IQVIA Holdings, Inc.

Good morning, everyone. Thank you for joining our second quarter of 2026 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer, Mike Fedop, Executive Vice President and Chief Financial Officer, Eric Sherbet, Executive Vice President and General Counsel, Clarissa Willett, Senior Vice President, Financial Planning and Analysis, and Katie Ward, Vice President, Investor Relations. Today, we'll be referencing a presentation that will be visible during and many more. 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. As previously disclosed, In conjunction with this change, prior period segment amounts have been recast to conform to this reporting structure. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered an outstanding second quarter with revenue adjusted EBITDA and adjusted diluted earnings per share, all exceeding the high end of our guidance. Importantly, the momentum we saw in the first quarter continued with improving market conditions and strong operational execution. Organic growth for the company as a whole accelerated to 6% year-over-year, which is three times the rate we delivered a year ago. Adjusted EBITDA margin began improving earlier than we had anticipated due to better operational performance. Let's look at the results for the quarter. Total revenue for the second quarter exceeded the high end of our guidance range representing year-over-year growth of 8.7% on a reported basis, with FX much less of a tailwind than we had anticipated. At constant currency, growth was very strong at 8.5%. Second quarter, adjusted EBITDA was above the high end of our guidance as well, representing year-over-year growth of 9.2%. Second quarter adjusted diluted EPS of $3.15, also exceeded the high end of our guidance range and increased 12.1% year over year. The beat was driven entirely by strong operational performance. Let's discuss the results by segment. On the clinical side, R&D has delivered great results with revenue growth of nearly 9% and organically 7%. We had $3,150,000,000 in net new bookings representing 19% growth year-over-year and 27% growth sequential with notable strength in full-service bookings Translating into a quarterly book to be ratio of 1.22. If I may add, this 1.22 was in a quarter where our revenue was up almost 9% year over year, stronger than anticipated. I want to point out that the improvement in bookings is not just from this quarter alone. As you know, I always remind you that we are a long cycle business and it's more meaningful to look at trends over longer time periods. And if you look at our last 12 months net new bookings, they have increased in each of the past four quarters. With $11.3 billion of last 12 month net new bookings as of June 30th, they are up 13% What these metrics point to is a consistently improving demand environment, as well as improving win rates for our R&DS business. On the commercial side, organic revenue growth accelerated year over year to 5%, which is more than a full point higher organic growth than a year ago. and this has clients launched newly approved products and expanded the breadth of services they utilize from IQVIA. Notably, analytics and consulting grew organically high single digits year over year, the highest growth rate since 2022. Commercial engagement services and patient solutions both continue to grow double digits year over year, and our AI offerings gained further traction with increased customer adoption. With three consecutive quarters of strong, sustained and improving results and pipelines that remain at record levels, there is clear momentum in commercial solutions. Let me now give you a little more color on what we are seeing in the market environment and let's start with forward-looking demand metrics in the clinical environment. RSP flow growth remains strong with double-digit growth both year-over-year and sequential with improvements across all client segments. Decision timelines continue to shorten and EDP funding continues to be very strong with the second quarter at $35 billion, according to Bayou World, which is more than double the Q2 2025 number. I want to elaborate on this EDP segment. In response to investor feedback and in reviewing publicly available information, We are taking the opportunity to update our own classification of customer segments to help you better benchmark IQVIA to our CRO peers. From now on, we are going to define large pharma by the top 20 companies by RX sales, mid-size companies will be the next 60 pharma companies by RX sales, and EVPs, everyone else. I want to give you the breakdown of our R&DS revenue by customer segments as I just defined them. Large Pharma represents approximately 50% of our R&DS revenue. Mid-size, approximately 15% of our R&DS revenue. And EVP represents 35% of our R&DS revenue. I guess you can see that based on publicly available information, it is apparent that we have more revenue in the EVP segment than any of our CRO peers. And this is extremely important because emerging biopharma continues to be where much of the industry's innovation is coming from. A decade ago, EVPs represented about 45% of all clinical trials starts globally. Today, EVPs represent about 70% of all clinical trials starts globally. EVP R&D spend is also expected to grow at two to three times the rate of large pharma R&D spend. And of course, EVP trials are full service outsourcing. All of this creates a meaningful opportunity for IQVIA given we are the largest EVP provider. At the same time, large pharma continues to be a significant segment for us. In fact, we are benefiting from the strategic outsourcing partnership renewals by large pharma over the past two years, which we've been discussing several times in the past. And we, as you know, have significantly expanded the number and the scope of our preferred partnerships. As a result, we have seen our win rate with large pharma improve materially, leading to an expansion of our share of wallets with those partnerships, and in several cases, replacing large CRO incumbent providers. Shifting now to commercial solutions. The market environment continues to improve, supported by a nearly 45% increase in new drug launches in the first half of 2026 versus