IQVIA Holdings - Earnings Call - Q2 2025

Executive Summary

• Solid quarter with revenue above the high end of internal targets and modest beats vs S&P Global consensus on revenue and EPS; record backlog and improving RFP flow underpin 2H setup. Results: Revenue $4.017B (+5.3% y/y), Adj. EPS $2.81 (+6.4% y/y), bookings $2.5B (1.12x b2b), backlog $32.1B (+5.1% y/y).
• TAS led growth (+8.9% y/y), while R&DS improved bookings and pipeline despite an “unsettled” environment; management is leaning in with “see more, win more” to drive share gains amid some pricing pressure.
• Gross margin pressure driven two-thirds by mix (RWE within TAS, pass‑throughs/FSP in R&DS) and one‑third by FX; SG&A control offset ~one‑third of the compression.
• FY25 guidance narrowed: Revenue $16.1–$16.3B, Adj. EBITDA $3.75–$3.825B, Adj. EPS $11.75–$12.05; Q3 guide: revenue ~$4.10–$4.25B, Adj. EPS $2.93–$3.02; tailwinds include ~100 bps FX and ~150 bps M&A contribution, offset by ~$100M COVID step‑down in R&DS.

What Went Well and What Went Wrong

• What Went Well

  • Revenue and profit came in above/towards the high end of expectations; first-ever $4B+ quarter; TAS outperformed with RWE strength. “Revenue exceeded the high end of our guidance range...” and TAS +8.9% y/y.
  • Forward indicators improved: bookings $2.5B (1.12x), RFP flow up low‑teens y/y and high single digits q/q; backlog a record $32.1B, NTM revenue $8.1B (+4.8% y/y).
  • Strategic AI progress and industry recognition; NVIDIA collaboration and agentic AI use cases highlighted; Everest named IQVIA a gen‑AI front‑runner in life sciences.

• What Went Wrong

  • Gross margin compressed, ~2/3 from mix (RWE in TAS; pass‑throughs/FSP in R&DS) and ~1/3 from FX; price competition remains elevated.
  • Decision timelines remain elongated and the macro/industry policy environment “unsettled,” pressuring near‑term conversion despite stronger bookings.
  • GAAP net income declined y/y ($266M vs $363M in Q2’24) amid higher interest expense and other below‑the‑line items.

Transcript

Speaker 4

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Kerri Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Speaker 0

Thank you, Offer A. Good morning, everyone. Thank you for joining our second quarter 2025 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Scherber, Executive Vice President and General Counsel; Mike Fedock, Senior Vice President, Financial Planning & Analysis; and Gustavo Ferroni, Senior Director, Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcasts. This presentation will also be available following this call in the events and presentations section of our IQVIA Investor Relations website at ir.iqvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements.

Actual results could differ materially from those stated or implied by forward-looking statements due to risk and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.

Speaker 3

Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered another strong quarter. Revenue exceeded the high end of our guidance range, as we reported over $4 billion in quarterly revenue for the first time in our history. Adjusted EBITDA and adjusted EPS came in towards the high end of our guidance range. As expected, TAS continued to perform well in the second quarter, supported by clients' commercial roadmap strategies and new drug launches. TAS reported revenue growth above our expectations at 8.9%, led by double-digit growth in real-world evidence. On the clinical side, our net bookings in the quarter were approximately $2.5 billion, translating to a net book-to-bill of 1.12.

Our booking performance improved in the quarter, even as the overall market environment remains essentially unsettled, and there is still uncertainty persisting regarding future administration policies affecting the biopharmaceutical industry. Of course, this continues to cause some delays in decision-making on new programs, but the R&DS team has reacted to this new environment by intensifying our "see more, win more" go-to-market strategy aimed at expanding market gains. These strategies are helping the business navigate this period, and in fact, the R&DS team is seeing good traction from these efforts. Our qualified pipeline was up high single digits sequentially and year-over-year, driven mostly by the EBP segment. Importantly, we saw a meaningful uptick in RFP flow. Second quarter RFP flow grew low teens year-over-year and high single digits sequentially with growth in all customer segments. Our win rate improved significantly, most notably in the EBP segment.

