Andrew Markwick - VP of IR Ari Bousbib - Chairman and CEO Mike McDonnell - EVP and CFO.

Erin Wright - Credit Suisse Tejas Savant - JP Morgan Robert Jones - Goldman Sachs Ross Muken - Evercore ISI Eric Coldwell - Baird George Hill - RBC.

Ladies and gentlemen, thank you for standing by. Welcome to the IQVIA Fourth Quarter 2017 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. As a reminder, this conference is being recorded, Wednesday, February 14, 2018.

I would now like to turn the conference over to Andrew Markwick, Vice President, Investor Relations. Please go ahead..

Thank you. Good morning, everyone. Thank you for joining our fourth quarter 2017 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; and Mike McDonnell, Executive Vice President and Chief Financial Officer. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast.

This presentation will also be available following this call on the Events & Presentations section of our IQVIA Investor Relations website at ir.iqvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements.

Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the Company's business, including the impact of the changes to the revenue recognition accounting standards which is discussed in the Company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and subsequent SEC filings.

During this call, we will discuss accounting standard ASC 606 Revenue from Contracts with Customers. Preliminary 2017 financials have been provided inclusive of the adoption of ASC 606. The recast of these financials will be finalized during the first quarter of 2018 and is therefore subject to change.

In addition, we will discuss certain non-GAAP financial measures on this call which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

I would also like to point out that as with other global businesses, we have been impacted by year-over-year foreign currency fluctuations. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib..

Thank you, Andrew, and good morning everyone. Thank you for joining our fourth quarter 2017 earnings call where we will close out 2017 and provide guidance for 2018. I'm pleased to report that we finished 2017 with strong financial results. For this final quarter, we delivered revenue and profit numbers at the higher end or above our guidance range.

The IQVIA team delivered solid operational performance and executed well on integration plans during our first full-year, as a merged company. Let's review the quarter. Fourth quarter revenue of $2.161 billion grew 10.7% and when adjusting for merger related deferred revenue in the fourth quarter of '16 revenue grew 7.7%.

Fourth quarter commercial services revenue growth was 10.6%, R&D Solutions 6.6% and Integrated Engagement Services revenue was down about 3%. Adjusted EBITDA was $582 million. I'm pleased to report that we delivered on our financial commitments during our first full-year as a merged company.

We were able to achieve this even as we began in a complex integration process and invested heavily in the business for future growth. Our integration teams have made great progress. We would reorganize the business during 2017.

We leveraged the legacy IMS operating infrastructure, implemented organizational and sales force changes at the country level and regional level, and we unified our go-to-market approach across the R&D and commercial businesses. We invested in new resources, ramping our next-generation of clinical development headcount during the year.

We now have approximately 200 professionals performing these activities who were not here a year ago, and we should be at 250 soon. The R&D business closed the year with another solid quarter of new bookings. The R&D business posted LTM net new business of $4.5 billion. We're very pleased with the bookings traction we gained post-merger.

To put this in context and looking at bookings under the old as award approach, we actually had over $5 billion of gross awards in 2017. I believe it is a record number for our R&D business ever. This uptick in new business performance is driven as you know by two main factors.

The first one, we implemented a strategy called, See More We More, where we aim to capture more of the available opportunities in a given quarter. In fact, I think the number of RFPs that came in during the fourth quarter was significantly higher compared to last year. The second reason the innovation that we have been discussing all along.

Our next-generation capabilities represented about 20% of the $5 billion gross awards in '17, and if I could finish 17 with over $1.2 billion of post-merger awards with these capabilities. We saw an uptick in the emerging biopharma space during the quarter with over 70% of Q4 next-generation awards coming from these customer segments.

I want to give you some color and give and give a couple of examples. We had a win of three schizophrenia studies with a U.S. based biopharma focused on central nervous system disorders. Our differentiated approach to analytics driven site ID and our ability to drive patient referral was key to this win.

A biopharma company based in Asia awarded us a lung cancer trial. Again this was driven by our differentiated approach to site ID. Another biopharma company also focused on oncology awarded our team a breast cancer study.

The client had no more work with us in the past, but the insights we provided on patient populations across North America, Europe and Asia demonstrated true differentiation and secured the win. Switching to our commercial segment, I want to highlight our tech business which had another solid year.

As you know, technology has always been an investment focus for us and so it was in '17. In addition to replatforming our commercial applications onto sales forces, marketing cloud and force.com, we also began to build a suite of clinical technology offerings.

