focused in improving our customers return on investment and R&D and delivering better outcome through patients around the world. An increasingly important trend impacting this return in investment is the need to demonstrate product value for regulators and payers.

Our commercialization and outcomes group addresses this need and in 2014 they recorded strong growth as their marketing leading offerings gained refraction. We are excited that we have signed the acquisition of MediMedia Pharma Solutions that will future improve our offering in this high growth area by adding scientific communication services.

We will also create cross-selling opportunities for our clinical services as their client base does not overlap significantly with ICON.

In 2014, we also saw our central lab perform well and record gross margins at target group level and we also saw our early phase business stabilize and return to modest profitability following the restructuring of 2013.

We continued to invest on our capabilities in 2014 increasing our scientific and medical expertise by launching ICON consulting services and with the acquisition of Aptiv we gained market leading adoptive trial capability and expanded our presence in Japan with Niphix.

So, as we look forward into 2015, we believe the key drivers of market growth will continue. R&D spend will continue to increase modestly driven in part by new breed of cancer therapies based on biologics and the growth of specialty drugs targeting niche indications.

More of this spend will be outsourced as customers seek to variabilize overhead and look for innovative technology and solutions to increase the productivity of drug development. Market share will continue to shift towards global CROs that have the footprint and breadth of capabilities to run large and increasingly complex global trials.

We are well positioned to capitalize in this growth. Alongside our global scale and food service portfolio, we have outstanding therapeutic, medical, and scientific expertise. Our expertise, operational excellence, and differentiated technology solutions have enabled us to develop industry leading partnerships.

So as we move forward into 2015, we have a strong platform on which to build and we are guiding for the growth. We expect revenue to grow to a range of $1.610 billion to $1.675 billion, an increase of between 7% to 11%, which in constant currency is an increase of 6% to 10%.

We expect earnings per share to grow by 20% to 25% to a range of $3.45 to $3.60. Before moving to the Q&A, I’d like to thank the entire ICON team around the world, its hard work and commitment have contributed to another successful year for ICON. Thank you everyone and we are now ready for questions..

Thank you. [Operator Instructions] We will now take our first question from Jeff Bailin of Credit Suisse. Please go ahead. Your line is open..

Good morning and thanks for the questions. May be just start with one for Brendan, not to get too greedy here on the margins, but looking at 4Q margins of 15.5% you are already in the upper end of the range that you provided as a new target of 14% to 16%.

So with that in mind, is there anything we should think about, there was maybe one time in the back half of ’14 and the margins that will moderate or kind of how we should think about the ongoing margin opportunity in ’15 and beyond?.

Yeah. Thanks. Obviously just to – in the quarter certainly there wasn’t – we wouldn’t collect any particularly one time.

We had – as you recall in the previous quarter in the SG&A, we had a revaluation gain, we have a 100 bips and obviously with the dollar still being the strong in fourth quarter we saw some benefit from that again probably to the tune of 70 bips this time around.

But also during the quarter, we had an offsetting onerous lease charge that was included in SG&A which pretty much offset that in its entirety. So the SG&A number that we saw in the fourth quarter was pretty much a good number and run rate number.

So from that perspective, it’s just continuing good gross margin story and SG&A leverage that’s got us to the 15.5% in the quarter..

I think, sorry Jeff, I think what we are really saying, if you look at our guidance we are implying that our margin will continue to grow this year probably average to just over 16% in that guidance. It exits the year somewhere around the 16.3% margin and in the medium term we’ve leased out our margin target to a new range of 15% to 17%..

Got it, that’s very helpful. I appreciate that color.

And just a quick follow-up, is there anything that you can give us around MediMedia, the multiple you paid or the revenue or margin profile for that acquired business?.

Yes. Hi, Jeff, it’s Ciaran again. In terms of the revenue contribution that we look out in ’15, we are estimating in the range of $45 million to $50 million for the same period. So it should as [indiscernible] was saying, it should be closing eminently.