As a result, our backlog reached a new record of over $32 billion at the end of the quarter, growing over 5% compared to the prior year. Now, let's look at the results of the quarter. We delivered strong revenue and profit results. Total revenue for the second quarter came in above the high end of our guidance range, representing year-over-year growth of 5.3% on a reported basis and 6.3% if you exclude the COVID-related work from both periods. At constant currency, revenue grew 3.6% and 4.6%, excluding COVID. Second quarter adjusted EBITDA increased 2.6%. Second quarter adjusted EPS of $2.81 increased 6.4% year-over-year. Now, let's review a few highlights of business activities. As you know, AI is a big deal for us. We are all in in this transformation, and as we've discussed before, a lot of work here is done with NVIDIA's support.

IQVIA is developing AI agents that simplify operations across life sciences. In fact, NVIDIA showcased these agents in June at their flagship conference in Europe, where our virtual trial platform was highlighted as a leading example of smart AI agentification. This collaboration develops custom-built AI agents using NVIDIA technology designed to streamline processes, enhance workflows, and accelerate insights across the life sciences ecosystem. Use cases for these agentic offerings include target identification, clinical data review, literature review, market assessment, and HCP engagement. This momentum has not gone unnoticed, reflecting the strength of our AI strategy and execution.

Everest Group recently named IQVIA a front-runner generative AI leader for the life sciences industry in its recent report, "AI Ideas to Action: Operationalizing Generative AI in Life Sciences." IQVIA was the only CRO to receive the highest ranking of front-runner in this report, which measures the value impact of end-to-end generative AI capabilities for 15 carefully selected broad-based AI companies, CROs, and life sciences specialists and niche firms. Let me now give you some color on TAS business activity. A top 10 pharma client selected IQVIA to advance their market access strategy for a breakthrough type 1 diabetes therapy entering Europe. By leveraging AI-driven insights and pricing expertise, IQVIA will help shape this value proposition, pricing, and contracting approach to support successful adoption. A European biotech client selected IQVIA to support the global launch of a novel oncology therapy. IQVIA is delivering a GenAI-powered assistant and HCP persona insights.

This solution will enable simulation of HCP behavior and precise targeting, showcasing IQVIA's unique blend of data, AI-enabled technology, as well as our expertise in product launch and the specific oncology therapeutic area. A top 10 pharma client awarded IQVIA a strategic engagement to support the launch of a novel oncology therapy in the US, delivering insights and technology infrastructure to ensure commercial success. A top 10 pharma client selected IQVIA to lead a global real-world safety and effectiveness study for a new dermatology treatment spanning eight countries and 3,000 patients, which will support product adoption and long-term evidence generation. A European biotech company awarded IQVIA a global observational study to assess the real-world safety and effectiveness of a rare disease therapy in kidney disorders. The win highlights IQVIA's rare disease expertise, strong client partnership, and use of AI-enabled tools to optimize study design and delivery. Moving now to R&DS.

We continue to win a significant portion of oncology-related trials. Our leadership in oncology research is exemplified by our recently announced strategic collaboration with Sarah Cannon Research Institute, one of the nation's leading oncology research hospital networks. This strategic collaboration aims to transform oncology trials globally. By uniting IQVIA's global scale and connected intelligence with SCRI deep community oncology expertise, we are aiming to accelerate trial activation, boost recruitment, and streamline data capture of electronic health records, ultimately removing operational barriers and speeding the delivery of breakthrough therapies to patients. A few examples of significant wins the R&DS team had in the oncology space. A biotech client selected IQVIA to lead the complex global phase three colorectal cancer program. IQVIA was selected due to our oncology therapeutic expertise, proven track record, knowledge of the regulatory landscape, and our analytics capabilities.

A rapidly scaling biotech selected IQVIA to lead two phase three global pancreatic oncology trials, continuing a high-performing partnership with this client. A large pharma client selected IQVIA to lead a global phase three MDS oncology trial. Continuing our successful collaboration with this client on this asset. Obesity is another therapeutic area where our performance has been particularly strong. A biotech client selected IQVIA to lead two global phase three obesity trials, leveraging our vast footprint and deep expertise in chronic weight management. A top 10 pharma client selected IQVIA Laboratories to support expansion of their next-generation GLP-1 development program. Building on an existing partnership to investigate the drug's efficacy in treating obesity and type 2 diabetes. I also want to highlight our growing strength in cell and gene therapy trials. IQVIA was selected to manage a significant gene editing program for Wilson disease, spanning both observational and interventional studies.

