IQVIA Holdings, Inc.

Ladies

and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Third Quarter 2024 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 one 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 like to turn the call over to Kerry Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Thank you, operator. Good morning, everyone. Thank you for joining our Third Quarter 2024 earnings call. With me today are Ari Boosby, Chairman and Chief Executive Officer, Rob Roman, Executive Vice President and Chief Financial Officer, Eric Sherbert, Executive Vice President and General Counsel, Mike Fedok, Senior Vice President, Financial Planning and Analysis, and Gustavo Perrone, Senior Director, Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the events and presentation section of our IQVIA Investor Relations website at .iqvia.com. Before we begin, I'd like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risk and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Boosby.

Thank you, Kerry, and good morning, everyone. Thank you for joining us today to discuss our third quarter results. IQVIA delivered another quarter of strong operational results. Revenue came in above the high end of our guidance range, representing about .5% growth, excluding the impact of foreign exchange and COVID-related work. And we also delivered 14% growth in adjusted diluted EPS. As we expected, the environment for our short cycle businesses continues to improve as our clients are launching new drugs and executing on critical commercial programs. In fact, TAS revenue growth accelerated in Q3 to over 8% year over year, with growth in all sub-segments. This reaffirms the second half growth trajectory that we had anticipated for TAS since the beginning of the year. And we now expect TAS growth for the year at the high end of our mid single digit range. On the clinical side, the near term market environment continues to be choppy as we've been discussing in prior earnings calls. None of this is new, but as you know, we've been facing aggressive competitive pricing and tougher negotiations. Additionally, the trend that started over a year and a half ago with large pharma re-prioritizing their program portfolios as a result of the IRA has been continuing. And this has been leading to a higher than normal level of cancellations. And we expect this to be the case again in the fourth quarter. On the EBP side, funding levels this year have improved, but as you know, it does take time for this funding to translate into actual RFP flows and even more time to translate into awards. Our bookings in the quarter included a substantial cancellation due to drug futility that impacted our quarterly net new business by approximately $350 million for that one trial. The reported net book to bill was 1.06, but excluding this specific cancellation, the book to bill would be 1.22. Lastly, in late September, two clients notified us of their need to delay two mega studies that were already in startup phase due to client related logistics issues. This affects our short-term guidance and Ron will share more about that later. While we navigate through these short-term challenges, it's important to remember that our CRO business is a long cycle business. The demand metrics give us confidence in the strength and resilience of our business. I'd like to share some details of what we are seeing. Firstly, as you may know, many large pharma companies have been running processes this year to reevaluate and consolidate their strategic partnerships. To date, we have successfully renewed every single large pharma strategic partnership. In fact, we've added new relationships, displaced incumbents and expanded the scope in over half a dozen of our strategic partnerships with large pharma clients. There are two aspects to this successful performance by the RDS team. One is that our existing large pharma customers have reaffirmed their trust in IQVIA. And two, it opens up opportunities for us to gain greater share of wallet in future programs because these clients have consolidated their strategic partnerships. In the EDP world, biotech funding reached about $16 billion in the quarter according to BioWorld. And that means that year to date, biotech funding was over $80 billion, which represents more than 50% growth in funding year over year. Now again, as I remarked earlier, it does take time and it could take a year to a year and a half before that funding translates in actual awards. Three, our backlog reached a new record of $31.1 billion at the end of the quarter and that represents growth of 8% compared to the prior year. Four, our trailing 12-month book to bill remains healthy at 1.22. Fifth observation, our next 12-month revenue from backlog is up .5% year over year. Our quarterly RFP flow continued the same trend we saw in the first half, increasing mid-single digits year over year. And finally, our qualified pipeline in the quarter is up across all customer segments and it grew low double digits overall compared to the prior year. And that is good. Now, just to be balanced, I should point out that in stronger market environments, that qualified pipelines have sometimes been up in high double digits. Now, let's turn to the results for the quarter. Revenue for the quarter grew .3% on a reported basis and .2% at constant currency. Compared to last year and excluding COVID related work from both periods, we grew the top line about .5% at constant currency of which just under 5% is organic