Simon Christopher Holmes - EVP Investor Relations and Corporate Development Brendan Brennan - Chief Financial Officer Ciaran Murray - Chief Executive Officer & Executive Director Dr. Steve A. Cutler - Chief Operating Officer.

John C. Kreger - William Blair & Co. LLC Sandy Y. Draper - SunTrust Robinson Humphrey, Inc. Robert Patrick Jones - Goldman Sachs & Co. Tim C. Evans - Wells Fargo Securities LLC Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker) Erin Wilson - Credit Suisse Securities (USA) LLC (Broker) Jonathan Groberg - UBS Securities LLC Donald H.

Hooker - KeyBanc Capital Markets, Inc. Tycho W. Peterson - JPMorgan Securities LLC Greg Bolan - Avondale Partners LLC.

Good day, and welcome to the ICON plc Q2 2016 Conference Call. Today's conference is being recorded. At this time, I would like to hand the conference over to Simon Holmes. Please, go ahead..

Thank you, Marion. Good day, ladies and gentlemen. Thank you for joining us on this call covering the quarter ended June 30, 2016. Also on the call today, we have our CEO, Mr. Ciaran Murray; our CFO, Mr. Brendan Brennan; and our COO, Dr. Steve Cutler.

I would like to note that this call is webcast, and there are slides available to download on our website to accompany today's call. Certain statements in today's call will be forward-looking statements.

Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, and listeners are cautioned that forward-looking statements are not guarantees of future performance.

The company's filings with the Securities and Exchange Commission discuss the risks and uncertainties associated with the company's business. This presentation includes selected non-GAAP financial measures.

For a presentation of the most directly comparable GAAP financial measures, please refer to the press release statement headed Consolidated Income Statements Unaudited U.S. GAAP.

While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP financial information is more useful to investors for historical comparison purposes.

We'll be limiting the call today to one hour and, therefore, ask participants to keep their questions to one each, with an opportunity to ask one related follow-up question. I would now like to hand over the call to our CFO, Mr. Brendan Brennan..

Thank you, Simon. Quarter two, we achieved a record level of business wins. Gross awards were $622 million and our net awards were $502 million. Translations were $120 million or around 3% of our opening backlog. This is higher than we have seen in recent quarters, but still within our historic range of 2% to 4% of opening backlog.

The primary driver of cancellations were determination due to safety and efficacy concerns of a large oncology program. The growth in new business wins in the quarter meant that our net book-to-bill was 1.22, and we grew our backlog year-on-year by 8.6% to over $4 billion. Net revenue in quarter two 2016 was $411 million.

This represents year-on-year growth of 5.7% or 5.3% on a constant currency basis. On a constant dollar organic basis, year-on-year revenue growth was 3.1%. Our client concentration continued to improve in the quarter, with our top client representing 28% of revenue compared to 31% for the full-year 2015.

Our top five clients represented 46% compared to 49% last year. Our top 10 represented 59% compared to 63% last year, while our top 25 clients represented 77% compared to 78% last year. This continued diversification of our customer base meant that outside our top account, revenue grew 8.6% year-on-year.

We added around 100 new staff in the quarter, which meant we ended the quarter two with approximately 12,300 staff. Group gross margin for the quarter two was 42% compared to 42.9% in quarter one and 42.1% in the comparable quarter last year.

We delivered further operational efficiencies in the quarter by leveraging our global business support model, and as a result, SG&A was 19.5% of revenue. This compared with 20.2% last quarter, 20.9% in the comparable period last year. Operating income for the quarter before nonrecurring charges was $78 million, an operating margin of 19%.

This compared to 19% last quarter and 17.5% in the comparable quarter last year. Net interest expense for the quarter was $2.8 million compared to net interest expense of $2.9 million last quarter and $10,000 in quarter two 2015. The effective tax rate in quarter two was 14%.

Net income for the quarter before nonrecurring charges was $64.7 million, a margin of 15.8%, equating to earnings per share of $1.14. This compares to earnings per share of $1.12 last quarter and $0.95 from the comparable quarter last year, an increase of 20%.

DSOs in the quarter were 46 days compared to 47 days last year – sorry – days last quarter, and 45 days in quarter one 2015. During the quarter, cash generated from operating activities was $16 million, and capital expenditure was $12.2 million.