Leveraging a strategy from the IMS commercial tech playbook, we completed a number of small tuck-in deals throughout '17. We now are working hard to integrate these assets, as we create a single platform of clinical and commercial technology.

We launched our new orchestrated customer engagement offering or OCE, a successor to the CRM platforms in December. Over 100 clients joined the event in Philadelphia and as you know till then we won significant OCE deal with Pierre Fabre, which we recently announced.

I am also pleased to report during Q4, we had a number of multiyear OCE wins with clients in U.S. and Canada. The other bright spot in our commercial business is our real work insight business which posted another strong year, growing in fact high teens in the fourth quarter and solid double digits for the year.

During Q4, we signed multiple deals with the top five pharma clients with benefit from our analytical and technology driven approach to Phase IV research. We also signed a deal with the top U.S. pharma company to run and enrich study for osteoporotic fractures in six countries.

This study will combine retrospective database analytics with prospective data collection, which I remind you combined the capabilities of both real-world legacy teams. With that, I'd like to turn it over to Mike McDonnell, our Chief Financial Officer to take you through the financials in more detail..

Thank you, Ari, and good morning to everyone. As Ari mentioned, we're pleased with our strong finish to the year and now let's review the details. Fourth quarter revenue of 2.161 billion grew 10.7% reported and 8.4% at constant currency. You'll recall the $55 million deferred revenue adjustment in the fourth quarter of 2016.

This was a non-cash adjustment and was the result of purchase accounting rules, which at the time of the merger required the elimination of IMS Health deferred revenue which would have otherwise converted to revenue. Adjusting for this 55 million of deferred revenue, fourth quarter revenue grew 7.7% reported and 5.5% at constant currency.

Commercial Solutions revenue of 1.027 billion grew 10.6% reported and 7.8% at constant currency. R&D Solutions service revenue of 947 million grew 6.6% at actual FX rates and 5% at constant currency. Integrated Engagement Services revenue of 187 million declined 3.3% at actual FX rates and 4.7% at constant currency.

And now turning to profit, fourth quarter adjusted EBITDA was 582 million. GAAP net income was 1.076 billion and GAAP diluted earnings per share was $5.02. GAAP net income and GAAP diluted earnings per share benefited from a 977 million provisional one-time reduction of net deferred tax liabilities in the U.S.

This reduction which is related to the Tax Cuts and Jobs Act enacted in 2017 resulted in the revaluation of our deferred taxes at the lower U.S. corporate tax rate of 21% and the reversal of our deferred tax liability on undistributed earnings net of the newly enacted transition tax.

Importantly, approximately 400 million of this adjustment is equal to a permanent tax liability reduction, and this will be realized as cash tax savings that we will see overtime as we will now repatriate overseas cash without additional U.S. tax expense.

Adjusted net income was 300 million and adjusted diluted earnings per share was a $1.40 in the fourth quarter. Now, let's take a look at the full-year results. I'd like to call your attention to the more meaningful combined company comparisons in the center of the page.

Full-year revenue was 8.060 billion and grew 4.3% reported and 4.2% at constant currency. In addition to the $55 million deferred revenue adjustment in the fourth quarter of 2016, you will recall the deferred revenue negatively impacted the first and second quarters of 2017 by $8 million.

When adjusting for this and on a combined company basis, full-year revenue grew 3.7% at actual FX rates and 3.5% at constant currency. Commercial Solutions revenue of $3.638 billion grew 4.4% at actual FX rates and 4% at constant currency.

The Commercial Solutions growth rate was impacted by the sale of the legacy Quintiles' Encore business as well as headwinds in the legacy Quintiles' advisory consulting business. The sale of the Encore business resulted in a drag of about 1.5% to full-year Commercial Solutions growth.

On a combined company basis, R&D Solutions service revenue of $3.647 billion grew 4.3% reported and 4.4% at constant currency.

Growth in the segment was impacted by a decline in our early clinical development business due to the closing of a facility in Europe during 2016 as well as weaker bookings and higher cancellations during the third quarter of 2016. Facility closure resulted in a drag of about 1% the full-year R&D Solutions growth.

Integrated Engagement Services revenue of $783 million declined 2.6% reported and 2% at constant FX. Full-year revenue growth in the IES business was impacted by one-time $9 million royalty acceleration in the second quarter of 2016.

Now turning to R&D Solutions net new business and backlog, closing backlog at December 31, 2017 was $10.54 billion as compared to $9.5 billion at the end of 2016. We’re very pleased with our new business performance in 2017. Now as Ari mentioned, our gross new business awards were over $5 billion for the year.

