Q2 2025 IQVIA Holdings Inc Earnings Call
Welcome everyone to the iqv a second quarter 2025 earnings conference call all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Carrie Joseph. Senior vice president, investor relations and treasury, Mr. Joseph, please begin your conference.
Thank you all for.
Ron Bromenn: Good morning everyone. Thank you for drawing our second quarter of 2025 earnings call. With me today are chairman and chief executive officer, Ron bromenn Executive, Vice, President and Chief Financial Officer, Eric szerver, Executive, Vice President, and general Consul Mike. Feduk, Senior vice president by supplying analysis and Gustavo Peroni senior director of investor relations.
Ron Bromenn: Today we will be referencing a presentation that will be visible during this. Call for those of you on our webcast, this presentation will also be available following us on the events and presentation section of our iqvia investor relations website at IR iqvia.com.
Before we begin, I'd like to caution listeners at certain information discussed by manager. During this conference call will include forward-looking statements, active results, could differ materially from those state or implied by 4 of those able to address uncertainty associated with company's business, which I discussed in the company's filings, with the Securities and Exchange Commission, including our annual report on form, 10K and subsequent SEC files.
Ron Bromenn: In addition, we will discuss certain non-gaap Financial measures on this call which should be considered for supplement too. And not a substitute for financial measures prepared in accordance with gaap. A Reconciliation of these non-gaap measures to the comparable, gaap measures. This included in the press release and conference call. Presentation, I would now like to turn the call over to our chairman and the CEO of r.
Speaker Change: Thank you Carrie and good morning everyone. Thank you for joining us today to discuss our second quarter results.
Speaker Change: I see you have the new version with another strong quarter Revenue with seated, the high end or our guidance range as we reported over 4 billion dollars in quarterly revenue for the first time in our history.
Adjusted evida and adjusted. The WPS came in towards the high end of our guidance range as expected tags continues to perform well in the second quarter supported by clients commercial roadmap strategies and new drug launchers.
Speaker Change: Does reported Revenue growth above our expectations at 8.9% led by double digit growth in real world evidence.
Speaker Change: On a clinical side. Our networking is in the port of approximately 2.5 billion dollars translating to a netbook to Bill of 1.12. Our booking performance improved in the quarter, even as the overall Market environment remains essentially unsettled. And there is still uncertainty persisting regarding future Administration policies, affecting the pilot pharmaceutical industry.
Speaker Change: Of course, this continues to cause some delays in the decision making on new programs. But the R&D team has reacted to this new environment by intensifying our Seymour win more go to market strategy aimed at expanding market gains.
Speaker Change: These strategies helping the business navigate this period. And in fact, the R&D team is seeing good traction from these efforts.
Speaker Change: Our qualified pipeline was up high, single digits sequentially and year-over-year driven mostly by the EVP segment. Importantly we saw a meaningful. Uptick in RSP flow, second quarter, RFP Pro RSP flow, low teams, year-over-year and high single digit sequentially with growth in all customer segments.
Speaker Change: Are we rate improved significantly most notably in the EBP segment?
Speaker Change: As a result, our backlog reached a new record of over 32 billion dollars at the end of the quarter, growing over 5% compared to the prior year. Now, let's look at the results of the quarter.
Speaker Change: With the legal strong revenue and profit results.
Speaker Change: A constant currency Revenue. Grew 3.6% and 4.6%. Excluding Co
Speaker Change: Second quarter was just a little bit. De increased 2.6%, second quarter, adjusted diluted EPS of $2.81 increased 6.4% year-over-year. Now
Speaker Change: Let's review a few highlights of business activities.
As you know, AI is a big deal for us. We are all in in this transformation and as we've discussed before, a lot of work here is done with Nvidia, support iqvia is developing, AI agents, that simplify operations across Life Sciences in fact,
Speaker Change: Nvidia. Showcased these agents in June of their Flagship conference in Europe, where our clinical trial platform was highlighted as a leading example of smart, AI a justification,
This collaboration you can of custom build AI agents using Nvidia technology designed to streamline processes.
Speaker Change: And hence, workflows and accelerate insights Across the Life Sciences ecosystem.
Speaker Change: Use cases for this agentic, offerings include Target, identification, clinical data review literature review market assessment and HTTP engagement.
Speaker Change: This will matter, has not gone, unnoticed reflecting the strength of our AI strategy and execution, Everest group recently named AUA a front runner generative, AI leader for the life sciences industry in its recent reports, a ideas to action operationalizing generative, AI in life sciences.
Speaker Change: A studio was the only cro to receive the highest ranking of front runner in this report, which measures the value impact of end-to-end generative? AI capabilities.