As a result, at June 30, 2016, the company had net debt of $97 million compared to net debt of $100 million at December 31, 2015, and net cash of $132 million at the end of June 2015. During the quarter, we also took a restructuring charge of $4.1 million as we continue to improve the efficiency of our operating model.

With all of that said, I'd now like to hand over to Ciaran..

Thank you, Brendan. Demand in market continues to be healthy across all of our segments. In the quarter, we saw increased awards from large pharma customers, alongside a continuing sort of business from midsized, specialty pharma, and medical device companies.

As a result, we achieved a record level of net new business awards, which exceeded $500 million for the first time in a single quarter. In addition, we successfully renewed our MSA with Pfizer, and we look forward to continuing our relationship with them to help advance their development pipeline.

Our success in maintaining our current customers and in winning new business results from a consistent strategic focus on operational excellence, and having the right scale, services, data and enabling technology that our clients need to enhance their development efforts.

As part of our overall strategy to grow within new markets and diversify our customer base, we announced an agreement to acquire ClinicalRM during the quarter. Clinical RM will provide ICON with a platform to further penetrate the market for government and NGO sponsored research. We continue to enhance our service offerings.

Through our PMG Research network, we were able to leverage patient data within partner healthcare systems to improve patient access to trials, so we get faster patient recruitment times for our sponsors. This is a critical challenge within clinical development and is an area where ICON has a differentiated solution.

Our targeted data strategy has led to partnerships with IBM Watson, EHR4CR and TriNetX that will also help us to find the best sites with the most suitable patients.

Once these sites and patients are identified and recruited onto our studies, our unique Firecrest technology platform is enhancing the engagement with these sites and patients throughout the trial life cycle. We continue to leverage our other differentiated technology platforms, ADDPLAN and ICONIK, to enhance sponsors' development programs.

ADDPLAN is allowing more efficient, adaptive trial designs; and using ICONIK, our project teams are analyzing clinical data in real-time to deliver innovative risk-based monitoring solutions that are significantly reducing trial monitoring costs. We continue to deploy our capital to maximize shareholder value.

As we have in the past, this will be done through a combination of bolt-on, M&A, and share repurchases. And at our recent AGM, we gained shareholder approval to buy back shares.

We will implement a share repurchase program of up to circa $400 million, which will be completed over the next 18 months to 24 months, depending on the funding and timing needs of our M&A pipeline.

As we look forward to the rest of the year, I want to take this opportunity to reaffirm 2016 earnings guidance in the range of $4.60 to $4.80, and to revise revenue guidance to the range of $1,665 million and $1,680 million.

This reflects the revenue impact of quarter two cancellations; the acquisition of ClinicalRM, which we expect to close at the end of quarter three; and the commencement of the share repurchase program in quarter four. Before moving to Q&A, I'd like to thank the entire ICON team for all of their hard work and commitment during the quarter.

Thank you, everyone, and we're now ready for questions. Marion, please..

Thank you. We'll take our first question from John Kreger from William Blair. Please go ahead..

Hey, good morning. Ciaran, a question, I know that the Brexit vote happened after the end of the quarter, but curious if you've seen any impact on that or think it might be an impact in the next quarter or two quarters? I guess it would be most relevant for your European clients. Thanks..

No, John, we haven't seen any impacts of the Brexit vote, and we don't expect to see any impact of the Brexit vote in the foreseeable future, if ever, we're a pretty global business. Our customer mix is also global, and we have a very small percentage of our operation in the U.K., I think, with 695 people there out of our 12,500 working on trials.

And the majority of our customers are non-U.K. So, no, nothing to report on that front, I'm happy to say..

Great. Thank you. And then one follow-up. Can you just maybe give us an update on the site network strategy in the PMG business? Have you been able to add any additional kind of affiliated site products? Just how you expect that to roll out would be helpful..

I'm struggling with the follow-up logic there, John, from Brexit to Q2 site and patient strategy. So while I reflect upon that, I'm going to let Steve take this question as he's closer to it than me..

Yeah, John, Steve Cutler here. We are continuing to add sites and – on the platform of the PMG acquisition that we made earlier in the year. That's an ongoing process in North America. We're also looking at opportunities in Europe as well, and that's continuing well.