Contracted net new business was $4.54 billion for the 12 months ended December 31, 2017. Both LTM net new business and LTM book-to-bill metric improved significantly during the year as our next-generation capabilities and new go-to-market model are resonating very well with clients.

I do want to remind you that this is a long cycle business and quarterly bookings can ebb and flow that we still encourage you to book on overall backlog and LTM metrics rather than the book-to-bill in a given quarter. You should also focus on the absolute dollar values.

And now turning to profit for the full-year, full-year adjusted EBITDA was $2.047 billion and our adjusted EBITDA margin of 25.4% expanded 30 basis points. GAAP net income was $1.309 billion and GAAP diluted earnings per share was $5.88 for the full-year of 2017.

Both GAAP net income and GAAP diluted earnings per share benefited from the 977 million one-time provisional reduction of net deferred tax liabilities that I mentioned previously. Adjusted net income was $1.039 billion, adjusted diluted earnings per share was $4.67 for the full-year 2017. And now let's spend a few minutes on the balance sheet.

At December 31, cash and cash equivalents totaled 959 million and debt was 10.2 billion, resulting in net debt of about $9.3 billion. Our gross leverage ratio was five times trailing 12 month adjusted EBITDA and net of cash our leverage ratio was 4.5 times.

Now as we told you at our Analyst and Investor Conference in November, we will target net leverage over the medium term of 4 times to 4.5 times trailing 12 month adjusted EBITDA. We feel very comfortable at this level given our high rate of cash conversion and revenue visibility.

Cash flow from operating activities was 233 million in the fourth quarter. Capital expenditures were 102 million and free cash flow was 131 million.

During the month of November, we repurchased 255 million worth of our shares from our private equity sponsors; and toward the end of the quarter, we repurchased an additional 114 million worth of our shares in the open market for total share repurchases of 369 million during the fourth quarter.

Our board today also authorized an increase in our post-merger share repurchase program from 3.5 billion to 5 billion leaving us with the remaining authorization of approximately $1.7 billion. And now before we turn to guidance, let's discuss the change in revenue standard ASC 606 which is effective January 1, 2018.

Today, we have recognized revenue in the R&D Solutions segment on a milestone basis. As of January 1, 2018, we required to adopt ASC 606 which requires percentage of completion revenue recognition.

This means that for every project we are required to calculate total cost incurred as a percentage of total estimated costs and recognize revenue on the basis of that calculation. These percentages of completion calculators are required to be updated on a regular basis and changes in estimates will cause fluctuations in our revenue recognition.

Given that our business is a long cycle business and projects run over several years, these changes can have a significant impact on the period in which revenue was recognized.

In addition to the change from the milestone basis for the percentage of completion basis, ASC 606 requires the service revenue and reimbursed expense revenue which included items such as investigator payments with revenue and cost in equal amounts to be treated consistently.

This means that reimbursed expense revenue will be included in the percentage of completion calculation and will be presented with service revenue as one line on the income statement going forward.

Please note that there is pass-through revenue not just in our R&D business but also in Commercial Solutions and Integrated Engagement Services segment primarily in Integrated Engagement Services. Due to these changes, we have provided a preliminary recast of 2017 financials on the new basis.

Revenue recast under the new standard now includes pass-through revenue and due to the nature of pass-throughs, this results in adjusted EBITDA margin compression of approximately 5 percentage points. This margin compression is optics only the economics of the business are unchanged.

In addition when 2017 financials are recast under ASC 606, it results in a negative adjustment of $37 million to both revenue and profit, as the revenue adjustment resulting from the new approach is allocated to prior and future periods.

This negative adjustment is due to the fact that we happened to have a higher proportion of our projects in earlier phases where pass-throughs are incurred at a slower pace. It could have been a positive adjustment of our overall mix without the latter stages of product lifecycle.

And as a result, we currently expect pass-throughs to be a drag on revenue growth. Therefore when recasting 2017, our full-year results would have been as follows. Revenue of 9.702 billion, adjusted EBITDA of 2.01 billion and adjusted diluted EPS of $4.55.

Before we look at 2018 guidance on a new basis to help with comparability, let's look at guidance on the old basis. Absent the implementation of ASC 606 full-year 2018 revenue 8.45 billion to 8.65 billion, adjusted EBITDA 2.19 billion to 2.26 billion and adjusted diluted EPS $5.35 to $5.60, which is year-over-year growth of 14% to 20%.