Speaker Change: For 15 Kerr, fully selected broad-based, AI companies crows and Life Sciences Specialists and each firm.
Speaker Change: Let me now, give you some color on task business activity, a top 10, farmer client selected in Cuba to advance their Market access strategy for a breakthrough type 1, diabetes therapy entering Europe.
Speaker Change: By leveraging, AI driven insights, and pricing expertise. I previously helped shape this value, proposition pricing and Contracting approach to support successful adoption.
A European biotech client selected, Ikea to support the global launch of a novel oncology therapy.
Vinnie greens: Hey QJ is Vinnie greens. The Gen AI, powered, assistant and HTTP Persona insights.
Vinnie greens: This solution will enable simulation of HTTP behavior, and precise targeting showcasing. A QBs unique, blend of data AI enabled technology as well as our expertise in product launch and the specific oncology therapeutic area.
Vinnie greens: The top 10 Pharma client. Awarded like qvr strategic engagement to support the launch of a novel, oncology therapy in the US, delivering insights, and Technology infrastructure to ensure commercial success.
Vinnie greens: The top 10 farmer client selected and curious to read a global real world. Safety and effective study, for a new Dermatology treatment spanning 8 countries and 3,000 patients, which will support product adoption and long-term evidence generation.
Vinnie greens: The European biotech company, awarded auia, a global observational, study to assess the real world safety, and effectiveness of a rare disease therapy in kidney disorders.
Vinnie greens: The win highlights that qvs rare disease expertise, strong client, partnership and use of AI enabled tools.
Vinnie greens: To optimize study design and delivery.
Vinnie greens: Moving now to rnds.
Vinnie greens: We continue to win a significant portion of oncology related trials.
Vinnie greens: Our leadership in oncology research is exemplified by our recently announced strategic collaboration with Sarah Cannon. Research Institute 1 of the late nation's leading, oncology Research Hospital Network.
Vinnie greens: This strategic collaboration aims to transform oncology trials, globally.
By the 1983 global scale, and connected intelligence with scri.
Vinnie greens: Deep Community, oncology expertise. We're aiming to accelerate trial activation boost Recruitment and streamline data capture of electronic health, records, ultimately removing operational barriers and speeding the delivery of breakthrough therapies to Part 2 patients.
Vinnie greens: College space.
Vinnie greens: Client selected IQ here to lead a complex Global phase 3 colorectal cancer program.
Speaker Change: Actually, I was selected due to our oncology therapeutic expertise proven track records knowledge of the regulatory landscape in our analytics capabilities.
A rapid disclaiming biotech selected IQ here to lead. 2 phase 3, Global pancreatic oncology trials, continuing a high performing partnership with this client.
Speaker Change: A large farmer client selected. Auia to lead a global phase 3 MDS, oncology trial.
Continuing our successful at collaboration with these clients on this asset.
Obesity is another therapeutic area where our performance has been particularly strong.
A biotech client selected auia to lead 2 Global phase 3. Obesity trials leveraging. Our vast footprint and deep expertise in chronic weight management.
Speaker Change: The top 10 farmer clients selected by Cuba Laboratories to support expansion of their next Generation glp1 development programs. Building on an existing partnership to investigate the Drug's efficacy in treating obesity, and type 2 diabetes.
I also want to highlight a growing strength in cell and gene therapy trials. Ailia was selected to manage a significant Gene editing program for Wilson disease.
Speaker Change: Spanning both observational and Interventional studies. The project, deploys AI enabled solutions that drive speed and Precision in rare disease, research.
Speaker Change: Finally, we were honored to be recently recognized for our innovation.
Speaker Change: In facilitating decentralized trials.
Speaker Change: at Cuba was named winner of the best mobile apps for patients engagements as the 2025 Medtech breakthrough awards at TVs, have a power patience and caregivers
Speaker Change: to participate in decentralized Trials from anywhere while ensuring strong privacy and security.
Speaker Change: The app has multilingual support and is available across many geographic regions.
Speaker Change: Increasing patient access and engagement and retention.
Speaker Change: And how to run more details for our financial performance.
Speaker Change: I'm sorry and uh good morning everyone. Let's start by reviewing Revenue, second quarter revenue of 4 billion, 17 million was up 5.3% on a reported basis in 3.6% constant currency. Now excluding Co related work from this year and last Revenue grew 6.3% at actual currency and 4.6% constant currency.
Speaker Change: Technology and analytics Solutions revenue for the second quarter was 1 billion 628 million that's up 8.9% on a reported basis is 6.8% of content currency.
Speaker Change: R&D Solutions, second quarter Revenue was 2,221 Million up to 2.5% reported
And 1.3% of constant currency.