We're looking – focusing on oncology, where we believe there is certainly a key unmet need there and making some solid progress there, and bringing on new partners and new sites within the network, as I say, that's foundational from PMG..

Great. Thank you..

We'll now take the next question from Sandy Draper from SunTrust..

Thanks very much for taking the question.

I guess the first question is just, could you guys quantify the – what you expect the impact of the – of acquisitions to be in the second half of the year? I think you said you expect the CRM business to close in the beginning of the fourth quarter, so just trying to get a sense of how much impact that's going to have..

Hi, Sandy, it's Brendan here. At the moment, we expect it to be a revenue impact of circa $17 million, depending on timing, obviously, with very little earnings impact at this stage..

Okay. And most of that in Q4, I think, is what we should say..

Yeah..

Okay. So, $17 million a quarter, and is that a reasonable – I mean, think about that as sort of a run rate, and as we think about....

That $17 million is in the second half of the year, Sandy. So, depending on the exact timing at the end of Q3 when it closes, it might be about $15 million a quarter, and I think it's a reasonable run rate, yeah..

Okay, great. And then follow up and I'll try to make a loose connection just since I'm talking revenue. You didn't give the comment in the slides about the expected backlog earned in the next 12 months or a percentage of backlog.

Are you willing to provide that number?.

We changed the format, Sandy. Sorry, we're both excited to tell you, we changed the format. And it's actually there on one of the slides. But, Brendan, you can disclose the number then. Yeah, yeah..

All right. I'm very excited. It is there on the slides, Sandy. It's just in a different part, on the backlog slide, it's 75%..

Okay. So 75% coverage, but, I guess, can you give a – historically, you've given, say, – last quarter, I think it was 32.7% of backlog was expected to be earned in the next 12 months. I don't know if you're willing – that number is the number I didn't see, sorry..

Yeah, that's because we – what we're saying there, Sandy, is that we have from our perspective, at this stage, 75% of the next 12 months' revenue in backlog as we stand at the end of Q2..

Okay, great. Thanks much, guys..

Thank you..

We'll now take the next question from Robert Jones from Goldman Sachs..

Great. Thanks for the question. So, first, on Pfizer, I guess, congratulations on the renewal. It looks like the revenue from Pfizer has been flat in the last three quarters or so, at least on a dollar amount basis.

Now that the renewal is complete, any expectations you guys have as far as seeing bookings and maybe revenue pick up or accelerate going forward?.

We expect to see bookings pick up, Bob. Our bookings with Pfizer have been lower in the first half of the year than they've been for some time, but that was expected with work that Pfizer were doing themself and their own potential transaction in Q1, and they're in the process of going through the renewal of the MSA.

So we had another relatively modest quarter of business wins from Pfizer, which is good because we had a record booking this quarter with our significant business from our largest customer.

And the good news is that we are having lots of discussions with them and looking at the pipeline, and we'll start to see those bookings pick up in the second half of the year and into next year.

However, our comment has been pretty clear on the revenue from Pfizer for quite some considerable time, and in that the way that deal was structured, there was a very significant amount of transition work that came in, in 2011 and 2012, which created a bolus of revenue, which we've been saying for some time, had matured and moderated.

So, we're expecting that the Pfizer revenue, as we go forward, to be flat or modestly declining. As that bolus works itself through, we're winning considerable amount of new work from Pfizer; will also remain by some way to be our largest customer, and we're excited by the work that's in the pipeline.

So bookings will pick up, but revenue will continue to follow the path that we've seen over the last number of quarters..

Got it. And I guess my follow-up as it relates to the P&L broadly, if I look at operating margins, they're flat sequentially, guidance looks like it's calling for only a modest increase in profitability in the back half.

Ciaran, just any longer-term thoughts on where we can see operating margins go over time? It looks like, obviously, the conversation may be shifting out beyond 2016, but are there remaining buckets of efficiency left for you to drive margins?.

I think there are always places that you can look for operating efficiencies, Bob. And I should know, I'm a great believer in the fact that every ceiling becomes your floor.

