Eric Coldwell

Eric Coldwell sought further color on Fortrea's improving RFP flow, details on Q4 bookings mix (FSP vs. full service, direct vs. indirect), win rates, and updates on new to Fortrea client initiatives. He also asked for more guidance on Q1 2026 phasing for revenue and margin, considering lumpiness and seasonality.

Answer

Anshul Thakral, Chief Executive Officer and Director, noted no unusual mix in Q3/Q4 bookings, with a healthy balance of Phase II and Phase III, and a pickup in full-service work. He confirmed win rates were consistent and new client hesitation subsided in Q4 due to executive-led engagements. He also highlighted growth in biotech RFP flow. Jill McConnell, Chief Financial Officer, reiterated expectations for a sequential step down in Q1 revenue, similar to last year, driven by pass-through mix and FSP headwinds, with a slight margin improvement year-over-year due to cost savings.

Eric Coldwell sought more details on Fortrea's RFP flow, particularly any improvements, and asked for directionality on the Q4 bookings mix between FSP and full-service, as well as direct versus indirect. He also inquired about win rates and updates on new client acquisition initiatives, specifically for new-to-Fortrea clients, and requested further guidance on Q1 2026 phasing for revenue and margins.

Answer

CEO Anshul Thakral noted a pickup in full-service work and a strategic, disciplined approach to FSP. He reported consistent win rates and successful executive-led engagements for new biotech clients, leading to increased biotech RFP flow and strong win rates in that sector. CFO Jill McConnell reiterated expectations for Q1 2026 revenue to be broadly similar year-over-year, with a slight margin improvement driven by cost savings, despite some variable compensation headwinds and early-year tax impacts.

Eric Coldwell of Baird asked about the status of hesitant 'new to Fortrea' biotech clients, questioning if they delayed decisions or chose competitors, and inquired about new CEO Anshul Thakral's commercial strategy and leadership style.

Answer

CFO Jill McConnell confirmed that the hesitant biotech clients chose a different direction, a temporary issue linked to the CEO transition uncertainty, similar to what was seen before the spin-off. CEO Anshul Thakral, on his third day, outlined his approach as being rooted in professional services, focusing on customer needs and delivering high-quality results, promising a more detailed plan after engaging with customers.

Eric Coldwell requested an update on SG&A expectations for the full year, in both absolute terms and as a percentage of revenue, and asked for more detail on the phasing of improvements through Q2 and Q3.

Answer

CFO Jill McConnell confirmed that SG&A improvements would be phased, with marginal gains in Q2 and more dramatic improvements in Q3 and Q4 as cost-saving initiatives fully ramp up. She reiterated the full-year target of $150 million in gross savings, with $70 million from SG&A, expected to yield $40 million to $50 million in net SG&A reductions for the year.

Eric Coldwell sought more detail on the 2026 outlook, asking if the overall EBITDA margin improvement would be greater than the guided SG&A savings due to better gross margins from revenue growth and a more favorable project mix.

Answer

CFO Jill McConnell confirmed they expect more than 100 basis points of total margin improvement in 2026, as gross margins should also improve from absorbing growth with existing resources. CEO Tom Pike added that as new, higher-margin work becomes a larger portion of the revenue mix, it will naturally accrete to the bottom line, forming a key part of the recovery plan.

Eric Coldwell asked about the drivers of Fortrea's clinical pharmacology (clinpharm) business, questioning the impact of GLP-1 studies versus other therapeutic areas, and requested specific metrics on win rate improvements and normalized interest expense.

Answer

CEO Tom Pike stated that clinpharm strength is broad-based across various sophisticated therapies, not primarily driven by GLP-1s, and confirmed win rates and Net Promoter Scores have improved since the spin-off without providing specific figures. CFO Jill McConnell added that the Q3 interest expense is a representative run-rate for the near future, subject to rate movements.

Eric Coldwell asked about the overall pipeline and market RFP activity compared to the recent past, and whether market changes, such as competitor ownership transitions or separation plans, are influencing market dynamics.