So you can do the math on what the full year impact is and then in EPS terms probably about a contribution of about $0.10..

Great. Thanks for the questions..

We will now take our next question from Douglas Tsao of Barclays. Please go ahead..

Hi, good morning. Thanks.

Hello, can you hear me?.

Yes, Doug, go ahead..

We’ve obviously seen you continue to add these sort of tuck-in acquisitions in terms of technology based deals, is that where you are thinking and focusing right now in terms of your M&A strategy versus thinking about consolidation of smaller players in the core clinical services segment of the business..

Yes, Jeff - Doug sorry. We’ve always kind of pursued a policy really of tuck-in M&A which add skills and capabilities to our organization ahead of more and more sounded consolidation place. MediMedia is another situation where we bring to the table of things that we don’t have before. We like that strategy. It’s what we continue to do.

We think it broadens our service offering and makes us a better partner for our customers. It allows us to drive more growth through our organic business. It was a consolidation of more core services.

It doesn’t really bring us a lot of additional or differentiated capability and it’s an option there for maybe if you are looking at synergies or that kind of thing, but it also brings integration of systems and overlapping things like that, that just aren’t as clean and value added as our capability based tuck-in strategy..

Okay, great.

And then just thinking about the business wins, just curious about the distribution of those across your customer base in particular in the fourth quarter versus your one large client, have you seen an improved mix in terms of non-Pfizer business or are you still seeing that same relative contribution from Pfizer versus ex-Pfizer business?.

No, we’ve seen an improvement in the mix. I think we’ve been pretty open saying during the course of the last couple of years that Pfizer account would ramp up to certain levels. You can see from the numbers in Q4 when you back out them out its stabilizing.

Obviously the large transitions at the start are on board to the level of business wins is stabilizing at a very healthy rate and we’re very happy with it.

But if I would have looked back on last year business outside of our largest account, it grew by about 30% of the business wins was the wins from our largest account are stabilizing and leveling off. So we’re very happy to see that mix improve..

Okay, great. Thank you very much..

We will now take our next question from Tim Evans of Wells Fargo. Please go ahead..

Hi, thank you. Brendan, I believe you said constant dollar organic growth of 9% in the quarter and I believe we’ve also established that there was a $4 million FX headwind in the quarter.

If we kind of back into the contribution from Aptiv, I am looking at something like $18 million and that would be meaningfully lower than what I would have anticipated from Aptiv contribution.

Just wanted to see if everything is going okay with that or if there is something we need to be watching?.

No, Tim. This is Ciaran here. Everything is going well with the Aptiv acquisition, it’s integrated well. The key areas that we were focused on around the Adaptive technology in Japan in particular are proceeding to plan. We finished the heavy lifting of the integration work albeit that this is a sophisticated technology will grow in time.

So there is nothing I would point to that would cause any concern with how that’s going. Steve, do you….

I think we are happy with it. We are starting to see a lot of traction from customers particularly around the Adaptive side of things. It’s not something that happened overnight, but it’s certainly something that we are getting a lot of interest from customers. And also in the Japanese operation, we feel we’re moving that forward as well.

So we’re very comfortable with the way things are moving..

Okay.

So do you still expect that to be a $100 million plus business here going forward annualized?.

Hi, Tim. I think one of the things we’re kind of it’s so well integrated into our overall business that we certainly haven’t – when we looked at that as part of the organization, we certainly didn’t model it separately. So it’s all baked into that revenue guidance that we put out there..

Okay.

And if I may sneak one more in, can you quantify the foreign exchange impact on your earnings and it’s baked into your 2015 guidance?.

Actually for the guidance numbers, it’s about 200 bips on the revenue side of headwind from FX impact. On the EPS line, it’s pretty much the same as we’ve talked about before. We see it as not only a huge impact, it changes the margin but in EPS terms it doesn’t [indiscernible]..

Okay. Thank you..

We will now take our next question from Dave Windley of Jefferies. Please go ahead..