The way we view the operating margin lever is that – is to view it in connection with revenue, and to see both of them really as a means to get to earnings, which is our ultimate target. So when we look at where the margin will go in the future, it has to be viewed in the context of what the growth ambition is.

We have, historically, if you looked at times of high growth, seen a little bit of margin pressure. You're adding resources ahead of the curve, you're making investments in your business. We'd also look at the mix of our business as we went to new markets, and we have a portfolio of businesses with different margin profiles.

Where we go beyond 2016 in terms of strategic direction in markets will also impact the margin possibility. And then, of course, you have technology, how we drive efficiencies. We've been very successful in building a very scalable and global business model.

We continue to expect that will be scalable, and it's very leverageable in the context where top line grows, it will grow significantly faster than our support costs, therefore, we get leverage there.

So there are a lot of moving pieces here, and I think as we play the chess game towards the end of the year and move towards our strategic planning cycle and looking towards the future, we'll move all those pieces together to come up with a plan that increases earnings..

Got it. Thanks so much for the questions..

We'll take the next question from Tim Evans from Wells Fargo Securities..

Thank you. I wanted to come back to the M&A piece a little bit. So, I wasn't expecting a ClinicalRM kind of a push into the government NGO market.

Can you just talk a little bit about, is that a market that you see as a growth opportunity? Secondarily, what kind of deal accretion, EPS accretion do you expect kind of the first year after close? And then third, how much stuff is in your M&A pipeline that may be different than the kind of deals that you've done in the past? Thanks..

Okay. Tim, what I'll do, I'll get Steve to address your first question, and then Brendan can talk about the deal accretion, and maybe I'll talk a little bit about the M&A pipeline. So, maybe, Steve, if you want to kick off first, yeah..

Sure. Jim, Steve Cutler. We look at the government market very carefully. And it is a different market, but it's certainly a very large one. And we believe it's not one that's – it's served particularly well. And there's an opportunity there. So it's significant.

We – it fits our core competencies in terms of there's a lot of vaccine anti-infective type work, we believe we're well-placed to be able to do that. We were awarded the best vaccine CRO a year or two years ago, and so we've got some great capabilities in that area. We believe we're well placed to do it.

We've recruited some good people who understand that market well. It is a little different, but it's one we believe there's a significant growth opportunity and we're going to take advantage of it..

Okay. Thanks, Steve. Brendan, do you want to talk a little bit about....

Yeah, taking into – for our full year's accretion, Tim, taking on the amortization, obviously, in the first couple of years, we expect the full year accretion to have about a $0.05 impact on earnings for the full year..

Okay. So, pretty minimal in this year's financials. On the M&A pipeline then, Tim, I think our strategy has always been bolt-on M&A. It's been geared at providing us with an organization which, in its totality, is very attractive to our customers to make them to want to pick us as being their trusted development partner, their go-to CRO of choice.

So, we've always thought of a full range of a geographic footprint for the range of services across the development spectrum, really laser-like strategic focus on operational excellence and project delivery, supported by technology enablers, which we have, which are very innovative, supported by good, high-quality, targeted data assets.

So, we haven't really changed the fundamentals of that strategy. ClinicalRM is fundamentally within the development space.

It's just in a different market segment that we've been in, but if you saw last year, we also pushed into the medical devices market segment for the first time significantly, and indeed, have had some success in that in recent quarters. So, it's really just an extension of us looking at what defines our market is in ClinicalRM.

And our focus will then continue to be around the core skills of site and patient access, and data and enabling technologies, and perhaps some niche services and geographical and so from an opportunistic basis..

Thank you..

We'll now take the next question from Eric Coldwell from Baird. Please go ahead..

Hey, thanks. I've got a new one I didn't expect. On the comment on ClinicalRM accretion, I just want to make sure everybody is on the same page.

You said full year accretion of about $0.05, but you meant the first 12 months of that deal closing, not 2016, correct?.

That's correct..

That's correct, yeah..

Yeah, okay. So, maybe $0.01 or so this year. Okay.

So the second question is jumping off of a couple of the others, I – just very specifically on – and I know you don't prefer to talk about your largest clients and contracts, but the Pfizer deal has been so visible, I'm just wanting to re-verify that the existing backlog terms and conditions are unchanged, and that any impact from that renewal was not felt in this quarter's profitability and would not be a major impact for the second half of the year.

