Q2 2023 ICON plc Earnings Call

Yeah.

Hello, and welcome to the Icon plc Q2, 2023 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question or that answer session to ask a question. During this session. Please press star one on your telephone to join the queue to be true.

Your question. Please press star one again please.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Kate's Haven.

Good day and thank you for joining us on this call covering the quarter ended June 32023 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's 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.

<unk> 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 statements either as a result of new information future events or otherwise or information about the risks and uncertainties relating to these forward looking statements may be found in our SEC reports filed by the company, including the form 20-F.

<unk> filed on February 24, 2023.

This presentation includes selected non-GAAP financial measures, which Stephen Brendan will be referencing in their prepared remarks for our 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 excludes stock compensation expense restructuring costs foreign currency gains and losses.

Organization and transaction related and integration related costs and their respective tax benefits.

We'll 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'd now like to hand, the call over to our CEO , Dr. Steve Cutler.

Thank you Kate and good day everyone.

I call them delivered good results in quarter, two as our focus on quality operational excellence and innovative solutions continue to drive success.

<unk> delivery for customers.

The industry demand environment has been solid with positive trends across all customer segments.

Overall RFP activity continued the sequential improvement we experienced in quarter one.

We saw a notable pickup in RFP activity within the biotech segment towards the end of quarter two.

While we are encouraged by the uptick in overall opportunities.

The behavior, we have previously noted a cautiousness regarding spending as well as delay decision, making on award is still present within this segment.

Within the mid and large biopharma segments, we continue to see a resilient environment with another quarter of strength functional service and hybrid opportunities.

We are cautiously optimistic that we will see an improving trend in bookings through the second half of this year.

And while it's early in the third quarter, we have seen RFP activity continue its positive trajectory in July .

We continue to see high level of engagement with customers that are seeking a partner that can provide flexible and customized solutions for their specific clinical development needs.

As customer pipelines development plans and management priorities evolve their outsourcing partner requirements change as well.

Our differentiated position as the most scalable and comprehensive provider of clinical development solutions strongly positions us with existing and new customer opportunities and partnerships regardless of their preferred development model.

To that end I am very pleased to announce we were successful in securing an expansion of an existing strategic partnership with a top 20 pharma customer in quarter two.

We have increased the scope and scale of services under our partnership which now includes multiple elements of our offering in foodservice and functional solutions as well as a number of preclinical services.

This strategic customer recognized the value of easily accessing a variety of scaled clinical development services and technologies that were unavailable at our competitors.

We see this scenario being replicated at other top 50, biopharma companies going forward and we remain in active dialogue with several large companies contemplating this type of model.

Similar to this partnership we have begun to see a number of large pharma customers move towards a more blended for hybrid model of clinical development.

This incorporates elements of both traditional full service and functional outsourcing as customers seek a solution, which drives efficiency for their entire portfolio, which often includes augmenting their existing infrastructure alongside outsourcing support.

As a market leader in a scale provider of these services <unk> is uniquely positioned to partner with customers and driving more efficient delivery of services and better outcomes to achieve their specific goals.

Our stated vision is to be the worlds, leading healthcare intelligence organization and to this end, we recognize the importance of being at the forefront of technology adoption, specifically with potential application of artificial intelligence and machine learning in clinical development.

We are investing in our technology infrastructure in order to accommodate the significant volume growth in trial data appropriately scaling to enable seamless data collection and management.

We are focused on developing and advancing our market leading tools that utilize elements of AI and machine learning alongside our clinical expertise.

In quarter, two we released our latest AI enabled capability called Echo Nicks, which enabled study teams to more quickly and easily identify potential investigators based on collections in active physician networks and public content.

This is particularly important and complex therapeutic areas such as rare disease and will support our efforts in improving site selection, our long held industry challenges.

Icon has also continued to make considerable advancements with robotic process automation and we are on course to double our progress from last year in 2023 with the expectation of processing 2 million hours of activity through automation focused in areas such as.

Data monitoring systems integrations and document handler.

In addition, we recently released the latest version of the icon digital platform, our end to end solutions to enable patient centric decentralized clinical trials.

This new release includes updates to important features such as E Cola and direct data capture while also integrating with several other icahn solutions, such as Firecrest portal to start training and communications as well as the Murphy Research Trust, our market, leading clinical outcomes assessment library.

And other validated instruments.

We're also making notable progress in other initiatives the dotcom.

In May we released our 2022 ESG report, providing updates on our commitment to conducting business sustainably and the further advancement of our ESG program icon cares.

We've made great progress towards the achievement of a number of our targets most notably.

To achieve gender parity at senior levels by 2025.

We have also submitted a commitment letter to the science based targets initiative, the first step and submitting targets for validation.

Separately, we were delighted to be added to the Russell 3000 index at the end of June following its annual reconstitution process.

It is a great milestone for icon since becoming a publicly traded company in 1998, presenting an opportunity to further expand our shareholder base.

Turning to our financial performance in the quarter icon delivered solid results with a four 4% revenue growth over quarter. Two 2022, our first quarter in excess of $2 billion in revenue.

Direct fee revenue growth was in the high single digits year over year on a constant currency basis, our net bookings grew 4% over quarter, two 2022, resulting in a net book to bill of one two.

Of note similarly to direct revenue our directory net bookings grew in the high single digits on a year over year basis.

We delivered another quarter of impressive margin performance with gross margin expansion of 120 basis points on a year over year basis, and 17% adjusted EBITDA growth on quarter two 2022.

Strong direct fee revenue growth and continued focus on cost management across the company were key factors in our <unk>.

Margin expansion in quarter two.

Our capital deployment strategy remains unchanged with our priorities focused on further reduction of our floating rate debt as well as potential tuck in acquisition opportunities that are strategically aligned with our portfolio.

Depending on progress in these two areas. We will also be opportunistic on share buybacks as we get to the end of 2023 and into 2024.

We made great progress in achieving our net leverage ratio target of two five times adjusted EBITDA as we closed our quarter two and this is now at a level to position us to return to an investment grade rating.

This will enable us to return to the debt market in the short term to restructure part of our current debt, thereby allowing us to reduce our interest payments for 2024.

With the positive results, we have delivered so far in the first half of this year, we are narrowing our financial guidance for the full year 2023.

We now expect revenue to be in the range of eight point over $7 billion to $8 to $1 billion, an increase of $4 three to six 1% over the prior year.

Additionally, we expect adjusted earnings per share to be in the range of $12 63.

The $12 91.

Representing an increase of seven five to nine 9% over the full year 2022.

This increases the midpoint of our adjusted earnings per share by four to.

To $12 77.

This guidance includes progress on our tax rate and assumes adjusted EBITDA margin expansion.

Approximately 150 basis points on a year on year basis.

Finally, I want to highlight an important milestone we recognized earlier this month, which was the two year anniversary of our Union with PRA Health Sciences.

We have delivered on all of the targets we set at the announcement of our combination surpassing initial timelines on the achievement of cost synergies and our target net leverage ratio.

We also performed at or above our key financial targets for the full year 2022 through continuing to deliver for our customers and patients.

We are grateful to and proud of all of our employees for their valuable efforts and commitment to driving our success through this transformational period for our company.

We look forward to icons continued progress and market leadership as we continue to build the world's leading healthcare intelligence organization.

I'll now turn the call over to Brendan for additional comments on our financial results.

Thanks, Dave and quarter two bike on achieved gross business wins of $2 86 billion and recorded $441 million worth of cancellations. This resulted in a net awards in the quarter of $2 $42 billion of net book to Bill of one two times.

With the addition of the New awards in quarter, two our backlog grew to a record $21 7 billion, representing an increase of two 2% on quarter. One of 2023, an increase of eight 5% year over year.

Backlog burn was nine 5% in the quarter slightly down from Q1 levels as we had anticipated.

Revenue in quarter, two was $2 billion and $20 million. This.

Rents a year on year increase of four 4% or four 3% on a constant currency organic basis.

Overall customer concentration in our top 25 customers decreased from quarter one of 2023.

Our top customer represented eight 6% of total revenue in quarter, two our top five customers represented 26, 2% of revenue.

10 represented 43%, while our top 25 represented 61, 1%.

Gross margin for the quarter was 29, 6% compared to 29, 8% in quarter one 2023.

Gross margin increased 120 basis points of gross margin of 28, 4% in quarter two 2022.

Total SG&A expense was $182 $9 million in quarter, two or nine 1% of revenue in the comparable period last year total SG&A expense was $194 5 million or 10% of revenue.

Adjusted EBITDA was $414 2 million for the quarter or 25% of revenue.

In the comparable period last year, adjusted EBITDA was $354 3 million or 18, 3% of revenue representing a year on year increase of 16, 9%.

Sequentially adjusted EBITDA margin improved 30 basis points of our quarter, one margin of 22%.

Adjusted operating income for quarter, two was $383 8 million a margin of 19%.

This was an increase of 16, 8% over adjusted operating income for up $328 6 million a margin of 17% in quarter two of 2022.

The net interest expense was $80 9 million for quarter. Two we now expect the full year <unk> expense to total approximately $310 million in 2023, reflecting the change in market expectations for further rate increases in the second half of 2023.

The effective tax rate was 15, 2% for the quarter. We now expect the full year 2023, adjusted effective tax rate to be approximately 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 $256 9 million a margin of 12, 7% equating to adjusted earnings per share of $3 11, an increase of eight 7% year over year.