growth. Third quarter adjusted EBITDA increased .7% driven by revenue growth and ongoing cost management discipline and that resulted in 30 bips of margin expansion. Third quarter adjusted diluted EPS of $2.84 increased .1% year over year. I'd like to share a few highlights as is our practice of business activity. Let me start with RMDS, where we continue to differentiate with our therapeutic expertise, clinical technology and public health offerings. IQVIA won a top 10 pharma partnership as a new preferred provider for central lab as well as secured extension for several existing FSP engagements in clinical monitoring, data management and clinical technology. We were awarded a strategic partnership to provide DCT solutions for a metabolic and cardiovascular program at the top 15 pharma clients. We're the only company that can offer these DCT services and technology without having to partner with third parties. Within oncology, which is as you know, a key therapeutic area for our industry, we were selected by several leading sponsors in the core, including a US biotech client to manage a large global phase three study for renal cell carcinoma for patients who have progressed after first line immunotherapy combinations. The large pharma customer to conduct an early phase trial in prostate cancer, leveraging our expertise in dose escalation and dose expansion study designs. A biotech client to run a global phase three study for a biosimilar targeting multiple myeloma. This project aims to bring the first biosimilar for multiple myeloma to market. A biotech client leader in cell and gene therapies to conduct a groundbreaking phase three trial for reoccurring cancer in the lymphatic system. Across these awards, we differentiate with our ability to run global studies with dedicated teams, as well as our AI enabled site selection solutions. Within clinical technology, in fact, we continue to expand our recently launched One Home for Sites offering. A biotech client selected IQVIA to increase clinical trial capacity by streamlining access to multiple vendor sites via our single sign on platform. In the quarter, a large biotech client selected IQVIA to expedite the setup of a trial to deliver vaccines for M-pox in Sub-Saharan Africa, addressing a critical outbreak in the region and significant unmet medical needs. Finally, IQVIA in partnership with the Coalition for Epidemic Preparedness and Innovations, CEPI, the Rwandan government and the Sabin Institutes responded to an outbreak of the Marburg virus, a hemorrhagic fever with greater than 50% fatality in Rwanda at the end of September. Our organizations collaborated to mobilize and dose the first patients with an investigational vaccination within nine days of the outbreak. Moving to TAS, as you saw from our results, the business is recovering even better than we had forecasted. One area we continue to make great strides in is in building differentiating AI capabilities across our offerings. You will have seen we recently launched the IQVIA AI Assistant, which is a new generative AI tool designed to provide life science customers with quick and powerful insights through a user-friendly conversational interface. This allows users to ask complex business questions and receive comprehensive and reliable answers in real time. IQVIA AI Assistant is built on IQVIA's trademark healthcare-grade AI, which enables extensive privacy safeguards and provides expert validation of accurate, reliable output as is demanded by the healthcare industry. IQVIA was awarded a multi-year contract by a large pharma client to deliver our next best action offering for sales reps across nine countries. This AI-enabled solution optimizes sales rep engagement activities and enhances their interactions with HCPs. IQVIA secured a multi-year contract with a North American biotech client to improve workflow efficiency through an integrated fully connected intelligence solution that includes OCE, orchestrated analytics, and one key offerings. The top 10 clients chose IQVIA to improve HCP engagement for a new schizophrenia treatment. And in this case, we displaced the incumbent by offering a solution that will enable daily alerts based on near real-time inputs versus the incumbent's weekly frequency. The top five pharma clients awarded IQVIA a multi-year contract to provide co-paid support for oncology and women's health franchises. This deal enhances patient access to medications and drives better health outcomes. Couple of examples in the real world segment, the top five pharma clients selected IQVIA to support the launch of a new GLP-1 asset targeting weight loss based on European payer reimbursement models. The top five pharma clients engaged IQVIA to provide an evidence-based approach for a client's medical affairs team to optimize funding decisions and pre-launch activities in the North American market. A top 20 large pharma client awarded IQVIA a contract to support engagement with HCPs and KOLs based on detailed share of voice analysis of scientific and clinical experts in nine countries across all core therapeutic areas for the client. Finally, and before I turn it over to Ron for more details on our financial performance, I'd like to invite you to our IQVIA Investor Day, which has been scheduled for December 10th on the campus of our headquarters in Durham, North Carolina. Our investor relations team will be available to provide additional logistical details. Event information is already available on our investor portal.