I'm still getting a lot of questions on that topic and I just want to kind of re-verify where we are with that renewal, and that the terms and conditions came out as you expected them to..

Yeah. I mean, I think we're on the record, Eric, and are saying the terms and conditions came out where we expected. We were happy with the deal we've been -Pfizer was our first customer in ICON 26 years ago. We've been working together a long time over that period. And deals we signed, we're looking forward to working on that.

We're happy with the terms and conditions. And that's really all I can say, but I think people should be happy with that, we are..

Good. Okay. Thank you very much.....

I should add to your specific question, there was no impact in Q2 of anything to do with that nor is there expected to be anything in the rest of the year..

Yes. That's what I expected, but just want to make sure everybody's clear on that because the topic keeps coming in. But thanks for the response on that..

We'll now take the next question from Erin Wilson from Credit Suisse..

I just have a quick follow-up to that, and maybe you can't speak to any more than you just did, but just any sort of detail on the differences between the Pfizer contracts now versus before? At least anecdotally, what type of business are you doing with them? Is it more or less profitable mix than it was previously?.

It's very much the same business that we were doing before, Erin. We have a considerable amount of backlog with them, which we're continuing to do in the same way that we did before, and new awards that have come in are very much across the same business areas and therapies, and we're one of the key development partners in that.

So, there's fundamentally no significant difference in the way and the nature of the business that we're doing..

Okay, great. And can you speak to the demand trends across the small to midsize biotech market, and more broadly, can you speak to the RFP environment and pricing trends across the industry? Thanks..

Yeah, we're seeing healthy RFP flow across the industry. Our funnel is good. We're happy with that, and obviously, it was good in Q2 as well and we posted the bookings, we're seeing that kind of environment. I think I said in my opening comments that we're continuing to see demand be healthy across all of our segments.

That includes small and midsize and biotech companies. And there's no real difference in the normal contrast of our business around how we price business and how we cost, as you know. Pricing has never been the first thing on anybody's list.

When it comes to RFPs, we're working for customers who are making considerable investments developing assets which are key to their future.

The whole value proposition is about taking time and cost out of the development cycle, and thus, allowing more days left on the patent life for when the customer gets the product to market so that they can maximize their revenue opportunities, and, of course, across the total cost of a study.

The key differentiator is the total cost, and that's around how you can deploy technology, how you can be more efficient, how you can take that time, how you can improve return on investment. That's been the story for quite a long time. We don't see any change in that dynamic in the market at the minute..

Great. Thanks..

We'll now take the next question from Jon Groberg from UBS..

Great. Thanks a million and congratulations. Just two quick kind of industry questions. One, when it comes to your revenue conversion, you've had some people start to talk about when they expect this impact of the complexity of the trials to begin to normalize. So, I'm just curious when you expect your revenue conversion to begin to normalize again.

And then the second is if you look at your business and your growth in gross bookings, what percent of that is coming from clients where you already are a preferred provider versus winning new business and you're becoming a preferred provider at new customers?.

Okay. Revenue conversion, Jon, when you say normalize, I don't know if anybody has established what the norm is going to be. These are all pretty complex drugs and trials in the world at the minute.

So, what I can say is that I expect us to hover around where it has been for the last few quarters, 10.3% or 10.4%, certainly into the foreseeable future throughout the rest of this year and early into next year, which is the – around our forecasting horizon at the moment. So, no change there.

The second question, you're going to have to refresh my memory.

What did you ask me there?.

On just the – I guess it's a little bit of trying to understand kind of how the world is evolving given a number of deals that have been announced from a competitive standpoint.

But just from a gross bookings standpoint, are these wins where you're already a preferred provider or are you winning new business at places where you current – where you weren't winning business previously?.

It's both. I mean, if you look at our world, a 25% – our 25 customers produce 76% or something historically of our revenue. So as you can imagine, a lot of our business every quarter comes from our existing top accounts and strategic providers.

But in this quarter two, I would say for the last there, the best part of seven quarters or eight quarters there, we very successfully increased the bench of our customers and added new customers. Again, this quarter, we have quite a bit of that business coming from some new relationships. So, it's good news all around, yeah..

