IQVIA Holdings Inc. (IQV) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Third Quarter 26 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' 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 1 on your telephone keypad. If you would like to withdraw your question, press star followed by the number 1 again. 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. Ms. Joseph, please begin your conference.

Kerri Joseph: Thank you all 3. Good morning, everyone. Thank you for joining our third quarter 26 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer. Michael J. Fedock, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel Clarissa Willett, senior vice president of financial planning and analysis and Katie Ward, Vice President, Investor Relations. Today, we will be referencing a presentation that will be visible during this call. Those of you on our webcast. 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 risks 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 comparable GAAP measures is included in the press release and conference call presentation. As previously disclosed, we implemented a new reporting structure that is effective 01/01/2026. In conjunction with this change, prior period amounts have been recast to conform to this reporting structure. I would now like to turn the call over to our chairman and CEO, Ari Bousbib.

Ari Bousbib: Thank you, Kerri, and good morning, everyone. Thank you for joining us today to discuss our third quarter results. The team delivered great numbers. The market environment has continued to improve. But our performance improved even more. Our organic growth rates year over year accelerated meaningfully, 2x for commercial and nearly 3x for clinical. Our margins expanded, And free cash flow was very strong. Our win rates were higher in the quarter which led to our strongest clinical bookings in 4 years. Our differentiated AI offerings are increasingly contributing to that momentum with continued adoption of our agentic solutions. In fact, IQVIA has now deployed 415 agents to date. Earlier this month, we brought together more than 400 attendees at Tech IQ to share our latest clinical and commercial AI capabilities. This event is our annual customer event focused on technology which this year took place in Boston, and included our technology partners NVIDIA, Microsoft, AWS, Snowflake, and Viva. Our AI leadership continues to earn industry recognition, including multiple industry awards. For AI and technology innovation across life sciences and healthcare. While we continue to see more adoption of these capabilities across our customer base. Let me spend a couple of minutes on the results for the quarter. Total revenue for the quarter exceeded the high end of our guidance range, representing year-over-year growth Of 8% on a reported basis at constant currency growth was even stronger. At 8.6%. Organic revenue growth was approximately 6% year over year, well over 2x the rate we delivered a year ago. Third quarter adjusted EBITDA was above the high end of our guidance as well. Representing year over year growth of 8.7%. Adjusted EBITDA margin as a result, expanded by 20 basis points the second consecutive quarter with margin expansion this year. Third quarter adjusted diluted EPS also exceeded the high end of our guidance range and increased 11.3% year over year, the beat was driven entirely by the stronger operational performance. Now on to segment performance. On the clinical side, revenue grew 8.7% reported, of which almost 7% was organic year over year. Which is nearly 3x last year's organic growth rate. We delivered $3.2 billion of net new bookings our highest in 4 years, and 15% above last year with notable strength in full service. And, yes, the book-to-bill was 1.2 in the quarter. But more importantly, this is a long cycle business, and I would like to highlight that our last 12-month net new bookings have now increased for 5 consecutive quarters. Reaching $11.7 billion, which is up 14% year over year. Within this metric, is 1 of the best forward-looking indicators we have in support of long term growth. Looking ahead, demand indicators are encouraging. The EVP funding environment continues to be very strong. Funding has reached $90 billion year to date up >85% year over year. And already above the total for all of last year. According to BioWorld. Similarly, clinical trial starts year to date are up high single digits. RFP flow continued to grow at a healthy rate. up high single digits as well. Compared to last year. Our strong performance, of course, reflects an improving market environment, but we also had good operational execution with win rates that continued to tick up 2 to 3 points. In commercial solutions, revenue grew 6.9%, of which 4% was organic, which is double last year's organic growth rate. We had good growth, across our 3 subsegments. Information offerings, which helps our clients understand the market, analytics and consulting offerings, which help our clients plan their go to market strategies, and our other commercial solutions that help them engage with patients, healthcare providers, payers, and channels. We have now delivered 4 consecutive quarters of strong revenue growth in commercial. And our pipelines remain at record levels. Looking forward, the demand outlook remains favorable with new drug launches up >40% year to date. Our own pipeline showing healthy growth. And decision timelines continuing to shorten. Now I usually give you some color on the business activity in the quarter and today, I would like to do that but focus on examples where AI was a clear differentiator. Let's start with clinical. Our predictive clinical development capabilities utilize AI to help sponsors design their studies identify risks earlier, and bring new therapies to patients faster. Here are a few examples of how this is playing out in some recent awards. A large pharma client needed to deliver multiple phase 3 studies in the same autoimmune indication across nearly 50 countries, Here, our AI enabled country and site modeling solution optimizes patient identification and enrollment shortening the overall program timeline by 9 months. Another example, an EBP selected IQVIA for a phase 3 oncology program, Critical to winning this award was our AI enabled protocol and site optimization tools, which accelerate timelines and reduce operational risk. Finally, IQVIA was selected by an EBP for a phase 3 cardiovascular outcome study this is exactly where our scale and integrated AI capabilities make a big difference. We are layering AI agents to bring together clinical delivery, laboratory services, and electronic patient assessments under 1 model to identify issues earlier, reduce handoffs, and proactively mitigate execution risk. Switching to examples in commercial. We continue to evolve the way we partner with clients. Successful adoption of our AI offerings in commercial organizations within our clients is deepening client trust in IQVIA, And as that trust grows, clients are increasingly looking to us to bring more of our AI enabled capabilities to their organizations. For example, a top 5 pharma client selected IQVIA to build and maintain an agentic platform that provides on demand insights from complex real-world healthcare data. This will help inform faster market access decisions and adjust commercial models in near real time as prescribing patterns and patient outcomes evolve. We also see AI help expand our role in patient services. A top 10 pharma company selected IQVIA to deliver an integrated support program for its rare disease portfolio. Our AI powered solutions adapt and shape interactions by factoring in patient mood and sentiments. That allows, in turn to automate tasks such as benefits verifications, and case management the program allows patients to gain access to the therapy start treatment sooner, and better adhere to the treatments all the time. Another example, a large pharma client deployed our recently launched IQVIA explorer solution. Explorer uses agentic AI workflows that integrate disparate data sources to answer complex questions spanning areas such as which cohorts of patients are taking the therapy, how therapies are being utilized in patient treatment, and help measure adherence by patient segment. The client can now execute commercial activities in minutes compared with weeks or months previously. Let me now turn it over to Mike for more details on our financial performance. Mike?