Hi, thanks. Good morning or good afternoon in your case. Your book-to-bill, you touched on a little bit in terms of seeing nice wins away from Pfizer. Your book-to-bill has been extraordinarily stable for quite a long period of time when I look at the chart in the slides.

Would you attribute that to still a fairly healthy contribution of quarter-to-quarter RFP driven non-strategic business or why do you think you’ve been able to report right around that 1.2 for such a long period of time?.

I suppose that Dave, if you look at the profile of our business, we have a good deal of visibility with our strategic accounts, our top five accounts account for half of our business. So we work with those guys in advance and planning kind of stuff, so we are able to see how things are going.

And the rest of our business is just in a healthy kind of flow of RFPs and practical works and then our win rates stay steady. But I think if you look at it, you will see there is more variation in the growth wins line and then what we are seeing is just – there’s been I think – this quarter was the growth wins possibly we’ve ever recorded.

But we picked up a couple of calculations that are more at the historic norm rather than a relatively low cancellations we’ve seen over the last three or four quarters. So I would just say we have a fairly stable business portfolio and we just have the high level of predictability, so we plan on that basis..

Okay. Thank you for that. And then wanted to ask a follow-up on margin and particularly trying to understand maybe underneath it covers a little bit what some of the more significant levers are that are helping you to not only improve margin up to this point, but raise your expectations again.

Are you seeing efficiencies that are coming more from supportive costs be it your central service offices for back office support and things like that or are you actually seeing, I mean obviously gross margin is improving as well.

I guess I’m wondering if you are starting to see real in steady efficiencies from selective source data verification, adaptive trial designs, whatever it might be that are say more in study efficiencies from changes in the way you are really doing clinical trials?.

I think Dave you have really pointed to all of the factors – it’s a little bit of everything..

Okay..

The first thing that I would draw attention to, we built a very efficient, invested heavily in the global business services model in over the last few years.

We started that heavy lift really back in 2011 and over time once the model is there, we are very efficient with management cost as we grow, so we continue to get leverage and that will continue to be a driver as we go forward. At the gross margin line, it is a combination of management and productivity, the key metrics that we look at.

And the technology, the in-trial technology and improving startup and recruitment and deploying new technologies and new processes. Steve, maybe you want to comment on–.

Yeah, I think it’s certainly on the clinical trial area, Dave.

We’ve put a lot of effort into our iconic platform, the Firecrest platform and we are seeing some benefits that the risk based monitor which you alluded to is becoming more accepted within this industry and we see we are able to offer our customers a better price, but also not sacrifice or even improve our margins on that work.

So it’s a win-win for both of us. And then around startup as well we see that’s an important area, we’re investing in that area and getting some efficiency there.

I think the other point is around, we have large portfolios of work with several customers, we are really able to generate some efficiencies around the management of those portfolios of work and that’s playing through to the gross margin line as well..

Great. I appreciate the color..

Okay. Thanks, Steve..

[Operator Instructions] We will now take our next question from John Kreger of William Blair. Please go ahead..

Hi, guys. This is Matt in for John today. Looking at your slides, I see that the burn rate has sort of tapered off a little bit over the last four quarter.

Can you guys just talk a little about what is driving that and where it might trend in 2015?.

Yes, we can – it’s really just a function of the fact that we’ve got more large studies of longer duration that come into the backlog over the last year or so. And those studies take longer time. I mean the burn rate comes down, but they last a lot longer, so it gives us the visibility into future and – but there is nothing to have beyond that.

Looking forward, we probably expect the burn rate to continue to decline modestly or level off at around 10.9% or 11% mark, but you can never be entirely sure, there are lot of moving parts, there is 500 ongoing projects been done every day and that is going at varying pieces so we don’t see significant difference in it, but certainly it’s the long studies that have taken it down from where it was say this time last year..

Okay.

And if I can ask a follow-up, with the Covent Elan Corp deal closing what do you guys see in the marketplace there, does that provide you guys any opportunities going forward, do you think within central lab?.