And I'm sorry, I'm just – guess I'm trying to clarify.

Are those one-off wins or are you becoming a preferred provider, more of a strategic provider at these new accounts?.

Some of it is strategic. If you look at the market, Jon, I think you get hung up here and maybe trying to parse it too much, a considerable amount of the market is still transactional, the – a lot of the topic and just strategic that's moving into mid-tier. So, on our new accounts, some of them are strategic and some of them are transactional.

And if you looked at how much money has been in the market over the last while for smaller biotech companies and specialty companies, they tend to have a more limited portfolio, so the business tend, by nature, to be a little bit more transactional..

Okay, great. Thanks..

Cheers..

We'll now move to the next question from Donald Hooker from KeyBanc. Please go ahead..

Great. Good morning, good afternoon. So I just wanted to also follow up on some detail on this ClinicalRM acquisition. I was a little surprised by the limited EPS contribution. I guess, you're saying $0.05 of sort of run rate EPS contribution in sort of the first 12 months.

Can you provide a little more detail on sort of the acquisition price and the amortization, sort of the non-cash amortization on that? And maybe some sort of elaboration on why it may appear here that the margins on that business are much lower?.

I suppose it's hard to say, Don, that – we always forecast and act conservatively in the first year of any of our acquisition. So, the strategic rationale behind an acquisition like this is that it moves us into new markets. And that as we integrate to companies, we can harvest further down the line, more potential from the market.

So what we would say is that ClinicalRM have really excellent market presence in that market, excellent expertise. You combine that then with our global footprint and capabilities, and you get a chance to outgrow the normal growth rates in the industry and the market. But it doesn't happen in our business in 12 months.

It's a complicated demanding business we're in, and we have to integrate the companies, put them together. So our forecast for the first 12 months always tends to be – to reflect that reality. The margin itself in that business is at a lower margin than, say, the more commercial clinical research, but it tends to be very good business.

It's government, it's NGO, they're large contracts, and they tend to run a long time. They're very stable, almost an annuity basis contract. So, you get very stable contracts with a – running a long time, good size in the market.

They're often in very interesting and cutting edge areas of research, so it's good to improve our own staff's capability and it's good, exciting work to do. So – and it grows the intellectual capability part of the company. So, they're all good things. The margin's a little bit lighter, but that's okay.

I still – we're not disclosing the purchase price and amortization, stuff like that, but it's well within our normal range of multiples of what we pay. So, there's nothing new we haven't paid. It's not low because we've paid some phenomenal outside of market range price and anything like that..

Okay. And maybe just then my follow-up on a separate topic, I think topical topic.

The concept of wage inflation, it's one of the kind of looking at your – looking at gross margins and thinking about gross margins in the next quarter or two quarters or going into 2017, can you update us on where wage inflation is around CRAs, I guess, particularly in the United States?.

It's no different now than it has been..

Okay..

We have CRAs in – across like 90 offices in 40 countries. Sometimes some of them are – they're harder than others, but across the portfolio of the business, it isn't any different at the minute than it was 12 months ago or 24 months ago or 36 months ago.

And it will have no, more or less, impact on margins than it's had in the past, so that's not a factor I expect to influence margin..

Okay. Thank you..

We'll now take the next question from Ross Muken from Evercore ISI..

Hey, guys. This is Luke in for Ross. Just a quick cleanup question, I think.

Did you guys call out the contribution of the M&A in the quarter, the revenue?.

We did on the – did you mean the constant dollar organic revenue growth, Luke?.

Yeah, yeah..

So we said constant dollar organic, we were up 3.1% year-over-year..

Okay, thanks. Just missed that one. Then, I guess, as a follow-up. You guys have done really well with your emerging biopharma and the small tech biotech growth. You guys put up, I think, a 1.4 book-to-bill last quarter.

Can you care to discuss whether you think that's more of share gains or just the white-hot – that small market growth?.

I will ask Steve to maybe comment on that..

Yeah. I would say it's probably a little bit of both, to be honest. The availability of funding has been strong traditionally. It's tapered off a little bit more recently, but we've seen certainly, plenty of good science being funded and we've been the beneficiaries of that, and we've also been focusing in that area as we've built that there.

But it's – so I'd say a little bit of both would be the answer to your question..