Answer

CEO Jim Boyle reaffirmed Medline's $1 billion commitment for new Prime Vendor signings, noting that favorable market conditions (reimbursement challenges, consolidation, non-acute growth) persist. He stated that competitor uncertainties are accelerating opportunities for Medline, and the pipeline looks similar to 2025, with ongoing opportunities related to service, value, and addressing competitor changes.

Eric Coldwell asked about the current state of Medline's overall pipeline and market RFP activity, and if recent competitor ownership transitions or separations are influencing market dynamics or client discussions.

Answer

CEO Jim Boyle stated that market conditions in 2026 are similar to 2025, characterized by customer challenges with reimbursement, accelerating healthcare consolidation, and faster growth in the non-acute market. He noted that competitor uncertainty and service challenges create opportunities for Medline, reaffirming the $1 billion Prime Vendor commitment.

Eric Coldwell asked for clarification on the $14.5 million legal settlement, specifically if it was the civil debt collection class action from North Carolina, if it's a final settlement covering all claims, and what steps the company has taken to prevent similar issues in the future.

Answer

Suzanne Foster (CEO, AdaptHealth) confirmed it was the North Carolina claim from 2022, a final settlement for all claims in that state, and that any technicalities in debt collection practices have been fixed. Jason Clemens (CFO, AdaptHealth) added that the company's control environment has matured significantly since 2022, resulting in a clean SOX opinion from their auditor.

Eric Coldwell inquired about the $14.5 million legal settlement, seeking confirmation on its nature (civil debt collection class action from North Carolina), whether it's a final settlement covering all claims, if it's a one-time event, and what steps AdaptHealth has taken to prevent similar issues in the future.

Answer

CEO Suzanne Foster confirmed the settlement was for the North Carolina claim, is final, settles all claims, and addressed a technicality in debt collection practices that has since been fixed. She noted the decision to settle was to de-risk the business. CFO Jason Clemens added that AdaptHealth has significantly matured its control environment since 2022, achieving a clean SOX opinion from their auditor.

Eric Coldwell of Baird inquired about the new $1 billion, five-year capitated contract, seeking details on the $200 million annual revenue figure, its potential for growth, inflation riders, and the specific timing of its ramp to full productivity. He also asked for clarification on the per-patient-per-month revenue calculation.

Answer

CEO Suzanne Foster explained that the contract will begin ramping in Q1 2026 and achieve full service by 2027. CFO Jason Clemens added that the $200 million annual revenue is a conservative baseline that does not include potential growth from a "halo effect." He clarified that AdaptHealth expects to exit 2026 at a $200 million run-rate and noted the per-patient-per-month rate differs from other contracts due to a varied patient mix, including commercial members.

Eric Coldwell of Robert W. Baird & Co. followed up on previous company commentary about a potential $10 million tariff impact in fiscal '26, asking for any updated thoughts on that exposure. He also asked if the current quarter's revenue faced a headwind from fewer selling days and if there were any other selling day comps to be aware of for the rest of the year.

Answer

Executive Jason Clemens stated that while it's early to update the fiscal '26 tariff outlook, the company feels better about its position now than it did in March, suggesting the impact could be lower. He confirmed a headwind of approximately $8 million in Q1 due to one less business day but noted no other significant selling day impacts are expected for the remainder of the year.

Eric Coldwell from Robert W. Baird & Co. probed the financial impact and drivers of the purchase versus rental revenue mix shift, sought the final impact from the PHE 75/25 rate expiration, and asked for details on the Humana contract extension.

Answer

CFO Jason Clemens explained the revenue mix shift is concentrated in the Sleep business due to accounting changes for integrated technology, causing a ~$25-30M Q1 revenue deferral that will wane through the year. He confirmed the 2024 PHE impact was ~$25M and described the 2025 reimbursement environment as "stable." Regarding Humana, he characterized the renewal as a multi-year extension of favorable existing terms.

Eric Coldwell from Robert W. Baird & Co. sought confirmation that the $45 million reduction in the full-year revenue guidance was exclusively due to underperformance in the diabetes segment and asked about the corresponding margin impact.