In the second quarter, the company recorded a $12 $7 million of transaction and integration related costs U S. GAAP income from operations amounted to $209 5 million or 10, 4% of revenue during the quarter to you.

GAAP net income attributed to the group in quarter, two was $115 6 million or $1 40.

Diluted per diluted share compared to a $1 41.

<unk> per share for the equivalent.

Three year period.

Net accounts receivable was $1.171 billion at the towards the end of June 2023. This compares with a net accounts receivable balance of $1.197 billion at the end of quarter one 2023.

DSO was 52 days at June 30 of 2023, an increase from 41 days at June 30 of 2022, and a decrease of two days from March 31 2023.

Cash from operating activities in the quarter with $204 million.

Deployment perspective, we made a payment of $150 million in our term loan beef as in quarter, two and ended the quarter with a leverage ratio of two and a half times net debt to adjusted EBITDA.

To continue our payments on our terminal Beavis is he over the course of 2023 totally of approximately $800 million to $1 billion for the full year.

Mentioned, given when we met our initial target leverage ratio of two and a half times adjusted EBITDA will be actively pursuing options to restructure our long term desk given the current floating rate level on our terminal Beavis us we see a very good opportunity secure a more favorable position in 2024, assuming an investment grade ratings occur.

This year.

Alongside revising our financial guidance for the full year, we've updated key assumptions, which are now and effective tax rate of 15.5%.

Keith sorry, free cash flow target of circa 1 billion capex spend of $150 million in interest expense of circuitry hundred $10 million all for the full year 2003.

Before we moved to Q&A, we want to extend our thanks to the entire like on team for their many contributions to our performance.

Quarter.

Operator, we are now ready for questions.

Thank you as a reminder to ask a question. Please press star one one on your telephone and waits field name to be announced to withdraw your question Preston.

Ken.

<unk> when you.

Your first question.

The first question comes from Sandy joined Guggenheim Partners Sandy alone is open. Please go ahead.

Mmm.

Thanks, So much and good morning, I guess the first question is Steve on your comment on our <unk>.

Maybe it's Brendan on the potential bookings improve in the back half of the year I'm trying to think are you thinking about on a on a year over year growth basis on a gross bookings and see where cancellation sort of shakeout on net bookings as any more color on how you see that and is that primarily driven by the biotech area. Thanks.

Yeah Sandy thanks for the question, we see we see isn't it.

The last question.

The opportunities.

Seen in the business and not just in the biotech, we really fairly broad based across the business. So.

Really we I think we reported last quarter and increasing our appear on a sequential basis. That's continued and the second in the second quarter arrangement as I said early in July were sitting further opportunity. So we're certainly cautiously optimistic.

A strong business development performance in the back into the right across the various segments.

In terms of whether it be gross net knew all of the above is what I would say I ultimately net new business is what is what draws out our revenues. We don't we haven't the cancellation to be perhaps slightly elevated above historical levels, we don't see them in any.

In any way to be abnormal and so we don't see cancellations being a major issue. So really we see the potential episodic cautiously optimistic tourists for an improved business development performance in the back into the based on what we're seeing in terms of opportunities across the business.

Great. That's really helpful. And then just a quick follow are unrelated follow up for Brendan on the on the free cash flow.

A tiny bit to $1 billion, but still would expect that are Ah requires a pretty good improvement the back half of the year is that just driven by continued.

Says coming down and do you have a new.

New DSO target for the end of the year. Thanks.

Hey, how.

Yeah.

Yeah, we need to continue to focus on our cash conversion, absolutely and of course, a big part of that will be DSL management.

We've said over the last couple of orders that we wanted to see that coming down by at least a couple of days, we said in the longer term, we'd like to be in the mid forties, and certainly that's where I'd like to be coming to as we get to the back end of the year. So that's certainly the target I've given the guys. We think that's a that's a good and close to optimal level of DSO for icon given the structure of our company, but also or.

Our customers. So I was very much the focus as we get into the back half of the year. I think it is also important to say, we will be looking carefully theater elements of a balance sheet.

In terms of our own depot focus on making sure that that lines up with Dsos in the credit market that were in the environment that we're in so we'll be keeping an eye on all elements of the balance sheet, but yet the dsos. It is by far the biggest piece of that would be targeting mid forties.

Great. Thanks Brenda.

Thank you <unk> for your next question.

And next question comes from Justin Powers at Deutsche Bank. Just your line is open. Please go ahead.

Hi, Good morning, everyone just on the improve improve.

Improving demand environment is that.

Across all customer segments and.

Can I ask a question would be what what are some of the what do you think the changes are.

<unk> from one to you and maybe even to the end of the year last year and then.

Are you seeing any changes in conversion rate as well or is that.

More of what you anticipate just one of them.

Nurse well.

Yeah, just Steve.

Sit in the previous answer the demand increase the RFP opportunities are really across the segments of the business I mean, a large large pharma group in a bar to group and and the more lab services preclinical early for us as well so it's from that point of view can.

Consistent functional as well so.

I'm pleased with the way that that's his eye broad based.

Terms of conversion you know I don't know.

No that we see any significant.

Significant change in conversion a lot of the work is still in the oncology space, which is you will not burns a little slow there are some large opportunities out there in the post Covid next generation World.

So it will depend upon what happens in terms of their success, writing and winning those that might have some impact on the right. If in fact was successful or not remains to be seen but I think the the main point is it's broad based across the across the group and.

Cautiously optimistic.

We can make some improvements.

On a business development wins in the back half of which will set us up will realistically for 2024 and beyond.

Good to hear an apartment.

Expansion of the existing strategic partnership what are <unk>, when when would you expect that.

Start to show up and then any updates on.

Your top customer and that partnership.

In terms of in terms of the the expansion of the existing one that's gonna take a little bit of time to flow through the various constraints. This partner has in terms of what their portfolio is and so we don't expect any dramatic.

Immediate uptick on a revenue basis, but I think broadly speaking it's for the longer term medium to longer term, we certainly see.

Some opportunities to build into draw for the revenues from from that part of it or nothing.

Certainly nothing for 2023 in terms of our top customer we have.

We continue to work well with them.

They can continue to.

The service in World.

There is some adjustments in the way that they are putting their development models together and moving perhaps more functional hybrid so the basis, but.

That's typical of the number of customers in the large pharma space, we're seeing it somewhat of a trend across the industry there, but it's something that we feel upset with we're well positioned.

To be able to accommodate given that we had the number one provider on the functional spicy meals, obviously, you'll have a very strong full service group and typically these customers.

Put in place hybrid solutions were part of a portfolio is functional but there's also a part of it.

Portfolio that studies.

Service and some becomes more hybrids so.

We feel we're well positioned about Oklahoma whatever development model that allows.

Largest or any other customer for that matter wants us to work with.

I appreciate it I'll jump talking to you.

Mmk pays $10 for your next question.

Your next question comes from Luke's I got a box.

Please <unk>. Please go ahead.

Great. Thanks for the question guys.

I kind of wanted to dig into their customer classes. Here. Then you guys report on so the top.

11 through 25 have really been picking up here. The last couple of the last three quarters now I guess.

Can you talk a little bit about what's going on there I would assume that.

Out of the way wrong in thinking that these are smaller biotech and that might just see that they are under served by you guys and you guys are winning wallet share. So talk about the growth of your seeing there, especially in the and lay of the.

Overall industry demand structure.

Let me, let me have a yard that were luger then I think Brendan might want to do again.

Don't don't assume that the 11 25, a little large or small.

Mix of different customers and some customers jumping there for a period of time and then and then come out I don't know that there's anything in particular going on with that with that group of customers. We believe we still got a large customers effectively I think I think the opportunity we're having as we going forward is looking at the more mid sized customers those who are.

Interest there obviously in the functional but that don't have their own into development resources to be able to do that and so they go full service, but they're also thinking about them all hybrid model and so I think we are focusing our attention.

Services more effectively in that mid size market and that may be some of what we're seeing in terms of how they grow friend in Montana.

Going to add to that Luke obviously, it's a it's a great sign to see expansion in the kind of the next cohort outside your top 10, and again I think it speaks to the strength of the portfolio of businesses that we have.

We're growing not just in the top 10, but growing outside of the top 10 and broadening the customer base generally speaking so I think it's a positive peace and I think it speaks really well and so the combination of the organizations over the last two years to six point in the opening remarks, and how we're really managing now to do much better job and making sure that.

Get across our portfolio were selling is what services, we kind of into our customers.

Great and then I guess the follow up.

Add on to that so as you guys are thinking about.

The industry growth as it is now talking about seeing green shoots and funding how.

How're you guys what are the conversation you're hearing from your larger customers on the large farmers side unlocking those programs and really kind of getting a path back to that high single digit growth.

[laughter].

The conversations we have a really around how they're spending their money effectively and efficiently and how we can help them get the drugs.

Drove the market so as I say when I get off this question.

Luke even when R&D budgets are going up all this spending more we clearly have an opportunity, but even when they're not.

Even goin', even Goin', Daniel standing flat, we have an opportunity in fact, sometimes it's more of an opportunity for organizations like al is when budgets flat because they like the pharma companies look at how they're spending and try to optimize this so.

It varies really depending upon the customer as I said, there's with some of the some of the lodge a farmer.