The project deploys AI-enabled solutions that drive speed and precision in rare disease research. Finally, we were honored to be recently recognized for our innovation in facilitating decentralized trials. IQVIA was named winner of the best mobile app for patient engagement at the 2025 MedTech Breakthrough Awards. IQVIA's app empowers patients and caregivers to participate in decentralized trials from anywhere while ensuring strong privacy and security. The app has multilingual support and is available across many geographic regions, increasing patient access, engagement, and retention. Now to Ron for more details on our financial performance.

Speaker 1

Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Second quarter revenue of $4.17 billion was up 5.3% on a reported basis and 3.6% in constant currency. Now, excluding COVID-related work from this year and last, revenue grew 6.3% in actual currency and 4.6% in constant currency. Technology & Analytics Solutions revenue for the second quarter was $1.628 billion. That's up 8.9% on a reported basis and 6.8% in constant currency. R&D Solutions second quarter revenue was $2.201 billion, up 2.5% reported and 1.3% in constant currency. Excluding the step-down in COVID-related revenues, R&D Solutions revenue growth was 4.2% in actual currency and 3% in constant currency. Lastly, Contract Sales & Medical Solutions second quarter revenue was $188 million, and that was up 9.3% reported and 6.4% in constant currency. For the first half, total company revenue was $7.846 billion, up 3.9% reported and 3.5% in constant currency.

Excluding COVID-related work, revenue grew 4.8% in actual currency and approximately 4.5% in constant currency. Technology & Analytics Solutions revenue for the first half was $3.174 billion, up 7.7% reported and 7.2% in constant currency. R&D Solutions first half revenue of $4.303 billion was up 1.4% reported and 1.2% in constant currency. Excluding COVID-related work from both periods, revenue in R&D Solutions grew 3.1% in actual currency and approximately 3% in constant currency for the half. Lastly, Contract Sales & Medical Solutions in the first half had revenue of $369 million, up 2.2% reported and 1.9% in constant currency. Okay, moving down to P&L, adjusted EBITDA was $910 million for the second quarter, while first half adjusted EBITDA was $1.793 billion. Second quarter GAAP net income was $266 million, and GAAP diluted earnings per share was $1.54.

For the first half, GAAP net income was $515 million, or $2.94 of earnings per diluted share. Adjusted net income was $486 million for the second quarter, and adjusted diluted earnings per share was $2.81, up 6.4%. For the first half, adjusted net income was $965 million, or $5.50 per diluted share, that being up 6.2% year-over-year. R&D Solutions backlog at June 30th was $32.1 billion, an increase of 5.1% year-over-year. Next 12-month revenue from backlog was $8.1 billion, growing 4.8% year-over-year. Let's review balance sheet metrics now. As of June 30th, cash and cash equivalents totaled $2.39 billion, and gross debt was $15.490 billion, and that resulted in net debt of $13.451 billion. Our net leverage ratio ended the quarter at 3.61 times trailing twelve-month adjusted EBITDA.

Second quarter cash flow from operations was $443 million, and capital expenditure was $151 million, resulting in free cash flow of $292 million. Now, you saw in the quarter that we repurchased $607 million of our shares, which brought our first half share repurchase activity to above $1 billion. This leaves us with approximately $2 billion of repurchase authorization remaining under our current program. Also, in the quarter, we issued $2 billion of senior notes maturing in 2032. Now, let's turn to the guidance. We're narrowing our guidance ranges for revenue, adjusted EBITDA, and adjusted diluted earnings per share as follows. We expect revenue to be between $16.1 billion and $16.3 billion, representing year-over-year growth of 4.5%-5.8%. We're just over 5% at the midpoint. This guidance includes year-over-year FX tailwind of approximately 100 basis points.