Speaker Change: It's good in the step down in Co related revenues rnds. Revenue growth was 4.2% at actual currency and 3% of constant currencies.
Speaker Change: Lastly, contract sales and Medical Solutions. Second quarter of Revenue was 1808 million dollars and that was up, 9.3% reported 6.4% of constant currency.
Speaker Change: For the first half total company Revenue was 7846 million up, 3.9% reported in 3.5% at constant currency, uh, and excluding coid related, work Revenue, grew 4.8%, had actual currency and approximately 4 and a half percent at constant currency.
Technology and analytics. Uh Solutions revenue for the first half was 3,174 million of 7.7% more than 7.2% in constant currency.
R&D solutions for a path revenue of 4,333 million was up, 1.4% reported in 1.2% in constant currency, and excluding Co related work from both periods revenue, and RDS from 3.1 it, actual currency and approximately. 3%, at constant currency for the half
Speaker Change: Lastly, a CFM that's in the first half, had revenue of 369 million up 2.2% reported in 1.9% of constant currency.
Speaker Change: Okay. Moving down to p&l adjusted. I was 910 million for the second quarter. Well, first half adjusted even though it was 1 billion 793 million.
Speaker Change: Second quarter gas. Net income was 266 million in gas. Diluted earnings per share was $1.54.
For the first half. Gaap, net income was 515 million.
Or $2.94 of earnings per diluted share.
Adjusted net income was 486 million for the second quarter and adjusted ballooned earnings per share was $2.81 up 6.4% for the first half adjusted. Net income was 965 million or $5.50 per diluted share that being up to 6.2% year-over-year.
Rise.
Next 12 months revenue from backlog was 8.1 billion dollars going 4.8% year-over-year.
Speaker Change: hey, let's review, balance sheet metrics, now, as of June 30th, cash and cash, equivalents total 2 billion, 39 million in Gross, debt was 15,490 million and that resulted in net debt of 13 billion 451 million, our net, leverage ratio ended the quarter at 3.61 times trailing 12-month Justice,
Second quarter of cash flow from operations was 443 million in capital expenditure of 151 million.
Speaker Change: Resulting in free cash flow of 292 million.
Speaker Change: now, you saw in the quarter that we repurchased 677 million of our shares, which brought our first half, Cherry purchase activity to above 1 billion dollars,
This leads us with approximately 2 billion dollars of repurchase authorization remaining under our current program.
Speaker Change: Also, in the quarter, we issued 2 billion dollars of senior notes maturing in 2032.
Speaker Change: Now, let's turn to the guidance.
Speaker Change: We're narrowing our guides ranges for Revenue. Adjusted Eva adjusted diluted earnings per share as follows.
Speaker Change: Uh, we expect Revenue to be between 16,100 million and 16,300 million representing year-over-year growth of 4.5. To 5.8%. We're just over 5% at the midpoint.
Speaker Change: This guidance includes year-over-year, FX Tailwind of approximately 100 basis points. We continue to assume about 100 million step down in coid related work.
Speaker Change: And approximately 100 150 basis points of contribution from m&a, activity for a full year.
Speaker Change: We expect adjusting, even though to be between 3 billion 750 million and 3 billion 825 million
Speaker Change: We expected just to deleted. DPS could be between 11 and 75 and 12 and 5 cents. That's up 5.6 to 8.3% versus prior year.
Speaker Change: Or about 7% at the midpoint.
Speaker Change: Okay, for the third quarter, uh, we expect Revenue to be between 4 billion, 255 million and 4 billion, 100 million dollars.
Adjusted Eva is expected to be between 935 million and 955 million and adjusted deleted. The EPS it's expected to be between 2.92 and 3 dollars.
Speaker Change: Both this quarterly guidance and our full year guidance assume that foreign currency rates as of yesterday, July 21 continue for the balance of the year.
Speaker Change: So to summarize, uh, in Q2 we delivered strong revenue and profit results towards above the high, end of our expectation,
Are the table business unit. Uh, in particular reported Revenue above Target and rnds despite the effects of continued uncertainty on the industry. The team. There is responded. Well, improving wind rates and expanding share, which together contributed to the stronger. Bookings and a record backlog in the quarter.
Forward-looking metrics for rnds offerings remained positive, including a significant uptick that we saw in RFP as well.
Speaker Change: Let me hand it back to the operator, clean up for Q&A.
Speaker Change: At this time, I would like to remind everyone.
Speaker Change: Star then the number 1 on your telephone keypad. We request that you please limit yourself to just 1 question, so that others in the queue May participate as well. We'll pause for just a moment to compile the Q&A roster.