10, a trend perhaps more towards a hybrid fools.

Full service function functional model at the moment, but.

But of course in the biotech the highly in the full service.

Mid sized ones in the middle of a really looking at how best.

To optimize those development dollars. So it it really depends upon the company it depends upon the management.

In the company at that particular time in and the size and the shape of their portfolio. There's really no one size fits all on it I'm afraid.

Okay great.

Police time Blacks you know next question.

The next question comes from check me hand, it in their phone research colonial. Please go ahead.

Thank you.

Morning.

Steve was.

Curious to get your thoughts as you speak with your farmer customers I'm. Just curious has the inflation reduction come up as a consideration and how do you think that could impact.

Trial activity as we go into 2024.

Yeah. Thanks Jack.

Not specifically I would say the IRI, obviously is out there and the implications of the I R. I really Ah Ah some years down the track.

So while I suspect, they're thinking about it and talking about it internally and looking at how they're spending their development dollars an.

Organizing their portfolio, we haven't had any specific conversations around the irin again, all cited as I said before I think the.

Offers us an opportunity going forward because there is potentially some implications for you know the drugs they develop in the the money they spend and so they'll be looking carefully at how they do that and perhaps some of the models.

<unk>.

Some food up maybe a reaction to what I see coming coming down the track coming several years down the track with the IRA right.

But we haven't had any sort of specific conversations with them about that.

Alright, Okay, and then one question for Brendan on just backlog burn expectations.

You know I think previously you were talking about 95 per cent for the year that would kind of culture of stabilization in the back half is that still your view and just as you look at your backlog. How do you think this kind of trends going beyond the sheer thank you.

Hey, Jack.

I suppose you know we'd call at nine and a half that's a full year number that means the obviously we started the you're at 96 foot nine five in the current quarter. So it's not going to move a huge amount from that but you know I think there is you know it'll be 95 or thereabouts as we get into the second half of the year.

So that is our full year number it's a struggle every we've talked about this in the past conversion is not easy. So you made the point on an answer right around there you know it was still see a lot of oncology in the marketplace.

And obviously those trials that can be four to six years in duration. So mathematically that's helped a lot lower than.

5% a quarter against that we have the mix of our businesses some of our foster revenue burn and so we're always looking at how do we optimize that how do we be as efficient as we can and delivery of our projects for our customers. How do we make sure we're starting them up quickly and getting on with the trials and getting them enrolled and so it is it's a it's a it's a constant battle.

As we get into next year will give you insights as we get to that point I think I mean, I think it's fair to say that this has been a declining trend over time in in the industry.

But we're always battling as hard as we can keep it as flat as possible I will certainly continue to continue to try to do that as we get into 2024, but we'll give you a better granularity on that as we think and talk to 224 later in the year.

I appreciate it thanks.

I'm going for the next question.

The next question comes from 10 minutes.

Apologies at credit Suisse, Daniel known as I couldn't please go ahead.

Alright, thank you.

I'm curious with the biotech funding environment seeming to be improving of beds could you share any thoughts on timing, whether you'd expect very lag between improved funding in your business opportunity or whether you think you could see a change in real time.

Sure you know I think as we see the green shoots of biotech funding sort of seeming to appear in that as I say in the.

[noise] opportunities I think he's just gonna take a little bit of time to play out as I said.

We'd like to thank for the second half of this year will that those opportunities will lead us to a strong.

Strong business development performance, which should play then I'll hang into revenues as we get into 2024.

I think that's all I can give you on timing at this stage and some of these opportunities as I think I indicated.

Around most of next generation vaccine at my burn a little foster.

And help us, but others are typically biotech is highly focused in the oncology spice as well so that will tend to be.

Pushed down the track a little bit so I wouldn't expect as I say.

Opportunities were seen to see much impact on this but I do think it gives us optimism for 2024.

I appreciate that and just a cleanup question Brendan can you remind us how much of your backlog as Covid at this point and what the Covid associated revenue was in the corner.

Yes, it is low singles at the moment.

A couple of percent in terms of the backlog of it I mean, the overall year, it's probably still not 3% range.

84%.

For the for the full year on on our on our Covid revenue at this point.

And then just jump and that's where I went for this quarter as well around 3.5% of revenue, which is down from one and is expected.

Perfect. Thank you.

Chris <unk> next question.

The next question comes from Patrick totally city, Patrick as long as I can.

Please go ahead.

Great. Thanks, guys, Steve maybe you just kind of putting a lot of your comments together on the potential improvements bookings rfps, giving sound pretty optimistic about the potential biotech improvement.

There's a lot of attention turning to 24 I know, it's a little early but there seems to be some debate you know if you guys are more of a mid single digit grow our next year, Yeah, I guess in the current environment and what you're seeing you see a path to that being more kind of getting back to that high single digit framework next year, Brendon touched a little bit on the conversion as well yeah. What do you see as the key very.

<unk> and and how do you kind of look at that high level.

Yeah, Patrick you know I don't think we're quite ready to talk too much about 2024 at this point as you've outlined you're quite right. We you know we see optimism.

Reason for cautious optimism with the with the RFP flow the sequential RFP flow.

Coming in and that's obviously needs to be converted into into business wins in the next.

Couple of quarters, and if we do well in that space and we continue L. I think very good when rights and if we can apply those to the opportunities that were saying I think we'll we'll be in good shape for 2024, but I'm not ready to put a number on 2024 at this point we feel.

We feel optimistic certainly about a medium and certainly long term growth, but medium term growth and that does include 2024, but it will just printed said, we'll get back to you on on that as we as we get towards the end of the.

Okay understood and then brown.

Alright, Patrick we just lost you know so you can just try to.

Repeat that second part.

Plus his pension got disconnected in the meantime should we take the next question from David Windley Jefferys, David you learn as I. Please go ahead.

Hi, Thank you.

You've made a really solid progress seemed to be well on your way to.

150 basis points of margin improvement. This year that has as I think you and and we expect been more geared toward G&A leverage, but you have made some progress on gross margin as well I guess I'm wondering Steve what your your longer term aspiration.

Things are relative to margin.

And then the the opportunities to get their essentially is there still some room on gross margin to make some progress or should we think about that largely being scaled on SG&A. Thanks.

Yeah, I think we made about 120 bit improvement on on gross margin.

Because I think that's a reasonable reasonable progress.

Gross margin both of them.

You know we've Ah. We've also made some progress on a on average G and I you know I I think it will have to pay a little bit on the mix of work that we get certainly some some therapeutic areas. Some parts of our business, obviously have a slightly different margin profile. So it will depend upon that I think we see so there's still some optimism.

Terms of our ability to to move our gross margin food modestly.

Given the various options, we have with respect to I talked about it robotics I-i machine learning and how that can help us in the in the direct sort of fee direct cost of labor area, but I'd say, probably most of our margin guide over the next few years will be around if we continue to I think you have.

The best.

Global business services groups in the industry.

So you know continuing to leverage that and delivered to their expertise.

And we have opportunity I think in terms of where we were we were locating those people that decided the processes around what they do or abilities with machine. So it's really on both but I'd say, probably the majority of progress will be made in the U S G and I I sort of level.

And do you hazard, a numerical target like if you're it better than 25 and a half for this year on EBITDA.

Are you thinking.

Several percentage points more to be had over multiple years.

EBITDA I think he's talking about 20th 20, 20.5, 25, and I don't give me give me a hug right sorry, I meant 20 and a half is what I meant to say if I didn't say that yeah. Thank you I'll just I'll just kill <unk> off the floor cause my mom [laughter].

[laughter].

You know, we we've made really good progress in that space and I'm delighted with we've done it we've done it both in gross and and the and the SGI level, we see we'll we'll make some.

The the number that we think will get to towards you know we can.

By some further progress on that as we get towards the end of the year and then we'll look at it for next year I'm not gonna I'm not gonna put a target on that at the moment, we continue to the challenge ourselves in that front as a pharmacy is that every ceiling becomes a every floor ceiling becomes a floor I'll get that right.

And so we continue to challenge ourselves on that front, but I don't think I'm ready to put out in any particular target on that.

Fair enough appreciate the answers thank you.

Okay.

Please stand by for your next question.

The next question comes from Elizabeth Anderson at Evercore.

Sorry Elizabeth.

Please go ahead.

Hey, guys. Thanks for the question, maybe I should send a payment of a black.

Hi, My name is just asking.

Think about the long term.

Moving toward more of a hybrid.

You know functional phone service.

Like how do you think about that visa visa longer term Martin opportunity either like particular like offset that you guys can have it that makes sense that I'd actually have other opportunities that present themselves. There I. Thank you.

Yeah, I think I think there's certainly some.

Those those businesses around the functional and even hybrid do present us with some different margin challenges Elizabeth going forward. We have some significant plans in place to make sure that we have our people in the right places Rotten locations.

And using the right technology in order to mitigate those sorts of challenges. So so awhile.

There are always going to be some challenges, whether you're working full service business of functional visit all awkward business on a margin fund customers are always expecting us to do things faster better cheaper on a long term, but we believe what we the organizations well position to be able to do that and we are taking steps even as we speak to continue that progress is.

We go forward into the future if you want to add.

No I think that's it.

It's something that we constantly keep under review, we look at our mix of business, we're always challenging ourselves what Steve said earlier on how do we maintain our gross.