Thank you..

We will take the next question from Tycho Peterson from JPMorgan..

Hey, thanks. Sorry to make you do this, but can you just maybe walk through the bridge to the guidance reduction? The acquisition is going to add, I think, $15 million in the fourth quarter. You brought down guidance by $25 million at the midpoint, so a net reduction of $40 million.

Is that all tied to the cancellations which picked up a bit, $120 million this quarter, or is it FX and other dynamics that we should be thinking about as well?.

It's about half thereabouts of the impact of the cancellations, Tycho, and the other half is really just as we had expected, a slight ramp-up in our conversion rate in the second half of the year form the book of business that we won over the last year.

And our new customer base and that just due to the complexity of some of those studies and as we've seen in the industry, that's not ramping up as we expected. So half of it's in the cancellations and the other half just that we didn't forecast accurately enough, the conversion of the new business..

And then can you, Ciaran, maybe break out the backlog conversion outside of Pfizer, both B2B action and backlog conversion? I know it's around 1.4 in the past, does that remain pretty consistent?.

Backlog conversion or book-to-bill, sorry?.

Both, outside Pfizer..

Are you talking about our bookings or backlog conversion, sorry?.

Book-to-bill, and then – yeah, why don't you start with book-to-bill?.

We don't split our backlog conversion across the portfolio. And the book-to-bill has been strong outside Pfizer, and again, it would have been just over 1.4..

Okay.

And then the restructuring you noted, was that kind of a one-off in the quarter or are there kind of broader changes?.

If you look back, it's – our business isn't static, and what we tend to do every couple of years, we look at where our infrastructure is and make sure we have the right resources in the right places.

So, it's not the precursor to any significant restructuring, but I would imagine, over the next few quarters, we will be continuing to tweak things to modest levels, So, you might see small restructuring charges in the next quarter or two quarters..

Okay. And just lastly, I know you had a question earlier about kind of trial complexity....

We're kind of stretching the two questions, Tycho, so maybe you can submit....

All right. All right. I'll hop off. Thanks..

Yeah. Thanks..

We'll now take our next questions from Greg Bolan from Avondale Partners..

Hey. Thanks, guys. Just a couple housekeeping questions. Ciaran, I think you had mentioned that of the – some of the assumptions around the buyback, one of which was it would take place or begin in the fourth quarter, but 18 months to 24 months is kind of the horizon.

Is there any – what's the estimated impact to EPS guidance from the buyback, is there anything in there?.

There is basically – I mean, why we're talking about Q4 to start it is that we are closing the ClinicalRM acquisition in Q3, so that will be what we're doing in Q3..

Sure..

And by the time we start in Q4, you might see an impact of maybe a $0.01 this year, but there won't be any more than that..

Okay..

So, almost nothing. Why we're talking about 18 months to 24 months is, as we've done in the past, we're going to balance this with our M&A pipeline requirements. And you're never quite sure how that's going to go. So, it might be a little quicker if we didn't move forward, some of our M&A acquisition targets.

But we – depending on how that goes and the inherent uncertainty will influence the time and the buyback..

Okay, great. Thanks. That's helpful.

And then just lastly, so the spread between the low end and the high end of EPS guidance, I guess, if I go back four years or five years, it's typically narrowed around this timeframe or narrows progressively throughout the year, but certainly, after the second quarter, is there may be a reason why there is still that kind of wide gap between the low end and the high-end?.

There is not really a reason why, Greg. We just did – so we didn't want to change it, it might reflect to some of just the complexity of business these days, and maybe I'll look at Brendan just to talk..

I think the range is there, but it still reflects an appropriate margin as you model out to the back end of the year, both at top and bottom end. So we didn't feel it was necessary at this stage to narrow it too much..

All right. Great. Thanks, guys..

As there are no further questions, I would like to hand the call back over to Ciaran for any additional or closing remarks..

Okay. Thank you, Marion. Thank you, everyone, for listening today. I have to say, we are pleased with the performance at quarter two. We look forward to building on this during the rest of the year as we build our position as the CRO partner of choice in drug development. Thank you, everyone..

Thank you. That would conclude this conference call. Thank you for our participation, ladies and gentlemen. You may now disconnect..