Answer

CFO Jason Clemens confirmed that the entire revenue and EBITDA guidance reduction was specific to the diabetes segment's recent CGM performance issues. He stated that the rest of the business, including sleep and respiratory, is performing as expected. He noted the EBITDA impact was a roughly one-third flow-through from the revenue reduction.

Eric Coldwell sought clarification on manufacturer cost increases and inflation, asking if they are broad-based or specific, their historical context, and what opportunities Accendra Health has to control them. He also inquired about the drivers behind the expected improvement in collection rates for 2026, following a 2025 headwind, and asked about the company's bad debt rate.

Answer

Ed Pesicka, President and CEO, clarified that cost increases are not across every category but in some major ones, reflecting normal inflation, and the company aims to mitigate them by working with manufacturing partners on pricing models. Jonathan Leon, CFO, expressed confidence in collection rate improvement in 2026, attributing the 2025 pullback to a learning curve with new technology investments, which are now expected to be additive. He respectfully declined to disclose the bad debt rate.

Eric Coldwell followed up on manufacturer cost increases, seeking clarity on their breadth, drivers (e.g., tariffs), historical context, and management's control over mitigation. He also asked about the 2025 collection rate headwind, the drivers of expected 2026 improvement, and the company's bad debt rate.

Answer

Ed Pesicka, President and CEO, reiterated that cost increases are not universal but concentrated in major categories, driven by normal inflation rather than tariffs, and can be mitigated through ongoing work with manufacturing partners. Jonathan Leon, CFO, expressed confidence in a 2026 collection rate rebound, attributing the 2025 pullback to a learning curve from 2024/2025 technology investments, which are now expected to be additive. He respectfully declined to disclose the specific bad debt rate but affirmed its competitiveness.

Eric Coldwell from Robert W. Baird inquired about the apparent discrepancy in NHP dynamics between the RMS and DSA segments, noting RMS headwinds from lower NHP volume versus DSA headwinds from higher NHP sourcing costs and strong study demand. He also asked for insights into the drivers of increased sourcing costs and the outlook for NHP utilization in 2026 compared to 2025.

Answer

EVP and COO Birgit Girshick clarified that RMS volume impacts in Q4 2025 were primarily due to shipment timing, with Q1 2026 also affected by timing and slightly lower volumes. For DSA, higher NHP sourcing costs in Q4 2025 and Q1 2026 resulted from unexpected demand for NHP studies, necessitating open market purchases at higher prices. She explained the nuances between different NHP sources and the timing of needs. Regarding 2026 NHP utilization, Ms. Girshick stated it was too early to provide a full-year outlook but highlighted 2025's growth in NHP studies as a key driver for the K.F. Cambodia acquisition.

Eric Coldwell asked about the apparent discrepancy in NHP dynamics between the RMS and DSA segments, noting lower NHP volume impacting RMS revenue while DSA faced higher NHP sourcing costs due to strong demand. He sought clarification on these nuances and the drivers of increased sourcing costs.

Answer

Birgit Girshick, Executive Vice President and Chief Operating Officer, explained that RMS volume impact in Q4 was primarily timing-related, with full-year shipments shifting. For DSA, higher sourcing costs in Q4 and Q1 stemmed from unexpected NHP study demand, requiring open market purchases at higher prices. She attributed the disconnect to timing and the need to source from different origins (Asian vs. Mauritius) based on immediate requirements.

Eric Coldwell of Baird asked for a breakdown of the Q2 CDMO performance, specifically questioning if a high-margin final payment contributed to the results. He also inquired about the operational and financial impact of the U.S. Fish and Wildlife Service clearing the Cambodian NHP shipments.

Answer

CEO James Foster stated that the NHP clearance provides significant flexibility for utilizing animals and improves future planning. CFO Flavia Pease clarified that the $20 million in revenue from the winding-down CDMO client was for the first half of the year, not just Q2, and carried a higher-than-normal margin. She also confirmed a separate payment was received in Q2 that boosted margins but did not quantify the amount.

Eric Coldwell inquired about the specific areas within the New Approach Methods (NAMs) portfolio where Charles River has a competitive advantage, areas where it is underrepresented, and its appetite for M&A to expand these capabilities.