Most margin profiled in the right levels and that's something that we do is just kind of our organization I'm part of the investment strategy and date that we have to make sure that we're we're thinking about technology and the efficiency of our trials to both deliver the best customer results, but also make sure that we're maintaining market profiles.

Got it. Thank you that's helpful and then in regards to certain headache.

But it also.

The only thing I remember that yeah proposes we lost Elizabeth that too next Christian and Elizabeth you've you'll still listening. Please do press star one one again.

And Patrick as well Star one one will put you back in the queue and then.

Meantime, the next question is from Mac smoke, William but I'm actually learning as I couldn't. Please go ahead.

Hi, good morning, and thanks for taking our questions sticking on the customer team, we talked about your top customer and some smaller customers, but it looks like revenue from customers 225 was down year over year in more than 10% sequentially here in the second quarter. Just wondering if there's anything to call out that would explain the lack of growth from these customers in particular in the second quarter.

Max spread that here I don't think there's anything too dramatic to to call that makes it really depends on each individual customer on where they are with their projects. For example, like you know we have often have the cases, where.

Either you know you could have a retro change over to pick up on a particular customer that could accelerate in the revenues in two to five and you know it would make you know the old our customer segments look look slightly different. So I don't think there's any kind of extraordinary not there and it's not as we have said in the past it's not enough to cause it's the number one of our top five doesn't <unk>.

Not much you do have people coming in and people moving out and again nothing has that that can be specific to the customer can be specific to where they are and they're developing profile one of the big things that we see that shifts our even our large customer was up and down it's just where they are on their development pipeline oftentimes will see big chunks of work I'm in from folks airborne for that.

Reset it could be a period of time, you don't see that much and then they they come back again. So there is that folks that are just natural to the clinical research business.

Yeah understood that's super helpful. Thanks, Brendan.

Another quick one here for me just on cancellations.

Kind of taking a little bit by 2.1% slightly above I think the 2.2 points per cent target you've laid out in the past is any detail you can provide around what accounted for the slightly elevated cancellations in terms of customer size therapeutic modality or indication and then relatedly how much bad debt expensive you take care of the second quarter.

I'll I'll leave the bad that one to you, but in terms of the cancellations Max no that were fairly across the.

Broad based if you like or consistent across the various segments of our business is not a particularly therapeutic area real customer segment, where we saw any more cancelled I since I've I've been really the.

Oh, it's a historical level to cancel I since we're pretty much you know.

As previously.

Up sequentially over on the East So you know it it's.

It's.

Really nothing to see there as far as we're concerned from a cancellation by system. When you think about that yeah sure amongst some you know.

As you guys know we took we took a chunk in the first quarter we felt.

Second quarter that were.

Added drinking more than adequately provided on by that provision.

We don't consistently over time do it every single quarter on so we kind of look at it on a on a quarter by quarter basis, we didn't feel the need to increase that provision in the current quarter.

Got it thank you again for taking our questions.

Okay.

Next question.

The next question comes from Casey would ring, a J P. Morgan Casey you're learning. Please go ahead.

Alright, great. Thanks for taking my question So Steve based on your comments it sounds like four Q as the bottom in terms of Smith Rfps given the sequential optics here and once you are now in two Q. So far through July but order growth was flat sequentially into Q. So can you maybe just talk about the customer conversations you've had.

Recently that gives you some confidence that this deliberate decision, making that you called out during the parents will improve in the back half of this year and then maybe just thoughts on where bookings growth can be in the back half as opposed to the acceleration maybe closer to the middle of that wants you to one three guidance range goal.

Is that realistic in the back half.

Yeah in terms of you know customers conversations and.

Converting rfps to was it yeah.

Really flat sorta sequentially, but it these tight these do take I mean, typically rfps you know it is it is.

A lag here in terms of winning the work and often take three months, many and sometimes longer than implementing the wood.

As I said, we're optimistic that we can improve our business development performance in the second half of it but really you won't be much impact on revenue.

Until we get into 2024, so and our customer conversations.

Sort of along those lines, there's certainly some opportunity out there we talked about <unk>.

Mentioned, some green shoots in terms of the biotech funding the RFP opportunities are sequentially up across the board and not just in Bartick, but an enlarged mid mid sized farmer as well and indeed in Perry clinical labs.

Really phase and functional Ah so yeah, I'm, so sorry, it's.

I'm cautiously optimistic and I think those two words are important we believe we've got some good opportunities now to prosecute and to bring in in terms of wins in the next.

Six months or so next couple of quarters, I think that can get us into the middle of that of that range. The 12213 that would be our expectation, but we have to deliver on that and we have to win that work and then we have to convert it into.

Into revenue and so there's work for us to do but we were certainly pronged up and we certainly have the raw materials and the opportunity to do it because.

Got it that's helpful. And then just one last one for me for the motto Brendon any changes to your ethics assumptions I think last quarter of your <unk>.

<unk> 50 basis point tailwind that's.

Affects on the top line, just because that changed at all.

I mean, we're we're still going I mean, we keep it under review that for the current year.

We'll look at it there's probably yeah, it's around half a per cent still so.

It's still there.

We'll keep it on the review as as we know the effects movements go up as well as down so we'll keep it under review as we go through the course of the year, but I think the the current guidance reflects all of our taking on both FX and little relevance at the moment.

Got it thank you.

Thank you Chris time go after the pronouncement question in the queue. Just a reminder, if you do wish to ask a question. Please press star one on your keypad to join the queue.

The next question comes from Dimmick debris Bank of America. Derek Your line is open. Please go ahead.

Hi, great. Thank you for taking my question.

I won't push on the EBITDA margins. The Rfps has already been asked sandwiches with my friends, but so I'll ask the obvious.

Delevered nicely.

Your gender.

Got good cash flow generation, it's improving how should we think about capital of employment I mean are there M&A opportunities, particularly on the technology side that you're looking at what about share buybacks, just a little bit more color on how should be sort of think about using the cash.

Yeah.

I think it's just as you know as we've really done a nice job and and movie.

Down and getting back to investment right and I think the first thing. We will do is is taken opportunity potentially restructure part of that data as I mentioned in terms of capital deployment, you know going forward as we get to the end of the U N. In the next you will certainly be certainly already surveying the market from Ah M&A point of view it'll be back tomorrow.

Typical traditional tucking string of pools type approach.

That's what we've done in the past and we will continue to look at that there was still areas of that business that I would like to see is build and scale up in you know and those are the areas I think we've talked about real world evidence labs imaging those sorts of Pops of our business. What we believe we can.

But bringing them together and scaling up we can really get ourselves a significant advantage of unique advantage in terms of buybacks 90 are probably the third priority, but but not not notwithstanding.

That we will be opportunistic and how we how we look at that clearly the market is it still reminds actually a little frothy in terms of 90 license for the company to wind up the the soda company, that's getting overpaid on a on an acquisition. So we'll we'll value and we'll look at the opportunities will look at what they bring to our business.

We look at how much we have to pay for them and what sort of opportunities and synergies. We can drive in as we as we acquire them and if I. If that makes sense will do that that would be the priority, but if they're not and we have a capital accumulating was certainly look at potentially buying back stock, but that is I would be on a more opportunist devices.

Got it and then just one follow up I mean, obviously, the China biotech has been weak.

Concerns coming out of that and certainly impacting some of the other companies will recover the giant situations can you just remind us on severe activities in that market in that region and and.

Has that been a headwind opportunity just just can talk about that I think in particular, thank you.

Yeah, I mean, China is not a huge part of our business. You know we have about 1500 employees out there in roughly what is it three or so per century opposite about our business, we haven't seen any particular problem.

Problem lately.

Obviously opened up a post COVID-19. So we see thoughts are now available to more effectively.

And you know with the Covid why you've really sort of dissipating now it's kind of almost back to business as usual in China.

That's not the case in Russia are you crying yet but.

China is you know.

To where we'd like it to be installed it's contributing we have a significant presence out there in terms of the number of people we have a functional business out there we have a full service business out there and increasingly we're seeing customer opportunities out there as well. So you know I'd say I'd say, China is pretty much back to almost pre COVID-19 levels now.

[noise] great. Thank you very much.

Thank you. Please stand by for your last question in the queue currency.

And that question comes from John So I went there at UBS Junior alone is open. Please go ahead.

Hi, Thanks for taking my question here hockey or not just one do you have any additional color around trial starts and how those are tracking.

Perhaps reports on shortages on certain ecology drugs out there that might be impacting.

<unk> just any color you to provide their thanks.

Do we see any particulars dramatic change in trial, if that's what you're seeing a little data around the industry around.

Perhaps.

Phase III going fuel phase III trial starts, but that hasn't that we haven't paid it hasn't appeared in terms of what we've seen from customers in terms of it clearly from what we said in terms of our opinion opportunity. So I don't really have much to to contribute on that front, we see the market still being plenty of opportunities to.

Plenty of great innovation happening in stools.

But I need a new drug not just drugs, but cell and gene therapy thing an important part of that that's a portfolio coming through and we have some expertise in that space.

No nothing nothing there too that we would call out is anything but normal.

Great. Thanks for taking the question.

Yeah.

I don't know if Elizabeth or Patrick wanted to jump back in we didn't cutting them off from us so.

Wondering if they wanted to jump back in but otherwise I think we're almost done an opera.