Ron. Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Third quarter revenue of ,000,000 grew .3% on a reported basis and .2% of constant currency. In the quarter, COVID-related revenues were approximately $20 million, down from about $100 million in the third quarter of 2023. Excluding all COVID-related work from both this year and last, constant currency growth was about 6.5%, of which just under 5% was organic. The majority of the acquisition contribution was in the TAS segment, as is typical. Technology and analytics solutions revenue was ,000,000, up .6% reported and .2% of constant currency. R&D solutions revenue of ,000,000 was up .9% reported and an even 2% at constant currency. Excluding all COVID-related work, growth at constant currency in R&DF was about 6%. Lastly, contract sales and medical solutions, or CSMS revenue of $180 million, declined .6% reported and .1% at constant currency. -to-date revenue was ,000,000, up 3% on a reported basis and .5% at constant currency. Excluding all COVID-related work, growth at constant currency was 6% -to-date. Technology and analytics solutions revenue was ,000,000, -to-date, up .9% reported and .3% at constant currency. Excluding all COVID-related work, growth at constant currency in TAS was 5%. Now as a reminder, Q1 2023 was the last quarter where TAS revenue had a meaningful contribution from COVID-related work. R&D solutions -to-date revenue of ,000,000 was up .6% at actual FX rates and 3% at constant currency. Excluding all COVID-related work, growth at constant currency in R&DF was 7%. Lastly, contract sales and medical solutions -to-date revenue of ,000,000 was flat on a reported basis, not 3% at constant currency. Let's move down to P&L. Adjusted EBITDA was ,000,000 for the third quarter, which was growth of 5.7%, while -to-date adjusted EBITDA was ,000,000, up .3% -over-year. Third quarter Gap Net Income was ,000,000 and Gap Deluted Earnings Per Share was $1.55. -to-date Gap Net Income was ,000,000, which represented $5.08 of Deluted Earnings Per Share. Adjusted Net Income was ,000,000 for the third quarter. Adjusted Deluted Earnings Per Share was $2.84, up .2% and .1% respectively versus prior year. -to-date Adjusted Net Income was ,000,000 or $8.02 per share. Our backlog at September 30th was $31.1 billion, that's up 8% -over-year and .7% at constant currency. Next 12 months revenue from backlog was $7.8 billion, growing .5% -over-year. Reviewing the balance sheet now, as of September 30th, -in-Cash Equivalents totaled ,000,000 and Gross Debt was ,000,000 and that resulted in a Net Debt of ,000,000. Our Net Leverage Ratio at the end of the quarter was 3.27 times trailing 12-month Adjusted EBITDA. Third quarter Cash Flow from Operations was ,000,000 and Capital Expenditures were ,000,000 resulting in very strong Free Cash Flow of ,000,000. You saw in the quarter that we repurchased ,000,000 of our shares. That leaves us with just under $2.2 billion of share repurchase authorization remaining under the current program. Okay, let's turn to guidance now. Now while our views on industry fundamentals remain positive, we are updating our full year guidance due to the delay in the two separate Fast Burning Mega Trials, which clients communicated to us at the end of the quarter. These delays resulted from client related logistical issues. Our team is working closely with these customers to ensure timely resumption of the trials in 2025. For the year, we now expect revenue to be between ,000,000 and ,000,000. Adjusted EBITDA to be between ,000,000 and ,000,000. And Adjusted Deluted Earnings Per Share to be between $11.10 and $11.20. There is no material change from our prior guidance to our assumptions around COVID related step down and foreign exchange. The revenue growth contribution from acquisitions is expected to be about a point and a half for the year. Now, at the second, excuse me, at the segment level, we currently expect TAS to grow approximately 6% for the full year and R&DS approximately 5%. Both growth rates are at constant currency, excluding the impact of the COVID revenue step down. For the fourth quarter, we expect revenue to be between ,000,000 and ,000,000. This includes TAS revenue of growth of approximately 8% and R&DS revenue growth of about 1%, both at constant currency and in the case of R&DS, excluding COVID related impacts. Adjusted EBITDA is expected to be between ,000,000 and ,000,000. And Adjusted Deluted EPS for the quarter is expected to be between $3.08 and $3.18. And this guidance assumes that foreign currency rates as of October 30th continue for the balance of the year. So to summarize, we delivered another quarter of strong operational results. Revenue came in above the high end of our guidance at about .5% year over year, excluding the impact of foreign exchange and COVID related work. Adjusted EBITDA margin expanded to 24.1%. Adjusted Deluted EPS grew by 14% as interest expenses no longer a headwind. Free cash flow was again strong, going 31% year over year, representing 109% cash conversion of adjusted net income. R&DS bookings were affected by the cancellation of one large program due to drug fatality. We updated our Q4 guidance to reflect the delayed start of two fast burning mega trials that are now expected to resume again in 2025. And while we are experiencing some near term bumpiness in R&DS, forward looking indicators continue to signal a healthy demand environment confirming the strength and resilience of this business into 2025 and beyond. And with that, let me hand it back over to the operator to open the Q&A session.