Luke Sergot: Your first question comes from the line of Luke sergot with Barclays. Please go ahead.
This is Samantha louth. Thanks for taking your questions here. Uh, just, uh, first 1 on tags, that's continued to kind of defy the overall environment of, you know, mfn tears, tariff fears,
And that seems to be hitting rnds a little bit along with your peers on the clinical research side being that at least a portion of it is short cycle. How does toss continue to earn through this environment?
Is the real world evidence strength and other areas of strength within ties. Offsetting any weakness and any of the other sub-segments
and how does the current environment differ from a year or 2 ago where Taz was seeing headwinds
Luke Sergot: And the R&D s side of the business was kind of humming along. So seems as if diversification story is shining through here.
Speaker Change: Yeah, good morning Glen. Thanks for your question. Um,
Speaker Change: not sure, I guess you're more of a general overall environment. And and, and what happened in each of the segments again, I can also say that in time
Speaker Change: We deliver better than expected Revenue growth in the quarter.
Speaker Change: Um, above the high end of, uh, our expectation range.
Speaker Change: Uh, just down to 9% um, 7% of council currency. We, you know, we will, uh, we have been on a
strong recovery in t, since really the first quarter of last year we
Speaker Change: Expected that it's a little bit better than expected.
Speaker Change: um again we've said this many times our clients um, continue launching new drugs,
despite the uncertainty your short-term and certainty over the environment, you know, the molecules that were approved need to be launched and you can uh only delay
Speaker Change: So much. And so at some point in time we knew this was going to happen and this is happening.
Speaker Change: um, clients are continue to execute, uh,
In a, you know, regular way they have, uh, commercial road maps.
Um, and uh, those require services.
Speaker Change: we really saw an improvement in the general environment, you know, uh, when when things slow down and uh,
Speaker Change: And there was sort of a lot of things put on, hold.
Speaker Change: Um, and Taz growth deteriorated to low single digits.
Speaker Change: And, and of 23, and this part of the 24.
Speaker Change: Um, we uh we saw decision, timelines, extend considerably.
Speaker Change: and they've now um gone back to normal actually even better than than than that and
Speaker Change: Uh, you know.
Speaker Change: It's sort of.
Speaker Change: Business as usual. In terms of the segments, yeah, real world was the strongest, uh, double digit.
Speaker Change: Remember, we are all is about a third.
Uh, of, uh, of the Taz business and the rest of the business, you know, data Consulting and take, you know, depending on the segment.
Speaker Change: Was uh you know, between low and mid single digits. Um I see here for for the segments but you're correct the driver.
Speaker Change: Makes driver of superior. Growth was the uh, the real world business, and the rest was again flat to meet single.
Speaker Change: we feel good by the way about the indicators and continued strength in 2025,
Speaker Change: Um, the the the opportunity is created in the whole uh, group.
Speaker Change: Um, I think very strongly both in volume and dollars.
Speaker Change: Uh, the heat rate, uh, the win rate in Taz, improved a couple of points, uh, year-over-year
Speaker Change: As I mentioned before the average time to close improved further, I think it's 15% or so shorter than than prior year. So we continue to be confident in the, in the fundamentals of the business and the, and the and the recovery.
Speaker Change: The team did all that coming along.
I think, uh, there was
very high level of activity and intensification of our go to market activities, which enabled us to
book on a net basis, 2 and a half billion dollars in the current environment versus the 2.1 billion dollars. We booked in the first quarter.
Speaker Change: Um, and uh, we generated a lot of opportunities and forward demand indicators. As we shared in our introductory, remarks are very strong,
Thank you.
Speaker Change: Absolutely.
Our next question is from the line of SLO Rosen bomb with steeple. Please go ahead.
Speaker Change: Hi, thank you very much. Um, our I want to focus a little bit more on that R&D as and what we were talking about. It sounds like for what you're saying is the environment. Did not really improve. Uh, but you're gaining more ground in that and if you could double click a little bit, is it, is it really the client confidence is is is really the same or is there anything that's improving? I'm just asking. Also, because not just to uh you know medpace also reported with some better numbers. And usually if you have a few uh you know competitors there that are moving the same direction, it it seems to indicate some kind of improvement because not everybody's always doing better at the same time. Uh, you know, they got to be taken care of from somebody. Maybe you could just d double click a little bit in terms of
Speaker Change: That changed sequentially of of what you saw on the ground.
Speaker Change: Yeah.
Speaker Change: Um just a few things aside here, you know, the competitor you mentioned, you call it the competitor, but I just want to say we never meet in any of the defenses with this competition.