We continue to assume about $100 million step-down in COVID-related work and approximately 150 basis points of contribution from M&A activity for the full year. We expect adjusted EBITDA to be between $3.75 billion and $3.825 billion. We expect adjusted diluted EPS to be between $11.75 and $12.05. That's up 5.6%-8.3% versus prior year, or about 7% at the midpoint. For the third quarter, we expect revenue to be between $4.25 billion and $4.1 billion. Adjusted EBITDA is expected to be between $935 million and $955 million, and adjusted diluted EPS is expected to be between $2.93 and $3.02. Both this quarterly guidance and our full-year guidance assume that foreign currency rates, as of yesterday, July 21, continue for the balance of the year. To summarize, in Q2, we delivered strong revenue and profit results towards or above the high end of our expectation.

The TAS business unit, in particular, reported revenue above target. R&DS, despite the effects of continued uncertainty on the industry, the team there has responded well, improving win rates and expanding share, which together contributed to stronger bookings and a record backlog in the quarter. Forward-looking metrics for R&DS offerings remain positive, including a significant uptick that we saw in RFP flow. We saw strong demand in the quarter for our senior note issuance. Finally, we ramped up our share repurchase activity in the quarter, which brought our first half repurchases to above $1 billion. With that, let me hand it back to the operator, Tina, for Q&A.

Speaker 4

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We request that you please limit yourself to just one question so that others in the queue may participate as well. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Luke Surgott with Barclays. Please go ahead.

This is Sam Wan for Luke. Thanks for taking our questions here. Just a first one on TAS, that continues to kind of defy the overall environment of MFN fears, tariff fears. That seems to be hitting R&DS a little bit, along with your peers on the clinical research side. Being that at least a portion of it is short cycle, how does TAS continue to earn through this environment? Is the real-world evidence strength and other areas of strength within TAS offsetting any weakness in any of the other subsegments? How does the current environment differ from a year or two ago where TAS was seeing headwinds and the R&DS side of the business was kind of humming along? It seems that the diversification story is shining through here.

Speaker 3

Yeah. Good morning, Luke, and thanks for your question. Not sure, I guess you're asking more of a general overall environment and what happened in each of the segments. Again, I can also say that in TAS, we delivered better-than-expected revenue growth in the quarter. Above the high end of our expectation range. Just under 9%. 7% at constant currency. We've been on a strong recovery in TAS since really the third quarter of last year. We expected that. It's a little bit better than expected. Again, we've said this many times. Our clients continue launching new drugs. Despite the uncertainty or short-term uncertainty over the environment. The molecules that were approved need to be launched, and you can only delay so much. At some point in time, we knew this was going to happen, and it is happening. Clients continue to execute in a regular way.

They have commercial roadmaps, and those require our services. We really saw an improvement in the general environment. When things slowed down and there was sort of a lot of things put on hold, and TAS growth deteriorated to low single digits end of 2023 and the first part of 2024. We saw decision timelines extend considerably, and they've now gone back to normal, actually even better than that. It's sort of business as usual. In terms of the segments, yeah, real-world was the strongest, double-digit. Remember, real-world is about a third of the TAS business. The rest of the business, data, consulting, and tech, depending on the segment, was between low and mid-single digits. I see here for the segments. But you're correct, the driver, main driver of superior growth was the real-world business, and the rest was, again, flat to mid-single.

We feel good, by the way, about leading indicators and continued strength in 2025. The opportunities created in the quarter grew, I think, very strongly, both in volume and dollars. The win rates in TAS improved a couple of points year-over-year. As I mentioned before, the average time to close improved further. I think it's 15% or so shorter than prior year. We continue to be confident in the fundamentals of the business and the recovery. You asked about R&DS. You said humming along. I wouldn't call what the team did for humming along. I think there was a very high level of activity and intensification of our go-to-market activities, which enabled us to book on a net basis $2.5 billion in the current environment versus the $2.1 billion we booked in the first quarter.

We generated a lot of opportunities and forward demand indicators, as we shared in our introductory remarks, are very strong. Thank you, Luke.

Absolutely.

Speaker 4

Our next question is from the line of Shlomo Rosenbaum with CIVO. Please go ahead.