At this time, I would like to remind everyone in order to ask a question, press star then the number one in your telephone keypad. We request that you please limit yourself to just one question so that others in the queue may participate as well. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Anne with Mizuho. Your line is open.

Good morning, thank you so much. Any thoughts on preliminary 2025? I know the industry is going through a tough time now, but do you think you could still grow in that kind of high single digit range given the backdrop?

Thanks. Well, thank you, Anne. You know, we don't usually give guidance for the following year at the time of the third quarter earnings release, but we do plan to at least give some indication of what 2025 will look like at our investor meeting on December 10. And as always, to give you more precise guidance for the year concurrent with the full year earnings release. Now, having said that, look, you know, I'm gonna depart from what everybody else here in the room is telling me to do, and I'm gonna tell you that what, and I'll do that because the environment is so shaky, and obviously you're wondering what's gonna happen in 2025. So look, if you look at 24, we grew, we will have grown the company about mid single digits, okay? After all the short-term challenges that we signaled are absorbed. And my expectation is that it'll be similar in 25. That's really a high level expectation. We haven't finished our planning process, as you can imagine, but if you look at the segments, TAS has predicted rebounded in the second half, and TAS is a short cycle business, so I think things are coming back as expected, and we anticipate this will continue. So if TAS grows this year at constant currency, again, around 6% or so, then I think I'm expecting that the same will be true at least in 25. And then for RDS, which will continue to deal with these short-term cancellations in Q4 and probably the early part of 25, we are projecting five-ish percent growth, 5% plus growth for RDS for this year. I'm going to assume at this early stage that it'll be similar, and that's what's guiding my observation that I think company-wide will be around those levels as well in 25. Again, that's just as a placeholder. I invite you to join us on December 10, where our planning will be more advanced, and we'll share more about that, and certainly full-year detail guidance when we release full-year earnings. Thank you, Ann. Thank you.

Your next question comes from the line of Shlomo with Stifo. Your line is open.

Hi, thank you very much. Ari, I knew it's one question, but I just wanted to get a lot more detail, if you can, on the trial delays, because Icon talked about two trial issues also. They were talking about financial reprioritization and stuff like that with some of their clients. You're talking about some kind of logistical issues. Can you give us a little bit more detail? Are these logistics, physical logistics, what else could be involved in that? Does it have anything to do with the financials, and what kind of confidence do you have that the projects will really ramp into the second half of 25? If you can kind of flesh that out as much as possible, I'd appreciate it.