Answer

CEO James Foster stated that Charles River is actively interested in acquiring or licensing practical and validatable NAMs technologies that do not compromise patient safety. He highlighted existing strengths like the Retrogenix technology and virtual control groups, and identified the use of the company's vast, anonymized toxicology database as a key, underrepresented opportunity for leadership.

Eric Coldwell of Robert W. Baird & Co. asked for an explanation of the RMS segment's operating margin, which seemed low given favorable pricing and high-margin Noveprim sales. He also inquired about the potential for lumpy large animal shipments in Q4.

Answer

EVP and CFO Flavia Pease confirmed that the timing of large model shipments can cause lumpiness and is factored into the Q4 guidance range. For the Q3 RMS margin, she explained that despite favorable NHP shipments, there were headwinds from a mix shift towards lower-margin volume growth in China and a revenue decline in the higher-margin research model services businesses.

Eric Coldwell sought clarification on the Early Development business's 2026 revenue outlook, questioning if the 'relatively flat' projection already accounts for the $50 million divestiture/cost impacts and FX, and if it implies an approximate $800 million revenue year. He then asked about the market signs and confidence drivers behind this outlook, and about the expected margin profile for the Early Development business, both near-term and longer-term.

Answer

Adam Schechter (Chairman, President and CEO, Labcorp) clarified that the 'relatively flat' expectation for Early Development *includes* the $50 million impact, with the second half performing better than the first, and indicated that Eric's second revenue estimate (closer to $865-$866 million) was directionally more accurate than $800 million. He pointed to the strong overall book-to-bill across the segment and the strong trailing twelve-month book-to-bill, noting improvements in both segments' book-to-bill, as drivers of confidence. Julia Wang (EVP and CFO, Labcorp) stated that while specific business unit profitability isn't broken out, Labcorp expects enterprise margin expansion in 2026, supported by both segments, with BLS margin expansion expected to be greater than Diagnostics. She attributed this to the actions taken in Early Development (making it meaningfully more profitable by Q2 2026) and solid top-line growth in Central Lab.

Eric Coldwell sought clarification on the Early Development (ED) business revenue outlook, specifically if 'relatively flat' for 2026 included the $50 million impact from divestitures and cost actions, and what market signs supported this confidence. He also asked for insights into the expected margin improvement for ED, both near-term and long-term, within the BLS segment.

Answer

Chairman and CEO Adam Schechter confirmed that the 'relatively flat' outlook for Early Development revenue in 2026 includes the $50 million impact, with the second half expected to perform better than the first. He indicated that the strong overall segment book-to-bill, including improvements in both BLS segments, provided confidence. EVP and CFO Julia Wang explained that while specific ED margins are not broken out, the BLS segment is expected to see greater margin expansion than Diagnostics in 2026. This improvement is driven by the actions taken in ED (to be completed by Q2 2026), making that business meaningfully more profitable, and solid top-line growth in Central Labs.

Eric Coldwell asked for clarification on remaining COVID-19 revenue comps in the Central Lab business, the size of a recent large trial cancellation, and a gross estimate of the tariff headwind.

Answer

Chairman and CEO Adam Schechter specified that the remaining COVID-19 revenue comp for 2025 is approximately $18 million, spread across the final three quarters. He quantified the recent trial cancellation at 'slightly larger than about $100 million.' Regarding tariffs, he declined to give a specific number but characterized the potential impact as 'relatively manageable' due to contracted and US-based spending.

Eric Coldwell inquired about the status of Labcorp's relationship with Walgreens amid news of store closures and asked when the employer testing business might see its comps normalize and cease being a headwind.

Answer

CEO Adam Schechter described the Walgreens relationship as good, noting the 400 service centers were strategically chosen in high-traffic stores, and he is confident most will remain. He added that Labcorp can easily stand up its own centers if needed. Regarding employer testing, he acknowledged it remains a small headwind but stated it is not significant enough to materially impact results, and it's difficult to predict when it will bottom out.