Speaker 1

Hi, thank you very much. Ari, I want to focus a little bit more on that R&DS and what you were talking about. It sounds like from what you're saying is the environment did not really improve, but you're gaining more ground in that. If you could double-click a little bit, is it really the client confidence is really the same? Or is there anything that's improving? I'm just asking also because not just MedPACE also reported with some better numbers. Usually, if you have a few competitors there that are moving in the same direction, it seems to indicate some kind of improvement because not everybody's always doing better at the same time. They got to be taking share from somebody. Maybe you could just double-click a little bit in terms of the change sequentially of what you saw on the ground.

Speaker 3

Yeah. Just to put things aside here, the competitor you mentioned, you call it the competitor, but I just want to say we never beat in any defenses with this competitor. We are not playing in the same—it is just a different business, as the numbers show. Moving to your question on RDS. The environment, I think, remains unsettled in terms of the administration policies and the level of uncertainty that is out there. Whereas in prior periods, we saw clients sort of on hold, we noted that clients essentially, not necessarily returning to business as usual, but are getting on with their programs.

If you have in front of you a phase three program that is very important for the company and that is going to last four years, it is important you be in market ASAP if you have good data and good results and good promise for the program. You cannot really afford to wait another six months. At some point in time, you have to get on with life. To that degree, I would say the environment possibly has improved slightly, and we see some of those green shoots in the demand metrics. It has remained the same with respect to the administration policies and the uncertainty around exactly what may or may not happen. That time window is relatively short, limited, and narrowing. Therefore, I guess the client base is moving on to a degree, and in that sense, the environment is improving.

Separately, to use your expression, which I think is a good one, we leaned on or leaned in to the market a little bit more forcefully than usual. We call this see more, win more. That is, we are expanding our net. We are responding to more RFPs, generating more flow of opportunities, and we are going in to win. Our win rate has increased. I think all of that is essentially what has led to the good results we have had this quarter, better than what we would have expected. By the way, this is across segments, large, mid, and EBP, but I would note that the EBP segment was particularly strong.

Speaker 1

Thank you.

Speaker 4

Your next question comes from the line of Elizabeth Anderson with Evercore ISI. Please go ahead.

Hi, guys. Thanks so much for the question. I was wondering two things. One, if you could comment on sort of the cadence in the back half of the year. Obviously, you gave the revenue assumptions for the third quarter. Is anything to think about in terms of timing aspects? I know you guys have previously started talking about the restarting of a trial that had previously gotten delayed, just so we can think about the cadence of that into 2026. And then secondly, anything to call out on the gross margin side? It looks like maybe it would have some just mixed impact from TAS, but just anything to think about there in terms of the cadence for the back half of the year. Thank you so much.

Speaker 3

Yeah. So on the cadence, I mean, first of all, generally, and there is a certain level of seasonality to our business, which you're familiar with. First quarter being the sort of weakest. A lot of our business in Europe essentially stops from 15th of July to 15th of September. And the fourth quarter is much stronger. That's true in R&DS, and it's true in TAS. So that's the first general element, and that's always true year in, year out. With respect to R&DS and the specifics of your question regarding that large delay trial, that we said before was going to resume in the latter part of 2025, and that's still on. And in fact, we're having initiation discussions with the client, and that is still on as forecasted. And that obviously will be responsible for some of the larger-than-usual uptick in the fourth quarter of this year.

So that's for the R&DS. You had other questions. TAS, again, tough to compare second half versus last year. Last year, you remember, we generated even, I think, 9%, if I recall, over 9% in the fourth quarter. So obviously, the comparison there is a bit more difficult when we get to the back half of the year in TAS. Again, we're trying to be—it's still early in the year, and we don't want to move the needle too much at this point. Let's see what happens. Everything looks good for now on TAS and R&DS, as you suggest, the cadence looks for a gradual improvement of the growth rate, and especially in the fourth quarter. Because of that resumption of that large trial, as well as, of course, compares versus last year, and generally stronger business activity than we would have expected otherwise. You then asked about gross margin.