Yeah, so look, what other competitors are experiencing is absolutely coincidental. That's two trials, and we have two trials. I understand why you're asking the question. Just again, to step back and look at what's happening, we've got a general environment where, as I stated in my introductory remarks, large pharma has been reprioritizing their programs. There is nothing new here, and that has led, that's a direct consequence of the IRA. That has led to an elevated number of cancellations. That affects the industry, that's the market environment. And frankly, even in that environment, we normally should be expected, given our scale and performance and momentum, we should be expected to continue to deliver. And that's what we did for the first three quarters of the year. Separately and unfortunately, at the same time, we have had to deal with a very large cancellation that has nothing to do with reprioritization, it has to do with futility. And that obviously is affecting our short-term impact. Now, in a normal environment, we would have been able to absorb that and move on. But because it's such a tough environment and we're dealing with a general heightened level of cancellations, we've not been able to absorb that. Again, separately and unfortunately concurrently, two clients, this is totally independent of anyone else, of any reprioritization, of any financial considerations, of anything else have had for their own reasons. We know what the reasons are, I cannot share them with you, we are subject to very strict NDEs for obvious reasons. It has absolutely nothing to do with the drug, with us, with financials, we just can't tell you what the reasons are, and I regret that. But those trials will resume, they happen to be fast burning and they have to tend to be very large. We're confident that they will resume in 25. Now, I know it's a lot to absorb, and when you look at the whole picture, that's a lot of different things. And I regret it as much as you, but that's the reality we're facing with. A choppy environment, we navigate that under normal circumstances, but we've had to deal with two discrete events unrelated really to the environment. Good,

thank you.

I hope that helps.

Yep,

thank you.

Your next question comes from the line of Ann with JP Morgan, your line is open.

Hi guys, thanks so much for the question. I was hoping perhaps you could help us understand just maybe the timing of some of these dynamics of the cancellations. How much notice do you get in advance? And when we think about the delays for kind of pushing to the back half of next year, do they impact any other projects for 2025, or does that become incremental to 2025? Thanks very much.

Okay, on cancellations, typically, look, it depends. Okay, all these, there's two types of cancellations, and I'm gonna roughly say that in this past year, what we're seeing is that about half is due to the re-prioritization, and about half is the normal, you know, drug utility based on results. How does it happen? Well, the re-prioritization, you know, it's a process that our clients are going through, and you know, they've been going through this for a year and a half, and I believe we are peaking at this point. You know, it has an end, this process has an end. I see this ending at the end of this year. That's my prediction, it's one man's prediction, but I think that we're gonna still see elevated cancellations in the fourth quarter. You know, we don't, we, now IQVIA does not give quarterly numbers for cancellations, but what I've said before, normally it's about a half a billion dollars, and it can vary plus or minus $200 million either side. By definition, it's not a constant number. It cannot be the same number every quarter, okay? So there are quarters where it's 300, there are quarters where it's 250, there are quarters where it's 600, 700. The average is around 500, and I think that, you know, we're seeing, I wouldn't be, I'm not surprised we see quarters where we have double that number because of these reprioritizations, okay? So that's what we're dealing with. The traditional cancellations, other than reprioritization, the traditional cancellations that are due to data, it usually takes time because you've got a piece of data that's not favorable, as you know, there are independent panels, investigative panels that review that data, there's discussions with the FDA, it's a long process, and even, you know, in order to reach the decision to cancel, it takes time. When that happens, it also takes time to unwind the trial. If the trial is ongoing, as opposed to the trials that are canceled because of reprioritization, which are things that are simply taken out of the backlog, programs that are canceled because they are in the middle, in flight because of results, it takes time to unwind. It could take two or three quarters because we have to deal with patients that are, that have been dosed, that are under treatment, et cetera. So there are serious reasons. And often it leads to additional bookings of extra work in order to facilitate that disengagement. So that's, again, it's a complex unwind process. But I hope that helps answer your question. Yeah, Ron? And,

Anne, you had also, I think, asked about delays and whether the delays add incremental work in 2025. Don't forget, these are multi-year trials. So if 24 work gets pushed into 25, sure, we pick it up there, but 25 work gets pushed into 26.

So

I wouldn't think of these as being incremental to 2025.

Right, that's correct. However, the sequential growth will be affected, right? So just because of the comparison.

Exactly, and we'll give you more information on the sequential growth that we expect as we go forward during our normal guidance process.

Great, thank you very much.

Your next question comes from the line of Luke at Barclays. Your line is open.

Hey, guys, thanks. A couple of cleanups here to start. On the M&A, you guys did $428 million, I think, in the quarter. Any update there on the financial profile and is all this in TAS? And kind of how we think about that business growing for modeling perspective in the next year?