Eric Coldwell from Baird asked for a comprehensive understanding of the recent Cedar Gate acquisition, including its strategic value, how it integrates into IQVIA's ecosystem, and specific financial details such as its revenue and profit contribution, accretion/dilution, and margin profile.

Answer

IQVIA CEO Ari Bousbib explained that Cedar Gate Technologies enhances IQVIA's payer-provider analytics business, providing scale in the U.S. market. He disclosed that Cedar Gate generated approximately $125 million in revenue and $33-$35 million in Adjusted EBITDA in 2024, with similar margins, and was expected to be slightly higher in 2025. EVP and CFO Ron Bruehlman confirmed these figures. The acquisition leverages 4 PB of data and covers 60 million lives, expanding IQVIA's solutions with synergies in data analytics and technology.

Eric Coldwell from Baird inquired about IQVIA's recent acquisition of Cedar Gate Technologies, seeking to understand its strategic value, how it integrates into the IQVIA ecosystem, and specific financial details such as its revenue, profit contribution, and margin profile.

Answer

Ari Bousbib, Chairman and CEO, and Ron Bruehlman, EVP and CFO of IQVIA, explained that Cedar Gate Technologies enhances IQVIA's payer-provider analytics business, providing insights for improved patient outcomes and cost reduction. They noted Cedar Gate's strong technology platform and scale, reporting approximately $125 million in revenue and $32.7-$35 million in Adjusted EBITDA for 2024, with slightly higher figures for 2025 (around $140 million revenue and $36-$37 million EBITDA) and similar margins. The acquisition expands IQVIA's solutions and offers synergies with its data analytics and technology business.

Eric Coldwell sought clarification on IQVIA's fourth-quarter TASS revenue guidance relative to street expectations, an update on two previously mentioned mega trials, and IQVIA's current involvement in Phase I trials.

Answer

Chairman and CEO Ari Bousbib and EVP and CFO Ron Bruehlman confirmed no change to the full-year TASS constant currency growth guidance of 5%-6%, suggesting street estimates might be high. They stated the two mega trials are pushed out of the year and not factored into Q4 guidance. Bousbib also highlighted increasing demand for Phase I work, particularly in oncology, and IQVIA's expanding presence in this segment.

Eric Coldwell sought clarification on the implied Q4 TASS revenue guidance relative to street consensus, requested an update on two previously mentioned mega trials, and inquired about IQVIA's increasing involvement in Phase 1 trials, particularly in oncology.

Answer

Ron Bruehlman, Executive Vice President and Chief Financial Officer, and Ari Bousbib, Chairman and Chief Executive Officer, reaffirmed full-year TASS constant currency growth guidance of 5-6%, with no change. They confirmed the two mega trials are pushed out of the year and not in Q4 guidance. Ari Bousbib noted increased demand and IQVIA's expanding presence in Phase 1 oncology, distinguishing it from healthy volunteer trials.

Eric Coldwell sought to clarify the impact of foreign exchange on guidance, asking if the positive FX shift protected EBITDA and EPS from a potential reduction. He also asked for more detail on the M&A contribution, particularly within TAS.

Answer

EVP and CFO Ron Bruehlman confirmed that FX has a very muted impact on EBITDA and no notable impact on EPS, so the reaffirmed guidance was not protected by currency movements. He specified that M&A contributed about 200 basis points to growth in the quarter and is expected to contribute 150 basis points for the full year, mostly in TAS. Chairman and CEO Ari Bousbib added that organic growth in TAS was in the low-to-mid single-digit range.

Eric Coldwell asked about the potential impact of recent Washington D.C. discussions on the regulatory environment for biosimilars, specifically if the potential for increased R&D and advancement of biosimilars for biologics coming off patent is factored into Cardinal Health's long-term vision.

Answer

CEO Jason Hollar confirmed that biosimilars are a long-term tailwind for the industry, contributing to access and affordability. He noted that while it's too early to assess the exact impact of recent administration actions, conceptually, anything that improves barriers for industry investment in biosimilars could be an opportunity for Cardinal Health.