I think you may have brought me that. Yeah. Look, you did see some compression in our gross margin in the quarter, and about a third of that is due to the FX tailwind. As you know, FX tends to move our revenue line without moving our EBITDA line very much. About two-thirds of it was due to product mix. We had the higher revenue growth in real-world and TAS, which tends to be a lower margin portion of that business. In R&DS, we had increased pass-through revenues and also an increased proportion of FSP revenues. Those were the drivers of what you saw. Now, of course, on the FG&A side, we had strong cost control and offset quite a bit of that gross margin compression.

Right. Right. That's exactly right. Basically, the short answer is the pressure on gross margin is mixed-driven for two-thirds and FX-driven for one-third. Of course, below the line, at the SG&A level, we offset by our strong cost reductions and so on. We offset about a third of that margin compression.

Makes sense. Thank you.

Speaker 4

Your next question comes from the line of Michael Cherney with Leerink Partners. Please go ahead.

Great. Thank you. This is Dan Clark on for Mike. Just had a question as you've been getting involved in more opportunities. One, are you seeing more CROs on average in an RFP, and are there any changes in pricing worth calling out? Thank you.

Speaker 3

When you say more CROs, you mean more people invited to the table, to the party?

Yes, exactly.

Yes. I mean, look. Once again, it depends on the clients and on the segments. With respect to the large segments, over the course of last year, virtually every large pharma company essentially re-invited the top five or six CROs, that is, the three largest ones and the three smaller ones, and rebid their preferred partnerships. As we mentioned, we were very happy that we won and expanded all of those relationships further. I would say the three largest ones essentially are the main providers, and the smaller ones are invited essentially to keep pricing in line from the point of view of the large pharma customers. With respect to the other segments, it's relationships, it's go-to-market. Generally, the EBP segments, you may have two or three bids, and we do not see much of a difference versus what was the case before.

Now, some of the competitors are forcing a little bit of price reductions. I would say that our strategy to see more and win more means that we are at the table every time. Whereas in the past, a competitor may have reduced pricing, and we might have walked away because we would not have wanted to align at that price level. Now, more often than not, we will not walk away and grab business. We will always prefer to have an additional point of top-line growth and then work later on our costs and margins and accept some short-medium-term margin pressure in order to ensure that we continue to build our backlog. Yes, your question about pricing, is there pricing pressure? Yes, because of all the reasons I mentioned.

Plus, the market environment, as I said, continues to be tighter, and therefore you have more people at the table for a relatively smaller pie, and that inevitably leads to pricing pressures. In that environment, we are the largest player. We have the global scale player, and we intend to win.

Speaker 4

Your next question comes from the line of Jeffrey Garro with Stephens Inc. Please go ahead.

Speaker 1

Yeah. Good morning, and thanks for taking the question. I was hoping we could dig in a little further on AI. Any updates you have on development progress of additional AI solutions and expanding use cases? I know it's early, but curious what you're seeing in terms of demand from customers. Lastly, any further comments about how you guys are using AI internally to drive efficiencies in the business? Thanks.

Speaker 3

Thank you. Yeah. Look, AI. Especially identification of our processes, is extremely important. We keep hiring resources, building up teams, and scaling up our efforts. We are progressing as planned to deploy highly specialized industry-focused AI agents, both on the clinical side and on the commercial side. So far, we've developed over 20 agents into production that cover three use cases in each of commercial, real-world, and R&DS. We're seeing positive results. We're experiencing significant client interest. Some are already being used. For example, we have one multi-agentic system for literature review. It has expanded the capacity to review by 10x. Another agent allows us to reduce delivery time by two-thirds, from 12 weeks to 4 weeks, with some significant cost reductions in our patient journeys for our clients. We are currently developing over 50 agents to be deployed in the third quarter to production and covering 15 use cases.

What this means for— Look, there's an enormous amount of interest from clients. Obviously, every large organization wants to be on this AI train. Initially, especially large pharma wants to develop their own solutions. Over time, it's becoming apparent that speed here is extremely important because it all depends on your ability to train your AI models. We've got the goods, so to speak. We've got the materials, the data, the expertise, which is why we're collaborating with NVIDIA on training these AI agents and trying to move as fast as we can. It's hard to see the impact in the short term, but it will make a difference in terms of our ability to execute a much larger backlog faster on the R&DS and our ability to execute commercial strategies for our clients on the commercial side a lot faster, real-world studies a lot faster. Speed, efficiency.