the first half of 2025. As you know, this is important because launch activity is a significant driver of demand across our commercial portfolio, with roughly half of launch-related spending typically occurring in the first two years post-approval. Additionally, as we shared before, there is an increasing trend from our large pharma customers seeking to outsource the full commercialization of certain therapies in select geographies. And given our global footprint and spectrum of capabilities across information, insights, and engagement, We have been winning a fair share of these opportunities. I want to take a moment to again remind you how to think about our commercial solutions business, especially in the era of AI. We help our clients in three main areas. One, understand their market. Two, plan their commercial strategies. And three, engage with their own customers. So one, we help our clients understand the landscape, primarily through our information offering. Our information business represents about 30% of our commercial solution segment, and revenue typically grows at low single digits. Two, we help our customers plan their commercial strategies, primarily through insights from our analytics and consulting business. This business represents about 20% of our commercial solutions business, and it grows mid to high single digits. And three, we help our customers engage with their own customers, that is healthcare providers, distribution channels, patients, and payers. And we do this through our patient solutions, technology, and commercial engagement services. That, in aggregate, is about 50% of our commercial solutions business and grows at high single digit to low double digits. Now, we've continued to see increased demand for these services across the board, as is evident in our own commercial demand indicators. The pipeline continues to grow strong double digits year to date. Decision timelines continue to reduce double digits. And of course, we are also winning more with win rates up double digits. When we think about future trends across both of our segments, clinical and commercial, we see the outsourcing market continuing to grow in 2027 and the years ahead. And in fact, We think AI will continue to contribute to this market expansion and will continue to fuel a strong tailwind for IQVIA. On the clinical side, clients are already telling us that AI in discovery will only increase demand for CRO services as more molecules with a higher predictable success are entering development. Additionally, Acuvias Living AI Solutions are further differentiating our clinical offerings and deepening our partnerships across all customer segments, large, mid, and EVP. Our AI-enabled capabilities, which, as you know, we've been working on, training on, and refining for at least two years, are already improving study design, accelerating timelines, and reducing operational risk across complex global trials. Let me give you an example of how this is playing out with large pharma. One of our longstanding customers recently expanded its partnership with IQVIA to include our full service clinical capabilities. That expansion led to an end-to-end award for large complex phase three stroke outcomes study. This client specifically told us that our AI-enabled capabilities in site startup and enrollment, along with our therapeutic expertise and global execution model, clinched the deal because it will help manage risk and run these studies with greater predictability. In another example, an EVP-awarded IQVIA complex global phase III oncology study across multiple treatment arms. And we won here because AI-enabled patient recruitment will help keep a complex study moving at higher speed with much better predictability. Another EDP selected IQVIA for a series of global autoimmune programs that bring together clinical, laboratory, and technology-enabled patient end-to-end solutions. Here, our AI-enabled patient reported outcome capabilities made the difference because they help support patient retention Protocol Compliance, and Higher Quality Outcomes. In commerce, we are seeing AI begin to contribute more directly to top-line growth as clients are moving beyond pilots and data foundation work and they're starting to deploy Iteria AI agents more broadly. Let me give you an example of what that looks like in practice. A mid-sized pharma client is expanding its use of Acuvia AI across an immunology franchise in 95 countries. We are combining our global syndicated pharmaceutical market data with our launch planning conversational AI agents to give the client an integrated view of market dynamics and help teams get to actionable insights in near real-time. Again, the benefit here is speed, precision, and Accuracy. Another example in commercial, we are working with the top five large pharma to deliver a complete AI-enabled enterprise analytics solution that seamlessly brings together data, technology and advisory support. This will deliver customized workflows that accelerate decision making and improve quality and accuracy. Beyond these broad and deep relationships with our customers, Governments and regulatory authorities around the world look to IQVIA for trusted healthcare expertise and insights. Recently, IQVIA was the only CRO invited to provide our perspective on clinical trial innovation at the clinical trials roundtable with the U.S. Department of Health and Human Services as part of their Trial Blazer initiative. We were subsequently invited to testify at a hearing of the House Energy and Commerce Subcommittee on Health regarding the FDA's role in creating a more efficient and accelerated path for early clinical development in the United States. We were the only CRO and also, by the way, the only representative from the biopharma industry to testify. We are proud of the trust policymakers placed in our leading expertise as they consider reforms to accelerate development timelines Modernize trials using AI and strengthening U.S. competitiveness in biomedical innovation. Finally, I'd like you all to mark your calendars for the upcoming IQVIA Invest the Day, which we are planning for December 2nd, 2026. And now to Mike for more details on our financial performance.