Yeah, so I think that's a great question. Yeah, thank you. Well, yeah, you're correct. As has been typically the case, the majority of our acquisition contribution is in TAS. But I would point out that in the quarter, TAS had very strong step up in organic growth. In fact, more than three times sequentially. The company-wide organic growth was just under 5%, excluding acquisitions. So acquisition contributed to just over one and a half points to our about six and a half points of growth at constant currency, excluding COVID. Now, if you do the math, you'll see that the organic growth in TAS was also mid-single digits, which again is over three times what it was in the prior quarter. So strong in TAS across the board organically. Since you asked about acquisitions, I just wanna step back and reiterate what I've said many times before. And that is that acquisitions are an important part of our growth algorithm. Always has been the case, and hopefully will continue to be the case. In fact, we always aimed at at least two points of incremental growth from acquisitions. But if you look at our numbers, you'll see that historically we've never been able to do two points plus of growth. It's been more between one and one and a half points, and this year hopefully one and a half of contribution from acquisitions. Now, bear in mind, we do a very large number of tiny, tiny deals, okay? You have the list here in front of you. Yeah, just to- Ron?

Just to give an example, a couple of examples this year in the TAS area, we did an acquisition of a commercial engagement company, H3O, that has a million dollars of annual revenue. We did a real world platform, B2I, that had slightly over a million dollars of revenue. So when you look at the total number of acquisitions we do, it looks like a really big number, but there are any number of very small acquisitions. That's

typical. If you look at our list of actual acquisitions, with all these little fancy names, and they are important, okay? These are little deals that we, we do this because we believe we are pretty good at buying good companies with potential growth, and typically after we integrate them within a year or two of ownership, they do very well. So again, the vast majority of these deals have very little revenue. Now, sometimes we have to pay up a lot. I mean, there are, there's a handful of acquisitions we've done in the past, in the recent past, that we've paid 10 times revenue for. You know, I'm thinking of the DMD, for example, by a couple of years, which facilitated our entry into the digital space. We paid almost 10 times revenue for that company. So if you will, the acquisition number, the dollar paid for the acquisitions and the revenue contributions are not connected. You know, for example, year to date, what's the spend on acquisitions year to date? As of Q3? 600, 400 million. Okay, we spent $649 million year to date on acquisitions as of the end of the third quarter. Almost half of that was one acquisition, a company called Micra, Micra, which is a small specialized CRO in met devices. It's actually an RDS acquisition. And we bought that in the third quarter, sometime in August, if I remember. And that was almost half of the spend. And we paid almost five times revenue for that. So obviously it's a big number in terms of the spend, but the revenue contribution this year of that acquisition is the minimum. Okay, because again, we paid almost five times. We bought that in, you know, that has like maybe one month of revenue in the quarter. And that's what it was. So again, very important acquisition as part of our strategy. Thanks for asking the question. By the way, I would remind you the best deal we ever did was the acquisition of the 40% minority we didn't yet own from our joint venture with Quest in our central lab. That was the largest deal that we did. And we paid $760 million for that. It came with exactly zero revenue because we already consolidated revenue, right? But it was a great deal nonetheless. So again, I hope that helps give context to our acquisition strategy. Thank you. It does.

Your next question comes from the line of Justin with Deutsche Bank. Your line is open.

Thank you. And good morning, everyone. Looking forward to seeing the lab at the Innovation Center in December. Ari, just sticking with the M&A, in capital deployment, at the beginning of the year, you guys talked about two billion in deployment. I think when you put together the M&A and the buyback, you're still tracking below one billion. So assume nothing gets done in the fourth quarter. Would it be fair to assume like sort of like three billion of dry powder for 2025? And then just lastly, related to the comments around pricing pressure. I think earlier you've said it's been mostly concentrated to FSP. Are you seeing that spillover at all into FSO?

Okay, well, thank you, Justin. These are great questions. On the capital deployment, as you know, we signaled between two and three billion dollars as a long-term goal annually spread between acquisitions and share repurchase. And as you correctly pointed out, so far this year, we signed the numbers, so far we spent $649 million on acquisitions and just $200 million on share repurchase. And frankly, that's because we were looking at bigger acquisitions that we were unable to do, either for pricing or other reasons. Acquisitions, as you know, are binary. You do them or you don't do them. Now, based on what I know today, I don't think that we're gonna spend a lot more on acquisitions before the end of the year. Maybe, again, I'm speculating between another 50 to a hundred million dollars at the most. And therefore, as you correctly pointed out, that leaves us with a lot of dry powder. My intention before the earnings release was to massively buy shares in the fourth quarter. And today, my intention is even to more massively buy shares by the end of the quarter. My general counsel is putting his head on his head here, but I am telling you that we are very excited and we are gonna buy a lot of shares. We have $2.2 billion plus share buyback authorization, and the share price is screaming buy, and that's where we're gonna spend our capital. Then you have the question on pricing. Pricing is tough across the board, has been commercial and RDS. Obviously, it's not that it's more on FSP than in FSO. It's just that FSP was stronger this year. Remember, FSP is perhaps, correct me if I'm wrong, over here, it's like about 15% of revenue. Roughly, but it's been increasing in terms of our bookings and inching towards 20%, right? So eventually, it'll be about 20%, but again, we might win again other FSOs. So I think it'll be always between 15 and 20%, and FSP has, as you know, lower margins, so that depresses our, it's a headwind to our margins because of mix every time we do more FSP. Pricing is tough across the board, okay? One, because as I mentioned before this year, clients most large pharma companies put us through a sort of a rebid process, invited every CRO under the sun, and as I mentioned in my introductory remarks, we did very well there. We essentially, in every single one of these bid processes, we were reselected for our existing strategic partnerships, and we expanded with half a dozen strategic partners and expanded the scope of what we are going to be preferred suppliers for, including especially for Central Lab. So we think that the future is very bright on our NDS. Again, pricing very tough. That's one reason. The other reason is that we have, as you know, the industry has kind of sort of split between three large CROs, and then another set of second tier CROs who have had, let's say, more trouble in the recent past, and who are desperate to win business, and when you're desperate, the place you go to is price, and so all of that, even though they never selected, they end up creating somewhat of a more pricing pressure, and clients, of course, are going to be delighted to use them for that purpose. So these are the reasons. It doesn't look like it's improving. It's gonna continue to be tough, but again, we are confident that we will continue to win and do well in the long term. Thank you, Justin. Thank you,

Ari. Your next question comes from the line of David with Jeffries. Your line is open.

Oh, hi, thank you for taking my question. Good morning. I wanted to start with just a clarification. I think based on the booked bill that you're reporting this morning, you added about $140 million of new wins, bookings above revenue. Your backlog's growing about 500 million. Is the difference there just FX? So that's clarification. And then Ari, thinking about taking the timing issues, the cancellations, et cetera, the pricing pressure that you just commented on, how should we think about your ability to manage cost structure and continue to kind of hold margin or deliver margin as you have in the past in this environment? Thank you.

Dave, first of all, the first observation, your math, I think is correct. I don't have the numbers in front of me, but based on what I heard, I think you're absolutely on the mark with the math on the bookings and the backlog. Your question on the cost management is an excellent one. And you probably are inferring from what we said correctly that we have to deal with significant cost headwinds for the following reason. These delays, as you can imagine, we had already started up those two mega trials. They were in startup phase. And therefore we stood up the resources and the infrastructure, the teams, and everything that's required to perform and deliver on those trials. Now, they are interrupted. So it's almost like, but they are gonna resume in 25. I think one of them second quarter and then the rest basically second half and ramp up in second half. Now, we're not gonna let these resources go and do what we just did to ramp up the resources. So that already is a cost that we have to bear. Now, obviously we're gonna redeploy some of that against some of the other opportunities, FSP and so on. But nevertheless, there is no question that we are going to be living here over the next two, three quarters with an extra bucket of costs associated with these. And these are huge trials. And that is going to affect our margins. Now, again, we haven't finished our planning process. We have a lot of other levers. We are working constantly on costs. And we, I mean, you saw, obviously we hadn't yet been affected by this issue so far, but you saw that so far, that this year we've done pretty well. And we've actually in the fourth quarter achieved record margins. I think .1% is the highest operating margins that we have achieved since the company was created in 16. Correct? So we've done well, 30 bips of expansion this quarter. But again, in the next two, three quarters, we'll have to see. And we'll share more details on December 10 and certainly on, you know, concurrent with the full year earnings release. But David, you're exactly on the mark. Thank you.