Yes, it’s Steve Cutler here. I think there are some opportunities for us in the lab space. I think we are seeing again some interest from customers in our labs and I think a number of other CROs have indicated the same. So we see some opportunity. Having said that, we have to go out there and make the most of those.

So nothing is given and we respect all of our competitors in the lab space. We believe there is opportunity, but there is also work to do there. So we are optimistic in terms of what those opportunities will bring us..

Great. Thank you..

We will not take our next question from Donald Hooker of KeyBanc. Please go ahead..

Hi, good afternoon and good morning.

One quick mundane question, when you think about your earnings per share outlook for 2015, what is your tax rate assumption there, because I don’t know if you recalled, if you guys mentioned why the tax rate was a little bit lower in the fourth quarter and how should we think about that flowing through into next year?.

Hi, it’s Brendan here. So for our guidance we are expecting sales to be in that 16% effective tax rate for 2015, we’ve done well with our tax rate over the years that’s come down to obviously that level in the fourth quarter.

Basically we saw some of our provisions roll off, this is a matter of timing after a certain period of time they just roll off and you get a bit of a bump and that often happens in quarter four rather than the earlier quarters of the year. So that’s what happened [indiscernible] quarter, but as an outlook for 2015 the rate is still at 16%..

Great. And then one other question sort of a follow-up. Somebody touched on it earlier, but I wanted to see if I can get you to discuss a bit more regarding the use of your technologies adaptive clinical trials and risk-based monitoring.

I know it’s probably impossible to do this, but could you maybe attempt this sort of gauge the penetration rate or something of those technologies.

Can we think about what percent of trials are using these technologies if that’s possible?.

The short answer probably is that it’s not really possible to give a credible or a meaningful, a hard metric on that but I’m sure Steve would have some anecdotal reflection..

Yeah, we see – I mean I’m not going to put a number on it, but we are seeing significant interest in it and we don’t have any expectations that this going to ramp up over six months. It’s taking some time.

Some customers are very interested and they are very active, others are much more conservative and still want to maintain some of the old procedures. So we are able to accommodate both. We are encouraging our customers to move to the more patient centric risk-based approach.

We believe there is benefit to them, in terms of the quality of the trial, in terms of the operational management of the trials, but in terms of – the pricing they are paying and the value they are getting. However, we work with a relatively conservative industry and so we have a lot of these discussions.

So it’s moving – it’s certainly moving faster than electronic data capture did 20 years ago and I think we will certainly see a lot faster progress in terms of patient centric monitoring then we had at electronic data capture but it probably won’t move as fast as we’d like or as fast as a lot of people expect.

So I would say it’s probably a five year process which we will move most of our trials to this approach. The bottom line is some trials just aren’t appropriate for it, they don’t shoot it very well. And so there is work for us to do in that area as well..

Is there any of – anything that might any catalyst that might happen to drive accelerate that adoption, I think there was a transliterate paper from earlier, is there any other thing that might accelerate that on the horizon?.

I think, I think the catalyst is customers needing to do more with less, R&D budgets being capped and challenged and I think that’s the catalyst and many of our customers understand that and moving that way, others are less inclined to move in that way. So but I think that’s the catalyst, they require them to get more value for their money..

Thank you..

We will now take our next question from Robert Jones. Please go ahead. Your line is open..

Hi, it’s Adam Noble calling in for Bob. Just go back to the plus 200 basis point margin expansion for 2015, any sense you could give us around the breakdown of that between gross margin and SG&A..

I might just need to clarify that was - the 15% to 17% was the medium to longer term target for our margins. What I said in relation to our guidance was that our guidance would imply margins that are averaging about 16% and exiting about 16.2% or 16.3%.

We’ve seen in the past couple of years where it’s about half and half, half of our margin expansion has come from gross margin and half from SG&A, and we’d expect as we move from our exit margin of 15.5% in Q4 2014 to the new levels over the year and it continue to be half and half.