Eric Coldwell asked about the potential impact of a competitor's recent divestment on Cardinal Health's GMPD business and the competitive landscape. He also inquired about the potential for increased R&D and advancement of biosimilars given recent policy discussions in Washington D.C. and whether this is factored into Cardinal Health's long-term vision.

Answer

CEO Jason Hollar stated that a competitor's divestment 'certainly doesn't hurt' Cardinal Health's GMPD, as the company focuses on service and performance to be the supplier of choice. Regarding biosimilars, he acknowledged them as a long-term tailwind for the industry and Cardinal Health, and while recent administration actions to improve access and affordability could present an opportunity, it's too early to fully understand the details and industry reaction.

Eric Coldwell asked for details on the company's use of the Nairobi Protocol for tariff mitigation, including what protections are in place, which products are applicable, and the process involved.

Answer

CFO Aaron Alt confirmed that some protections are already in place and the team is actively working to identify additional products that could benefit. CEO Jason Hollar added that this is an established process for the company, having been used for the past two years across hundreds of SKUs, and they continue to monitor its application.

Eric Coldwell asked several questions about the GMPD segment, seeking to quantify the underlying profit growth excluding unexpected costs, the impact of new manufacturing expenses, and trends in international sourcing costs due to tariffs.

Answer

CEO Jason Hollar confirmed that GMPD profit would have been in the mid-$20 million range without the $17 million health and wellness cost headwind. He noted the incremental manufacturing cost impact was of a similar magnitude. Executive Aaron Alt added that while their supply chain is diverse, tariffs on goods from regions like China will inevitably raise costs for the industry, some of which will have to be passed through.

Eric Coldwell questioned ICON plc's unique backlog and bookings approach, which uses written confirmations over formal contracts. He asked how these ratios have changed, what percentage of cancellations come from non-contracted bookings, and how this ratio has evolved.

Answer

CFO Nigel Clerkin explained that ICON books awards on confirmation rather than contract to reflect real-time commercial demand. He noted that the predominance of cancellations has been in awards not yet moved to enrollment, which includes a mix of both contracted and non-contracted projects. He attributed elevated cancellations to reprioritization and funding environment challenges in biotech and large pharma.

Eric Coldwell questioned ICON plc's unique approach to booking awards (written confirmations vs. formal contracts), asking how these ratios have changed, and what percentage of current cancellations originate from non-contracted bookings.

Answer

CFO Nigel Clerkin explained that ICON plc books awards on written confirmation for a more real-time measure of commercial demand, acknowledging a lag to contract signing. He noted that the predominance of cancellations has been in awards not yet moved to enrollment, reflecting a mix of contracted and pre-contracted studies, driven by reprioritization and funding environments. He did not have the exact mix at hand.

Eric Coldwell of Baird sought clarification on whether 'elevated' cancellations are expected to exceed historical highs and asked about the broader industry trend of higher pass-through revenue.

Answer

CEO Steve Cutler clarified that near-term cancellations are expected to be in a 'broadly similar' range to the $916 million reported in Q2. COO Barry Balfe addressed the pass-through question, stating it is 'overwhelmingly a business mix trend' driven by an uptick in studies in areas like cardiometabolic, which inherently have higher pass-through costs.

Eric Coldwell from Baird sought clarification on the $350 million COVID-related work removed from guidance, asking if it was all expected to be recognized in 2025 and the size of the cancellation impacting Q2.

Answer

CFO Nigel Clerkin confirmed the $350 million was the anticipated revenue impact for 2025. He clarified that the total award value was higher and would have extended into the next year. He specified that the cancellation to be recorded in Q2 bookings will be approximately $300 million.

Eric Coldwell asked for the reason behind the 45% year-over-year increase in unbilled revenue, whether the company had sold receivables, and for details on the company acquired at the end of Q3.

Answer

Outgoing CFO Brendan Brennan attributed the rise in unbilled revenue to new large pharma contracting practices that push out milestones and reduce upfront pass-through payments. CEO Dr. Steve Cutler disclosed the acquisition of a modest-sized organization in Eastern Europe to supplement biotech and functional service capabilities, noting its financial contribution was immaterial in Q3.

Eric Coldwell of Baird posed several questions, asking for the financial sizing of the Illumicare acquisition and the expected wind-down results for Contigo Health. In a follow-up, he inquired about the average size of large advisory deals, revenue recognition timing, the distinction between advisory and consulting, and the performance of the life sciences business.

Answer

CFO & CEO Glenn Coleman sized Illumicare as an $8-10 million revenue business for fiscal 2026 at breakeven profitability, while Contigo Health is expected to have a $9 million revenue and a $6 million EBITDA loss. Mr. Coleman confirmed large advisory deals are higher than $5 million annually and have milestone-based revenue recognition, making it back-end loaded for FY26. President & CEO Michael Alkire and David Zito, President of Performance Services, clarified that 'advisory' and 'consulting' are interchangeable terms for their comprehensive performance improvement engagements. Mr. Coleman noted the life sciences business is performing as expected.

Eric Coldwell from Robert W. Baird & Co. asked for details on a $17.6 million distribution from a minority investment and inquired about a multiyear phased member departure, including the nature of any associated one-time payments.

Answer

CEO Michael Alkire clarified the distribution was a one-time event from a minority partner, not OMNIA, and was excluded from adjusted results. Regarding the member departure, Alkire explained it's a phased termination as the member still uses some services post-partnership. CFO Glenn Coleman confirmed a one-time payment is expected in Q4 and is included in the updated guidance, though the amount was not disclosed.

Eric Coldwell from Baird asked for more detail on the bookings dynamics, sought specific clarification on the reimbursable cost mix forecast, and questioned the sustainability of high revenue growth and conversion rates into 2026.

Answer

CEO August Troendle confirmed no single large study win drove the quarter's results. CFO Kevin Brady clarified the 200-300 basis point increase in reimbursables is relative to Q2's level, potentially pushing the mix into the low 40% range. Regarding sustainability, CEO August Troendle stated that while pass-throughs can be volatile, the underlying direct fee business growth is solid, and they don't foresee a major growth challenge in 2026.

Eric Coldwell from Baird questioned the drivers behind the strong backlog burn rate and its sustainability. He also asked for clarification on the strong Q1 revenue performance, which contrasted with prior guidance for a modest start, and inquired about the company's updated outlook on hiring and employee turnover.

Answer

CFO Kevin Brady attributed the higher backlog burn to a combination of revenue acceleration, a significant increase in reimbursable pass-through costs, and a lower bookings denominator, rather than a change in execution. He confirmed the Q1 revenue beat was largely due to higher-than-expected reimbursables. President Jesse Geiger added that the company targets mid-single-digit headcount growth for the year, contingent on the business environment.

Eric Coldwell of Baird inquired about the expected revenue phasing for 2025, the outlook for indirect revenue mix, the drivers behind the significant year-over-year increase in advanced billings, and the discrepancy between strong performance obligation growth and weaker bookings.

Answer

CFO Kevin Brady projected that indirect revenue as a percentage of total revenue would be similar to Q4 2024 levels and anticipated a linear revenue progression in 2025. He attributed strong advanced billings to timing and payment schedules on active programs. CEO August Troendle clarified that performance obligations are a longer-term measure, while backlog is a better near-term indicator of revenue, explaining the divergence.

Eric Coldwell asked about the historical contribution of pre-backlog awards to quarterly bookings and directly addressed market rumors that cancellations were due to client dissatisfaction. He also questioned the new "normal" book-to-bill target of 1.15x versus the higher historical average, inquired about the backlog burn rate, and asked for the current number of active trials.

Answer

CEO August Troendle clarified that virtually 100% of backlog recognition comes from awards made in prior quarters. He emphatically denied the rumors, stating they have had zero client losses due to performance dissatisfaction in the last year, attributing any moves to other CROs to client funding issues where Medpace had to issue termination notices. He positioned the 1.15x book-to-bill as a floor for H2 2025 expectations, not a new target. CFO Kevin Brady explained the burn rate is influenced more by the pace of new bookings than study progression. The executives estimated they are working on approximately 500 projects.