Great, thanks.

Your next question comes from the line of Elizabeth with Evercore ISI. Your line is open.

Hi guys, thanks so much for the question. Maybe one high level question and one numbers question. Can you tell me where we are in this sort of strategic partnership? Obviously that's been an area of strength for you guys, but sort of, are we sort of through this round? Are we sort of still beginning this? Is it that not the right way to think about it? And then on the numbers side, what do you think that interest expense is going to be for 2024 in your updated guidance? Thank you.

Thank you, Elizabeth. Yes, I mean, the strategic partnerships, we did very well this year. Listen, we've been working with these guys for a long time. As you know, we've expanded the number of logos that we have preferred partnerships with. And so this year, and I think it's part of the overall reaction to the IRA and the overall focus on cost management. You know that most large pharma companies announce massive cost reduction programs. And so they opened up, they reopened all of their vendor relationships. I believe that we are largely through all of that. And I think that we are ready to move forward. Most of the large ones essentially have been completed. So that's for your first question. And second question, guys, you've got the answer.

Interest expense, talking about this year, Elizabeth.

Yeah.

You know, round number 625 or so, give or take around that number, which is not terribly different than what we were telling you before.

Got it. And do you want to comment on 25 right now or not on that? 25

interest? I mean, obviously it depends to an extent on what the Fed and the ECB do with interest rates, but flattish for next year. For now, yeah. We're anticipating, but we'll update as we go along. Great,

thank you very much.

Thank you.

Your next question comes from the line of Michael with Learing Partners, your line is open.

Morning, and thank you for taking the question. So I know we don't have the formal 25 guidance, so it might be treading a little lightly here, but relative to R&DS and the 5% rough give or take expectation at this point in time, what are the conditions have to look like relative from a macro basis, cancellation rates, et cetera, to make sure that number is still feasible? Is that predicated on those two mega trials re-ramping the second half? And what are the most important puts and takes you're focused on that could change versus what the current trend is of general market choppiness?

Yeah, I mean, look, I wish I had a crystal ball, you know, but I can only tell you what we see now. I believe that by the end of the year, these program reprioritizations will come to an end. We know that because we are in close conversations with our clients and look, that's the business our clients are in, is to do research and innovate. You know, they've been at this for a year and a half, started I think in the, just, you know, in the kind of middle of last year, I think if this is this, we basically know what's been re-prioritized and canceled. We know what will be canceled by the end of the year, basically. Now there could be other trials that have drug futility issues that can always happen, but that's kind of in the normal range of things. And we anticipate that. In that mean single digit type of high level expectations that we have as of now for 25, for our NDS, that's based on what we know today that has been canceled the large, you know that we had this $350 million program canceled in the quarter that we took in. We also had in the first quarter, a large $250 million program cancellation. And we know that these two programs, Megatrash have been delayed. And then we factored in everything else. Again, most of the trials are much smaller than that. And we worked on hundreds and on over 2000 of them. So it's gonna be the normal course of things. These big ones move the needle. If you look at our NDS growth this year, we have 7% in the first quarter. What did we have? First quarter was ex-COVID constant currency. First quarter? 80%. Right, 8% first quarter. Then we had 6% and 6% again, a constant currency ex-COVID basis. And then we're gonna have 1% in the fourth quarter. So similar to what I said last year about TAS, it might be like a mirror image in 25, with things going the other way. Just because of the cancellations, the short-term impact of that, and the delay is the short-term impact of that. So that's our best I can describe what we expect for 25 at this point, based on what we know. Thank you. Thank you, Michael.

There are no further questions at this time. Mr. Joseph, I turn the call back over to you.

Thank you, Operator. Thank you all for taking the time to join us today. And we look forward to speaking with you again in our fourth quarter of 2024 earnings call. The team will be available the rest of the day to take any follow-up questions you might have. Thank you.

This concludes today's conference call. You may now disconnect.