Let's turn to 2018 guidance inclusive of the adoption of ASC 606. Our full-year 2018 revenue guidance is 10 billion to 10.2 billion. This guidance assumes a negative adjustment to both revenue and profit resulting from the new revenue standard, which in 2018 is expected to be in the same range as 2017.

It also includes pass-through revenue which is expected to be approximately 1.6 billion in 2018. Of this amount our IES and commercial segments have pass-throughs of approximately 175 million with the remainder being an R&D Solutions. You should note that pass-through revenue can vary depending on the mix of clinical trials.

As a result of the significant new business that we generated in 2017, more of our trials are in our early phases and pass-through revenue is not normally generated until later in the trial.

Due to this higher mix of trials in the startup phase, pass-through revenue is expected to dampen 2018 R&D Solutions revenue growth by about 3.5% to 4% and total company revenue growth by about 2%. Again, this is just optics.

The economics of the business are unchanged which you will see when you look at the limited impact of these headwinds have on our 2018 guidance are both adjusted EBITDA and adjusted diluted EPS. This revenue guidance also assumes currency rates remained at current levels for the remainder of the year.

As a reminder, we have a high level of visibility into our full-year revenue. Under the new revenue standard, we have line of sight into approximately $4.5 billion of 2018 R&D Solutions revenue and the Commercial Solutions business has historically been about 70% recurring.

For the full-year profit, we expect adjusted EBITDA to be between $2.15 billion and $2.22 billion and adjusted diluted EPS to be between $5.20 and $5.45 which represents year-over-year growth of 14% to 20% or the exact same growth rates as the old accounting basis.

Both adjusted EBITDA and adjusted diluted EPS reflect the adjustment resulting from the new revenue standard that was discussed earlier.

The adjusted diluted EPS guidance assumes interest expense of approximately $390 million, operational depreciation and amortization of approximately $275 million, other below the line expense items such as minority interest of approximately $35 million and a continuation of our share repurchase activity.

Tax rates are now expected to be approximately 24% for the adjusted book tax rate and approximately 17% for the adjusted cash tax rate. You will note that the adjusted book tax rate is about 4 percentage points lower than it was last year and this is partially the result of tax reform in the U.S.

For the first quarter of 2018 assuming current FX rate remained constant through the end of the quarter, we expect revenue to be between $2.42 billion and $2.47 billion, adjusted EBITDA to be between $520 million and $540 million and adjusted diluted EPS to be between $1.23 and $1.30. And so to summarize, we have a solid performance in 2017.

We closed the year with a stronger financial performance. Our integration teams drove solid execution of their plans. We reorganized the business during 2017 to leverage the legacy IMS operating infrastructure, implemented organizational and sales force changes at the country level and unified our go-to-market approach across R&D and Commercial.

R&D Solutions gross new business awards totaled more than 5 billion for 2017. Our R&D business enhanced by next-generation capabilities saw success in the market with over $1.2 billion of post-merger awards. Our commercial team launched our new OCE SaaS based offering which is gaining traction in the market.

Real-world insights grew solid double digits. We invested heavily in the business for future growth. We have repurchased 3.6 billion of our shares at an average price of $82.76 since the merger.

We successfully merged two large organizations, repositioned the Company in the market and rebranded the Company as IQVIA, and of course, we were honored to be included in the S&P 500. We look forward to delivering another year of strong financial performance in 2018. And with that, I would like to ask the operator to please open the lines for Q&A..

[Operation Instructions] And our first question comes from the line of Erin Wright with Credit Suisse. Please proceed with your question..

The next-gen offering I guess continues to gain traction here which now associated with business win to 1.2 billion.

Are you addressing more of the incoming RFP flow with the next-gen offering? I guess where does that percentage stand at this point?.

Yes, thank you Erin. We are in this seeing a lot of interest and our traction in the market -- we originally thought that we would be able to target up to 20% of the pipeline with our next-gen capabilities.

But as we progressed and taking this to market now it's becoming operational, we see that it can be applied to a much bigger proportion of the trials and substantially 50% or 60%. So we are excited, we are totally are ahead of our original plans in terms of next-generation capabilities based awards.

I think now our premerger or the time of the merger, we were hoping to have books by now about $300 million of next-gen base capabilities wins, but in fact we have 1.2 billion. So, we are very pleased with the traction we're getting so far.

We also find that in the biotech area and that was particularly true with the fourth quarter, it is very applicable and very compelling.