Eric Coldwell of Robert W. Baird & Co. sought to understand the magnitude of the forecasted revenue slowdown in the 3PL business within Prescription Technology Solutions, and if that implies stronger growth for the higher-margin access and affordability businesses.

Answer

CFO Britt Vitalone clarified that while the rate of growth for the 3PL business is expected to slow from a very strong fiscal 2025, they still anticipate good absolute growth consistent with historical trends. He affirmed they feel very good about the growth rate in the higher-margin access solutions, particularly given the strong momentum from Q4.

Eric Coldwell requested details on the projected EPS accretion from the Florida Cancer Specialists (FCS) acquisition, asking for the sources of the accretion (MSO vs. distribution), the drivers of growth from the year-one to the year-three target, and the margin profile relative to the overall pharma business.

Answer

CFO Britt Vitalone explained that the FCS accretion is subject to regulatory approval but is expected to be driven primarily by drug distribution and GPO services synergies that will benefit the providers and their patients. He noted that over time, FCS would also leverage McKesson's clinical trial and data capabilities, but the majority of the financial benefit stems from the drug-related synergies.

Eric Coldwell asked about the realized tariff impact in Q1, the timing of price increases versus cost impacts in Q2, how the company would handle customer pushback or competitive pricing, and whether the Rotech acquisition target is still performing to plan.

Answer

Executive Edward Pesicka stated there was no material Q1 tariff impact due to inventory levels and that the timing of June price hikes aligns with when higher-cost products will flow through. He defended their direct, SKU-based tariff pass-through strategy and noted they must work with customers on alternatives. Executive Jonathan Leon confirmed Rotech's performance is tracking with the original deal model, with recent declines being anticipated post-COVID benefits.

Eric Coldwell of Baird requested details on an Apria capitated contract change, the 2025 outlook for each business segment, the LTM adjusted EBITDA for the P&HS segment, and an update on the debt financing for the Rotech acquisition.

Answer

Executives Edward Pesicka and Jonathan Leon explained the capitated contract's impact is limited in 2025 due to timing and is factored into guidance. Leon noted that Patient Direct will drive most of 2025's growth and that P&HS contributes 20-25% of consolidated EBITDA. He also confirmed the Rotech debt financing premarketing went well, with costs expected to be in line with the deal model.

Eric Coldwell requested quantification of the growth rates in the sleep and diabetes categories, asked how much growth was from clearing the backlog versus new demand, and sought reasons for the delay in working through the patient backlog.

Answer

CFO Jonathan Leon declined to provide specific growth rates but confirmed diabetes and sleep supplies were very strong. He suggested Q3 growth was driven more by real-time market demand than backlog clearance, as new demand remains high. Leon attributed the persistent backlog to the manual work still required post-Change Healthcare disruption and the high volume of incremental new patient starts.

Eric Coldwell from Baird asked for a deeper analysis of the World Courier business, inquiring about the performance of non-clinical trial services like cell and gene therapy, the basis for expecting a clinical trial pickup, and the competitive landscape.

Answer

CFO James Cleary explained that while cell and gene therapy is a significant long-term opportunity, it is not yet a material contributor to the bottom line. He noted the expectation for a pickup is based on market data and pipeline analysis. He acknowledged the market is competitive but stated Cencora intends to remain a leader through innovation.

Eric Coldwell sought to clarify Cencora's market share in ophthalmology specialty products, asking if its significant share with one manufacturer is representative of its position across the entire market.

Answer

Bennett Murphy, SVP, Head of Investor Relations and Treasury, affirmed that Cencora is a leader in the ophthalmology space and has a long-standing customer relationship with RCA. He reiterated that retina and ophthalmology have been consistent and key growth drivers for the company, similar to oncology.

Asked how the Q1 COVID revenue compared to initial expectations and what drove the full-year guidance increase. Also requested more details on the nature of the new gummy contract win, such as whether it was a new customer or a competitive takeaway.

Answer

The initial COVID forecast was conservative, and revenue came in stronger than expected in the first half. The new gummy contract is a share gain, representing new business for an existing product from a customer. It fits well into the existing network with open capacity, requiring minimal CapEx and offering good margins.