Yes, they haven't joined the queue again, so I'm, assuming they they they they wish to banking Patrick and Elizabeth If you do want to ask a question star one one when you'll keep hat.

Okay.

Okay.

I think we can assume that question my answer perhaps by following questions.

Back to you even if the final remarks.

Okay, well. Thank you operator, and thank you all for listening into our call today and your interest you know like we look forward to providing further updates as we progress.

The second half of 2023, so thank you all and have a good day.

Thank you.

This concludes today's conference cool you might know disconnect because please stand by it.

[music] [music].

Mhm.

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[music].

Good day and thank you for joining us on this call covering the quarter ended June 32023.

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's 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 Companys 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 statements either as a result of new information future events or otherwise or information about the risks and uncertainties relating to these forward looking statements may be found in our SEC reports filed by the company, including the form 20-F.

Filed on February 24, 2023.

This presentation includes selected non-GAAP financial measures, which Stephen Brendan will be referencing in their prepared remarks for our presentation of the most directly comparable GAAP financial measures. Please refer to the press release section titled condensed consolidated statements of operations.

All 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 excludes 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.

Thank you Kate and good day everyone.

I call them delivered good results in quarter, two our focus on quality operational excellence and innovative solutions continue to drive success in our project delivery for customers.

The industry demand environment has been solid with positive trends across all customer segments.

Overall RFP activity continued the sequential improvement we experienced in quarter one and.

And we saw a notable pickup in RFP activity within the biotech segment towards the end of quarter two.

While we are encouraged by the uptick in overall opportunities. The behavior. We have previously noted of cautiousness regarding spending as well as delay decision, making on awards is still present within this segment.

Within the mid and large biopharma segments, we continue to see a resilient environment with another quarter of strength functional service and hybrid opportunities.

We are cautiously optimistic that we will see an improving trend in bookings through the second half of this year.

While it's early in the third quarter, we have seen RFP activity continue its positive trajectory in July .

We continue to see high level of engagement with customers that are seeking a partner that can provide flexible and customized solutions for their specific clinical development needs.

As customer pipelines development plans and management priorities evolve their outsourcing partner requirements change as well.

Our differentiated position as the most scalable and comprehensive provider of clinical development solutions strongly positions us with existing and new customer opportunities and partnerships regardless of their preferred development model.

To that end I am very pleased to announce we were successful in securing an expansion of an existing strategic partnership with a top 20 pharma customer in quarter two.

We have increased the scope and scale of services under our partnership which now includes multiple elements of our offering in full service and functional solutions as well as a number of preclinical services.

This strategic customer recognized the value of easily accessing a variety of scaled clinical development services and technologies that were unavailable at our competitors.

We see this scenario being replicated at other top 50, biopharma companies going forward and we remain in active dialogue with several large companies contemplating this type of model.

Similar to this partnership we have begun to see a number of large pharma customers move towards a more blended for hybrid model of clinical development.

This incorporates elements of both traditional full service and functional outsourcing as customers seek a solution, which drives efficiency for their entire portfolio, which often includes augmenting their existing infrastructure alongside outsourcing support.

As a market leader in a scaled provider of these services <unk> is uniquely positioned to partner with customers and driving more efficient delivery of services and better outcomes to achieve their specific goals.

Our stated vision is to be the worlds, leading healthcare intelligence organization and to this end, we recognize the importance of being at the forefront of technology adoption, specifically with potential application of artificial intelligence and machine learning in clinical development.

We are investing in our technology infrastructure in order to accommodate the significant volume growth in trial data appropriately scaling to enable seamless data collection and management.

We are focused on developing and advancing our market leading tools that utilize elements of IATA and machine learning alongside our clinical expertise.

Quarter, two we released our latest AI enabled capability called Echo Nicks, which enabled study teams to more quickly and easily identify potential investigators based on collections in active physician network and public content.

This is particularly important and complex therapeutic areas, such as rare disease and will support our efforts in improving site selection.

Long held industry challenges.

Icon is also continued to make considerable advancements with robotic process automation and we are on course to double our progress from last year in 2023 with the expectation of processing 2 million hours of activity through automation and focused in areas such as <unk>.

Data monitoring systems integrations and document handy.

In addition, we recently released the latest version of the icon digital platform, our end to end solution to enable patient centric decentralized clinical trials.

This new release includes updates to important features such as a co op and direct data capture while also integrating with several other icahn solutions, such as Firecrest portal for site training and communications as well as the Murphy Research Trust, our market, leading clinical outcomes assessment library.

And other validated instruments.

We are also making notable progress in other initiatives the dotcom.

In May we released our 2022 ESG report, providing updates on our commitment to conducting business sustainably and the further advancement of our ESG program icon cares.

We've made great progress towards the achievement of a number of our targets most notably in our goal to achieve gender parity at senior levels by 2025.

We have also submitted a commitment letter to the science based targets initiative, the first step and submitting targets the validation.

Separately, we were delighted to be added to the Russell 3000 index at the end of June following its annual reconstitution process.

It is a great milestone for icon since becoming a publicly traded company in 1990, yet presenting an opportunity to further expand our shareholder base.

Turning to our financial performance in the quarter icon delivered solid results with a four 4% revenue growth over quarter. Two 2022, our first quarter in excess of $2 billion in revenue.

Direct fee revenue growth was in the high single digits year over year on a constant currency basis, our net bookings grew 4% over quarter, two 2022, resulting in a net book to bill of one two.

Of note similarly to direct revenue.

Net bookings grew in the high single digits on a year over year basis.

We delivered another quarter of impressive margin performance with gross margin expansion of 120 basis points on a year over year basis, and 17% adjusted EBITDA growth on quarter two 2022.

Strong direct fee revenue growth and continued focus on cost management across the company were key factors.

Margin expansion in quarter two.

Our capital deployment strategy remains unchanged with our priorities focused on further reduction of our floating rate debt as well as potential tuck in acquisition opportunities that are strategically aligned with our portfolio.

Depending on progress in these two areas. We will also be opportunistic on share buybacks as we get to the end of 2023 and into 2024.

We made great progress in achieving our net leverage ratio target of two five times adjusted EBITDA as we closed our quarter two and this is now at a level to position us to return to an investment grade rating.

This will enable us to return to the debt market in the short term to restructure part of our current debt, thereby allowing us to reduce our interest payments for 2024.

With the positive results, we have delivered so far in the first half of this year, we are narrowing our financial guidance for the full year 2023.

We now expect revenue to be in the range of eight points over $7 billion to $8. Two 1 billion, an increase of $4 three to six 1% over the prior year.

Additionally, we expect adjusted earnings per share to be in the range of $12 63.

To $12 91.

Representing an increase of seven five to nine 9% over the full year 2022.

This increases the midpoint of our adjusted earnings per share by four <unk> to.

To $12 77.

This guidance includes progress on our tax rate and assumes adjusted EBITDA margin expansion of approximately 150 basis points on a year on year basis.

Finally, I want to highlight an important milestone we recognized earlier this month, which was the two year anniversary of our unit with PRA Health Sciences.

We have delivered on all of the targets we set at the announcement of our combination surpassing initial timelines on the achievement of cost synergies and our target net leverage ratio.

We also performed at or above our key financial targets for the full year 2022 through continuing to deliver for our customers and patients we.

We're grateful to and proud of all of our employees for their valuable efforts and commitment to driving our success through this transformational period for our company.

We look forward to iphones continued progress and market leadership as we continue to build the world's leading healthcare intelligence organization.

I'll now turn the call over to Brendan for additional comments on our financial results.

Thanks, Steve and quarter, two micron achieved gross business wins of $2 86 billion and recorded $441 million worth of cancellations. This resulted in a net awards in the quarter of $2 42 billion and net book to Bill of one two times with the addition of the New awards in quarter, two our backlog grew to a record.

$21 7 billion.

Representing an increase of two 2% on quarter, one of 2023, an increase of eight 5% year over year.

Backlog burn was nine 5% in the quarter slightly down from Q1 levels as we had anticipated.

Revenue in quarter, two was $2 billion and $20 million. This represents a year on year increase of four 4% or four 3% on a constant currency organic basis.

Overall customer concentration in our top 25 customers decreased from quarter one of 2023.

Our top customer represented eight 6% of total revenue in quarter, two our top five customers represented 26, 2% of revenue.

10 represented 43%, while our top 25 represented 61, 1%.

Gross margin for the quarter was 29, 6% compared to 29, 8% in quarter one 2023.

Gross margin increased 120 basis points of gross margin of 28, 4% in quarter two 2022.

Total SG&A expense was $182 $9 million in quarter, two or nine 1% of revenue in the comparable period last year total SG&A expense was $194 5 million or 10% of revenue.

Adjusted EBITDA was $414 2 million for the quarter or 25% of revenue.

In the comparable period last year, adjusted EBITDA was $354 3 million or 18, 3% of revenue representing a year on year increase of 16, 9%.

Sequentially adjusted EBITDA margin improved 30 basis points of our quarter, one margin of 22%.

Adjusted operating income for quarter, two was $383 8 million a margin of 19%.

This was an increase of 16, 8% over adjusted operating income for $328 6 million a margin of 17% in quarter two of 2022.

The net interest expense was $80 9 million for quarter. Two we now expect the full year interest expense to total approximately $310 million in 2023, reflecting the change in market expectations for Florida rate increases in the second half of 2023.

The effective tax rate was 15, 2% for the quarter. We now expect the full year 2023, adjusted effective tax rate to be approximately 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 $256 9 million a margin of 12, 7% equating to adjusted earnings per share of $3 11, an increase of eight 7% year over year.

In the second quarter, the company recorded a $12 $7 million of transaction and integration related costs U S. GAAP income from operations amounted to $209 5 million or 10, 4% of revenue during the quarter to you.

GAAP net income attributed to the group in quarter, two was $115 6 million or $1 40.

Diluted per diluted share compared to a $1 41.

<unk> per share for the equivalent.

Three year period.

Net accounts receivable was $1.171 billion at the towards the end of June 2023. This compares with a net accounts receivable balance of $1.197 billion at the end of quarter one 2023.

DSO was 52 days at June 30 of 2023, an increase from 41 days at June 30 of 2022, and a decrease of two days from March 31 2023.

Cash from operating activities in the quarter with $204 million.

Free cash flow increased 18% over the second quarter of 2022, and we expect further improvement in cash conversion in the second half of this year as quarter. Two is typically our lowest quarter due to the timing of bonus payments.

We expect this to result in free cash flow of circa $1 billion for the full year 2023.

We are pleased with the initial progress made on DSO in the quarter and will remain focused on billing levels and cash collection activities to ensure we continue to improve.

Yes true this year.

At June 30 of 2023, the company had a cash balance of $270 million and debt of $4.312 billion, leaving a net debt position of <unk>.

Just over $4 billion.

This compared to net debt of $4 to $1 billion at March 31, 2023, and net debt of $4 43 billion at June 30 of 2022.

Capital expenditure during the quarter was $32 1 million.

From a capital deployment perspective, we made a payment of $150 million on our term loan b facility in quarter, two and ended the quarter with a leverage ratio of two five times net debt to adjusted EBITDA.

To continue our payments on our terminal in <unk> over the course of 2023 totally of approximately $800 million two 1 billion for the full year.

As Steve mentioned, given we met our initial target leverage ratio of two five times adjusted EBITDA, we will be actively pursuing options to restructure our long term debt given the current floating rate level on our term loan b facility, we see a very good opportunity secure a more favorable position in 2024, assuming an investment grade ratings occur.

This year.

Alongside revising our financial guidance for the full year, we have updated key assumptions, which are now an effective tax rate of 15, 5%.

Keith sorry, free cash flow target of circa $1 billion.

Capex spend of $150 million and interest expense of circa $310 million or for the full year 2000 phase III.

Before we move to Q&A, we want to extend our thanks to the entire icon team for their many contributions to our performance this quarter.

Operator, we are now ready for questions.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Please stand by while we pay your first question.

Our first question comes from Sandy Draper Guggenheim Partners Sandler. Your line is open. Please go ahead Sir.

Okay.

Thanks, so much and good morning I.

I guess the <unk>.

First question is Steve on your comment on <unk>.

It's Brendan on the potential bookings improve in the back half of the year trying to think are you thinking about on a year over year growth basis on a gross bookings and we'll see where cancellations sort of shake out our net bookings just any more color on how you see that and is that primarily driven by the biotech area.

Yes, Sandy thanks for the question, we see we see it.

Ill answer your last question first.

The opportunities that we're seeing in the business and not just in the biotech they really fairly broad based across the business. So.

Really we I think we reported last quarter and increase in RFP on a sequential basis. That's continued in the second in the second quarter related to that as I said early in July we're seeing further opportunities. So we're certainly cautiously optimistic.

Strong business development performance in the back end of the right across the various segments.

In terms of where our big growth net new all of the above is what I would say ultimately net new business and what is what drives out our revenues.

We haven't seen cancellations have been perhaps slightly elevated above historical levels, we don't see them in any.

And any way to be abnormal and so we don't see cancellations being a major issue. So really we see the potential as I say cautiously optimistic for us for an improved business development performance in the back end of the based on what we're seeing in terms of opportunities across the business.

Great. That's really helpful. And then just a quick follow are unrelated follow up for Brendan on the on the free cash flow.

A tiny bit to $1 billion, but still would expect that requires a pretty good improvement in the back half of the year is that just driven by continued <unk>.

DSO is coming down and do you have.

New DSO target for the end of the year.

Hi, it's Danny.

How are you.

Yes, we need to continue to focus on our cash conversion, absolutely and Thats of course, a big part of that will be DSO management.

We've said over the last couple of quarters that we wanted to see that coming down by at least a couple of days, we've said in the longer term, we'd like to be in the mid <unk> and certainly that's where I'd like to be coming to as we get to the back end of the year. So that's certainly the target up given the guidance, we think that that's a good and close to optimal level of DSO for icon given the structure of our company, but also our.

Our customers. So that's very much the focus as we get into the back half of the year. I think it's also important to say, we'll be looking carefully at the other elements of our balance sheet.

In terms of our own GPO focus on making sure that that lines up with Dsos in the credit market that we're in the environment that we're in so we'll be keeping an eye on all elements of the balance sheet, but yet. The dsos is is by far the biggest piece of that and we'll be targeting mid forties.

Great. Thanks Brendan.

Thank you. Please standby for your next question.

Yeah.

Your next question comes from Justin Bowers with Deutsche Bank. Your line is open. Please go ahead.

Hi, good morning, everyone.

On the <unk>.

Improving demand environment is that.

Across all customer segments and.

We ask the question would be what what are some of the what do you think that.

<unk>.

<unk> from <unk>, and maybe even the end of the year last year and then.

Are you seeing any changes in conversion rate as well or is that.

More of what you anticipate sort of in the back half.

Yes, Justin it's Steve.

As I've said in the previous sensor.

Bond increase the RFP opportunities really across the segments of the business.

Large pharma group and our board to group ended the Mora lab services very clinical early phases as well so from that point of view.

Consistent functional as well so.

I am pleased with the way that that's broad.

Broad based.

In terms of conversion I don't know that we see any significant change in conversion a lot of the work is still in the oncology space, which as you will note burns a little slow there are some large opportunities out there in the sort of post Covid next generation work and so it will depend upon what happens.

In terms of the success, writing in winning those that might have some impact on.

If in fact, we're successful.

That all remains to be seen but I think the main point is its broad based its across the across the group.

Cautiously optimistic.

We can make some improvements.

On a business development wins in the back half of the year, which will set us up well realistically for 2024 and beyond.

Good to hear and if I may.

On the expansion of the existing strategic partnership.

What or when.

When would you expect that.

Start to show up and then any updates on.

Your.

Top customer.

And that partnership.

In terms of in terms of the expansion of the existing one thats going to take a little bit of time to flow through the various constraints. This partner has in terms of what that portfolio is and so we don't expect any dramatic.

Immediate uptick on a revenue basis, there, but I think broadly speaking for the longer term medium to longer term, we certainly see some.

Some opportunities to build and to draw for the revenues from that partner, but nothing.

Certainly nothing for 2023 in terms of our top customer.

We have.

We continue to work well with them.

We continue to.

To service them well.

There is some adjustments in the way that they are putting the development models together and moving thats modal more functional hybrid so the basis, but.

Thats typical of the number of customers in the large pharma space, we're seeing somewhat of a trend across the industry, but it's something that we feel ourselves well positioned.

To be able to will come at that given that we are the number one provider on the functional suppose meals, obviously youll have a very strong full service group and typically these customers put.

Put in place hybrid solutions, where part of the portfolio is functional but there is also a part of this portfolio that stays in a full service and some becomes more hybrid so.

We feel we're well positioned to better accommodate whatever development model that allows us or any other customer for that wants us to work with.

I appreciate it I'll jump back in queue.

Thank you please Tim next question.

Your next question comes from Lucas at Barclays. Your line is open please.

Please go ahead.

Great. Thanks for the question guys.

I kind of wanted to dig into their customer classes here that you guys report on so the top.

11 through 25 have really been picking up here in the last couple of the last three quarters now I guess can.

Can you talk a little bit about what's going on there I would assume that I'm probably wrong in thinking that these are smaller biotech and it might just be that they are under served by you guys and you guys are winning wallet share so to talk about the growth that youre seeing there, especially in the in light of the.

Overall industry demand structure.

Let me let me have a go that when Luka, then I think Brendan might want to dig in.

Don't don't assume that the 11 25 are all large or small there's a fair mix of different customers and some customers jump in there for a period of time and then and then come out I don't know that Theres anything in particular going on.

With that with that group of customers. We believe we saw that large customers effectively I think what I think the opportunity we're having as we going forward is looking at the more mid sized customers those who are interested obviously in the functional but perhaps don't have their own internal development resources to be able to do that and so they go full service, but they're also thinking about it more.

Hybrid model and so I think we are focusing our attention.

Services more effectively in that mid sized market and that maybe some of the.

What we're seeing in terms of how they grow Brendan.

I was just going to add to that look I would say, it's a great sign to see expansion in the kind of the next cohort outside your top 10, and again I think it speaks to the strength of the portfolio of businesses that we have that we're growing not just in the top 10 were growing outside of our top 10 and broadening the customer base generally speaking so I think it's a positive piece and I think it is.

Speaks really well to the combination of the organization over the last two years to Steves point in the opening remarks, and how we're really managing now to do much better job and making sure that right across our portfolio. We're selling is what services, we can into our customers.

Great and then I guess the follow ups.

Add on to that so as you guys are thinking about.

The industry growth as it is now and talking about seeing green shoots in funding.

How are you guys what are the conversations youre hearing from your larger customers on the large pharma side unlocking those programs and really kind of getting a path back to that high single digit growth.

No.

The conversations we have are really around how they're spending their money effectively and efficiently and how we can help them get their drugs to market. So as I say when I get asked this question.

Look even when R&D budgets going up or are they spending more we clearly have an opportunity, but even when they're not even going even going down or staying flat. We have an opportunity in fact, sometimes it's more of an opportunity for organizations like al is when budgets are flat because.

The pharma companies look at how they're spending and try to optimize their spend so.

There is really depending upon the customer as I said, there is with some of the some of the larger pharma.

10, a trend perhaps more towards a hybrid.

Full service function functional model at the moment.

But of course in the blood test.

Highly in the full service in those mid size ones in the middle of really looking at how best.

To optimize those development dollars. So it really depends upon the company it depends upon the management.

The company at the particular timing and the size and the shape of the portfolio Theres really no one size fits all on that upfront.

Okay great.

Please standby for your next question.

Your next question comes from Jack Meehan with Nephron Research. Your line is open. Please go ahead Sir.

Thank you.

Morning.

Steve.

Curious to get your thoughts as you speak with your pharma customers I'm just curious.

Has the inflation reduction come up as a consideration and how do you think that could impact.

Trial activity as we go into 2024.

Yes, Thanks Jack.

Not specifically I would say the IRI, obviously is out there and the implications of the IR I really have some years down the track.

So while I suspect, they're thinking about it and talking about it internally and.

Looking at how they're spending their development dollars in.

Organizing their portfolio, we haven't had any specific conversations around the IRI and again ill.

As I said before I think the IRI offers us an opportunity going forward because there is potentially some implications for the drugs that are developing the money they spend and so there'll be looking carefully at how they do that and perhaps some of the models that we're seeing come forward, maybe a reaction to what they see.

Coming down the track coming several years down the track with the IRI that value, but we haven't had any sort of specific conversations with them about that.

Alright, Okay, and then one question for Brendan on just backlog burn expectations.

I think previously you were talking about nine 5% for the year that would kind of call for a stabilization in the back half is that still your view and just as you look at your backlog. How do you think this kind of trends going beyond this year. Thank you.

Hey, Jack.

I suppose we'd call out nine five that's a full year number that means that obviously, we started the year at 96 four at nine five in the current quarter. So it's not going to move a huge amount from that but I think there is it.

It will be 95 or thereabouts as we get into the second half of the year.

So that is our full year number it's a struggle.

We've talked about this in the past conversion does not easy Steve made the point on.

That answer right around we still see a lot of oncology in the marketplace.

Obviously, those trials that can be four to six years in duration, so modestly lower than the nine 5% a quarter against that we have the mix of our businesses some of our faster revenue burn and so we're always looking at how do we optimize that how do we be as efficient as we can and delivery of our projects for our customers how do we make sure we're starting.

The more quickly and getting on with the trials and getting them enrolled as though it is.

It's a constant battle as we get into next year, we'll give you the insights as we get to that point I think I mean, I think it's fair to say that this has been a declining trend over time in the industry.

We're always battling as hard as we can to keep it as flat as possible and we'll certainly continue to continue to try to do that as we get into 2024, but we'll give you a better granularity on that as we think and talk to 24 later in the year.

I appreciate it thanks.

Thanks, Tim for the next question.

Your next question comes from Dan Leonard Apologies at Credit Suisse. Your line is open. Please go ahead.

Thank you.

I'm curious with the biotech funding environment.

Proving of beds.

Can you share any thoughts on timing, whether you'd expect any lag between improved funding in your business opportunity or whether you think you could see a change in real time.

Sure I think as we see the green shoots of biotech funding sort of assuming to appear in the say in the in the RFP.

<unk> I think this is going to take a little bit of time to play out as I said.

We'd like to thank the second half of this year will that those opportunities will lead us to.

<unk> business development performance, which should play into revenues as we get into 2024.

I think thats all I can give you on timing at this stage Dan some.

Some of these opportunities.

I think I indicated our around more so next generation vaccine that night burn a little faster.

And help us, but others typically biotech is highly focused in the oncology space as well so that will tend to be.

Pushed down the track a little bit so.

Wouldn't expect as I say.

The opportunities, we're seeing to see much impact on this year, but I do think it gives us optimism for 2024.

I appreciate that and just a cleanup question Brendan can you remind us how much of your backlog is COVID-19 at this point and what the Covid associated revenue was in the quarter.

Yes.

Low singles.

Moment.

A percent in terms of the backlog that I mean, the overall year, it's probably still in that 3% range three.

3% to 4%.

For the full year on an art.

On our Covid revenue at this point.

And then just jump then that's where at one four in this quarter as well around three 5% of revenue, which is down from quarter one as expected.

Perfect. Thank you.

Please standby for your next question.

The next question comes from Patrick Donnelly at City, Patrick Your line is open.

Please go ahead.

Great. Thanks, guys.

Steve maybe just kind of putting a lot of your comments together on the potential improvements in bookings RFP, giving sound pretty optimistic about the potential biotech improvement there was a lot of attention turning to 'twenty four I know, it's a little early but there seems to be some debate. If you guys are more of a mid single digit grower next year I guess in the current environment.

And what Youre seeing do you see a path to that being more kind of getting back to that high single digit framework next year, Brendan touched a little bit on the conversion as well what do you see as the key variables and how do you kind of look at that high level.

Yes, Patrick I don't think we're quite ready to talk too much about 2024 at this point.

<unk> outlined you're quite right, we see optimism.

Reason for cautious optimism with the RFP flow the sequential RFP flow.

Coming in and Thats, obviously needs to be converted into into business wins in the next.

It's a couple of quarters and if we do well in that space and we.

Continue.

Think very good win rates and if we can apply those to the opportunities that we're seeing I think we will.

We will be in good shape for 2024, but I'm not ready to put a number on 2024 at this point we feel.

We feel optimistic certainly about our medium and long term growth, but medium term growth.

And that does include 2024, but as Brendan said, we'll get back to you on the on that as we as we get towards the end of the.

Okay understood.

And then Brian .

Alright, Patrick we just lost deals you can just try to.

Repeat that second part.

Pension got disconnected in the meantime should we take the next question from David Windley at Jefferies. David. Your line is open. Please go ahead hi.

Thank you.

You've made really solid progress seem to be well on your way to the 150 basis points of margin improvement this year.

That has as I think you and we expect been more geared toward G&A leverage.

But you have made some progress on gross margin as well I guess I'm wondering.

Steve what you or your longer term aspirations are relative to margin.

And then.

The opportunities to get there essentially is there still some room on gross margin to make some progress or should we think about that largely being scaled on SG&A. Thanks.

Yes, Dave.

Dave I think we made about 120 bps improvement.

Margin year on year, because I think thats, a reasonable its a reasonable progress.

The gross margin basis, and as you know we've we've also made some progress on that on our SG&A.

I think it will depend a little bit on the mix of work that we get certainly some some therapeutic areas. Some parts of our business, obviously have a slightly different margin profile. So it'll depend upon that I think we see still some optimism in terms of our ability to to move our gross margin Ford motor.

<unk>.

Given the various options, we have with respect to I talked about it robotics, AI and machine learning and how that can help us in the direct sort of fee direct cost of labor area.

But I would say probably most of our margin gain over the next few years will be around SG&A, we continue to I think.

The best.

Global business services groups in the industry, and so continuing to leverage that and to leverage their expertise.

And we have opportunity I think in terms of where we are locating those people as I say the processes around what they do our abilities with Ms. Sheila So its really on both but I'd say, probably the majority of progress will be made in the SG&A I sort of level.

And do you hazard.

A numerical target like if you're at better than $25 five for this year on EBITDA.

Are you thinking.

Several percentage points more to be had over multiple years.

EBITDA I think he's talking about 2225, 25, and I don't give me give me all right sorry, I meant 20 and a half is what I meant to say if I didn't say that yes. Thank you I'll just I'll just give it back off the floor.

Good morning.

We've made really good progress in that space.

Got it.

We've done it we've done it both in growth and in the SG&A level, we say we will make some.

The number that we think we'll get to it we can make some further progress on that as we get towards the end of the year and then we will look at it for next year.

As I say I'm not going to put a target on that at the moment, we continue to challenge ourselves in that front as a pharmacy is that every ceiling becomes a every floor.

Ceiling becomes a floor I'll get that rod.

And so we continue to challenge ourselves on that front, but I don't think I'm ready to put out any particular target on that.

Fair enough I appreciate the answers thank you.

Got it.

Please standby for your next question.

The next question comes from Elizabeth Anderson Evercore ISI Elizabeth Your line is open. Please go ahead.

Hey, guys. Thanks for the question, David just said.

Pivot.

I was just asking.

How do you think about the long term.

Moving toward more of a hybrid.

Functional full service mix like how do you sort of think about that vis vis our longer term margin opportunity are there particular.

Like offset that you guys can have it that makes sense does that are there other opportunities that present themselves there.

Thank you.

Yes, I think I think there's certainly some.

Those those businesses around the functional and even hybrid do present us with some different margin challenges Elizabeth going forward, we have some.

