The number of FDA approval is at a record high. And all of that bodes well for our clinical business and all the metrics that we see from funding to RFPs, to awards, to backlog and bookings are very, very strong. Once again, we had a record historically — historic high in services bookings in the quarter of $2.3 billion, representing a book-to-bill ratio of 1.4x, excluding pass-through. So that’s what the clinical side of the house. We have not seen the impact of any revisions or rethinking of pipelines so far. On the commercial side, that’s the area where we are seeing an impact of our clients being more cautious, more conservative, stepping back from some of the projects they were planning to do. But for the most part, what we do, except again for the discretionary part, must be done, there is discretion with respect to timing.
And of course, clients are being more aggressive in terms of seeking price reductions and better terms and so on. The pipelines that we have indicate that demand is still there. To your question, when people say to us, they will no longer do a project, it’s no longer in our pipeline. But if it remains in our pipeline, then it means the clients still intends to do it. It’s just that the time line for decision-making has been pushed to the right. What explains it, it’s, again, general concerns about the economy, general concerns about the macro geopolitical issues, the pressures resulting from sharp revenue declines, post-COVID and what that entails from a margin point of view. As I mentioned in my introductory remarks, we are a very large vendor to pharma and to large pharma in particular.
And when large pharma seeks to improve their margins, they seek to reduce costs. And obviously, they come to us for further reductions and that elongates time lines, and of course, erodes pricing as well on our side. All of that has resulted in us coming short on our revenues in TAS, along with, as we mentioned in the introductory remarks, the significant FX headwinds versus what we had guided to before. So that’s the environment. Thank you for that question.
Charles Rhyee: Sorry, and the portfolio review?
Ari Bousbib: Portfolio on the R&D side?
Charles Rhyee: No, no. On the commercialization side, I misspoke. I meant, how much has the IRA impact is sort of as a — has that had an effect on when pharmas have portfolio reviews and where they put their discretionary spend, but it sounds like you’re saying it’s more just the general macro environment that’s had an impact on?
Ari Bousbib: Yes. We measure the IRA hasn’t had any concrete — significant concrete impact yet on the market. This is all based on hypothetical developments and down the line. So that just adds another cloud of uncertainty and in anticipation of that uncertainty that causes management teams to appropriately seek cost containment. That’s all.
Operator: Your next question comes from the line of Dan Leonard with UBS.
Daniel Leonard: I just wanted to circle back to your 2024 framing commentary, that mid-single-digit growth figure. Can you speak to your expectations between the TAS segment in the R&DS segment? And then in R&DS in 2024, do you expect any meaningful difference in growth rates between the direct fee revenue and total revenue?
Ari Bousbib: So again, this is a very — we thought it would be helpful just because there’s uncertainty. And you will recall that even in the — at the peak of COVID, we decided to give you guidance early. And we’re doing this because we hope that, that’s helpful to you. Now it’s an initial outlook based on where we are in our planning process. We have not completed that planning process. So I would caution you that this is, again, preliminary, and we will come back as is our custom when we release full year earnings early in ’24 with detailed and precise guidance by segments, et cetera. Just on your question, we are guiding to mid-single digit overall revenue growth. That includes $300 million of step-down from COVID and I think that’s essentially are in R&DS.
So if you added that back to our total revenues, that would be another couple of hundred basis points on top of that. And of course, we have — we expect 100 basis points of foreign exchange headwinds assuming FX rate remains where they are today. So when we say mid-single digits, that’s really on a reported basis once you adjust for the COVID step-down and FX, it’s more high single digits, which I’m sure you agree for and about $15 billion revenue company is quite an achievement in the current environment. With respect to segment growth, I think it’s too early to give it to you. We obviously have an idea, but what should we — I mean, I just gave it to you when we tell you that the COVID impact is 100% in R&DS, you could just assume that we are expecting — is actually for now, assume about the same across the segments, that is mid-single digits, I would say, okay, before the COVID adjustment.
Operator: [Operator Instructions]. Your next question will come from the line of David Windley with Jefferies.
David Windley: Ari, I wanted to focus on margin. You commented in your prepared remarks about productivity initiatives that you took in the third quarter, you’re talking about the bookings mix being heavy to service, and so that could be beneficial in R&DS to EBITDA growth. Just wondered if you could talk expansively about any further productivity initiatives that you might be able to take? And kind of what are the drivers to get you to that 50 basis points of EBITDA margin expansion for next year?
Ari Bousbib: Thank you, David. Look, I mean, the productivity initiatives I mentioned, not just in the third quarter, you will recall, we started this towards the end of last year. That’s what has led us to be able to address the revenue shortfall and not completely bear the brunt of that reduction falling through EBITDA. We’ve been able to offset a lot of that headwind with those cost reduction programs. It takes time. As you know, if we — the actions that we took in Q3 are not going to be benefit in Q4, Q1, Q2 of next year. So we’re possibly taking actions to restructure our overhead structure, to review our spans of control globally, to continue our offshoring programs to review our infrastructure footprint that includes real estate.
It includes IT. It includes really all of that infrastructure that we need to run our business and all of those cost factors along with mix of the — the proper mix of in-sourcing, outsourcing. And as I mentioned, continued offshoring of certain activities and taking advantage of labor arbitrage among our different centers, whether it’s in the Philippines, in India, in Bangladesh, in South America, et cetera, all of those things are being done on an ongoing basis, and we see the benefit in our margins this year. And the actions we took, for example, in the third quarter, the carryover benefit will materialize in Q4. So the — and in following quarters during 2024. The reason we feel confident about a 50 basis point margin expansion in 2024 is because we see that it’s the carryover of the actions we took this year that will benefit on a full year basis 2024.
And of course, we don’t intend to stop those actions selectively.
Operator: Your next question will come from the line of Justin Bowers with Deutsche Bank.
