Q1 2025 IQVIA Holdings Inc Earnings Call
and Ken Lieberman
Ladies and gentlemen, thank you for standing by.
Speaker Change: At this time, I would like to welcome everyone to the Iqvia First Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the sequence remarks, there will be a question and after session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. If you would like to withdraw your question, press star one again.
As a reminder, this call is being recorded.
Speaker Change: I would now like to turn a call over to Kerri Joseph, Senior Vice President of Investory Relations and Treasury. Joseph, please begin your conference. Thank you for your time.
Kerri Joseph: Thank you all for waiting. Good morning, everyone. Thank you for joining our first quarter of the 20-25
Speaker Change: with me today, Ari Bousbib, Chairman and Chief Executive Officer. Thank you, sir.
Speaker Change: Ron Bromand, Executive Vice President, Chief Financial Officer, Eric Sherbert, Executive Vice President, and General Counsel, Mike Fedock, Senior Vice President,
Speaker Change: Today we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation also will be available following this call in the events and presentation section of our IQVIA investment relations website at ir.iqvia.com.
Speaker Change: Before we begin, I'd like to caution listeners that certain information is specified by a man during this conference hall will include forward-looking statements.
Speaker Change: Axe Results could differ materially from those state that are implied by four of the statements to address and a certainty to associate company's business, which are discussing the company's filings with the securities and exchange commission, including our AM report on form 10K at subsequent SEC filings.
Speaker Change: Hey, Rick and Sylvie, some of these non-GAAP measures to the comfortable GAAP measures is included in the press release of the conference hall presentation. I would now like to turn the call to our chairman and CDO, Ari Bousbib.
Ari Bousbib: Vibhu Tewari, and good morning everyone. Thank you for joining us today to discuss our first quarter results.
Ari Bousbib: I'm going to start with a usual update on financial performance for the core, I then provide perspectives on the market, including a random standing of the possible effects of research US government initiatives. [inaudible]
Thank you.
Ari Bousbib: How we are well positioned to navigate these near-term challenges and finally why we remain confident about the industry's resilience and prospects. Thank you.
Ari Bousbib: Arthroes by Highlighting and shooting fourthed winds in the first quarter. So, let's get started!
Ari Bousbib: We delivered strong revenue and profit results at the high end of our expectations despite a continued challenging environment in R&DF.
Ari Bousbib: Total revenue for the first quarter can yield above the high end of our guidance range, representing your real growth of 2.5% on a reported basis.
and 3.5% at constant currency.
Ari Bousbib: First quarter adjusted EBITDA increased 2.4%, first quarter adjusted diluted EPS of $2.70 increased 6.3% year over year.
Ari Bousbib: Let me share some details on the market landscape and the demand metrics we've received for each set.
Ari Bousbib: Starting with us, the business continued the strong recovery trend we saw exiting last year, as our clients are launching neutrons. [inaudible]
Ari Bousbib: and our executive thing on our commercial road maps. It is in times like these where there is some uncertainty in the bio-pharmaceutical sector. [inaudible]
Ari Bousbib: that we clearly see the value of the scale, diversification, and differentiation of Iqvia's portfolio of authorities.
Ari Bousbib: It's great that Todd is contributing over 40% of our leavens.
Todd's Revenue Globe actually can evolve our expectations.
Ari Bousbib: At 6.4% reported, and 7.6% at constant currency, led by double digit growth in real world evidence.
Ari Bousbib: On the clinical side, as we expected, the near-term market environment continues to be bumpy.
Ari Bousbib: We experienced delayed decision-making by customers on new programs, reflecting the heightened macroeconomic and industry sector caution.
Ari Bousbib: In fact, our average time from RFP issuance to award in the quarter increased by approximately 10% both year-over-year and sequentially.
Ari Bousbib: We believe that this is the result of the sector uncertainty caused by the pronouncements of the new administration, the precise effects of which are unknowable at this point.
Ari Bousbib: Several of our clients are showing or re-evaluating programmatic decisions until there is better visibility.
Ari Bousbib: Also reflecting these same concerns, the funding environment for EDP, especially for early stage, has deteriorated.
Why the RNDS business is experiencing some turbulence?
Aldemand Matrix, remain positive.
Ari Bousbib: Our first quarter RSP flow improved mid-single digits year-over-year and high-single digits sequential.
Ari Bousbib: A qualified pipeline is a low single digit year-over-year driven mostly by good growth in large
Thank you. Thank you. Thank you.
Speaker Change: Now, obviously, the demand environment is impacted by your proposed changes that have been signaled by the new U.S. administration. The White House is an initiative relative to our industry sector can be grouped into three categories. Tariffs?
Speaker Change: Starting with turns when the president announced plans to initiate the secret code carry program.
Speaker Change: Pharmaceutical industry received certain exemptions however.
Speaker Change: Following the announcement the department of Commerce began the National Security investigation.
Speaker Change: The life Sciences industry. When she May result in <unk> specific to the pharma sector now IQ via direct exposure to tariffs is.
Speaker Change: He is limited primarily to certain supplies in our laboratory business and is immaterial financially.
Speaker Change: We haven't said that industry specific tariffs implemented may have a more direct impact on our customers. However, it is too early to assess what that impact may be.
Speaker Change: With respect to agency actions HHS announced a number of initiatives, including NIH delays and cancellations of government contracts, along with establishing a 15% cap on indirect costs now to be clear.
Speaker Change: <unk> has no clinical trial contracts with BARDA.
Speaker Change: And no COVID-19 contract sponsored by the government. So our exposure there is zero.
Speaker Change: That said, we have excellent relationships with these agencies, including BARDA.
Speaker Change: <unk> does have a minimal amount of business with the government and we do not expect any of this to have any impact.
Speaker Change: And the NIH funding cap relates to indirect administrative and overhead costs.
Speaker Change: It is aimed at aligning those indirect costs to the same levels as private foundations. This has no impact on direct costs for research funding and therefore zero impact on us.
Speaker Change: Regarding the FDA there have been numerous restructuring actions announced which has impacted the significant portion of the workforce. These reductions in force primarily targeted overhead and support functions such as planning training travel communications in our records management in <unk>.
Speaker Change: Ultimately.
Speaker Change: Core products review teams responsible for evaluating new drugs and vaccines and medical devices, which are primarily funded by the industry.
Speaker Change: <unk> largely preserved to maintain <unk>.
Speaker Change: Essential regulatory functions.
Speaker Change: We have no evidence of any trial or approval delays.
Speaker Change: Whatever anecdotal disruptions there maybe in non approval related interactions with staff, we expect these to normalize.
Speaker Change: FDA Commissioner Mercury has announced his intention to reduce annual testing in favor of AI based models and enhanced usage of real world evidence in the approval process.
Speaker Change: We applaud this and we see these actions proposed by commissioner of Mercury as well.
Speaker Change: You see our industry that will enable clients to move prospect faster into clinical trials the.
Speaker Change: The increased use of real world evidence not only preclinical work, but also in phase II and phase III trials plays to our strengths. Ultimately this is positive news for E&P companies, which develop over 50% of the drugs in clinical trials.
Speaker Change: Finally on drug pricing the U S administration recently issued an executive order.
Speaker Change: The role of Pbms pricing transparency and Medicare costs.
Speaker Change: These initiatives are still in their early stages and some provisions may require congressional approval.
Speaker Change: The impact of these potential actions is difficult to a certain at this point because the specifics.
Speaker Change: <unk> been determined.
Speaker Change: There are two aspects that could actually be very positive for the industry first.
Speaker Change: The proposed to the proposal to do away with the so called peal penalty provision in the IRI, we subject small molecule drugs to CMS pricing review after only nine years versus 13 years for large molecule drugs.
Speaker Change: This is key for pharma lines as 60%.
Speaker Change: 50% of the drug's value is realized in years nine to 13.
Speaker Change: Second the focus on drug pricing treatment value and comparative effectiveness.
Speaker Change: Drive that drives the need for earlier clinical results and more real world evidence so in summary.
Speaker Change: Some of our customers have slowed down their decision, making processes as you would expect.
Speaker Change: And we experienced delays in RFP moving to contracts in the first quarter.
Speaker Change: And unusually high number of MVP awards that were constructed in the quarter were not included in our bookings because funding has not been secured yet.
Speaker Change: Now we are confident that our the industry was successfully managed given the uncertainty and will find ways to adapt <unk>.
Speaker Change: Life Sciences industry has consistently demonstrated its resilience.
Speaker Change: Overcoming macroeconomic obstacles and thriving in changing environments and a few year is particularly well positioned to navigate this marketplace.
Speaker Change: We believe when everything is said and done key decision makers will recognize the industry is a strategic sector for the U S that deserves to be strongly supported U S companies in the biopharmaceutical sector have maintained strong global leadership in biomedical discovery and clinical research.
Speaker Change: Yes.
Speaker Change: Our sector serves as an extraordinary engine of innovation at all.
Speaker Change: He is responsible for 46% of the 634 novel drugs approved globally over the past decade.
Speaker Change: From a strong U S leadership.
Speaker Change: The U S is responsible for 61%.
Speaker Change: Global pharmaceutical sales of branded drugs, which is up from 56% a decade ago.
Speaker Change: This sector invest almost $200 billion annually in research and development and drives economic growth contributing 165 trillion dollars of economic output argued.
Speaker Change: So both direct and indirect employment of highly skilled.
Speaker Change: Highly educated workers and a growing nearly 5 million people at an average of $157000 annually, which is double the national average.
Speaker Change: In fact, many non U S. Large pharma companies have remained the primary R&D centers to the U S to take advantage of the talent pool.
Speaker Change: And of course, the five biopharmaceutical industry provides substantial societal benefits by improving health outcomes and extending life expectancy.
Speaker Change: Now before I turn it over to Ron Let me give you a little color on business activity in the quarter and I'll be brief here and just mentioned a few.
Speaker Change: Examples.
Speaker Change: As the revenue that will show task this quite well in the quarter.
Speaker Change: We won a number of partnerships with clients that are launching new products for example.
Speaker Change: Large project for an important EBIT decline that's launching their first product.
Speaker Change: The first ever treatment for.
Speaker Change: Low grade serous ovarian carcinoma.
Speaker Change: We also won a long partnership with another EVP leveraging our AI powered patient relationship management platform for a groundbreaking treatment for a rare condition and that is underserved patient convenience.
Speaker Change: We were selected to support a mid sized pharma client with an Omnichannel campaign that includes kpis designed to improve patient engagement.
Speaker Change: Our commercial technology suite continues to be successful successfully in the marketplace.
Speaker Change: Our award winning small store offering which is a proprietary quality management system.
Speaker Change: Displaced incumbent as immediate decline in domestic space, we secured a significant contract with deployment of integrated information solutions to help our clients streamer operations and decision making.
Speaker Change: Let me.
Speaker Change: A few more of these move to R&D, yes, we achieved notable wins across customer segments.
Speaker Change: As you'll recall last year, we renewed all 22 of our strategic partnerships with large pharma clients and we expanded the scope in a half a dozen of them.
Speaker Change: We are being awarded significant contracts from these partnerships for example in the quarter.
Speaker Change: <unk> five pharma clients that has selected <unk> as a preferred partner.
Speaker Change: Rewarded us for early stage studies under the new model.
Speaker Change: <unk> was selected by a top 20 pharma client to support a phase III obesity program.
Speaker Change: Cross eight studies are best in class clinical trials technology solutions and industry, leading expertise were key factors in security this deal.
Speaker Change: The top 10 pharma clients active SBS pharmacovigilance offerings to achieve a significant reduction in case processing time enable efficiency and manage the increase in volume.
Speaker Change: We secured a contract with ADP clients, who want a phase two trial for an innovative treatment for patients with PAH.
Speaker Change: We'll be hypertension associated with interstitial lung disease.
Speaker Change: The customer selected <unk> equal our deep technology expertise delivery model and partnership focused approach lastly.
Mike: Mike mentioned.
Mike: Our progress with AI, you May recall, we announced our collaboration with <unk> earlier in the call.
Mike: We are progressing as planned to deploy highly specialized industry AI agents so far.
Mike: We moved over 20 agents into production covering three use cases in each of the commercial real world and R&D.
Mike: Okay.
Mike: We are.
Mike: We are seeing positive results and productivity gains in areas, where these AI agents have been deployed for example.
Mike: One <unk> system in commercial.
Mike: It allows us to reduce delivery time by two thirds from 12 weeks to folks with a net 30% cost reduction.
Mike: We plan to scale up from these three use cases to 12 by the end of the second quarter and.
Mike: And fully use cases by the end of the year.
Mike: And now to run for more details on our financial performance.
Speaker Change: Thanks, Lori and good morning, everyone, let's start by reviewing revenue.
Speaker Change: First quarter revenue of $3 billion $829 million grew two 5% on a reported basis and three 5% at constant currency in the quarter, we had virtually no COVID-19 related revenue versus over $40 million in last year's first quarter.
Speaker Change: Adjusting for the Covid step down constant currency growth was about 4%.
Speaker Change: Already mentioned acquisitions contributed approximately two points to this growth.
Speaker Change: Majority of that in the past staggered.
Speaker Change: Technology and analytics solutions revenue for the first quarter was $1 billion $546 million.
Speaker Change: That was up six 4% reported and seven.
Speaker Change: 6% constant currency.
Speaker Change: R&D solutions first quarter revenue was $2 billion $102 million of.
Speaker Change: Zero, 3% reported one 1% constant currency.
Speaker Change: Excluding COVID-19 related work R&D revenue grew approximately 3% constant currency.
Speaker Change: Finally contract sales in medical solutions first quarter revenue of $181 million declined four 2% reported and two 1% at constant currency.
Speaker Change: Moving down the P&L adjusted EBITDA was $883 million for the quarter with growth of two 4% year over year.
Speaker Change: First quarter GAAP net income was $249 million and GAAP diluted earnings per share was $1 40.
Speaker Change: Adjusted net income with.
Speaker Change: $479 million for the first quarter up two 4% year over year and adjusted diluted earnings per share grew six 3% to $2 70.
Speaker Change: Yeah.
Speaker Change: R&D <unk> backlog at March 31 was $31 $5 billion, an increase of four 8% year over year and four 6% at constant currency.
Speaker Change: Next 12 month revenue from this backlog.
Speaker Change: Is $7 9 billion.
Speaker Change: Reviewing the balance sheet as of March 31, cash and cash equivalents totaled 1700, $40 million and gross debt of $14 billion and $330 million.
Speaker Change: Resulting in net debt of $12 billion $590 million.
Speaker Change: Our net leverage ratio ended the quarter at three four times trailing 12 month adjusted EBITDA.
Speaker Change: First quarter cash flow from operations was $568 million in capex with $142 million, resulting in strong free cash flow of $426 million.
Speaker Change: In the quarter, we repurchased $425 million of our shares this leaves us with approximately $2 $6 billion remaining under the current program.
Speaker Change: So let's turn to guidance now you saw we are raising our full year revenue guidance by $275 million. This to reflect more favorable foreign currency exchange rates since we last guided.
Speaker Change: We now expect revenue to be between $16 billion in $16.400 billion.
Speaker Change: Which represents year over year growth of three 9% to six 5% on a reported basis or five 2% growth at the midpoint.
Speaker Change: This guidance now includes a year over year FX tailwind of approximately 50 basis points compared to about 150 basis points of headwind in our previous guidance.
Speaker Change: We continue to assume approximately $100 million.
Speaker Change: Stepped down in Covid related work and about 150 basis points of contribution from M&A activity for the full year.
Speaker Change: All right.
Speaker Change: We are reaffirming our adjusted EBITDA guidance of $3 billion $765 million to $3 $885 million.
Speaker Change: FX changes had a negligible impact on EBITDA.
Speaker Change: This represents year over year growth of two two to five 5%.
Speaker Change: We're also reaffirming our adjusted diluted EPS guidance, which continues to be $11 70 to $12 10, that's up five 1% to eight 7% versus the prior year or six 9% growth at midpoint.
Speaker Change: Now, let's go through the second quarter guidance for the second quarter, we expect revenues to be between $3.925 billion and $4 billion.
Speaker Change: Adjusted EBITDA is expected to be between $895 million and $915 million and adjusted diluted EPS to be between $2 72, and $2 83.
Speaker Change: Both this guidance for the second quarter and our full year guidance assumes that foreign currency rates as of May five continue for the balance of the year.
Speaker Change: So to summarize in Q1, we delivered strong revenue and profit results at the high end of our expectations.
Speaker Change: We had a very solid free cash flow of 89 at 89% of adjusted net income.
Speaker Change: The cash business continued.
Speaker Change: To achieve above target performance with revenue growth at seven 6% at constant currency and R&D asset bookings were affected by delayed decision, making by customers on new program, and lower edp funding, reflecting incremental macroeconomic and industry sector uncertainty.
Speaker Change: That set forward looking indicators for R&D offerings, such as qualified pipeline RFP flow and backlog continue to grow.
Speaker Change: We're progressing as planned and deploy a new highly specialized industry AI agents and we've identified over 40 use cases and scaled op decline across our portfolio in 2025.
Speaker Change: In the quarter, we repurchased $425 million of our shares and lastly, we raised our full year revenue guidance by $275 million.
Speaker Change: Changes in FX and of course, we reaffirmed our <unk> guidance.
Speaker Change: So with that let me hand, it back over to the operator to open the session for questions and answers.
Speaker Change: Hello, operator.
Speaker Change: I apologize I listen yes at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We request that you. Please limit yourself to just one question so that others in the queue may participate as well.
Speaker Change: And we will take our first question from Justin Bowers that Deutsche Bank.
Speaker Change: Thank you and good morning, everyone already could you discuss some of the some of the drivers behind the strength in our WAM in the quarter, how the order book looks through the balance of the year end.
Speaker Change: Whether or not this outperformance is durable.
Speaker Change: Thank you Justin.
Speaker Change: <unk> has delivered better than expected revenue growth.
Speaker Change: Which is what helped the company deliver above the high end of our guidance grew seven 6% in constant currency and as I've mentioned.
Speaker Change: This was driven largely by the strong.
Speaker Change: Strong growth in real World, which was.
Speaker Change: <unk> double digits.
Speaker Change: This basically.
Speaker Change: Recall that real world.
Speaker Change: Decline.
Speaker Change: The pause of real World that's discretionary.
Speaker Change: Has essentially shut down.
Speaker Change: And in the end of 'twenty three 'twenty four time frame.
Speaker Change: And the rest of the real World business, which is more mission critical has been.
Speaker Change: No delayed and pushed to the right in terms of when to do it and so on.
Speaker Change: So both the discretionary piece.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: The required work that's necessary to support safety or pricing.
Speaker Change: Demonstrating the effectiveness of treatments et cetera of both how returns.
Speaker Change: There is pent up demand and we expect this based on the book of business to continue.
Speaker Change: The rest of <unk>.
Speaker Change: Pause.
Speaker Change: It was also good.
Speaker Change: Basically the low to mid single digits for the different other.
Speaker Change: Aspects of the business. Thank you Justin.
Justin: Thank you.
Justin: Well move next to Matt <unk> at Goldman Sachs.
Matt: Thanks for taking my question.
Matt: Ron just maybe on the margin side I know you guys had called out in Q4, a 20 basis point potential margin expansion. It looks like as you kind of rearrange. The guide maybe not expecting that could you just maybe talk about the opportunities for any potential margin expansion.
Matt: And kind of what you could do on the cost side to help achieve that.
Matt: Yes, well one thing I would point out Matt when Youre looking at the margin versus our previous guide obviously the impact of FX.
Matt: <unk> effects, our top line that doesn't have much impact on the bottom line and if youre looking at gross margin or EBITDA margin.
Matt: $8 weaken and revenue it's gone up profit.
Matt: So that really explains all of that change in our imply margins versus what we guided to previously.
Matt: Now.
Matt: Yes.
Matt: If youre looking towards what can help drive margins going forward, it's always cost reduction.
Matt: AI would be one example that we're looking at we're always looking at taking cost out across the organization.
Matt: And ongoing effort you can see that in our restructuring expense.
Matt: Against that we do have pressures on things like not just add backs, but mix is going against that to a certain extent, you'll see that in the gross margin.
Matt: And that mix includes for instance, the shift towards FSP, which hurts margins, a little bit, but net net the margin picture really hasn't changed that much what youre seeing is mostly just the impact of FX almost entire.
Speaker Change: Got it thank you.
Speaker Change: And just for a follow up could you just maybe talk a little bit about on a longer term basis, you made a comment in Q3.
Speaker Change: Guarding sort of the competitiveness of Rfps going from sort of $1 13 to one or four if ive got the numbers correctly and just in this environment given sort of lower levels of demand. How do you feel about your position and do you think that vendor consolidation trend, which has already been in place will accelerate in this environment.
Speaker Change: Are you talking about the Rds business and yes, alright.
Speaker Change: Alright, Rds, specifically up and vendor consolidation.
Speaker Change: Yes Luke.
Speaker Change: The.
Speaker Change: The RSP through.
Speaker Change: He is actually pretty good given the environment. So the underlying demand is still there we've not seen.
Speaker Change: Customers.
Speaker Change: Decided to no longer move certain programs.
Speaker Change: We went through a period of.
Speaker Change: Reviews, and re prioritization of pipelines.
Speaker Change: Which led to the beach and installations during the course of 'twenty four.
Speaker Change: Maybe 50% higher.
Speaker Change: Cancellation levels in 2004, then.
Speaker Change: Well rich Moore.
Mike: In the quarter with just Mike mentioned, we had cancellations that were just in a normal historic range.
Mike: So what's happened in the quarters, we expect while mortgages, mostly again programs.
Mike: Clients decided to pause and wait to see.
Mike: What the actual concert uses are.
Mike: Some of the administration's pronouncements before they decided to go ahead and separately as you might have noticed the reserve.
Mike: Joe duration of the funding for <unk>. So we had an unusually high number of.
Mike: <unk> awards in the first quarter that were action.
Mike: The only award winning we're also contrast.
Mike: Our policy is not to include.
Mike: Those in bookings.
Mike: We have confidence in the in the phone as long as we.
Mike: The audience I'm sure that the funding has been.
Mike: Secure we expect the RFP flow, though it's still very very good.
Mike: Weather.
Mike: We've seen consistent numbers in terms of whether.
Mike: Whether its dollar value or volume.
Mike: We now believe rates and heat rates are stable. So we're not seeing.
Mike: Any.
Mike: <unk> really in the through.
Mike: The rfps.
Mike: The launch pharma Rfps are up.
Mike: Stronger.
Then <unk> at this point, but.
Mike: But it's good.
Mike: Pretty good actually getting sequentially high single digits.
Mike: Hi.
Mike: So from that standpoint, the ICU better.
Mike: At this point in the quarter than they did at the same point last one.
Mike: And as we've mentioned previously we did very well last year renewing and expanding all the large pharma provider shifts that they went through and what we're starting to see the benefits of those new rfps for those relationships coming true.
Speaker Change: Thank you.
Shlomo Rosenbaum: We'll go next to Shlomo Rosenbaum of Stifel.
Hi, Thank you for taking my question I wanted to ask a little bit more just probing on the operating environment given the uncertainty of what you saw in R&D.
Shlomo Rosenbaum: I was just surprised that you didn't see that in more of the short cycle business.
Shlomo Rosenbaum: In intact. So like you kept the guidance and I guess the assumption is things are going to continue but.
Shlomo Rosenbaum: Do you think that theres risk that that could spill over into some of the uncertainty enter into some of those areas and taz by consulting or some of the analytics or some of the areas like that and could potentially result in further re prioritization is even in the R&D business.
Shlomo Rosenbaum: Just give us your thoughts on those things.
Shlomo Rosenbaum: Yes.
Shlomo Rosenbaum: Yes, I mean, you guys thought what are you asking a question of this considerable uncertainty out there and whenever you have uncertainty then obviously people are hesitant to spend money that shifts.
Shlomo Rosenbaum: As a general rule and Thats.
Shlomo Rosenbaum: That's the concern out there so far.
Shlomo Rosenbaum: We haven't seen that in ties all of our indicators leading indicators pipeline.
Shlomo Rosenbaum: Is your timelines and so on continues to be strong I believe that the reason we haven't seen that because they were pent up demand.
Shlomo Rosenbaum: We have already gone through the.
Shlomo Rosenbaum: Use of holding back on spend in <unk> <unk>.
Shlomo Rosenbaum: <unk> from the middle of 2003 through the middle of 'twenty four.
Shlomo Rosenbaum: And so that's points draws.
Shlomo Rosenbaum: Drugs have been approved needed to be launched.
Shlomo Rosenbaum: And that's what's happening now.
Shlomo Rosenbaum: So what we believe to support the launch of new drugs market access pricing of drugs supporting commercial.
Commercialization efforts et cetera.
Shlomo Rosenbaum: And.
Shlomo Rosenbaum: That's the day in and day out.
Shlomo Rosenbaum: Day to day business some of our clients.
Shlomo Rosenbaum: Stop doing that.
Shlomo Rosenbaum: So.
Speaker Change: We haven't seen that I understand the question, but in the ties.
Shlomo Rosenbaum: Business, we have seen continued good growth as expected.
Speaker Change: And again.
Speaker Change: I believe that the spend has been held back.
Speaker Change: For a while and there is there is pent up demand and necessary things to do.
Speaker Change: Now the discretionary.
Speaker Change: So who discretionary stuff consulting and so on yes, I mean, it's not spectacular in Ccs.
Speaker Change: Okay.
Speaker Change: Flat to mid single digit kind of level. So it is not.
Speaker Change: Now that we are looking at spectacular thing so what is being done now as described those as necessary.
Speaker Change: To operate.
Speaker Change: And we are well before as well.
Speaker Change: <unk>.
Speaker Change: On other things and that's what's driving so I don't I don't see the environment influencing this much on the R&D side, yes.
Speaker Change: Again.
Speaker Change: Because of uncertainty so you hold back on on decisions.
Speaker Change: <unk> patients we saw four.
Speaker Change: We will do to the IRA and I think as we mentioned.
Speaker Change: Five calls, we see that to be lost over.
Speaker Change: The re prioritization of pipelines, which led to elevated levels of cancellations.
Speaker Change: Were triggered by certain provisions of the Iras and I'll remind you. The <unk> was I guess at least 42.
Speaker Change: This process started in 'twenty three.
Speaker Change: So we are now a couple two years after that process.
Speaker Change: And we believe that that re prioritization process of R&D pipeline at large pharma.
Speaker Change: Due to the <unk> rate is largely complete now.
Speaker Change: Now could there be other cancellations, we haven't seen that yet.
Speaker Change: Due to move.
Speaker Change: Developments.
Speaker Change: We don't know again mobile videos, the exact impact of what.
Speaker Change: What has been signaled by with what administration the uncertainty has caused.
Speaker Change: Delays in decision, making I mentioned in my introductory remarks.
Speaker Change: Debt.
Speaker Change: Yes.
Speaker Change: The time from receiving the RFP to the actual award has expanded by about 10% offices more than that.
Speaker Change: Both year over year and sequentially.
Speaker Change: So that's really indications with a high level nationally, but we notice directly on class a pool as well.
Speaker Change: On the heat of the season this quarter, but we've just got to wait a little bit too on the <unk>.
Speaker Change: Applications No one is signal now going.
Speaker Change: Through the program.
Speaker Change: But it's just natural that in an environment of uncertainty.
Speaker Change: <unk> hold off on Michigan decision on large capital investments.
Speaker Change: Thank you.
Speaker Change: We'll take our next question from Michael <unk> at Bank of America.
Speaker Change: Great. Thanks for taking the question guys kind of follow up on I think Netflix earlier question talked about the cancellations in the quarter RMB being kind of normal.
Speaker Change: Maybe I could hone in on.
Speaker Change: To build trends I know, you're only talking about a number of quarterly but just.
Speaker Change: 102 in the quarter last year, you called out a few major cancellations across <unk> to be lower this.
Speaker Change: This year that this quarter doesn't seem to be the case is really so what do you attribute that and number two is it really the emerging biotech, but you talked about.
Speaker Change: Some of the Rfps are quite in bookings yet because the funding is not there is.
Speaker Change: Is that the major swing there so.
Speaker Change: Do you expect to be closer to that 11512 number for the rest of the year.
Speaker Change: Okay.
Speaker Change: Okay. So.
Speaker Change: I Love this question on the quarter in Q2.
Speaker Change: I mentioned before that.
Speaker Change: Once that CW contract during the quarter the contract wasn't signed and will delay.
Speaker Change: So that happened in that large pharma.
Speaker Change: A number of times.
Speaker Change: In the quarter and Thats due to this uncertainty.
Speaker Change: General and certainty in the biopharmaceutical sector.
Speaker Change: That's one.
Speaker Change: Our reasons subsequent motions.
Speaker Change: The second reason as you mentioned you did you notice.
Speaker Change: Notice that.
Speaker Change: Sources for what was the <unk> funding.
Speaker Change: Given quarter, but we follow.
Speaker Change: Consistently by the World status and I think the funding the first blue went down to $13 billion.
Speaker Change: Now Theres immunology is fine, but it's way lower than what we had seen before.
Speaker Change: And that's an indication I think whatever source you look at Youll see it.
Speaker Change: Again due to same reasons before are hesitant to commit to the phones.
Speaker Change: It does happen.
Speaker Change: <unk> signed a contract with us and we decided not to be included in the bookings.
Speaker Change: Because we're not sure about the funding.
Speaker Change: But that happens once or twice.
Speaker Change: No given quarter.
Speaker Change: Here, we had much larger number of such cases in the quarter.
Speaker Change: So again, the two reasons all deriving from the same underlying factors, which is the macro uncertainty.
Speaker Change: Last follow up ticking down.
Speaker Change: <unk> contract to a later period.
Speaker Change: And <unk> <unk>.
Speaker Change: <unk> confirmed that the funding is secure for contract the mortgage side and as a result, we do not include that in our bookings.
Speaker Change: Cause the software bookings in this particular quarter not cancellations.
Mike: So again I wanted to since you brought it up and it's Mike.
Mike: It's like agitation in the Red Slagging and talk over boy typically react to mentioned a quarterly book to bills.
Mike: Sure.
Mike: We are projecting for our company, 5% growth or thereabouts by four 2% for this year.
Speaker Change: If you focus on the CLO business.
Mike: We are a guide for the year was 4% to 6% for.
Mike: For the year, but we see that we have software bookings.
Mike: Even if it's at the lower end of that range of 4% kind of range for R&D, yes.
Mike: And Thats.
Mike: Excluding the step down of the business, which is about $100 million year over year.
Mike: And FX.
Mike: It's still somewhere around 4%.
Mike: Now you look at our sector there aren't that many benchmarks out there, but we do have.
Mike: A large competitor that's publicly traded and published numbers and outlook.
Mike: As the numbers this morning.
Mike: It happens to be coincidentally, the exact same book to bill ratios quarter or two.
Mike: Trailing 12 months.
Mike: And yet they are projecting negative growth.
Mike: On a comparable basis that is a negative growth is 5%.
Mike: So <unk> had the same exact book to Bill ratio.
Mike: The same exact way.
Mike: Projecting.
Mike: And that mid single digit growth positive growth for the segment.
Speaker Change: We are projecting mid single digit decline.
Speaker Change: On April nine four swing in revenue growth.
Speaker Change: So if there ever was a proof point.
Speaker Change: This quarterly book to Bill ratio doesn't mean anything with respect to predict.
Speaker Change: Growth and performance I think that's a very strong one.
Speaker Change: This.
Speaker Change: It's an interesting snapshot picture of what's going on at one given point in time.
Speaker Change: Given the circumstances in the world, it's like taking a picture of <unk>.
Speaker Change: The particular horse in the Kentucky Derby in the malls, we wanted to get the picture.
Speaker Change: It looks like it's all it's the muscles extended and doing extremely well, but then what do you see the full movie you see the whole slows the rates.
Speaker Change: No.
Speaker Change: And really that has been very much it's a snapshot.
Speaker Change: It's interesting right other technical store.
Speaker Change: So once.
Speaker Change: Yes.
Speaker Change: No not at all very very fair point alright. Thank you. Thank you for that color I appreciate the context, if I could squeeze in a quick follow up.
Speaker Change: Just any any commentary on pricing environment.
Speaker Change: Just wondering if there was any change in the quarter given all the macro uncertainty.
Speaker Change: This is more specific to R&D.
Speaker Change: No no no change.
Speaker Change: Come in.
Speaker Change: Pricing is.
Speaker Change: Is.
Speaker Change: Got it.
Speaker Change: We delivered for some time so.
Speaker Change: We are.
Speaker Change: Yes.
Speaker Change: Pricing negotiations are always are tough.
Mike: But again as Mike mentioned earlier, we've secured strategic partnerships with our large pharma clients last year that was assignment, which order rates or the shaded and so on.
Mike: And so I think we are comfortable operating in the current environment no changes.
Speaker Change: Thank you thanks a lot.
Mike: Thank you.
Speaker Change: We'll move next to Jay Leno, Zhang at risk Securities.
Jay Leno: Yeah. Thank you and thanks for taking my questions.
Jay Leno: Given all the recent macro developments and uncertainty you flag and thanks for all the color you gave.
Speaker Change: Have you guys seen any change in the RFP or new bookings mix in terms of <unk> versus FSP and one another follow up quickly if I can.
Speaker Change: The latest two mega trials that were delayed unexpected resume in second half.
Speaker Change: Provider.
Speaker Change: Costs during questions at some point.
Speaker Change: Thank you very much for the questions.
Speaker Change: Number one I think you are talking about the the mix.
Speaker Change: Foodservice versus.
Speaker Change: FSD.
Speaker Change: And Luke.
Speaker Change: We had signals.
Speaker Change: Over the course of the prior year that.
Speaker Change: Large pharma was sort of.
Speaker Change: Doing a little bit more FSP.
Speaker Change: And I think we saw these reflected in the RFP flow.
Speaker Change: And in the awards and in the bookings Okay.
Speaker Change: FSP as a percentage of total was decreasing.
Speaker Change: <unk>.
Speaker Change: We said that.
Speaker Change: In our bookings in the year.
Speaker Change: Reaching 24 close to 20%.
Speaker Change: Whereas in our revenue of course, it's lower than that since we're burning revenue related to prior period bookings in our revenue.
Speaker Change: Fsp's represent in 'twenty, four more about 15, 15% to 16%.
Speaker Change: So.
Speaker Change: Obviously, we try and get to 20% however.
Speaker Change: Again, I said before.
Speaker Change: Many times that these are <unk>.
Speaker Change: <unk> suites.
Speaker Change: We've seen it before in this industry, where large pharma revolts to FSP. Despite.
Speaker Change: I decided to in source more of the activity.
Speaker Change: But then this swing back and Mike you might find it interesting to know that in the quarter. We actually started seeing some signs of this reversal.
Speaker Change: Okay actually in the quarter.
Speaker Change: SSD are bookings.
Speaker Change: Bookings represented less than 10%.
Speaker Change: Of the four.
Speaker Change: And when we look at our qualified pipeline is in the <unk>.
Speaker Change: Mid single digits, low single digits and the RFP flow is about 5%.
Speaker Change: We actually have a very very strong.
Speaker Change: Yes.
Speaker Change: Exciting pipeline.
Speaker Change: And RFP flow in full service work for asphalt and the reason is this is all the same as the reasons that have always led our clients to do more outsourcing which are basically that.
Speaker Change: They cannot possibly if you have all the expertise in house.
Speaker Change: Sometimes they buy assets.
Speaker Change: Current therapeutic.
Speaker Change: Indication.
Speaker Change: And they need it.
Speaker Change: The resources that they don't have in house.
Speaker Change: And thirdly accurately in doing the FSP work and thinking more oversight in house, they realized that it can become prohibitively costly to do so over a large number of spuds.
Speaker Change: And invariably.
Speaker Change: The reverse back for any of these reasons to foodservice and we started to see some signals of that it's not just a snapshot in this case it was towards the bookings it's truly the RFP flow and it's truly the qualified pipeline, we see FSC as a percentage of total decline.
Speaker Change: I think you had another question.
Speaker Change: That's why I was so.
Speaker Change: So two big files, we said.
Speaker Change: <unk> had been postponed I've taken out of the us.
Speaker Change: The end of last year and pushed back to the back of this year.
Speaker Change: We received confirmation from one of them and Thats. The good news that is expected to get started in the towards the second half of it was the end of the year as planned. So that's confirmed the second one go for reasons that are.
Speaker Change: Inherent to the comfortable trial itself. The same situation that we're facing before was pushed out of this year and want to stop this year again all of that was.
Speaker Change: Contemplated in our guidance and so nothing has changed with respect to our numbers.
Speaker Change: Okay. Thanks very much.
Speaker Change: Alright, yes add a little bit more color on that so.
Speaker Change: Our reaffirming our range.
Speaker Change: That Mega trial pushed out of the period is already set.
Speaker Change: Let's see what happens with the bookings environment for the balance of the year, you can conceivably see sort of Rds, probably shading more towards the lower end of our guidance range, but we'll have to see our BD teams are out there actively working to security business.
Speaker Change: Correct, yes.
Speaker Change: Got it thanks guys.
Speaker Change: Well move to our next question from Eric Coldwell at Baird.
Eric Coldwell: Thanks, I have two if you don't mind you might've, just partially answered the first one so I was going to ask about the impact on guidance from FX and the question was was there any other change to the guidance or directionality of the guidance, excluding FX what im good.
Speaker Change: To us during the prepared remarks, or maybe the Q&A Ron said that the.
Speaker Change: Year over year gross margin reduction in Q1 was primarily FX, but FX has now turned from a big headwind to a moderate tailwind.
Speaker Change: Im questioning how much EBITDA and EPS were protected by the FX shift I E would you have.
Speaker Change: Needed to maybe reduce the range on EBITDA and EPS, if it werent for FX.
Speaker Change: No I mean EBITDA is.
Speaker Change: You can think of it as being largely independent from the FX rates the impact of FX on EBITDA is very muted the impact on revenue. Obviously is you saw a big increase in our value.
Speaker Change: For the year on revenue and that the combination is to reduce our margin into our required margin guidance, but yes.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: No no no notable impact on EPS than familiar for wrap up.
Speaker Change: And then if I can have one more quickly.
Speaker Change: And apologize toggling like everyone toggling multiple calls today, so I might have missed this.
Speaker Change: I have received a couple of inbound questions from investors during the call about.
Speaker Change: Taz M&A and the M&A impact overall from the firms. So if you addressed this im sorry, but I am getting some questions on it I thought I'd throw it out there.
Speaker Change: 200 basis points for the quarter, Eric and about 150 basis points for the year, the majority, but not entirely and task.
Speaker Change: So if cash so the question Ron was if <unk> was the majority and I don't know if thats, a 60% or 90%, but if it was the majority then mathematically I believe you could have picked up as much as five points of growth in Taz <unk>.
Speaker Change: No no I forgot March organic organic growth and solid mid single digits. Okay. Perfect. Thanks, very much <unk>.
Speaker Change: Yes.
David Windley: We'll move next to David Windley at Jefferies.
David Windley: Hi, good morning, Thanks for taking my question.
David Windley: I wanted to focus on margin and ask if you could talk about margin performance by segment.
David Windley: And then on the restructuring activities.
David Windley: The expense that you took in the quarter the add back was a little bigger I wondered if you could comment.
David Windley: Related to cost takeout, what some of the targets or is it still kind of right sizing head count or facility consolidation or is it something else and how we should think about those cost takeouts again going back to the margin by segment. Thanks, Yeah, Yeah, well Luke.
David Windley: What we're doing in terms of.
David Windley: Margins.
David Windley: And is essentially dwarf in our cost structure to say, where we'll be working on it forever.
David Windley: The address.
David Windley: The overhead structure as we continue to scale up our business.
David Windley: The address.
David Windley: Sure.
David Windley: Labor arbitrage, we offshore we have offshore centers.
David Windley: All over the world for different.
David Windley: Our centers of excellence for different types of activities both on the <unk> side.
David Windley: And we continue to shift work.
David Windley: Different places where it is optimal.
David Windley: And finally, we use technology automation and now AI agents.
David Windley: To bring.
David Windley: More efficiencies to our processes.
David Windley: Those activities result in a restructuring of head counts.
David Windley: Literally all over the world in both in all segments.
David Windley: So that's what you see reflected in the boardroom structural numbers, but that's the when we talk about margins by segments.
David Windley: We do we have a disclosure we disclosed.
David Windley: Yes, we have a disclosure segment disclosure on that basis.
David Windley: It's a little a little bit more pressure on overall margins and the R&D segment and there is then the tag segment.
David Windley: We've had good SG&A performance, a little bit where gross margin pressure in the <unk>.
David Windley: <unk> segment, some of that mix related relating to FSP.
David Windley: It also increases higher growth in that business it tends to be around the rollout of our digital mix the mix influences margins in the segments right. So.
David Windley: Real World for example.
David Windley: Is somewhat lower margin than the rest of the business and the analytics the data the technology and so as a result, when real wood grows faster.
David Windley: And you do have a mix impact on margins that's for the commercial side and then on the R&D yes.
Speaker Change: Ron mentioned FSP and lab do have lower margin profile, that's in service and as I mentioned in our revenues.
David Windley: Hi, Paul.
David Windley: In the quarter.
David Windley: Sure.
David Windley: On the revenue side I mentioned earlier that in my commentary on bookings.
David Windley: And pipeline Rfps that seems to be going the other way now.
David Windley: On the on the revenue side.
David Windley: It was a little larger in the quarter and that was assortment with larger and those too.
David Windley: Lower margin profiles, then then for certain so yes, we did have the quarter.
David Windley: Adverse mix impact on margins, but again that can fluctuate quarter to quarter.
David Windley: Alright, great.
David Windley: <unk>.
David Windley: Yes, I would just say any any pass through movement as part of that conversation that we should be aware of pass through change.
David Windley: The revenue composition.
David Windley: Talking.
David Windley: About the area of significant okay.
David Windley: Okay, great. Thank you.
David Windley: Alright, we have time for one more operator.
Speaker Change: And we'll go to Kate has silver at Morgan Stanley.
Hey, guys. Thank you for the time here.
Speaker Change: A quick two parter, Ron any comments on the stranded costs associated with the Mega trial that you that is now pushed to 2006 and ease.
Speaker Change: Are there any risk that the second trial, which you just got confirmation on could slip again in that sort of <unk> timeframe into 2006, as well and then I have.
Speaker Change: One for you on railroad evidence you called out some of the unique sort of policy driven opportunities for that business over the medium term.
Speaker Change: Is there anything youre doing either organically or perhaps from an M&A standpoint that could position us to fully capitalize on some of these opportunities that are coming up.
Speaker Change: I'll start with the.
Speaker Change: <unk> Court.
Speaker Change: A little bit of impact, but not a not a huge impact obviously on the trial that got further delay.
Speaker Change: We're going to free up those resources.
Speaker Change: <unk> purpose is to keep them there indefinitely, but there is for the one that's going forward there is a little bit of impact not terribly significant and well we can only react to what our customer tells that saw the.
Speaker Change: The trial that with further delayed and we're assuming.
Speaker Change: It will go forward.
Speaker Change: The customer still wants to do it and will fit and we wanted to.
Speaker Change: As far as planned.
Speaker Change: Recent transformation that's the plan so theres no no further news on that one notification of any changes.
Speaker Change: As of today, so that's what that what was the other question.
Speaker Change: Real World, Yeah, well no look re award I think we are the industry.
Speaker Change: Palin.
Speaker Change: We are recognized as the leader in the area.
Speaker Change: In this segment and we intend to fully capitalize on the opportunities that may emerge.
Speaker Change: From.
Speaker Change: Any new initiatives from the from the administration as I mentioned in my remarks. So I think again, we are very well positioned here.
Speaker Change: To navigate these turbulent.
Tubular and times.
Speaker Change: We're very confident based on our conversations with clients that.
Speaker Change: The world is not coming to a head.
Speaker Change: The industry will find ways to adapt we find there are many reasons to feel very optimistic.
Speaker Change: As I said, it before and again I feel better.
Speaker Change: We'll be rewarded than I did at the same point last quarter when I look at the metrics, whether it's on the commercial side or on the R&D side.
Speaker Change: <unk>.
Speaker Change: And based on our conversation with clients.
Speaker Change: So with that.
Speaker Change: Okay. Thank you everyone statements joining us today.
Speaker Change: Our second quarter 2025 earnings call. The team will be available the rest of it take any follow up questions that you might have thank you very much aggregate debt.
Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.