Speaker Change: So we're not planning to it's such a different business as the numbers show, but moving to your question on RBS.
Speaker Change: um,
Speaker Change: uh, we the, you know, the environment.
Speaker Change: I said remains unsettled in terms of the administration policies and the level of uncertainty that
Speaker Change: That's how big.
Speaker Change: but um, whereas in Prior periods, we saw clients sort of on hold we noted that clients essentially
Speaker Change: Not necessarily returning to business as usual, but I getting on with their programs, you know, if you have a, a, a in front of you a phase 3 program, that's very important for the company and that is going to last 4 years.
Speaker Change: You know, it's important that you be in Market ASAP. If you have good data and good results, and good, promise for the program,
Speaker Change: And you can't truly afford to wait, another 6 months. So at some point in time, you got to get on with life. So to that degree, I would say the environment possibly has improved slightly and we see some of those green shoots in the demand metrics.
Um,
Speaker Change: It has remained the same with respect to the administration and policies and the uncertainty around exactly what may or may not happen.
Speaker Change: um, and that time window is relatively short limited and and narrowing and therefore I guess the client base
Is moving on.
To, to a degree.
Speaker Change: And and and to that, in that sense, the environment is is improving and then separately. We as to use your expression, which I think is a good 1, we lean lean on
Speaker Change: We lean in.
Speaker Change: Uh, to the market, uh, a little bit more forceful than usual. We call this see more
Speaker Change: With more.
Speaker Change: That is with expanding your net.
We are uh, responding to more rfps generating more.
Speaker Change: A flow of opportunities.
Speaker Change: And we are going in to win.
Speaker Change: And our win rate has increased. And I think all of that is essentially What's led to
Speaker Change: the good results. We've had this score better than what, uh, we would have expected. And by the way, this is across segments a large Meat and EBP, but I would know.
That um, the EBP segment was particularly strong.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Elizabeth Anderson with evercore isi. Please go ahead.
Speaker Change: If you could comment on sort of the, the Cadence in the back half of the year, um, obviously you give the revenue assumptions for the for the third quarter, you know, is there anything to to think about in terms of timing aspects. I know you guys have like a previously started talking about the restarting of a trial that had previously gotten delayed, um, just so we can think about the Cadence of that into 26 and then, secondly, anything to call out on the gross margin side. You know, it looks like maybe it would had some just mix impact from Taz, but just anything to think about there in terms of the Cadence for the back half of the Year. Thank you so much.
Yeah.
Speaker Change: Um,
Speaker Change: so on the Cadence, I mean first of all generally uh and that's it, there is a a certain level of seasonality to our business which you're familiar with
Speaker Change: Um, the first quarter will be the sort of weakest. A lot of our business in Europe, essentially stops from 15th of July, to 15th of September,
Speaker Change: Um, but and the fourth quarter is is is is much stronger. That's true in R&D is, and it's true, uh, in advance. So, that's the first general element that has always through year in year out.
um, with respect to rnds and the specifics of your question regarding that a large delay trial that we uh, said before was going to resume in the later part of 25 and that's still on and in fact, we're having um, you know, initiation discussions with the client and that is still on as
uh, as forecasted and and, and that obviously, um, will be responsible for some of the
Speaker Change: larger than usual optic in the fourth quarter of this year. That's for the RDS.
um,
Speaker Change: You have other questions or ties again the you know tougher compared second half versus last year last year. You remember we generated in 199% very recall over 9% in the fourth quarter. So obviously you know the comparison there is is is is a bit more difficult when we get to the back half of the year in Talent.
Speaker Change: Um but um again you know, we're trying to be it's still early in the year and we don't want to, you know, move the needle too much at this point. And uh and uh um, let's see, let's see what happens. Everything looks good.
Speaker Change: um uh for now and and all of this as you suggest the the Cadence uh is looks for a gradual Improvement of the growth rate and especially in the fourth quarter,
Uh because of that uh resumption of that large trial as well as of course, Compares versus last year and generally stronger business activity than we would have expected. Otherwise you then ask about gross margin
um,
I I think you may have it wrong. You want to? Um yeah yeah work uh you you did see some compression in, our gross margin in the quarter and about a third of that is due to the FX Tailwind. As, you know, FX tends to move our Revenue line. Without moving our even down line very much and about 2/3 of it was due to product mix. Um, we had the higher Revenue growth and the real world and Taz, which tends to be a lower margin of portion of that business. Uh, and rnds, we had increased pass through revenues and also an increased proportion of fsp revenues, so that those were the drivers of what you saw. Now, of course, on the sgna side, we had strong cost control and offset, quite a bit of that. Uh, gross margin compression. Right, right. That's, that's, that's exactly right. It's a mix. Basically the the the strong answer is
The uh, pressure on gross margin is mixed driven for 2/3 and and FX driven for 1/3.