But we are forecasting a 700 bip increase in margin in 2015 with that 15% to 17% ranger in the longer term circa..

Okay. That makes a lot of sense. And you bought back quite a bit of stock in the past two quarters.

Anything you could share around share repurchase assumptions in your 2015 guidance and should we think of share repurchases as being a more consistent part of the capital allocation strategy going forward?.

Yes. I think you can consider that it will be more consistent part of our strategy. What we said I think last year was that it would be our intention to – as part of our deployment of capital to kind of the anti dilutive in our share purchases.

We will always be a little bit opportunistic, some of our strategy will depend on when we thrown off cash, how much we have in investment opportunity and where we don’t have investment opportunities, we are more than happy to do buybacks.

I think we said we pretty much pursue a policy of buying back enough shares every year to make sure there is no dilution to the shareholders in the share count through the option that we issue to staff. So there is actual guidance I think we just haven’t assumed any buybacks in the numbers that we’ve quoted.

So to the extent when and if we go to market, that will be upside to that, but there is an opportunistic element to it. The timing will depend on what we are doing on our M&A strategy and things like that.

So we felt given it would be a relatively modest level and that we issue about 1 million shares a year, it won’t move the number significantly so we just left it out of the guidance..

Makes sense, thanks a lot..

We will now take our next question from Tycho Peterson of JPMorgan. Please go ahead..

Hi, guys. It’s Tejas on for Tycho, congrats on the quarter. Just one quick question on Aptiv, can you comment a little bit on the medical device components of that and how you’re planning to capitalize on that opportunity going forward..

Steve?.

Sure. It’s Steve Cutler here. Yes, we have a very strong medical device group which really come to us from Aptiv. ICON did have a medical device expertise and the resources.

We’ve been able to combine that with a very strong group of the Aptiv team and we’ve established that within our commercialization group as a separate FPU entity and we are pushing forward with building that business. We think there is opportunity in that area.

We think the outsourcing market is relatively undeveloped and has great potential for moving forward. The dollars are just large but we believe that device space is probably where the drug pharmaceutical space was 20 years ago. So we are putting an active push on moving that forward and we are seeing some good traction here.

We’ve won some good work, we have some good strong people who are experts in the industry and we are feeling in a good place there..

Great.

And then in terms of the guidance for the top line, should we think of a sequential growth quarter-over-quarter on the top line as well as being the trend in 2015 or is there any kind of seasonality or anything else in terms of trial wind down that we need to be aware of?.

I think what we will see in 2015 is that we will be stronger in the back half of the year due to the customers that we’ve added to the roster in the back half of 2014. It takes time to get these things up to speed. So we’d expect a pattern of starting the year with moderate growth on Q4 but then accelerating through the course of the year..

Great. Thanks guys..

We will now take our last question from Todd Van Fleet. Please go ahead..

Hi guys.

Ciaran, just want to get your assessment as to where things stand industry wide on the whole strategic partnerships concept and movements? Things seem pretty quiet for a period of time and just wanted to get your thoughts on whether or not you think it’s going to stay quite or whether there will be more activity I guess over the course of maybe the next 12 months?.

Yeah. I think probably you would say that the larger transactions, deals that have done over the last few years and the top CRO’s have got their strategic partners and their arrangement made. What we are seeing are similar kind of models being talked about in different market sectors.

I think I mentioned in my comments that we’ve seen good traction and good wins in midsized specialty pharma and biotech as we are taking the learning and the advantages from some of the strategic models into different players. But I wouldn’t expect any massive activity such as we saw probably a couple of years ago..

Thanks..

As there are no further questions in the phone queue at this time, I would like to hand the call back to Ciaran Murray for any additional or closing remarks..

Okay. Thank you. I’d like to reiterate that we are pleased with the progress that ICON has made in 2014 and we are looking forward to building on this progress during 2015 as we seek to become the CRO partner of choice in drug development for our customers and the industry. Thank you everyone..

Thank you. That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect..