IQV - NYSE

Ladies and gentlemen, thanks for standing by. At this time, I would like to welcome everyone to the IQVIA Second Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] And just as a reminder, this call is being recorded. I would now like to turn the call over to Mr. Nick Childs, Senior Vice President, Investor Relations and Treasury. Mr. Childs, please begin.

Good morning, everyone. Thank you for joining our second quarter 2023 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Mike Fedock, 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 Presentations section of our IQVIA Investor Relations website at ir.iqvia.com. Before we begin, I would 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 risks 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 10-K 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.

Thank you, Nick, and good morning, everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered another quarter of strong operational results with 9% organic revenue growth, excluding the impact of foreign exchange and COVID-related work. The demand environment for the industry continues to be healthy, which supports our confidence in the long-term outlook for our businesses. Emerging biotech funding continued its healthy trend. According to BioWorld, second quarter EBP funding was $17.1 billion, up 33% versus prior year and up 10% sequentially versus Q1. Clinical trial starts were up over 10% sequentially compared to Q1 2023. FDA approvals continued their strong momentum, which is a positive indicator for our commercial businesses going forward. There were 26 approvals in the first half of the year, and that's up 30% versus the average of the prior five years. M&A activity in the biopharma sector remains strong with over $90 billion spent in the first half. 2023 is on pace to be one of the largest years in the last decade in both value of transactions and number of deals, and that is with a high interest rate environment. Our Q2 demand metrics showed continued healthy growth. Net new bookings were just under $2.7 billion, which was our second largest quarter ever and represented a quarterly book-to-bill of 1.28. By the way, before I move on, I know that some of you inquired last quarter about our services book-to-bill, and I think some of you are concerned about what that may have implied about our performance. So just to remove any concern, our services book-to-bill this quarter was, Nick, 1.34?

Correct.

1.34. And our trailing 12-month book-to-bill is 1.34 overall. And again, for those who asked, it's the same on a services basis. Once again, going forward, if there is any meaningful deviation between our total book-to-bill ratio and the services book-to-bill, then we will let you know. Otherwise, you can assume they are roughly the same. Now as a result of these bookings, our backlog reached $28.4 billion, growing 11% versus prior year on both reported and constant currency basis. Another metric we track is our quarterly RFP flow. And this past quarter, it was the largest ever. It was up 8% year-over-year and 6% sequentially. For the longer-term fundamentals of the industry are certainly very positive. Now in the short term, our clients have continued to be cautious with their spending due to the uncertain macroeconomic conditions and that's reflected primarily, I would say, only in some subsegments of our commercial business segments, that is TAS and CSMS. In the second quarter, these businesses were stable with the TAS segment growing in the second quarter at a rate consistent with the first quarter as we had anticipated in our guidance. Of course, last time we spoke, we expected client spending in these commercial businesses to show signs of acceleration by now. But unfortunately, they have continued to delay decisions. Our pipeline is still there. However, decisions keep being moved to the right. And as a result, we now expect these commercial businesses to perform for the balance of the year similarly to what we saw in the first half. For the TAS segment, that represents approximately 6% growth organically, excluding the impact of FX and the COVID step-down. And that 6% growth organically for the year is actually very strong in the current environment. With that, let's review the second quarter results. Revenue for the second quarter grew 5.3% on a reported basis and 5.5% at constant currency compared to last year. And again, excluding COVID-related work from both periods, we grew the top line 9% at constant currency on an organic basis. Second quarter adjusted EBITDA increased 8%, driven by the revenue growth and ongoing cost management discipline. Second quarter adjusted diluted EPS of $2.43, as expected, faced the headwind of the step-up in interest expense and the UK corporate tax rate change. Excluding the impact of these non-operational items, our adjusted diluted EPS growth would have been 14%. A few highlights of business activity. IQVIA has been awarded a significant contract with a top 10 pharma to implement our full commercial data and analytics solution suite. This suite of offerings will benefit our clients by utilizing insights powered by AI, such as personalized engagements with HCPs; leveraging our multichannel capabilities, including digital; precise geographical sales targeting; and better cost efficiency by reducing the number of resources that are manually generating insights. This initiative positions IQVIA as a strategic partner with this large top 10 pharma client for AI-powered data and analytics solutions. Another top 10 pharma extended and broadened an analytics project to track the sales performance of their top-selling immunotherapy oncology drug in Europe. The project allows commercial teams to continuously track brand performance, factoring AI-generated insights and improve, as a result, execution across seven cancer indications in over 25 countries. In another win, IQVIA was awarded a significant contract from another top 10 pharma client to deploy our OCE Optimizer application globally. This is an AI-powered multichannel sales management application that optimizes HCP engagement in real-time. IQVIA was selected over two other competitor solutions because of the seamless integration that OCE offers with the client's current ecosystem, the superior AI capability and our successful history with these clients in previous global system implementations. Also, in the quarter, IQVIA was selected by multiple clients to deliver regulatory-mandated plus post-approval safety studies in Europe. In each case, IQVIA was selected over preferred providers due to our deep expertise in sourcing data from the local health systems in Europe and our ability to bring multiple databases together in a harmonized manner for research. We were awarded a five-year pregnancy exposure study from an EBP customer to collect and analyze health information from women who take prescription medicines or vaccines during pregnancy and compare results with women who have not taken them. We won this award because of our rich experience in post-approval safety studies in pregnancy and deep experience in epidemiology. In the quarter, IQVIA has been recognized by the Artificial Intelligence Breakthrough Awards with the prestigious Best AI-Based Solution for Healthcare award. IQVIA was recognized for its AI software, including natural language processing and proprietary large language models technology, which analyzes complex and unstructured patient data to provide unique insights into patient care and disease states. This technology is helping clinicians identify and screen at-risk patients, enabling targeted intervention to patients in need. IQVIA continues to differentiate in the application of AI analytics with two of the top 10 pharma companies designating their use of IQVIA AI as their innovation of the year. In addition, both Databricks and Snowflake separately named IQVIA their 2023 Health and Life Sciences Partner of the Year. These awards recognize AI and tech partners for their exceptional accomplishments and joint collaboration. There's a lot going on at IQVIA with generative AI, and we will likely be discussing this at the appropriate time at a future investor meeting. Let me now move to R&DS segment, which had another strong quarter, including several key wins. Our expertise in oncology continues to be a differentiator for us. In the quarter, a midsized pharma company awarded IQVIA two large Phase III trials for gastric and prostate cancer, which are expected to last about six years. The client selected IQVIA due to our therapeutic expertise and infrastructure to run global complex oncology studies as well as our global data assets. Also this quarter, a large FSP client renewed their partnership with IQVIA as a preferred provider this time without soliciting competing bids. This client was a historical lockout account for the historical Quintiles legacy company. We won here due to our FSP expertise, scale and delivery capabilities. In our lab business, the top 10 pharma awarded us a large study in the quarter for a novel drug that improves the quality of life of patients suffering from a serious autoimmune disease that impacts one out of 50 people worldwide. This study is our clients' top R&D program, and it has positioned IQVIA as the largest laboratory service provider for this client. Lastly, I'm proud to share that Sheetal Telang, Vice President of Therapeutic Strategy at IQVIA, has been honored with the 2023 Rising Star Award by the Healthcare Business Women's Association. Sheetal earned the award for strong and innovative leadership of critical industry initiatives, including by increasing diversity and inclusion levels among patients enrolled in clinical trials. I will now turn it over to Ron for more details on our financial performance.

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Second quarter revenue of $3.728 billion grew 5.3% on a reported basis and 5.5% at constant currency. In the quarter, COVID-rebated revenues were approximately $120 million, which is down about $140 million versus the second quarter of 2022. Excluding all COVID-rebated work from both this year and last, organic growth at constant currency was 9%. Technology & Analytics Solutions revenue was $1.456 billion. That was up 3.4% on both a reported and constant currency basis. Excluding all COVID-related work, organic growth at constant currency in TAS was 6%. R&D Solutions revenue of $2.096 billion was up 7.5% reported and 7.6% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 12%. Lastly, Contract Sales and Medical Solutions, or CSMS, revenue of $176 million declined 3.8% reported and was flat at constant currency. Total company first half revenue was $7.380 billion, which was up 3.8% on a reported basis and 5.1% at constant currency. Excluding all COVID-related work, organic growth at constant currency for the first half was 10%. Technology & Analytics Solutions revenue for the first half was $2.900 billion. That's up 1.9% reported and 3.2% at constant currency. And excluding all COVID-related work, organic growth at constant currency and TAS was 6% for the first half. R&D Solutions first half revenue of $4.122 billion was up 6.1% at actual FX rates and 7.1% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 14% in the first half. Contract Sales and Medical Solutions, or CSMS, first half revenue of $358 million declined 5.3% reported and 0.5% in constant currency. Let's move down the P&L now. Adjusted EBITDA was $864 million for the second quarter, which represented growth of 8% while first half adjusted EBITDA was $1.715 billion, which was up 6.4% year-over-year. Second quarter GAAP net income was $297 million, and GAAP diluted earnings per share was $1.59. For the first half, we had GAAP net income of $586 million or $3.12 of earnings per diluted share. Adjusted net income was $454 million for the second quarter, and adjusted diluted earnings per share was $2.43. For the first half, adjusted net income was $916 million or $4.88 per share. Now, excluding the year-over-year impact of the step-up in interest rates and the increase in the UK corporate tax rate, adjusted diluted earnings per share grew 14% in the second quarter and 11% for the first half. As already reviewed, R&D Solutions delivered another quarter of excellent bookings. Backlog at June 30 stood at a record $28.4 billion, which is up 11% year-over-year and up approximately 40% in the last three years. Reviewing the balance sheet. As of June 30, cash and cash equivalents totaled $1.382 billion, and gross debt was $13.777 billion, which resulted in net debt of $12.395 billion. Our net leverage ratio ended the quarter at 3.59 times trailing 12-month adjusted EBITDA. Second quarter cash flow from operations was $402 million and capital expenditures were $160 million, resulting in free cash flow of $242 million. As we previously announced, in May, we issued $1.250 billion of senior secured and unsecured notes. The proceeds from these notes were used to pay down our revolving credit facility. We also took advantage during the quarter of our stock price multiples falling to 2017 levels and deployed $490 million to repurchase 2.5 million shares at an average price of $194 per share. In the first half, share repurchases totaled $619 million. Now we ended the quarter with $736 million of share repurchase authorization remaining under the program. But our Board of Directors just authorized a $2 billion increase to our share repurchase plan, which brings the authorization to $2.736 billion as of today. Let's turn to the guidance. We're updating our guidance to address the impact of the continued client cautiousness we've been experiencing in the commercial business. We now anticipate this cautiousness persisting for the balance of the year. And reflecting the reduced expectations for both TAS and CSMS, we currently expect revenue to be between $15.050 billion and $15.175 billion, which represents year-over-year growth of 4.4% to 5.3%. Total company organic growth at constant currency, excluding COVID-related work, is now expected to be between 8% and 9% for the year. This revenue guidance continues to assume about 100 basis points of contribution from acquisitions and a step down in COVID-related revenue of approximately $600 million versus 2022. By segment, we now expect TAS to grow approximately 6%, consistent with what we saw in the first half. Our expectations for the R&DS segment are unchanged and consistent with our previous guidance. And finally, we now expect CSMS revenue to decline approximately 3%. And all of these growth rates are organic at constant currency, excluding COVID-related work. Now, to reflect these changes in revenue, we're also updating our guidance for full year adjusted EBITDA to $3.600 billion to $3.635 billion, which represents year-over-year growth of 7.6% to 8.6%. And lastly, we're updating our guidance for adjusted diluted EPS to $10.20 to $10.45, representing year-over-year growth of 0.4% to 2.9%. This adjusted diluted earnings per share guidance includes the year-over-year impact of the step-up in interest rates and the increase in the UK corporate tax rate. And together, these non-operational items reduced the year-over-year growth rate by approximately 12 percentage points. So excluding these items, adjusted diluted earnings per share is expected to grow 12% to 15%. Now let's move to our third quarter guidance. In Q3, we expect revenue to be between $3.760 billion and $3.810 billion or growth of 3.9% to 5.3% on a constant currency basis and 5.6% to 7% on a reported basis. Adjusted EBITDA is expected to be between $880 million and $895 million, up 8.1% to 10%. And adjusted diluted EPS is expected to be between $2.39 and $2.49, declining 3.6% to growing 0.4% year-over-year. Excluding the step-up in interest expense and the increase in the UK tax rate, this translates into third quarter adjusted diluted EPS growth of between 11% and 15%. Now, I should note that all of this guidance assumes that foreign currency rates as of July 31 continue for the balance of the year. So, let me summarize. We delivered another strong quarter of financial performance, including organic revenue growth of 9%, excluding the impact of foreign exchange and COVID-related work. Our quarterly net new bookings were the second highest ever at just under $2.7 billion, and our industry-leading backlog reached a new record of $28.4 billion, up 11% year-over-year. Underlying demand in the industry and our business remains healthy with our RFP flow reaching a new record high in the quarter, up 6% sequentially versus Q1 2023. We took advantage of the stock price multiples falling to 2017 levels during the quarter and bought back almost $0.5 billion worth of shares at an average of $194 per share. On top of this, our Board of Directors authorized a $2 billion increase to our share repurchase authorization. And finally, while client cautiousness and their discretionary spending is slightly reduced, our short-term outlook on the commercial side of the business, that is TAS and CSMS, the fundamentals of both the clinical and commercial markets continue to be healthy and support our confidence in the longer-term outlook for our company. And with that, let me hand it back over to the operator to open the phones for Q&A.

[Operator Instructions] We'll go first this morning to David Windley at Jefferies.

Hi, good morning. Thanks for taking my question. Ari, you talked about a pretty substantial increase in trial start activity, which is encouraging, certainly. And the bookings, as you highlighted, are also pretty strong. I'm wondering if -- kind of on two points, if that is reflective of maybe pharma companies -- pharma and biotech companies kind of getting about business after some period of evaluation of pipelines; and then two, if there's any improvement in the operational environment, thinking about site staffing, labor turnover, things like that, that would help throughput on the operational side? Thanks.

Yes. Thank you, Dave. Look, the environment from what we have been able to see over the past 1.5 years, two years has not changed. I know there have been rumblings about EBP funding on one hand and concerns about the impact of the IRA on the other hand. And it's true large pharma is evaluating the longer-term impact of the IRA and in that context, taking another look at their portfolio of studies, both in-flight and to come. And some of them reprioritized some of the studies. But fundamentally, our business has been sound, strong, growing sequentially every quarter. Our bookings have been beating record after record. So we really did not experience any tremor at all in the market on the R&DS side. And this quarter was just a continuation of what we had experienced. With respect to your second question about staffing and site start-up, attrition rates are back to pre-pandemic levels, which is about 10% to 12%. So, from our -- on our end, things are good. We continue to actively recruit and hire because we're growing organically at a very high rate. And therefore, we need the people to execute the work. So that recruiting is targeted at meeting the incremental demand. Obviously, there's always competition for talent. And right now, we have about 87,000 employees, and we continue to recruit thousands of people a year. So that's on our end. With respect to the site staffing issues, they saw -- frankly, we continue to see some staffing issues at some sites, but it's really, to a lesser degree than in prior, let's say, probably half a year or three quarters, and it's already dramatically reduced. So really, we are essentially getting back. I'm not going to say to 100% staffing levels at the site because there's still, again, are sporadic issues here and there, but it's not -- you're correct, it's not the severe issues we experienced perhaps six months or nine months ago. So it's much improved. Thank you, David.

Thank you.

Thank you. We'll go next now to Ann Hynes at Mizuho.

Hi. Good morning. I just want to dig into TAS a little bit more. Within TAS, I know there are several sub-segments. Can you just give us growth rates or declines within the sub-segments like consulting technology and real-world evidence? And also, I think most of the pressure is coming from the consultant segment. Can you tell us just what the margin drop-through is that? So if consultant is maybe like 25% of revenue, I think it is, what's the debt margin -- negative margin drop-through? That'd be great. Thank you.

Okay. I don't think we disclosed by sub-segment, the margins, but it's very good margin, I think, put it this way. The consulting is good margin, and the analytics is also very strong margin. A lot of our analytics work is delivered out of offshore centers in Bangalore, in Manila. And we generate good margins. It's a lot of standardized work. We have workflows that we use in processes that over the years, we've refined. And that work -- when we say consulting, don't think McKenzie-type consulting. Consulting is really, again, a pricing market access study, a launch study, a sales force optimization study. So, these are operationally geared consulting services that our clients utilize to support often the launch of new drugs or the reprioritization of geographic markets or specific restructuring of their sales organization in certain geographies or in certain therapies, those types of projects. And it's not like they are not going to do them. Those must -- are must-do projects. But the environment, the climate, the higher interest rates has kind of put people on sort of on a hold pattern, if you will. The pipeline is there. No one is spending is. I am just not doing the project. And therefore, we would say, well, the prospects are lower. Now, we have -- the projects are still there, but the decision-making seems to be pushed to the right. We were hoping, frankly, up to two, three months ago that things would recover by now in terms of the decision-making and accelerate. And that's why we, frankly, we were hoping that we would get back to the 8%-or-so growth, higher single-digit growth for the TAS segment for the year. We were expecting a strong acceleration, but we haven't seen it materialize in the second quarter. And so as of now, based on what we've seen, I think it's prudent to say that this -- the type of growth rates we've seen for the segment as a whole, which is 6% organically at constant currency and not including the COVID impacts, it should be -- should continue the rest of the year. Thank you.

Great. Thanks.

Thank you. We'll go next now to Eric Coldwell at Baird. Baird, excuse me.

Thank you very much. I had the same question as Anne, and I just wanted to follow up on that. The way we think about TAS is for us broadly defined sub-segments, data, analytics, consulting, real-world evidence and technology. I'm curious, did any of this cautiousness or sluggishness, did it expand beyond the analytics and consulting side? What are the growth trends in data, real-world evidence, tech any nuances or changes there? And then I have one quick follow-up, if I might. Thank you.

All right. Sure. Of course, Eric. Thank you. So let's start with data, right the core of the business. That has not changed. I would say 90-plus percent of our business for the year on the data side is just locked in by the month of December for the following year. So there's no change there. That's recurring revenue, and not much has happened there. The level of discretion in terms of data by here for the clients is much less than the analytics and consulting segment that we were just discussing. For the faster-growing businesses, real world and commercial tech, now let's take the technology suites. It's not like the revenue is a reflection of the sales in the year. It's -- the revenue generated in technology is longer cycle, corresponds to technology awards from prior periods, from prior years. So nothing has changed there on the revenue side. There is cautiousness, similar to consulting and analytics, on the technology side in terms of new buys and new transitions. There's a number of dislocation in technology going on right now, by the way, both on the clinical side and on the commercial side, the main CRM competitor decided to change their platform. So as a result, clients are kind reviewing their technology decisions on the technology side. We've got new innovations. We've got the main competitors there, Medidata and others and Oracle, are launching a new suite. So, there is dislocation. So, because of that, clients are kind of taking their time to review decisions, but that's not impacting our revenue in year. On the real-world side, again, some of these are longer-term studies. There is a little bit, but again, I don't think that we've seen it affect our revenue year that much. A little bit of cautiousness and perhaps a little bit of delay on the late-phase real-world studies that we've seen. Again, I'm just giving you a really high-level commentary here on -- just to really scratch the business. But fundamentally, it is a 25% piece of the TAS segment, that's consulting and analytics, that's essentially down year-over-year by, I think, about 5%, if I recall. And so everything else is pretty much stable as expected.

Thank you.

What's your follow-up?

Yeah, Mike. Thank you for the follow-up. I know you don't tend to get into details on M& A in the quarter with -- typically, these are smaller companies, sometimes higher revenue multiples. But I did notice $426 million, I believe, spent on acquisitions this quarter. I was hoping to get some sense of directionally what that might have been.

Yeah. And I think it was done towards the end of the quarter. I mean, I can tell you, so it's a company called Cognitive for which we paid almost $300 million, so clinical site network. As you know, as part of our strategy overall, we are -- we've been acquiring certain assets that have strong patient enrollment capability in specific therapies. So Cognitive is, in particular is strong in internal medicine, in CNS, in vaccines as well and has some large pharma customers. So, we -- the company is headquartered in Arizona. It's -- obviously, it's a significant multiple of revenue. But -- and we acquired that towards the end of the quarter. And we have a bunch of all smaller stuff over here, but that's the -- what else do we have here? We have a $36 million investment in a small--

We had one other site network we've acquired.

Right, right, right. It management organization, yes. That was in psychiatry and smoking cessation. So again, highly specialized site benefit organization we've done a couple this past quarter.

So you are starting to follow the path of what PPD and ICON have done in prior years with moving into the opening up the marketplace for actually being a hybrid SMO, but probably still at a very small scale, I would assume.

Yes, yes -- no. So we had already -- we do have -- we had a network that we had started ourselves. But we -- you're correct. I don't think we -- I mean we bought maybe one other one last year, if I remember -- you're correct. Again, these are -- it's not like we are buying dozens of this, but there happens to be that coincidentally, we bought two in the quarter. And that's basically the bulk of the spend that you see there.

Perfect. Thank you so much. Thank you.

We'll go next now to Tejas Savant at Morgan Stanley.

Hi, guys. Good morning and thanks for the time this morning. Ron, maybe one for you and a quick follow-up on the M&A side for Ari as well, if I may. So Ron, first for you, I mean, margins in the midpoint look to be expanding nicely here into the fourth quarter as implied by your third quarter guide. Can you just walk us through sort of what drives your confidence in that sort of margin expansion into year-end? And then on the M&A side, Ari, we noticed that the Propel Media acquisition from earlier in the year is being blocked by the FTC at the moment. We had some new merger review guidelines, draft guidelines admittedly, put out a couple of weeks ago as well. Does it concern you that you need to sort of rejig your M&A strategy here in light of like some of these recent developments?

I'll take the margin question first, Tejas. Look, there were a couple of things here. Number one, we've had market expansion all year. So it's really good indicator that it's credible to say we're going to have it in the back half of the year. We have a number of productivity initiatives underway to reduce cost. And those tend to be, of course, more back-end loaded. You get more benefit as you go through the year. So that's certainly going to support margins in the back half of the year. I think you have -- another thing that's happening is some of the labor cost pressure that we've been feeling over time on a year-over-year basis. You're starting to kind of lap that and get more pricing benefit in as well. So it's a combination of factors. Now all those factors overcome a little bit of drag from mix. For instance, the info business, which is -- tends to be a profitable business, never grows as fast as the rest of the business. So we're very confident in the margin outlook for the back half of the year, and those are the reasons.

Yes. And the question on the acquisition that we're trying to do that we -- really is, I think, about a year. You know that we have a strategy to continue to grow in the digital space. Our strategy remains intact. We've seen those merger guidelines. Look, I'm not going to comment on the pending litigation with the FTC because planning litigation. We continue to believe strongly that there is absolutely zero logic to blocking this transaction. But we are aware that there are a few novel theories that are being promoted by this administration of the FTC. And listen, administrations come and go. And we are not going to change our M&A strategy. We believe that we are still a very small player in a hugely massive digital promotional market. I mean you've got the Googles of this world, giants that also participate in this market. And we have a right to participate in this market. We are serving the life sciences industry and their needs. And our customers welcome that development and our ability to offer those services. We believe that this acquisition actually increases the degree of intensity of competition in this market and actually allows all other participants to counter the essential strong behemoths that dominate the digital space today. So we just simply do not understand the FTC's arguments, and I'll leave it at that.

Thanks, guys. Appreciate the color.

You’re welcome.

We'll go next now to Luke Sergott at Barclays.

Good morning, guys. Thanks again for the questions. So you were talking about a little bit about decision-making getting elongated and I know that, that was on parts of the TAS business. But can you talk -- can you give us a sense of how much longer that has gotten? It typically takes for you guys, like, let's say, two months or three months to close a certain deal and now that that's six months. Just give us some type of framework on how long that has gotten. And then as you guys think about things recovering, I assume that there's also some delayed decision-making on the big -- the R&DS side. So when things start to turn around, is it safe to assume that the RDS side comes back before the TAS side when -- on this decision-making process?

Thanks for the question, Luke. I'm not sure what you mean by R&DS coming back. I mean it's very strong. The R&DS segment is not experiencing any delays in decision-making that we can see, frankly. Again, we had another record quarter of bookings. Nothing's changed there. And our RFP flow, again, is at a record level. I could spend time giving you stats on the -- on our leading indicator metrics on the R&DS side, a qualified pipeline and the pipeline overall and so on are at a record high, and recontinue our sales activities as before, again, nothing -- no sign of delaying decision making on R&DS side. I want to be very clear on that. On the TAS segment and CSMS and again, it's largely affecting the consulting and analytics segment. And I would say almost exclusively, the issue is I can't quantify in month. I mean the stuff that's in our pipe that we've had since the end of last year. And here we are, August 1, and the clients on that specific opportunity still hasn't decided to -- everything is negotiated, and they know they have to do the study, but they could do the study next year. So. whatever clients -- on that side of the business, clients are basically saying to themselves, well, do I need to do this now? Or can I keep the can another few months? So. this stuff has been our pipeline six months, and we haven't taken it out because the client still is telling us that they want to do it. They just haven't signed yet. So, yes, I mean it's a bit in the time frame that you're talking about. It would have taken a month or two, and it's taking six months or more.

Okay. And I guess I -- sorry for implying that you guys were seeing the RDS weakness or delays there in decision-making. It's just going more of an overall pharma comment. And on that decision-making on the TAS, is that more due to them, like your customers, focusing more on where they're going to place their bets and deploy that capital for the clinical trials and then kind of the TAS stuff is like a secondary knock-on or secondary benefit that you guys offer?

It's really all over. Every client has -- it's hard to -- it weighs on everyone. Is there going to be a recession? Is there going to be a recession? Maybe we should delay the launch in Portugal. Maybe we should not look at our sales force now. If we do this next year, maybe that project that we were planning to do -- to evaluate whether we should adjust pricing in consideration of the IRA implications and so on, on this drug, in that market, in that therapy, we push it back. So it's not like I can give you a blanket answer. It's just the environment, the atmospherics are such that -- look, I'm sure someone is going to ask me a question, and I'm assuming it's going to be Shlomo, but our cash flow wasn't too special this past quarter and is the same thing. Why are large pharma companies that are sitting on massive piles of cash not paying their bills on time? Our collections are not where they should be. And it's just -- it's a high interest environment. So people tend to just find all kinds of reasons why there was a comma missing in an invoice, and therefore, we can't pay you and send me by the invoice in two weeks. It's just the environment. I don't have another answer.

Got you. That's helpful. Thank you.

Thank you, Luke.

And we'll go next now to Shlomo Rosenbaum at Stifel.

Here we go.

Hey, Ari. I still get a question, even though you asked that one, right?

Yes, yes.

All right. Thank you. Actually, just -- I wanted to touch on one, just a metric and then maybe follow-up with another one just more oil broad. Just if you could talk to -- just tell us what the growth rate on real-world evidence was in the quarter. And then, Ari, maybe just if you could talk a little bit about, in terms of AI, you gave us a little bit of a teaser. But can you talk a little bit about just where you might have unique advantages, either because of the investments you've made in AI over the last bunch of years or just because of the uniqueness of the information that you've aggregated? Is there anything that's out there in market that's really unique right now? Or is this really stuff that's going to be on the comp? Thank you.

