Justin Bowers: So I just wanted to take a step back and with respect to some of the cost-cutting programs that we’ve seen large pharma announced, what is IQVIA’s opportunity to sort of participate in some of that and help drive some of those savings, whether it’s in sort of R&DS or TAS? And then secondarily, on — for the outlook for 2024, what’s the M&A assumption embedded in that growth rate?
Ari Bousbib: Thank you, Justin, for your question. Yes, we are actively engaged with our customers to help them with their cost reduction programs. Look, we have to, we are a large vendor to large pharma across the board, clinical and TAS. And they come to us and ask us to help them. So we have an opportunity to do that. Obviously, it affects our revenue growth, that’s primarily the case in TAS because that’s where the pricing changes and the renegotiated terms impact us almost immediately, less so in R&DS, but mostly in TAS. Now the opportunities, if you will, for us, is that in those conversations, we try to offer more services, that has always been the case. That’s a traditional way of engaging with our clients when they seek our cost reductions.
We try to capture a bigger share of their spend in exchange for being able to deliver those services at a lower price point. And so the benefit for us is longer term, we get a bigger piece as they give us more volume. We’ve seen that happen, frankly, on the commercial side and on the R&DS side, over the past 5, 6 years and certainly since the merger. And we certainly hope that, that will materialize, but it will take a couple of years to materialize because when clients need to switch vendors, it takes time to let the contract and convey them to us. Your next question was on the…
Justin Bowers: Acquisition impact.
Ari Bousbib: It’s about — yes, about 100 basis points, yes. Again, that’s the assumption for 2024 at this stage. Yes. That’s what’s baked in — when we come back we’ll give you formal guidance. This is really not guidance. It’s really a preliminary look on where we are. Thank you, Justin.
Operator: Your next question will come from the line of Shlomo Rosenbaum with Stifel.
Shlomo Rosenbaum: I just want to drill down a little bit more into TAS. You talked about the discretionary areas. Maybe you can just get a little bit more into — is it consulting, BPO, software data sales? Maybe just a little bit more of detail as to how growth is trending within each one of kind of the subsegments. I know you don’t break it out exactly revenue-wise, but it is helpful to kind of think about what’s going on beneath the surface there?
Ari Bousbib: Yes. Thank you, Shlomo, for the question and — but you need to clarify. Look, the TAS segment has continued to grow in the quarter. I mean, you know and you can look at the large cap companies that serve the life sciences industry with products and services, supporting post-drug introduction in the market and you can see that they almost uniformly are showing declining growth this year, and sharp declines in the quarter for those who have reported. Now we continue to have growth. And the reason for that is because some of this stuff is longer term and is somewhat mission-critical. I’m speaking about data, the stuff that’s technology licenses, subscription, recurring revenue, all of that continues as is, and that’s what is enabling us to continue to deliver growth.
However, the parts of our business that are more discretionary. And when I say discretionary, I don’t mean to say that our clients may decide simply not to go ahead. It happens, but that’s a small proportion of what we sell. It means that it can be done later. It means that it can be done in a different way, perhaps in a “slim-down version”, less — better than we thought. And so the consulting and analytics part of our business, which as you know is a bad quarter of our revenues. It is showing sharp declines, sharper than we would have expected. Some of the projects have simply fallen off, but the pipelines are still there. That’s what gives us confidence for a rebound in ’24. We know that these projects have to be done. The clients are just taking a lot more time to make a decision.
They are negotiating us a lot longer and a lot more aggressively. And this is what has happened. This is — I mentioned in my introductory remarks, a few examples of significant wins in TAS, and these are almost uniformly these types of projects. Helping clients launch a — launch products in new markets, helping them with their go-to-market strategies. These are things that have to be done. And the project that we won in the quarter, frankly, some of those we should have won in the first quarter. They were in the pipeline since last year. So the decision time lines have expanded and the terms have been tougher. That’s what has happened. I hope that color helps you.
Operator: Your next question comes from the line of Luke Sergott with Barclays.
Luke Sergott: So you talked about the large FSP win. I know you’re seeing a lot more shift to that type of hybrid model. And you’ve talked in the past about this being really in cyclical in nature. But this has also come at a lower margin. So help us think about like the duration, the size of the FSP wins that you had. And if we should expect some mix headwinds to your future over the next 3 months to a year on this business from — regarding R&DS side.
Ari Bousbib: Thank you, Luke. Yes, you’re absolutely correct that an FSP award comes at a lower booked margin than a full-service program. And you’re also correct that this has — is a cyclical development in the industry. I recall very well that at the time we did the merger 7 years ago, and coming into at the time, the legacy Quintiles organization, it was explained to me that the industry was now in the midst of a switch from full service to FSP. And as a result of which, Quintiles at the time had pulled back from servicing these clients because they didn’t want to do FSP work given its lower margin profile. I thought at the time there was a strategic error and we since then, of course, have decided to serve our clients with the full portfolio of services, including FSP and including full service and including hybrid and everything else.
We serve clients. We don’t push offerings. So if at this point in time, our clients are interested in more FSP or more hybrid models, that’s what we will sell to them. It is then incumbent upon us to work on our cost structure to try to recover margins when we execute the work at a higher level than when we booked it out, and try to continue to develop cost containment and cost reductions so that we can offset the margin mix impact. Look, we are a very large company we are executing thousands of trials at any given point in time. We manage a portfolio of businesses. Once again, we are about a $15 billion revenue company growing mid-single digits before your account for the step down in COVID revenue and the FX headwind. And we are at adjusted EBITDA margins of 24%, and we are expanding those margins.
And we intend to continue that model well into the future despite cyclical headwinds that may occur, whether it is a tougher spending environment on the TAS side, whether it is a switch to FSP from some of our large pharma clients. You saw in the quarter, again, $2.3 billion of services fee revenue, excluding pass-through bookings resulting in a book-to-bill of 1.4x, again, a historic high in our bookings. That included some FSP wins, again, not anything that would move the needle dramatically. But on a large number like this, you can see that we have less pass-throughs, that will materialize in our margin mix in the next couple of years, not next quarter, obviously, and we fully intend to offset that with our cost reductions and continue to increase our margins.