It's probably also easier generally because the decision making process is simpler in the EBP segment, and you generally have very senior leaders and sponsors that are exposed to our demos directly and can make a decision. So, in fact 70% of the next-generation awards during Q4 were with emerging biotech.

And of course as we noted previously, we are very pleased that many large pharma companies that had previously done zero business with Quintiles Legacy CRO business have awarded us significant trials on the back of those capabilities since the merger..

Right, that's very helpful, I guess quick follow-up to that.

Where are you leveraging the fixed price model as well? And I am curious, if you're seeing any sort of competitive response to that in the market?.

Yes, again, we have to be obviously -- this is new, we are very careful about this. We don’t disclose really how much of our new business is fixed price. These are, obviously, commercial elements to the strategy.

We said previously that about maybe up to a quarter of the next-gen capabilities awards have idle in totality a fixed price in contractual arrangement or a hybrid fixed price in contractual arrangement. There are aspects of the project that lend themselves more to fixed price.

We hope overtime that this will apply to more of the pipe and again we will be monitoring this carefully. We always have -- always say, we mind the business of growing our market share and our revenues. We’re also in the business of growing our margins..

And our next question comes from the line of Tycho Peterson with JP Morgan. Please proceed with your question..

This is Tejas on for Tycho. Mike just one quick question here on the guidance.

Can you just quantify the impact of FX and acquisitions along with the embedded headwinds from the Encore divestiture and the closure of the early development facility and R&D Solutions? Obviously, the latter two are presumably a headwind to your guidance, but the prior two hopefully are tailwinds. So just would help to get some color on that..

You want to answer Mike or Andrew..

So, I think in terms of acquisition contribution if you look at the full-year '17, and I think our growth was little under 4%, and obviously we've had headwinds as we said we had from Encore and ECD.

Mike called out the drags for the full-year by segment, I think if you take it up to the total company level, you got about a 100 basis points of drag there. And then IES has also been a little bit of a drag of 120 basis points or so. So your growth really excluding those drags closer to 5%.

Now, as we said a year ago, we've been aggressively kind of trying to build up in the clinical tech space and so we’ve done a number of acquisitions things like DrugDev, Wingspan, HighPoint also. So we've done more than we usually would do. So we're at the higher end of our usual range, which is usually kind of 1 to 2 point.

So, we're kind at the couple of points or so organic, inorganic contribution in the fourth quarter for the full-year that is rather -- sorry not fourth quarter..

Got it. And you're expecting a similar run rate in terms of your 2018 outlook as well..

Yes, I think I mean over the medium term we’ve always said it’s kind of one to two points of contribution from acquisition. I think again it’s probably it’s probably going to be highest to the higher end given the amount of clinical tech stuff we did during 2017, so probably at the higher end of that 2.1..

Right and that's because those acquisitions were down through the year. So roughly about half of the revenue that they would have contributed came in 2017, and so the other half, we have the full-year, will come in '18. So that’s what we see in the numbers..

Got it. And one quick follow--up for you, Ari, just in terms of the IES decline in 2018 looks like you’re calling for about 7.5% to 13% down year-over-year.

Can you just talk to us a little bit about what specific measures you are putting in place to perhaps help stabilize that business?.

Yes, so as you know, I don’t think it was a secret. We spent -- we have a lot to do in other parts of the business and we spent considerable amount of time working on the R&D and the commercial integration.

We decided to explore strategic alternatives for the business and we went through that process, and as a result kind of let the segment very much long during the year. We had a few reviews but we carved out the financials. We stood it up as a separate business entity.

Even though again, this business is a very local business, probably the single most local business is all of the businesses in our portfolio. The decisions are very much contrary level very local, but we left it operating as a global segment.

We continue to report other segments for now though we made the decision to integrate it more with our regional go-to-market business model and to have our commercial leaders take ownership for it at the regional level.

So that’s the first big change that we have that is we are going to take it to market along side, the rest of our commercial products and services suite. Separately from the product side, obviously we have a lot of capabilities whether its information assets or technology applications.

We talked about OCE that we are going to a factor into the equation when we go to market.

Again, to the degree we can equip our sales reps with more capabilities, data and tech, we believe they can be more effective in the marketplace, and we believe we can at least partially price that with customers than -- we probably have -- potentially have a winner in terms of beginning to turnaround that business.

So, that, these are the two main things. Reorganization of the go-to-market, re-localize the business and to bring more capabilities to the floor.