Thank you. So quickly on the real-world evidence, it's been double-digits for one and it's still strong double-digits. So nothing changed there. With respect to AI, we're obviously very excited by the opportunity. This is not new for us, right? I mean we've been working on this for a long time. We've invested since 2015, 2016, and we own the number of market-leading and proprietary AI software engines. We've dedicated AI/ML resources for a long time. And we are extremely well positioned. We apply AI in drug development, discovery, clinical development, safety, market access, medical affairs and, of course, in commercialization to inform promotional and sales and targeting activities. We are using AI in NLP processes, in translations of medical documentations and protocols. That's for the offering part of the business, if you will. On the internal side, we've applied AI to many of our own internal processes. For example, lead to cash, we -- really across a set of processes to create efficiencies operationally. So it is a great opportunity for us and has been for the past few years. Now, how do you use AI to gain competitive advantages? It helps optimize site identification based on the patient populations that we derive from our -- that we mine in our databases, helps optimize patient recruitment techniques based on data and analytical footprint. It helps optimize development -- drug development protocols. We can -- we have support -- it has built predictive enrollment models based on all the protocol criteria thresholds. You're familiar with the next best application in our OCE suite, which leverages the know-how and the historical data to create predictive models of engagement with customers. We've also been developing a novel biomarker database with IQVIA's own natural language processing tools. We've used it in Alzheimer's studies to have an early identification and recruitment of patients with most likely to develop Alzheimer's. A lot of activities, frankly, to expand patient pathways. So if you look into -- I'm sure it's somewhere in our websites or literature, we have over 150 patent pending methodologies and algorithms, more than 30 predictive data disease models, more than 300 life science-specific analytical libraries, I mean I could go on and on. We've got a lot of stuff here on proprietary material in AI. Now this whole buzz around generative AI, as people are finding out, it's not so easy to apply and actually derive precise and relevant insights. And I'm looking forward to presenting why even using -- and by the way, we are working with -- everyone has announced significant generative AI applications and models because it's really -- as always, it's -- if you don't have access to the business rules and to the relevant content, you're going to come up with what they call hallucinations. And we've tried it and we are working with partners -- with technology partners, and it's very clear that we have the sauce internally here that would enable those large language model tools to be a lot more effective and accurate and precise than what they are today in the world of life sciences, where they basically only have access to what's available on the Internet or on public sources. That's why I can say now, but again, it's a very exciting development. Obviously, we are very busy leveraging internally. And there was a question earlier on margins and margin expansion, and it's one of the several initiatives that is helping us generate margin expansion.

Thank you.

We go next now to Jailendra Singh at Truist.

Thank you, and thanks for taking my questions. I actually want to ask about data and information offerings business for you guys. One of your competitors recently talked about coming up with competitive solutions in that space for pharma companies. I understand this is a more stable and high-margin, very sticky business for you guys. But just remind us about your positioning there and what makes the barriers to entry high in that business.

You are asking about the data business?

Yes, yes.

Okay.

Comments that Dave has made in terms of data.

Okay, okay. Yes. I mean, look, I don't know what to say here. It's just not the same planet, the only way I can put it. The scale, the global presence in over 100 countries, the level of granularity, the infrastructure -- the IT infrastructure to process, cleanse, cure, connect all that data on a global basis, the business rooms. I mean look at health care, data is chaos. It's -- you can have as much data as you want. If you don't understand it and connect it and cleanse it and know what you're dealing with, it's not really relevant. We have data on about 1.4 billion...

1.2 billion.

1.2 billion patients. And that -- I don't think there's anyone that has anything resembling what we have. I mean I just don't know what it's like.

We've been at it since the early 1950s, Jailendra. That should tell you something. I mean you don't -- there's nothing that would stop somebody technically from recreating what we have in data if they have 70 years and all the expertise we have.

Got it. Thanks a lot.

Thank you.

Okay. Well, thanks, everyone, for joining us today. We look forward to speaking to all of you again on our third quarter earnings call. The team and I will be available the rest of the day to take any other follow-up questions you may have. Thanks for joining.