Thanks, Ari. Good morning, everyone. As a reminder, we implemented a new segment reporting structure effective January 1, 2026. In conjunction with this change, prior period segment amounts have been recast to conform to this reporting structure. Let's start by reviewing revenue. Second quarter revenue of $4,368,000,000 grew 8.7% on a reported basis and 8.5% at constant currency. Revenue growth within the quarter includes about two and a half points of contribution from acquisitions. Commercial solutions revenue for the second quarter was $1,793,000,000, up 8.6% on a reported basis and 8.4% at constant currency. R&D solutions second quarter revenue was $2,575,000,000, up 8.8% on a reported basis and 8.6% at constant currency. For the first half of the year, Total company revenue was $8,519,000,000, up 8.6% on a reported basis and 7.3% at constant currency. Commercial solutions revenue was $3,547,000,000, up 10.1% reported and 8.5% at constant currency. R&D solutions revenue was $4,972,000,000, up 7.5% on and Tom Senn Currency. And moving down to P&L. Second quarter adjusted EBITDA was $994 million, representing growth of 9.2% year over year, while first half adjusted EBITDA was $1,926,000,000. Second quarter GAAP net income was $266,000,000 and GAAP diluted earnings per share was $1.53. For the first half, Gap Net Income with $530 million or $3.14 of earnings per diluted share. Second quarter adjusted net income with $527 million and adjusted diluted earnings per share was $3.15 representing growth of 12.1% year over year. And for the first half adjusted net income was $1,019,000,000 or $6.04 for a diluted share up 9.8%. Returning to RDS bookings, the R&D Solutions net new bookings in the quarter were $3,150,000,000, a 19.3% increase year over year, resulting in a 1.22 book to bill, which as Ari mentioned, is all the more impressive given revenue grew 9%. I should also note that cancellations remained within the historical range. As of June 30th, R&D's backlog was $34.2 billion, and the next 12-month revenue from this backlog was $9,230,000,000, which is up 7.5% versus last year. And as discussed, given the long cycle nature of our business, it's more important to focus on the longer-term booking trends. In the quarter, The last 12 months net new bookings were $11,250,000,000, an increase of 12.9% year over year. And importantly, this metric has been steadily increasing in each of the past four quarters and clearly points to momentum in our business. So let's turn to the balance sheet. As of June 30th, cash and cash equivalents was $1,909,000,000, Gross debt with $15,999,000,000 resulting in net debt of $14,090,000,000. Our net leverage ratio ended the quarter at 3.59 times trailing 12 months adjusted EBITDA. Second quarter cash flow from operations was $558,000,000 and capital expenditures were $198,000,000 resulting in free cash flow of $360,000,000 represented growth of 23% year over year. And in the quarter, we repurchased $398 million of our shares, resulting in first half share repurchases of $950 million. And this leaves us with approximately $2.8 billion of share repurchase authorization remaining under the current program. Now let's turn to guidance. To reflect stronger organic revenue growth, In changes in the M&A and foreign exchange impacts, we are raising our full-year 2026 guidance for revenue, for adjusted EBITDA, and for adjusted diluted earnings per share. We now expect revenue to be between $17,275,000,000 and $17,475,000,000, representing year-over-year growth of 5.9% to 7.1%. The new midpoint of the revenue growth guidance is 6.5% versus the prior guidance midpoint of 5.8%. This new guidance includes approximately 100 basis points higher organic revenue growth and approximately 50 basis points higher contribution from M&A, all set by a foreign exchange impact that is 80 basis points less of a tailwind than in the former guidance. This revenue guidance now assumes approximately 200 basis points of contribution from acquisitions and only approximately 20 basis points of a tailwind from foreign exchange. We are also raising our adjusted EBITDA to be between $4 billion and $4.5 billion, growing 5.6 to 6.9% year over year, reconfirming flat margins year over year at approximately 23.2%. And finally, We are also raising adjusted diluted EPS to be between $12.80 and $13, up 7.4% to 9.1% versus prior year, or 8.2% at the midpoint. Let me provide a third quarter guide. For the third quarter, we expect revenues to be between $4,315,000,000 and $4,390,000,000, which represents year-over-year growth, 5.2% to 7.1%. Adjusted EBITDA is expected to be between $1 billion and $1.2 billion, representing growth of 5.4% to 7.5% versus prior year. An adjusted diluted EPS is expected to be between $3.19 and $3.29, which represents year-over-year growth of 6.3% to 9.7%. Both this guidance and the full-year guidance assume that foreign currency rates as of July 27th continue for the balance of the year. So to summarize, IQVIA delivered outstanding financial results. The second quarter revenue adjusted EBITDA and adjusted diluted DPS exceeding the high end of our guidance. We accelerated organic revenue growth across both commercial and clinical segments. We delivered strong adjusted EBITDA margins in the quarter. We had strong free cash flow performance up 23% year over year. The RDS net lead bookings were the highest since 2022 at $3,150,000,000 from double digits year-over-year and sequentially with very strong full-service bookings. And as Ari mentioned, the demand environment for both clinical and commercial has significantly improved as reflected in our forward-looking demand indicators. We've raised our full-year guidance for revenue, adjusted EBITDA, and adjusted diluted earnings per share, and we're planning a December 2nd investor day where we look forward to seeing you. Now with that said, let me hand it back to the operator for Q&A.

Thank you. 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. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Eric Coldwell with Baird. Your line is open. Please go ahead.

Thanks very much. I almost feel like you ought to end the call now. That was a pretty positive update. We can only go south, I think. So last quarter, you had some added disclosures around the bookings profile that helped, I think, help people understand the dynamics and What was optically a lower net book to bill? This quarter, you're obviously putting up a bigger book to bill against a strong revenue growth rate. But I do have to ask, were there any chunky awards or other callouts within those bookings? And you did mention FSO was very strong. What about FSP awards? What about pass-through mix in the awards? Any other notable callouts that you'd like to share with us? Thanks very much.

Good morning, Eric, and thanks again for your kind words. Actually, you had a good call in your notes a few weeks ago. We had indeed a great quarter. I have to tell you, in over 25 years of reporting earnings in this or other companies, I've never had as clean a quarter as this one all around. I must tell you, there is absolutely nothing salient, unusual, abnormal, odd, awkward in our numbers anywhere. With respect to the question on the bookings per se, there was strength literally across the board. Nothing unusual. Pass-throughs were in the normal range. Cancellations were in the normal range. Good mix of large, mid, EBP. I mean, really, FSO was very strong, but again, similar to what it was before all the multiple crises erupted over the past two, three, four years. Really good, strong outsourcing continuing from large pharma, good EBP bookings, Again, strong around FSP, you asked specifically, you know, low to mid double digits, kind of as usual, percentage of total, Mike? I mean, really, there's nothing to call. I mean, it's a fair question because the numbers are so good everywhere. I have to tell you, in preparing for the call, we looked and said, well, is there anything we can point to? And there is nothing unusual. All very strong. Mike, anything else?

I was just going to add that the therapeutic mix and all that stuff. Yes. Great job, guys. I'll leave it there. Thanks, Eric. Thank you.

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

Hi, good morning, everyone. Ari, in your prepared remarks, you talked about outsourcing penetration potentially increasing over the interim. Is that comment broad-based, more focused on some of the conversations you've been having with your large and mid-sized pharma customers? Just any more color there would be helpful.

Sure. Thank you. Okay, so as you know, the EBP segment is 100% outsourced by definition. And again, as I want to reiterate, we are the largest CRO provider to the EBP segment. I think it's very clear from the numbers now. So that clearly is all outsourced. Mid-size, pretty much similar, except for some of the larger ones that Large Pharma is really where you've had that debate, insourcing, outsourcing, etc. Look, I want to tell you that large pharma clients are already telling us that because of the increasing extensive use of AI, and by the way, use of AI by large pharma is not starting on July 28 with a press release. It's been going on for more than two or three years. So the use of AI in discovery will only increase demand for CRO services. And our clients are actually telling us and asking us to gear up capacity as additional molecules will enter development. Some of our large-former clients are predicting they will double their study portfolio. And so they're asking us literally to ask thousands of FCEs in anticipation of those studies. So the additional demand with CROs is simply because, again, the dynamics of outsourcing remain the same. Some of these new molecules are identified through use of AI are in adjacent therapies where the client may not have all the therapeutic expertise. The additional capacity required, you know, no one is interested in adding more headcounts for specific trials. It's always more cost effective to use a CRO. And then the global footprint helps. The domain expertise, the regulatory and internal knowledge for study design, the site relationships and the network, the broad therapeutic coverage, the expensive data to land on the best design and successfully recruit more specialist patient populations, all of that lends itself to more outsourcing. So the current outsourcing for large pharma You know, we continue to increase as we look at our conversations with our clients and we model it out.

Thank you. That's it for me.

Your next question comes from the line of Michael Ryskin with Bank of America. Your line is open. Please go ahead.

Great. Thanks for taking the question. I kind of want to follow up on just the last one. Thinking about your future investment and your future opportunities there. Like you said, you have been talking about AI for a number of years now. You've talked up some of the benefits you're seeing from the solutions you've developed internally. There's clearly some opportunity to partner externally or maybe do some M&A. There was a deal in the space maybe a week or two ago. Could you just talk about how you see the development of those solutions over time and where you're putting the incremental dollars?

Well, I mean, look, it's again not news for us. We've been doing this for some time. The idea of inserting intelligence in the design and performance of clinical trials to accelerate outcomes and improve outcomes is really what prompted our merger 10 years ago. Now, of course, with the advent of Frontier Models, etc. This has just been accelerating over the past two, three years. Just to step back in terms of investments and where we continue to focus, I've said this before, but I think it's worth repeating. There are at least three necessary requirements to effectively deploy AI models in our industry. Number one, you need proprietary expert content. that is globally sourced, de-identified, curated, fit for purpose, integrated, interoperable, and ready for extraction. That's proprietary healthcare data, and we've got that. Again, it has to meet interoperability, relevance, completeness, traceability, reliability, and linkability standards under countless ontologies at a scale that has no comparison to any other industry. And this is why our clients trust us to work with them on their AI journey. Actually, we recently read a quote from, you might want to look at the book if you haven't already, called Empire of AI. And the author says their acquiring training data has turned into one of the most difficult, expensive, and legally fraught activities a frontier lab undertakes. You know, there's a phrase going around now that that the web is empty because the frontier AI models essentially are close to exhausting everything that's out there. And so you've got to turn out proprietary data. And again, we've got that. And that's what we are continuing to invest. Number two, you need deep domain knowledge to read, understand, and interpret these highly complex data sets in their proper context. And of course, we've got that too. And number three, You need to operate within the significant regulatory compliance and privacy frameworks that healthcare requires. And they vary across countries and geographies. And of course, we've got that expertise too. So our own agentic roadmap has continued to make great progress. In fact, we now have 294 agents deployed across 90 use cases. I want to remind you, an agent is not and many more. with us to develop their AI roadmaps. Four of the top 10 pharma companies have already contracted with us to co-develop AI solutions. And 19 of the top 20 pharma companies have already deployed active AI solutions in their workforce. So this has been and continues to be our priority area for investment and continues. We are seeing it in our win rate. Keneally differentiates us from the rest of the pack. We've been displacing incumbents in deal after deal, including the large CROs. Thank you. Thank you.

Your next question comes from the line of Michael Cherney with Learing Partners. Your line is open. Please go ahead.

Hey, guys. Thanks for taking the question. Maybe to build on that last comment Ari had regarding displacing other CROs and competitive processes, can you give us a little flavor of what that looks like? And when you go into these competitive RFPs or competitive displacements, what is the discussion looking like on price versus capabilities versus technology and AI functionality? If you can break it down to those three buckets. Thanks.

Yeah. Thanks for your question, Michael. You know, we've shared before that large pharma, literally every single one of the top 20, went through a very significant process to renegotiate all of their partnerships. They opened up all of their preferred relationships, and that process occurred over the 24-25 timeframe. We stated before that we were very happy With the outcome of those renegotiations, we both increase the number and the scope of those relationships. And so when there is a specific RFP within the context of those partnerships, a large pharma typically invites the two or three partners that they have selected in that prior process. And then the discussion, by the way, the rates have been typically negotiated during those relationships. So I would say it's less on price on a specific RFP and more on delivery timelines, capabilities, technology, site networks, relationships, experience with that particular therapeutic area, the skill sets of the individuals involved, et cetera, and of course our AI capabilities. Thank you.

Your next question comes from the line of David Windley with Jefferies. Your line is open. Please go ahead.

Hi, good morning. Thanks for taking my question. I wanted to ask a clarification and then more of a content question. So the clarification, I think, Mike, you quantified 2.5% of acquisition contribution. I was wondering if you could break that out between segments. And then Ari, You seem in the mood to talk about the expanse of the business. The company has kind of quietly started to build some discovery capabilities. You're talking a lot about AI. I wondered if you might expand the discussion to talk about what your thoughts are in investing in and building out capabilities in the early part of the development supply chain and how you see that folding into your broader strategy leading into your clinical capabilities. And is there an AI angle there as well? Thank you.

Well, Dave, it sounds like you've been listening in in our highly secretive strategy session. I wish. I wish. All I can say is that yes, we are working on those things and I can leave it at that. And again, you would expect us to do that simply because we have great relationships with our clients and we are expanding upwards and downwards the set of capabilities you saw us buy discovery assets. In fact, we completed the Acquisition of the Charles Weaver assets in the hold. I guess that was the first part of the question to you, Mike. You want to make it say what? And that's basically what normally our acquisitions, we have guided to a point and a half for the year. But now that we did, it's going to add what? About 75, 80 million? Yeah. Like this year's revenue?

Mm-hmm. Yeah, and Dave, normally the acquisition impact is usually about two-thirds commercial, one-third R&DS. It's about the same.

Yeah, about the same for these schools as well. Thank you. Thank you.

Your next question comes from the line of Jalandhra Singh with Truist Securities. Your line is open. Please go ahead.

Thank you and congrats on a strong quarter. I want to follow up on your comments around EBITDA margin improving faster than you had expected. Can you elaborate on that? What was in the key operational drivers there? And related to that, have you started to see any benefit from any productivity-related investments from AI?

Sure, Jalindra.

I'll take that one. So let me give you some color on our EBITDA margins. Yes, they expanded, as we noted, 10 basis points. And as we started to provide a little bit more color on the composition, our operational and productivity programs are going exceptionally well. And we've said that AI is just another lever in that toolkit. So that drove about 90 basis points of operational margin expansion in the quarter. And then obviously we have non-operational items like SX that were about 80 basis points of a drag. Excuse me. Passers of 80 basis points of a drag. So clearly operational productivity programs are delivering value.

Yeah, I mean, just for context, Jaring, if you recall in the first quarter, We reported that we generated 60 bps of operational productivity improvements, now margins, but that was offset by 120 bps of negative impact from the stronger pass-through growth as well as FX. Now, in this quarter, we had no FX virtually negligible, but we still had pass-through growth, and those created a headwind of 80 bps. Now, we generated 90 bps of operational underlying margin improvement, and that led to that small, I guess, 10 bps of adjusted EBITDA improvements.

And it's also important to remember that we get leverage off of our fixed cost space as we have stronger dividends. That's true.

Got it. Thanks, guys.

Your next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is open. Please go ahead.

Yeah, thanks. Good morning. Maybe just adding a little bit more dimension to what you just talked about with the margins and the guidance. Mike, I think you said 80 basis points of non-operational headwind eased out margins in the second quarter. If you could just kind of help us. understand how FX and pass-throughs are going to kind of progress in terms of like non-operational margin headwinds in Q3 and Q4. Thanks.

Yeah, so in the full year, I think that was the context of your question. I mean, we were pretty explicit in our guide, but you really have to look at all the moving parts that are in there. So obviously, FX tailwind reducing, you know, helps our reported margins. We added in M&A, which is primarily Charles River, which, as you know, has lower margins. And then we have our strong productivity programs that are delivering incremental EBITDA margin and value that are helping offset. And when you put all that together, that's where we're maintaining our flat margins for the year.

Yeah, just to be clear, FX is not helping margins. Less of an FX impact eliminates the headwind Thank you. One more question.

Your last question will be from the line of Shlomo Rosenbaum with Stiefel. Your line is open. Please go ahead.