And we want to be realistic and conservative in terms of what we expect given the market dynamics of an overall relatively stable to declining sales reps headcount globally and pockets of the markets were that is declining.

Bear in mind also, we don’t have that business in many regions, many regions of the world like, I think the entire Asia Pacific region doesn’t have -- we don’t have any presence whatsoever in this business. And that is the region where actually there are market opportunities, market growth opportunities.

With the exception of Japan, we have no presence in those markets. So again, by integrating the business more regionally, we potentially have an opportunity to address segments that we were not previously addressing when the business was a more standalone..

And our next question comes from the line of Robert Jones with Goldman Sachs. Please proceed with your question..

Just looking at the R&D solutions backlog conversion, fell a little bit sequentially. I know there is a lot of moving parts in quarter-to-quarter conversion.

But anything worth calling out that might have weighted on the conversion? And then, Ari, with the traction you are seeing in next-gen as that constitutes more and more of the bookings each quarter.

How should we think about the conversion rate picking up as we trend through 2018?.

Look, it's hard to focus on a quarterly burn rate metric. Burn rate kind of fluctuate for a number of reasons. If you win a large multiyear study and we didn't win quite a few, the burn rate will go down. If you win more SST work, the burn rate may go down depending on the length of the contract.

A very strong bookings quarter may cause the next quarters' burn rate to go down. So also our burn rate tends to fluctuate with season trend as well. So it's hard to draw conclusions from one quarter. So in theory, you should see for the industry as a whole.

For the industry as a whole, we should see burn rates to reduce as a trend, simply because patients are becoming harder to find and trials are becoming more complex. So product gets stuck into backlog and patient recruitment kind of slows.

So, this is why a blind next-generation capabilities and using our analytics and technology and so on, we're having success rescuing these studies and overtime you are correct those should help us do better than overall industry..

And then, Mike, if I could just sneak one in on guidance.

Anything there contemplated around share repurchases? How would you expect for us to trend out or model out the 1.7 billion authorization over the course of the year?.

Yes, so Bob, we do have a new authorization and certainly we continue to see our stock as a very attractive investment and we will continue to be a buyer.

You shouldn’t expect the pace that you saw perhaps that we did in 2017, but certainly we are going to continue to be a buyer of our shares and we factored at least some of that into our thinking for the 2018 guidance.

And I think that the authorization that we announced today also sets up very nicely through repurchasing stock, not only in 2018 but beyond that as well..

Our next question comes from the line of Ross Muken of Evercore ISI. Please proceed with your question..

On the tech solution side, it seems like you are getting pretty good momentum with the OCE products. In general, it also seems like you've added a couple of pretty interesting new capabilities via acquisition over the last quarter.

So could you just give us a little bit more color about the breadth of demand on some parts of tech solutions and then maybe just a little bit about sort of the cadence of how some these new pieces will kind of supplement the overall growth rate?.

Yes, Ross, thank you for the question and by the way welcome back. We as you know have had the tradition at IMS historically to develop technology capabilities.

We did this partially in-house and partially through acquisition of capabilities and typically we buy a small company that has one or two applications and then we take them to a different level by integrating them into the rest of the applications, number one.

And number two, by allowing our sales force to take you to market to clients who would not have otherwise considered buying from a small outfit. That has been our strategy. And early on post-merger, we identified a great opportunity on the clinical technology side.

That is redoing the same thing that we've done with commercial side, which culminated as you mentioned with this OCE offering, which is sale force platform based. Do the same thing on the clinical technology, and by the way, we're working also hand in hand with sales force and other partners on the clinical side.

The reason why we feel this is different and unique, this is not new many people have identified this issue. Processes are very, very manual in life sciences, a lot of paper. Great opportunity for automation of what's really our standard processes. The processes are already standardized because they're highly regulated in many instances.

And the history and the tradition have been as these were largely paper based and manual. So when you look at it in a wholesome fashion, really from the clinical side to the commercialization side, you see that they all leverage the same data inputs and really could be handled on a seamless technology platform. And that is where we want to play.

There are in the market many technology applications some of them very successful whether it’s a math data management application or a CRM application, but they are very siloed. Our strategy is to build a technology platform across the board.

That doesn't mean that you have to buy the entire platform, the entire suite, you can buy a module and it’s a plug and play, but you get material benefits both in terms of deployment of the platform and implementation. You noted maybe that we bought a company in the fourth quarter called HighPoint. That's a technology implementation services company.