Yes, exactly. Yes. Well, I mean look it again once again, it depends uh on the clients and on the segments with respect to the large segments.
Speaker Change: Um, over the course of last year, uh, virtually every large farmer company is essentially reinvented. Um, the top, you know, 5 or 6.
Speaker Change: Crows. That is a 3. Largest ones, and 3 smaller ones.
And rebid, um, that preferred, uh, Partnerships. And as we mentioned we were
Speaker Change: um very happy that we uh won an expanded, all of those relationships further, I would say the the the 3 largest ones essentially are the
Speaker Change: The main providers and the smaller ones are invited.
Speaker Change: Essentially to to, to to, to keep pricing, you know, in line from the point of view of the of the large barmah customers and we respect with the other segments, you know, it's relationships. It's, it's go to market,
Um, and generally the mdp segments, you may have 2 or 3 uh bits, and we don't see much of a difference versus um, what was the case before, now, some of the competitors, uh, are, you know, forcing a little bit of a of a, of a price reductions. And I, I would say that that look our strategy to see more and win. More means that we are at the table every time.
Speaker Change: and we, whereas in the past,
Speaker Change: The competitor may have reduced pricing and we might have walked away. Um because we would not have wanted to align at that price level.
Speaker Change: um, you know
Speaker Change: now we we we don't know more often than not, we will not walk away and um, and grab business we will always prefer to have
Speaker Change: Uh, uh, uh uh, an an, an additional point of of Topline growth.
Um, and then we're work later on our on our costs and margins and accepts some short medium-term margin pressure. Uh, in order to ensure that we continue to build our backlog. So yes, your question about pricing is their pricing pressure. Yes, because of all the reasons I mentioned,
Speaker Change: Uh, plus the market environment, as I said, continues to be tighter and therefore, you have, uh, multiple other table for a relatively smaller pie. And that inevitably leads to, uh, uh, price impressions.
Speaker Change: So, but in that environment, you know, we are the large the largest player.
Speaker Change: We have the global scale player.
Speaker Change: Uh, and we intend to win.
Jeff Garo: From the line of Jeff Garo with Stevens Incorporated, please go ahead.
Jeff Garo: Yeah, good morning and thanks for taking the question. I was hoping we could dig in a little further on AI, any updates you have on development progress of additional AI Solutions and expanding use cases. And I I know it's early but curious what you're seeing in terms of demand from customers and and then lastly any further comments about how you guys are are using AI internally to drive efficiencies in the business. Thanks.
Jeff Garo: Thank you. Well yeah. Look a AI uh especially a gentrification of. Our processes is extremely important with uh we keep uh hiring resources uh building up teams and scaling up uh our efforts.
Jeff Garo: Um, we are progressing as planned to deploy, highly specialized industry focused AI agents both on the clinical side and on the commercial side. So far we've developed over 20 agents into production.
Jeff Garo: That cover 3 use cases in each of commercial real world and rnds.
Jeff Garo: We're seeing positive results, we're experiencing significant, um, you know, client interest.
Jeff Garo: um, we've expanded capacity to, you know, it has expanded the capacity to review by 10x
Jeff Garo: Um, another agent allows us to reduce delivery time by 2/3 from 12 weeks to 4 weeks.
Jeff Garo: With uh, with some significant cost reductions in the, our patient Journeys for our clients.
Jeff Garo: Um, we are currently developing over 50 agents to be deployed in the third quarter to production and covering 50, new cases what this means for. You know, look, there's a non enormous amount of interest from clients obviously every large organization.
Jeff Garo: Um, you know, wants to be on this AI trained and initially, especially large farmer wants to develop their own.
Jeff Garo: Solutions over time. It's becoming apparent that you know, speed here is extremely important because it all depends on your ability to train
Jeff Garo: Um, your AI models. Um, and you know, we've got the the goods so to speak. We've got the, the materials, the data, the expertise, um, which is what we collaborating with Nvidia on training is this AI agents and trying to move as fast as we can. Um, it's hard to see, um, you know, the impact in the short term, but in it will make a difference in
Of our ability to execute a much larger backlog faster on the rnds, and our ability to execute commercial strategies for our clients. On the commercial side, a lot faster, real world studies a lot faster. So speed efficiency uh over the long term. Obviously we expect internally
Jeff Garo: that, um, those efficiencies will enable us to
Jeff Garo: Um, you know, resume margin expansion and and go back to and and and continue to mitigate those pricing pressures. We are seeing in the short term.