Over the long term, obviously, we expect internally that those efficiencies will enable us to resume margin expansion and go back to and continue to mitigate those pricing pressures we are seeing in the short term.

Speaker 4

Your next question comes from the line of Michael Cherny with BofA. Please go ahead.

Speaker 1

Great. Thanks for taking the question, guys. Ari, I want to come back to the win rates you called out in EBP, touched on it a couple of times. Just wondering if you could expand on sort of what steps you've taken internally with the organization to achieve those higher win rates, and whether you think that's sustainable going forward. Is that sort of a sustainable change, or is that something more reflective of the dynamic and the near-term market environment? Thanks.

Speaker 3

Success in the marketplace is a function, A, of generating as many opportunities as possible where we have the opportunity to bid. As I said, that's part of the first part of our strategy, which is see more. We are much more aggressive in going to market, in responding to RFPs, in generating the RFPs. The RFP flow grew low teens year over year and high single digits sequentially. Again, the growth was across all customer segments. I might say EBP was up very, very strong. Very strong. The RFP flow was up low teens year over year. Large pharma was low to mid-single digits. EBP was much higher than that. It is great to generate the flow. Now, you have to win. There, our directive is to win more and to win as much as we can.

Back to an earlier question, that sometimes requires us to align to a lower price than we would have been willing to tolerate in the past. We have sort of adjusted and fine-tuned that strategy, and now are actually winning a lot more than we were before. You are asking, "Is this sustainable?" The answer is, I do not see why not. The flow of opportunity is there. If we look at the qualified pipeline, which is an earlier indicator, an earlier leading indicator versus the RFP flow, the qualified pipeline is up year over year and sequentially high single digits. Again, in EBP, it is there in the double-digit growth year over year. We see that the demand we are able to participate in is increasing. Our win rate depends on our strategy, on our capabilities.

We believe strongly that we are uniquely positioned, and we will continue to push to win. The win rate is up significantly. I do not think we disclose those numbers. I have them in front of me, and they are very, very good.

Speaker 1

All right. Thanks.

Speaker 4

Your next question comes from the line of Dan Leonard with UBS. Please go ahead.

Thank you. I was hoping to talk a bit more about the margin. The two-thirds of gross margin compression you attributed to MEX, how do we think about that going forward, especially in the context of that flat to 30 basis point margin expansion framework that you've previously discussed?

Speaker 3

Yeah. I mean, look. This is. The mix is what it is. Real world is growing faster. And that's lower margins. We have more FSP to execute in the short term, and that's also lower margins on the R&D Solutions side. I think in the short term, I would say that is going to continue. By short term, I mean in the next couple of quarters. Having said that, I might mention that this pendulum move towards FSP—I have said this before, and I will repeat it—I do not believe is permanent. In fact, and this fluctuates, by the way, but in fact, in this quarter, the proportion of net bookings that FSP is in the very, very low single digits. And I mean very, very low. Everything else was FSP. So.

Speaker 1

Full service.

Speaker 3

I'm sorry. Everything else was full service, right? FSP. I think overall, we saw FSP as a proportional backlog tick up one or two points from a historic 14-15% to more 16-17%. We see it coming down back to the same level. I think RDS, yeah, in the short term, some mix, unfavorable mix. I think after that, we should be back to a more favorable mix.

Speaker 1

All that's reflected for the next couple of quarters in the guidance.

Speaker 3

Yes. That's right. You just also have to remember about the FX dynamic. We have that tailwind, and that's compressing margins as well. Right.

Speaker 1

Thank you.

Speaker 3

Thank you.

Speaker 4

Your next question comes from the line of Jolinda Singh with Truist Securities. Please go ahead.

Thank you. Thanks for taking my questions. I want to go back to TAS business. Thanks for the color by business lines. I actually wanted to double-click on business and consulting piece. It seems trends there still remain below historical trends. What are your expectations there in terms of business returning to high single double-digit growth? What are some of the key leading indicators you're watching for that business to start bouncing back?

Speaker 3

Yeah. Look, the pipeline is there. We track pipeline versus prior years and pipeline coverage. I think we are confident that certainly in the future, we'll return to need to high single digits as it was in the past. The mix of projects is different. We spoke about AI before, and that's part of the equation as well. As we are transitioning to different offerings, we think that that's part of that transition. Yeah, we are expecting that to happen just basically based on our pipeline reviews. Thank you.

You're not expecting to return this year, right? It's more like most likely next year or beyond. Just want to clarify that.

Yeah. Probably end of the year next year. Yes.

Okay. Thank you.

Speaker 4

Your next question comes from the line of Anne Hines with Mizuho. Please go ahead.

Good morning. Thank you. You referenced some of your clients have some short-term uncertainty. What do you think they need the most clarity on to accelerate projects? Is it MFN pricing? Is it clarity on, maybe, tariffs? I know it is still early for 2026, but when I look at consensus estimates for R&D, revenue is up 4%. Do you think the current bookings environment supports that type of growth, or do we need an acceleration to support that?

Speaker 1

Anne, you saw the next 12-month revenue in backlog that we reported. Out of R&DS. Now that does not cover you all the way into 2026, but the numbers give you some indication there. Our pipeline and RFP flow has been strong. We are not going to be giving 2026 guidance at this point, but you can kind of piece it together from all of that.

Speaker 3

Yeah. You asked the question on the client's concerns and the policies. Yeah, I mean, it's all of the above. The changes in the agencies and policies, FDA, and so on, this seems to be sort of stabilizing, and there have been some very good appointments, and we feel good about that. MFN pricing, we're just waiting. There's been discussions, and there's been thoughts. Let me just say, I don't want to comment more, but as you said, it's extremely complicated. Then tariffs. You saw a lot of non-US large pharma companies announce massive investments. I think this will help.

Great. Thank you.

Speaker 4

Your next question comes from the line of Jack Meehan with Nephron Research. Please go ahead.

Thank you. Good morning, everyone. I was wondering if you could just share latest thoughts on what you're seeing related to cancellation trends. Have you seen that continue to moderate at all? Just thoughts on kind of a path to normalization there? Thanks.

Speaker 3

Yeah. I mean, look, we mentioned the first quarter that cancellations were in the normal historical range. I'd say the second quarter, same thing, same trend. Overall, first half, really nothing unusual. No mega cancellation. The average basically is the same as it was historically before we had the disruptions that we had last year. Thank you.

Speaker 4

Your next question comes from the line of Max Smock with William Blair. Please go ahead. Max, your line is open.

Hi. Sorry about that. It's Christine Reams on for Max Smock. Hoping you can give some quantification about the delays you are seeing on new clinical projects. I know that you gave the 10% figure last quarter, curious if delays for new programs got better or worse in the second quarter. Thank you.

Speaker 3

I see. You're talking about which delays?

Speaker 1

You're talking about RFP to decision-making timeline?

Yeah. Correct.

Yeah. I mean, that remains. Longer.

Speaker 3

Yeah. Again, the environment is more or less similar in terms of client uncertainty and positive decision-making. I mentioned that in many cases, some of these large programs are being launched because clients just can't wait. Some of what had been delayed, decisions were made to launch. If you look at the totality of the decision timelines, they remain more elongated than usual. Really, I think our better performance in bookings and sales and in generating opportunities is only partially related to a slight improvement in the environment. Because if you look at, for example, EVP funding, it wasn't particularly special since the beginning of the year, has been relatively tame. It's just that we've been a lot more proactive, and we've been extremely, extremely successful in the marketplace in terms of our win rates versus history, and in generating both the opportunities and in winning those opportunities.

I wouldn't necessarily derive an implication and assume that all of a sudden the market has returned to normal.

Speaker 1

Thank you. All for you.

Thank you.

Speaker 4

There are no further questions at this time. Mr. Joseph, I turn the call back over to you.

Speaker 1

Thanks, Alfredo. Thank you, everyone, for taking the time to join us today. We look forward to speaking with you again on the third quarter 2025 earnings call. The team will be available for the rest of the day to take any follow-up questions you might have. Have a good day.

Speaker 4

This concludes today's conference call. You may now disconnect.