And the reason we did this is because we want to continue develop this idea that we can help our clients do better, be more efficient and deploy state-of-the-art capability and we want to provide the implementation. Many times when we go-to-market, clients starts well this is great, but how do I make it work, right.

I mean this is -- it looks good but I just don't have the capabilities in-house. And today when they buy one application from a technology vendor, they've got to go out and ask people like Accenture or IBM or what have you, to come in as a third-party implementation vendor.

And while we do work with those as well, the reality is, it is a lot better and most seamless experience for the customer win. We think ownership responsibility for the delivery of the technology and the operationalization of the technology with the clients' personnel directly without another implementation partner in the middle.

So that’s our strategy and we think it’s a little different than others, and we are very excited by the prospects also on the clinical side..

And our next question comes from the line of Eric Coldwell with Baird. Please proceed with your question..

I have got a few questions, if you'll bear with me. First off I know you've said current rates in the revenue guidance.

I’m curious if you can give us more specificity on what you think the current rates contribute to revenue growth in 2018?.

Yes, I would say this, Eric. We think it’s the best way to guide I think that we put the guidance based on current rates and where they sit today and gave you the growth indications by segment.

Obviously, our guidance assumes that those rates are going to stay consistent throughout the rest of the year, which we think is the most appropriate way to guide. And that’s just kind of how we calculate and how we do it, and hopefully that’s the way it's done that makes the most sense..

Yes, it does. I’m thinking about maybe in FX revenue tailwind that maybe 2% to 2.5%, right now.

Is that a fair approach?.

Yes, the most disappoint point..

And most disappoint now?.

Yes..

Okay. Good..

You mean when comparing actual rates across '17 versus the rates that which we’re planning for '18, which is actually the end of year rates of '17 that’s what you mean, right?.

Just the average year-over-year contribution as the year progressed..

Yes, right. So it’s about reform. I understand your question is about..

The commercial segment, more important question here, the commercial segment had a really strong fourth quarter.

I know there were some seasonal items and some timing items and I think that point through the call today maybe address this in generally, but I’m hoping for a lot more detail on this north of $50 million revenue bid in the fourth quarter compared to street models.

What is reason everybody else get wrong here in terms of that fourth quarter trend? And then the guidance for commercial also seems to be particularly good for 2018. I’m curious if perhaps some of this heightened M&A pace is helping that segment, if I don’t know if you reclassify anything into that segment from other segments.

But anymore detail on the strength in commercial growth will be very helpful?.

No, okay, fine. So I am going to take that and ask you guys to chime in. The -- well, it's a good observation. First of all, the fourth quarter hockey stick has always been the true on the commercial side. I’m speaking now about the legacy IMS piece of the commercial side, which is the bulk of the business. So, we always had fourth quarter.

What -- the reason this happens frankly Eric is that our client have budgets is that they planned on and they tend to be prudent earlier in the year and then with summer is kind of dull drawn so the third quarter typically is low. And then the fourth quarter, people kind of get busy again and set up the year. So, they set up their data needs.

So they approach this there. They finalize their technology plans and so there is a lot of last quarter activity going into November December on the commercial side that has always be the case. If we go back to IMS historical numbers, you see fourth quarter always very strong.

Second driver particularly this year is the real world business which we -- was I'd say the largest part of the legacy Quintiles business that we inherited from the merger and that came into new commercial segment wasn’t doing that great, earlier in the year or other time of the merger.

And a considerable amount of work was put into reorganizing this business and integrating it. And it's a little bit of a shorter cycle and it also has long cycle, this is little bit of a shorter cycle business.

And we were able to see early on great results from that and we saw in the fourth quarter in the beginning of the turnaround on the Quintiles real-world legacy business, the real world late Phase, which integrated -- we have always said that was a -- I recall I'll remind you this was the original area of collaboration Quintiles decided to the merger was on the real world style.

And so, we kind of had a hedge stock if you will and the fourth quarter was particularly strong there and also is responsible for some of that perhaps higher uptick in the fourth quarter on the commercial side. Anything else guys you wanted to suggest on the commercial side..

Yes, the Encore thing that was kind of big drag. On the commercial side, this Encore stuff really was 150 basis points of drag for the year. So when you add that back it's kind of a gets you to about six point of growth for '17 approximately and that’s kind of what we have been generating here in year out in the legacy IMS business.

We have some more drag here because we move the clinical tech the CTOs business to clinical, but let's say six point of which as we said this acquisition there is always going to be acquisitions one to two point. So it's very consistent with our history once we clear up the drag from Encore..