Next question comes from the line of Michael Riskin with boa. Please go ahead.
Speaker Change: Great, great. Thanks for taking the question guys. Um Ari, I want to come back to the, the win rates, you called out. Um, in EBP, um, personal have a couple of times, um, just wondering if you could expand on sort of what steps you've taken internally with the organization to to achieve those higher wind rates. Um and whether you think that's sustainable going forward, if is that a sort of a a sustainable change or is that to make more effective of the dynamic and the the near-term market environment? Thanks.
Jeff Garo: well, look, um
the uh,
Jeff Garo: the success in the marketplace.
Jeff Garo: Um,
Jeff Garo: is a function, a of generating.
Jeff Garo: As many opportunities as possible, but we have the opportunity to bid.
Jeff Garo: And as I said, that's part of what's, the first part of our strategy which is see more?
Jeff Garo: so,
Jeff Garo: We're much more aggressive in going to Market in responding to rfps in general in the rfps.
Um, the RFP flow grew.
Low teams year over year and high single digit sequentially. And again, the growth was across
Jeff Garo: all customer segments, I might say EBP was up very, very strong.
Jeff Garo: Very strong.
Jeff Garo: Um, you know, see what was up, low teams year over year.
Um, large farmer was uh, low to mid single digits.
Jeff Garo: and EBP was, um,
Jeff Garo: Was much higher than that.
Jeff Garo: Um, now it's great to generate the flow. Now you have to win.
Jeff Garo: And their uh our directive is to win more and to win as much as we can.
Jeff Garo: Now, back to an earlier question that sometimes requires us to align to lower price than we would have been willing to tolerate in the past.
I know you're living indicator versus um, versus RSP flow, the qualified pipeline is up year-over-year and sequentially, High single digits. And again in EBT it's there in the double digits growth year over year. So uh, we don't we see that the the demand we are. Uh, we are able to participate in is increasing. Our win rate depends on our strategy, on our capabilities, we've been strongly that we are uniquely positioned and we will continue
Jeff Garo: To push through it. So the win rate is up significantly. I don't think we disclose those numbers. I have done in front of me and they are very very good.
Your next question comes from the line of Dan Dan Leonard with UBS. Please go ahead.
Dan Leonard: Thank you. I was hoping to talk a bit more about the margin. The the 2/3 of gross margin compression, you attributed to Mex
Dan Leonard: how do we think about that, going forward, especially in the context of that, you know, flat to 30 basis, point margin expansion, framework, that you've previously discussed
Dan Leonard: Uh, yeah. I mean uh look this is uh the mix.
Dan Leonard: Is what it is. Real world is growing faster.
Dan Leonard: Uh, and that's lower margins.
Dan Leonard: Um,
Dan Leonard: We have, uh, more fsp to execute in the short term.
Dan Leonard: And that's also lower margins on the RDS side.
um so I think in the short term, I would say that is going to continue and by short term, I mean in the next couple of quarters
Speaker Change: Have it said that?
Speaker Change: um, I might mention that this
Speaker Change: Uh, pendulum move towards fsp. I've said this before and I will repeat it. I do not believe is
Speaker Change: um, is permanent, in fact, a this fluctuates, by the way, but in fact in this um, quarter
Um, the proportion of net bookings, that FSD is in the very, very low single digits.
And I mean, very, very low.
Speaker Change: Everything else was fsp.
So full service. Um I'm sorry, everything else was full service right fso. So so I I think overall uh we saw fsp as a as a proportion of backlog pickup.
Speaker Change: Uh, 1 or 2 points.
Speaker Change: Totally historic 14 to 15% to more 16 16% 17%, but we see it coming down back to, to the same level. So I think
Speaker Change: RDS. Yeah, in the short term um some uh mixed unfavorable mix.
Speaker Change: But um I think uh, you know, after that we we should be back to to um to a more favorable mix. But all that's reflected for the next couple of quarters in the guidance. Yes, that's right. And, and you just also have to remember about the FX Dynamic. We have, we have that tailwind and that's compressing margins as well, right?
Speaker Change: Right. Right.
Speaker Change: Thank you. Thank you.
Speaker Change: Your next question comes from the line of jalinda sink with truist Securities. Please go ahead.
Thank you, and thanks for taking my questions. So I want to go back to task business. Uh, thanks for all the color by business lines. I actually want to double click on business and Consulting piece. It seems Trends. They are still remain below. Historical Trends. What are your expectations there in terms of business returning to high single double digit growth? What are some of the key leading indicators? You're watching for that business? Start bouncing back.
Speaker Change: Yeah, look the white 1 is there we track pipeline versus prior years and prior and and and python coverage.