Significant plans in place to make sure that we have our people in the right places right locations.

And using the right technology in order to mitigate those sorts of challenges.

Yes, there are always going to be some challenges whether you are working full service business a functional business all audit business on a margin front customers are always expecting us to do things faster better cheaper on a long term, but we believe the organization is well positioned to be able to do that and we're taking steps even as we speak to continue that.

Progress as we go forward into the future do you want to add.

No I think thats it.

It's something that we constantly keep under review as we look at our mix of business, we're always challenging ourselves as to what Steve said earlier on how do we maintain our growths are that gross margin profile and the right levels and that's something that we do is just part of our organization are part of the investment strategy and data that we have to make sure that where we're thinking.

<unk> technology and the efficiency of our trials to both deliver the best customer results, but also make sure that we're maintaining margin profiles.

Got it. Thank you that's helpful and then in regards to listen in today.

There's also Louis.

Linda proposals will ask Elizabeth to.

Next question and it is especially if you're still listening. Please do press star one again.

So in the Q and Patrick as well Star one when we'll put you back in the queue.

The next question is from Max smoke at William Blair. Your line is open. Please go ahead.

Hi, good morning, Thanks for taking our questions.

Sticking on the customer team, we talked about your top customer and some smaller customers, but it looks like revenue from customers to two five was down year over year and more than 10% sequentially here in the second quarter. Just wondering if there's anything to call out that would explain the lack of growth from these customers in particular in the second quarter.

Max Brendan here I don't think there's anything too dramatic who to call out Max it really depends on each individual customer on where they are with their projects. For example, like <unk> often have cases, where.

You could have a retro change order pickup on a particular customer that could accelerate in the revenues in two to five and it will make the other customer segments looks slightly different so I don't think theres any kind of extraordinary not there and it's not as we've said in the past it's not enough to do consists of number one our top five doesn't change.

Is that what you do have people coming in and people moving out and again nothing that I can be specific to the customer I can be specific to where they are in their development profile. One of the big things that we see that shift or even our large customers up and down as those where they are on their development pipeline oftentimes, we'll see big chunks of work come in from folks they'll burn through that <unk>.

It could be in a period of time, you don't see that much and then they come back again. So there is that flocks that are just natural to the clinical research business.

Yeah understood that's super helpful. Thanks, Brendan.

Maybe another quick one here from me just on cancellations.

Again, okay.

Quarter basis, we didn't feel the need to increase that provision in the current quarter.

Got it thank you again for taking our questions.

Your next question.

The next question comes from Casey would ring at J P. Morgan Casey Your <unk>. Please go ahead.

Alright, great. Thanks for taking my questions Uhm, So Steve based on your comments it sounds like four Q as the bottom in terms of Smith Rfps, given the sequential upticks here and once you announce your cue and so far through July but you know order growth was flat sequentially into Q. So can you maybe just talk about the customer conversations you've had.

Recently that gives you some confidence that that this deliberate decision, making that you called out during the prepared so will improve in the back half of this year and then maybe just you know thoughts on where bookings growth can be in the back half and as opposed to the acceleration maybe closer to the middle of that one two to one three guidance range goal you know is that realistic in the back half.

Yeah in terms of you know.

Customers conversations and you know <unk>.

<unk> was it yeah.

Relatively flat sequentially.

Please do take I mean, typically rfps yeah. It is it is.

Lag here in terms of winning the world can often take three months, many and sometimes longer than implementing the world. So so.

As I said, we're optimistic that we can improve our business development performance in the second half of it but really you won't be much impact on revenue until we get into 2024. So.

Conversations have been sort of along those lines, there's certainly some opportunity out there we talked about.

Mentioned, some green shoots in terms of the biotech funding the RFP opportunities are sequentially up across the board and not just in Bartick, but an enlarged mid mid sized farmer, as well and and and they didn't know Perry clinical labs.

Really phase and functional Ah so yeah, I'm, so sorry, it's it's.

I'm cautiously optimistic and I think those two words are important we believe we've got some good opportunities now to prosecute and to bring in in terms of wins in the next.

Six months or so next couple of quarters, I think that can get us into the middle of that of that range. The 1.2 to 1.3 that would be our expectation, but we have to deliver on that and we have to win that work and then we have to convert it into.

Revenue and so there's work for us to do but we were certainly primed up and we certainly have the raw materials and the opportunity to do it because.

Got it that's helpful. And then just one last one for me for the motto Brendon any changes to your ethics assumptions I think last quarter of your <unk>.

<unk> 50 basis point tailwind.

F X on the top line, just because that changed at all.

I mean, we're we're still going I mean, we keep it under review that for the current year Ah well, we'll look at it there's probably yeah. It's around 100 per cent still so.

Still there we'll keep it on the review as as we know the effects movements go up as well as down so we'll keep it under review as we go through the course of the year, but I think the the current guidance reflects all of our taking on both FX and little relevance at the moment.

Got it thank you.

Thank you <unk> for the pronouncement question in the queue. Just a reminder, if you do wish to ask a question. Please press one on your keypad to join the queue.

The next question comes from Dimmick debris Bank of America Derek <unk>. Please go ahead.

Hi, great. Thank you for taking my question.

I won't push on the EBITDA margins. The Rfps has already been asked sandwiches with my friends, but so I'll ask the obvious.

Delevered nicely.

You you're January .

Got good cash flow generation, it's improving how should we think about capital of appointment I mean are there M&A opportunities, particularly on the technology side that you're looking at what about share buybacks, just a little bit more color on how should be sort of think about using the cash.

Yeah, Gary Kim.

I think it's just as you know as we've really done a nice job and and movie get down and getting back to investment right and I think the first thing we will do is.

Taken opportunity potentially restructure part of that data as I mentioned in terms of capital deployment, you know going forward as we get to the end of the U N. In the next you will certainly be certainly already surveying the market from Ah M&A point of view it'll be back to more.

Typical traditional tucking a string of pearls type approach.

That's what we've done in the past and we will continue to look at that there was still areas of that business that I would like to see is build and scale up in you know and that is in the areas. I think we've talked about real world evidence labs imaging those sorts of Pops of our business. What we believe we can.

But bringing them together and scaling up we can really get ourselves a significant advantage of unique advantage in terms of Bob actually 90 are probably the the third priority, but but not not notwithstanding.

We will be opportunistic and how we how we look at that clearly the market is it still reminds actually a little frothy in terms of 90 license for the company to wind up the the soda company. That's got all of the pie.

On an acquisition so we'll we'll value and we'll look at the opportunities will look at what they bring to our business will look at how much we have to pay for them and what sort of opportunities and synergies. We can drive in as we as we acquire them and if I. If that makes sense will do that that would be the priority, but if they're not and we have a capital accumulating was certainly look at potentially bond.

I stopped but as I say would be on a more opportunist devices.

Got it and then just one follow up I mean, obviously, the China biotech has been weak.

Concerns coming out of that and certainly impacting some of the other companies to recover the Chinese situations can you just remind us on severe activities in that market in that region and and.

Has that been a headwind opportunity just just can talk about that I think in particular, thank you.

Yeah, I mean, China is not a huge part of our business. You know we have about 1500 employees out there in roughly what is it three or so per century opposite about our business, we haven't seen any particular problem lately.

Obviously opened up a post COVID-19. So we see thoughts are now available to more effectively.

And you know with the Covid why you've really sort of dissipating now it's kind of almost back to business as usual in China.

Unfortunately, that's not the case in Russia, Ukraine, yet, but China's you know back to where we'd like it to be installed. It's contributing we have a significant presence out there in terms of number of people. We have a functional business out there we have a full service business out there and increasingly we're seeing customer opportunity out there as well. So you know I'd say I'd say.

Is pretty much back to almost pre COVID-19 levels now.

Perfect. Thank you very much.

Thank you Chris time buy for your last question in the queue currency.

And that question comes from John <unk> at UBS shown your line is open. Please go ahead.

Hi, Thanks for taking my question here do you not just one do you have any additional color around trial starts and how those are tracking.

Press reports on shortages on certain ecology drugs out there that might be impacting trial starts just any color you can provide their thanks.

Did we see any particulars dramatic change in trial, if that's what you're seeing a little data around the industry around perhaps.

<unk> going to fuel phase III trials to us, but that hasn't we haven't paid it hasn't appeared in terms of what we've seen from customers in terms of it clearly from what we said in terms of Ah repeat an opportunity. So I I don't really have much to to contribute on that front, we see the market still being plenty of opportunities to put.

Great innovation happening and still have some.

A new drug not just drugs, but cell and gene therapy thing an important part of of that that's their portfolio coming through and we have some expertise in that space.

No nothing nothing there too that we would call out is anything but a normal.

Great. Thanks for taking the question.

Yeah.

I don't know if Elizabeth or Patrick wanted to jump back in we we didn't cut him off we promise so.

Wondering if they wanted to jump back in but otherwise I think we're almost done and Oprah yes. They haven't joined the queue again, so I'm assuming they they they they wished to pack and Patrick and Elizabeth If you do want to ask a Christian star one one on your keypad.

Thank you.

Okay.

I think we can assume that question my answer perhaps by following questions.

Back to you even if the final remarks.

Okay, well, thank you upper either and thank you all for listening into our call today and your interest you know like we look forward to providing further updates as we progress.

The second half of 2023, so thank you all and have a good day.