Hi. Thank you for squeezing me in. Ari, I want to ask you something. I'm not sure how quantitatively you can answer, but maybe qualitatively. You talked about 100 basis points of better organic revenue growth in the guidance, and I'm trying to understand the whole market is getting better. You know, you said that the market environment is strengthening. Are you able to kind of give us an idea of how much of your guidance raised on the organic side is, you know, just a rising tide lifting all boats versus, you know, the better execution and the wind rates that you're having?

And if you could give us some color on how we should be thinking about this.

Well, Luke, I mean, you need a good market to be able to perform. As you know, we've been facing a lot of headwinds, macro headwinds over the past years, but there's no question. I shared some of the forward-looking demand indicators. No questions that the RFP flows, which we report or indicate to you at every quarter, have been improving. and probably one or two quarters, which if you go back and look, I'm sure they were good, probably mid to high single digits. And that kind of reflects itself now in our bookings. Now RFP flows were up double digits in the quarter, strong double digits actually. And I think that goes well for the future. Now, of course, it's not enough to get an RFP, you also have to win. And so you're right, our win rate has been picking up significantly on the back of all of the capabilities we talked about and on the back of the fact that the EBP segment in particular has seen very, very strong funding growth. And that usually translates six months to two years after the funding into awards. And again, given our strong position in the EBP segment in winning a fair share, so that has also contributed to it. Anything else, Mike? No.

Next question.

Your next question comes from the line of Elizabeth Anderson with Evercore ICI. Your line is open. Please go ahead.

Hi, guys. Congrats on the nice quarter, and thanks so much for the question. If we think about the guidance, particularly the revenue increase, How would you sort of allocate that between the improving demand environment that you're seeing in R&DS and CS and anything to call out sort of either like interest expense or tax rate or anything that changed versus what you were saying last quarter? Thank you.

I'm saying no significant changes on the below the line assumptions there. And clearly, when you talk about R&DS, it's a long cycle business. So the great bookings that we've had are really more of a 27 and beyond indicator. So we've been getting a lot of questions about our bookings.

Yeah. Well, I think I answered a number of your questions about bookings and the fact that they were really broad-based. Again, there was nothing salient. I think it was generally very strong. And I just want to Recently, several of you asked about bookings and bookings policy in light of some other people's changes to their bookings policies and so on. And I just want to again emphasize that we continue to have contracted bookings, that is that You know, all bookings need a signature and to take a cancellation, we also need the signature. You know, we feel that the signature is an objective criteria and removes judgment. And we think that we're going to stick with that best-in-class policy. I'm just giving that as a context for your questions. Again, broad-based bookings or contracted bookings. Many of you, by the way, also with We received several inquiries wondering if we also have 15 or 16% of our backlog that's inactive trials. And we asked the RNDS team to go back. Obviously, we have, you know, in our backlog, $34 billion, we've got thousands and thousands of trials, as you can imagine, accumulating over the years. And we asked the RDS team to review the backlog to identify so-called inactive trials. And just want to make sure that to reassure those of you who asked, and several of you asked, about the quality of the backlog. Mike, do you have any comments on that? I saw there were preliminary comments.

Yeah, I think the team is looking at it and will finalize it in the third quarters. But if there is an adjustment to our backlog for inactive trials, it's in the ballpark of 5%, not this 15% metric that was out there by competitor. And I think that it's important to note that if we do make an adjustment, It will have zero impact on any historical financial results, guidance, the next 12-month revenue from backlog, which is recorded zero. So again, it's something that we're looking into, and if we do something, we will talk about it in our third quarter call.

But to your question about the next, what is important, because we reported this time very strong growth in next 12 months revenue from backlog. and then as you know it's at the record level what's the number nine over nine to two billion dollars seven and a half percent seven percent growth and has been also increasing quarter after quarter um we want to draw your attention also to the net new bookings last 12 months quarter after quarter if you go back and look over the past five quarters that metric has been constantly increasing in a regular steady pace and year-over-year it's up 12.9%. All of that bodes well to your question about our revenue going forward, not just guidance for this year, but the momentum into next year.

And specifically this year, we're seeing the acceleration growth in both commercial solutions and RDS segment, Elizabeth, so we feel good about the guide.

Thank you all.

Thank you. At this time, Mr. Joseph, I turn the call back over to you.

Thank you, Operator. Thank you, everyone, for taking the time to join us today. We look forward to speaking with you again on the third quarter 2026 earnings call. The team will be available the rest of the day to take any follow-up questions you might have. Thank you. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.