Speaker Change: And I think we, we are confident that um, certainly in the future, we will return to, uh, needs to, uh, you know, High single digits as it was in the past.
Based on a, on a pipeline, uh, reviews.
Speaker Change: Thank you, but you're not, you're not expecting to return this year, right? It's more like most likely next year and Beyond
Speaker Change: Just want to clarify that? Yeah, probably end of the year next year. Yes. Okay, thank you.
For the next question, comes on the line of Anaheim with mizuho. Please go ahead.
Speaker Change: Good morning, thank you. Um, you know you referenced some of your clients, have some short-term uncertainty. Um, what do you think they need the most Clarity on to accelerate projects? Is it mfn pricing? Is it Clarity on, um, maybe tariffs?
Speaker Change: And I know it's still early for 2026, but when I look at consensus estimates for R&D revenue is up 4%. Do you think the current like bookings environment supports that type of growth or do we need an acceleration to support that?
Speaker Change: And, and you, you saw the next 12 months Revenue, in backlogs that we've reported um, out of Rees. So you can now that doesn't cover you all the way in 2026 but but but the numbers give me some investigation there and our pipeline, uh, and RFP flow has been strong. So we're not going to be giving 2026 guidance at this point, but you can kind of piece it together from all of that.
Yeah, and you have a question on the client's concerns and the policies. Well yeah, I mean it's all of the above, you know, it's the the the changes in the agencies and policies MD and so on this seems to be
Speaker Change: Um, sort of stabilizing. And there's some very good appointments and, and, and we feel good about that.
Speaker Change: Um, you know, mfn pricing, we're just waiting, you know, and there's been discussions and there's been thoughts but let me just say it's it. I don't want to come and more but then I said it's extremely complicated.
Speaker Change: Yeah. Um, and then tariffs
Speaker Change: You solve a lot of, uh, you know, non us large, uh, farmer company announced massive Investments.
Speaker Change: And I think this will help.
Speaker Change: Great. Thank you.
Question comes from the line of Jack mihan with nephron research. Please go ahead.
Thank you. Good morning everyone.
Speaker Change: Was wondering, if you could just share the latest thoughts on what you're seeing related to cancellation Trends. Um, have you seen that continue to moderate at all and, um, just thoughts on, you know, kind of a path to normalization there. Thanks.
Speaker Change: Yeah, I mean, look, we mentioned the first quarter that, uh, that cancellations were in the normal historical range, and that said the second quarter, same thing, same uh, Trend and overall first half really, uh, nothing unusual. No mega cancellation. And the uh,
Average basically is the same as was historically. Before we had the disruptions that we had last year.
Speaker Change: Thank you. Our next question comes from the line of Max Smock with William Blair. Please go ahead.
Matteline is open.
Speaker Change: Hi. Sorry about that. It's it's Christine rims on for Max smok. Um, so hoping you can give some quantification about the delays you are seeing on new clinical, um, projects know that you gave the 10% figure last quarter. So curious, if delays for new programs, got better or worse in the second quarter. Thank you.
Speaker Change: um,
Speaker Change: you're talking about which delays you're talking about RFP, uh, to decision making timeline.
Yeah, correct.
Speaker Change: Yeah. I mean that remains uh, longer. Yeah, I you know again the environment is
Speaker Change: More or less similar in terms of flying of the uncertainty and causing decision making. I mentioned that, you know, in many cases, some of these are programs that have been lost because clients just can't wait.
Speaker Change: To Launch.
Speaker Change: Um,
Speaker Change: But uh, if you look at the totality of the uh, decision timelines, they remained more elongated than than usual. So really,
Speaker Change: Um I I think our um, better performance in bookings in sales and generating opportunities is only partially related to a slight Improvement in the environment. Because if you look at, for example, EVP funding, it wasn't particularly special. You know, since the beginning of the year has been relatively tame,
Speaker Change: Uh, it's just that we've been a lot more um uh, proactive. Um, and with been extremely extremely successful in the marketplace uh in terms of our win rates versus history.
Speaker Change: And in generating both the the opportunities and in winning those opportunities.
So I wouldn't necessarily derive an implication and assume that uh all of the sudden the market has returned to normal.
Speaker Change: Thank you.
Speaker Change: No further questions at this time. Mr. Joseph, I turn the call back over to you.
Mr. Joseph: Thanks operator. Thank you everyone for taking the time to join us today and we look forward to speaking with you. Again, on third quarter 2025 earnings call, the team will be available for the rest of the day to take any follow-up questions. You might have have a good day.
This concludes today's conference call, you may now disconnect
Mr. Joseph: Please wait the conference will begin shortly.