The last couple of quarters you helped us out and I know I'm going to be in trouble for asking as you hate the quarterly backlog and bookings questions. But I'm old school, so I have to do it.

FX Mike, I don’t know how much FX contributed or took away, but I would assume a little contribution to that book-to-bill? And was there any M&A affiliated addition to the bookings or the backlog this quarter?.

The book, I mean, I want to be very clear, Mike. And we wanted to be clear we showed you book-to-bill ratios exclude FX, okay. If you add FX, the book-to-bill ratio is north of 1:3. That’s not -- we took out FX. When we shown you those book-to-bill metrics, we want to show you what is the underlying growth of the business.

If you want to look at, you want us to look at honestly what actually is the revenue built into the booked backlog for the future and look at it as actual effects, it's going to be higher than that.

And the backlog reported at $10.5 billion -- $10.4 billion, that's at the yearend close backlog and maybe there is what you want to say how much of that in FX..

Yes, maybe like 100 million..

Yes, $100 million maybe of that is really coming from it..

The 1.24 LTM to make it very clear, we pull FX out of that to make it more apples-to-apples..

You want to have one more question..

Yes, I think I am coming up on the hour, but I think we probably got time to squeeze in one more question..

Certainly, our last question comes from the line of George Hill with RBC. Please proceed with your question..

Hey good morning guys and I appreciate you squeezing me in. I'll keep this simple because Eric kind of stole my question on the commercial business.

I guess maybe Mike or Ari, can you talk about, you talked about file complexities, how should we think about how the timeline is changing from bookings to trial starts? And I guess do you feel like next-gen is helping you get to trial, get the trials up and running sooner? and I'm kind of trying to tie this all into the new accounting standard kind of like, and I guess how should we, just how should we be thinking about as a modeling lag from book as we did the bookings to backlog to revenue like, what is the lag looking like now and how are you guys thinking of the opportunities.?.

Yes, it's hard to model overall because we have so many projects going on, some of them are next-gen, some of them are not some of them are FX piece. It’s a different life across the overall book of business.

I can tell you is that for the projects and soon we're going to have well over a 100 trials that are actually active based on next-gen capabilities. And we’re looking forward to reporting those metrics for larger base.

If you remember at the November conference, Cindy Verst, who runs now that platform for us, reported some metrics in terms of acceleration of the timelines between booking and site start up and those look quite significant.

Now, we did point out at the time that is all a very small sample of -- this was a small sample of trials so we don’t want to say that that improvement is going to be true across the board. We don't feel confident enough to say that it’s going to be as high as it was.

But I mean we can certainly go back and look at the numbers and it was quite significant improvements on the timelines. Now as we do more and more next-gen base trials, you will see that we will report and we'll tell you how many results there was.

But just to give you a second refresh the numbers that Cindy showed, these were really early proof points. Now, we don't think it’s enough to make it a model, but the benchmark from booking to site selection is typically 80 to 100 days. And with next-gen we're able to do it in less than 30 days. So you see a dramatic improvement to site selection.

The timeline to site startup is usually between 60 and 300 days thereabouts with the early next-gen results we were between 15 and 240 days. And then the time to patient enrollment then we have a metric there, which measured the speed at which patients are enrolled.

So the benchmark we using is 0.29 patients per site per month that’s kind of the baseline metric that we have over a large, large number of products over the long period of time. With next-gen early proof points, we are enrolling 0.46 patients per site per month.

So a dramatic improvement from 0.29 to 0.46, again I don’t want to say this is what we are targeting, this is what we are going to be promising in a model, but these are the numbers from the early next-gen based trial as of last November when we reported this. We now have a lot more trials that I am going to get start.

I mean we continue to update these figures and feel -- we feel comfortable. Once you have a couple of hundreds trials that are running, we feel we are in good shape. We can say, look, we can get to site identification 75 days faster to site start up 90 days faster and how the first patient enrolled 20 days faster. This makes a dramatic difference.

So again, I’m trying to give you as much granularity as I can, but we will continue to update. And again in follow-up calls with the team, we can provide more color as required. I want to -- I think that we're well past the times. Thank you very much..

Thank you everyone. Sorry, we couldn't take all the questions. We look forward to follow up calls..

Yes, we'll be available for the rest of the day to take follow ups. And we look forward to speaking to everyone on our Q1 2018 earnings call. Thank you..

Thank you, ladies and gentlemen. That does conclude the conference for today. We thank you for your participation and ask that you please disconnect your lines..