August Troendle: Yes, and they were actually — I think I was saying, from last year, they were coming across both in quality and number in stable to improved. Numbers were actually a bit up in Q1 over Q4, and I think they are kind of where we expect based upon the improvement in the environment. They are very good opportunities. I mean, sometimes you get a lot of opportunities that people are just shopping around for fundraising plans, but there is a — we have strong signals that — and confidence and funded companies coming to us with programs that are moving forward. So I think the environment has improved.
Dan Leonard: Thank you. And just a quick follow-up. Do you think the recent uptick we’ve seen in biotech M&A activity over the past couple of quarters might impact your outlook at all?
August Troendle: I don’t think M&A has, particularly in the short term, has an effect on our performance. Long term sometimes takes out a client, sometimes that’s good, sometimes not, depending upon whether we keep, but on the shorter term, we tend to book and keep what we win.
Dan Leonard: Thank you.
Operator: Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Justin Bowers with Deutsche Bank. Your line is open. Please go ahead.
Justin Bowers: Hi, good morning, everyone, and thank you for the questions. So in terms of the lower employee growth assumption or projection for this year, are those — I’m just trying to understand why the change there, if there’s really no change in the revenue outlook. And it sounds like it’s related to productivity. So is that something that’s durable as we think about sort of the growth into 2025 and beyond? Is there an ability to get some more operating leverage there?
August Troendle: Yes, I think that’s — we’re signaling is that we do think we’ve invested quite a bit in productivity and are improving that. We did do a little bit of trimming and optimization of staffing. So you’ve seen a little bit of that in terms of our reduced growth rates, but that’s driven by productivity gains. Part of that is the retention that has come down over the last, from — we started with COVID and elevated turnover, and now we’re at a very good range for turnover, but it’s beyond that. It’s a lot of productivity improvement that we have tried to put in place and are improving continuously, and I think through this past year, and we’ll continue through this year. So I think there’s opportunities on at least a core margin basis to improve. There’s other factors like the proportion of pass-throughs and FX and other things that can sometimes swallow that productivity gain, but I think on net we’re improving our productivity.
Justin Bowers: Okay. And then in terms of the cancellations, you did call out that they were a little higher than normal this quarter. Do you have a sense of, was that driven more by the data or funding or programs that maybe you thought would restart and is there anything to call out by either phase or therapeutic area just to sort of help us get a better sense of the environment?
August Troendle: Yes, it was — yes, sure. It was, from our view, entirely based upon product performance and failed compounds. It’s sometimes difficult to sort out whether reprioritization and hence funding behind the scenes was a factor, but it did not appear to be in the cases by and large in the cancellations that we saw this quarter, past quarter. So it really was kind of the usual random product performance activities that led to cancellations, I think.
Justin Bowers: Okay. Thank you.
Operator: Thank you. And one moment as we move to our next question. And our next question comes from the line of David Windley with Jeffries. Your line is open. Please go ahead.
David Windley: Hi. Good morning. Thanks for taking my questions. I wanted to first start with a clarification. So to Max’s earlier question on bookings or book to bill levels that you would be looking to achieve to support that accelerating growth in 2025. August, I think you said 2.2 to 2.25. I suspect everybody knows you mean 1.2 to 1.25, but just for purposes of getting the transcript right, I just wanted to make sure.
August Troendle: Yes. I was going to the second digit to start with your idea. 1.2 something. So 1.22 to 1.25 is kind of what I was trying to say.
David Windley: Right. Figured as much. On the cancellations, just thinking more precisely about how you guys book. So the cancellations that you’re taking, you’re referencing today were taken as bookings already in the past, I would presume. And given your late — your kind of bookings very close to when the study starts, that suggests to me that maybe these studies were already started. Maybe you could talk about whether those cancellations are having any near term impact on your actual revenue cadence.
August Troendle: Yes, they do. These are ongoing. You’re right. These are studies that were in backlog, were running and do have an effect on near term revenue. But again, we do feel confident in our — in this year’s roughly 15% direct revenue in spite of that. And they were not massive. They were outside of our normal range. They did result in what would have been an in-line booking quarter to push it to a flat quarter. So that’s kind of how it played out.
David Windley: Got it. And then you also commented about win rate. In that regard, are you referencing win rate of initial award notifications from a couple of quarters ago that then manifest in lower gross bookings to be taken in this quarter? Or are you talking about like IANs and the award rate in the current quarter? I’m just trying to make sure I’m calibrating correctly on the commentary.