Michael J. Fedock: Thank you, Ari, and good morning, everyone. As a reminder, we implemented a new segment reporting structure effective 01/01/2026. In conjunction with this change, prior period segment amounts have been recast to conform to this reporting structure. Now let's start by reviewing revenue. Third quarter revenue of $4.43 billion grew 8% on a reported basis and 8.6% at constant currency. Organic revenue growth within the quarter was strong at approximately 6%. Commercial Solutions revenue for the third quarter was $1.79 billion up 6.9% on a reported basis and 7.9% at constant currency. R&D Solutions third quarter revenue was $2.64 billion up 8.7% on a reported basis and 9.1% constant currency. Year to date, total company revenue was $12.947 billion up 8.4% on a reported basis and 7.7% at constant currency. Organic revenue growth was strong at over 5%. Commercial solutions revenue was $5.34 billion up 9% reported and 8.3% at constant currency. And R&D Solutions revenue was $7.11 billion up 8% on a reported basis. And 7.4% at constant currency. Now moving down the P&L. Third quarter adjusted EBITDA was $1.008 billion, representing growth of 8.7% year-over-year, while year to date adjusted EBITDA was $2.958 billion And in the quarter, adjusted EBITDA margin expanded by 20 basis points. Third quarter GAAP net income was $350 million and GAAP diluted earnings per share was $2.10 Year to date, GAAP net income was $880 million or $5.24 per diluted share. Third quarter adjusted net income was $557 million and adjusted diluted earnings per share was $3.34 representing growth of 11.3% year over year. Year to date, adjusted net income was $1.576 billion or $9.38 per diluted share, up 10.4%. Looking at R&D bookings. The R&D solutions net new bookings in the quarter were $3.2 billion a 15% increase year over year resulting in a 1.2 book-to-bill. I should also note that cancellations remained in the historical range. And as we noted during the last earnings call, the company conducted a detailed review of inactive trials in our backlog, resulting in an adjustment to backlog of approximately $2.1 billion This backlog adjustment has no impact on historical financial results, 2026 guidance, net new bookings or next 12-months revenue from backlog testing. Obviously, should any of these same trials resume, the value will be added back to backlog and will not be included in future bookings or book-to-bill metrics. As of September 30, 2026, R&D's contracted backlog was $32.6 billion, and the next 12-months revenue from this backlog is $9.4 billion, which is up 10% versus prior year. And as discussed, given the long cycle nature of the business, it is more meaningful to focus on the longer term booking trends. For the quarter, the last 12-month net new bookings were $11.7 billion an increase of 14% year over year. And importantly, this metric has been steadily increasing each of the past 5 quarters and points to continued momentum in our business. Now turning to the balance sheet. As of September 30, cash and cash equivalents was $2.249 billion and gross debt was $16.067 billion resulting in net debt of $13.818 billion Our net leverage ratio ended the quarter at 3.45x trailing 12-month adjusted EBITDA. Third quarter cash flow from operations was $825 million and capital expenditure of $158 million. Resulting in free cash flow of $667 million representing 120% of adjusted net income. Let's now turn to guidance. We are raising our full year 2026 guidance for revenue for adjusted EBITDA, and for adjusted diluted earnings per share. We now expect revenue to be between 17.350 billion and $17.5 billion representing year over year growth of 6.4% to 7.3% and reflects >1 point constant currency or revenue growth acceleration versus prior year. This revenue guidance now assumes approximately 200 to 250 basis points of contribution from acquisitions based on acquisitions completed to date and acquisitions we expect to have completed by the end of the year. The guidance also assumes approximately 20 basis points of tailwind from foreign exchange which is unchanged from our previous guidance. And by the way, this implies that there is an approximately 70 basis point headwind for foreign exchange to Q4 revenue. We are also raising adjusted EBITDA to be between 4.025 billion and $4.055 billion, growing 6.3 to 7% year over year reaffirming flat margins year over year at approximately 23.2%. Given the mathematical distortion pass through revenues have to reported margins, I would also want to take this opportunity to remind everyone to focus more on the EBITDA dollars as it is a more meaningful measure of operational performance. We are confident in our EBITDA dollar guidance irrespective of the pass through contributions to our reported revenue. And finally, we are also raising adjusted diluted EPS to be between $12.90 and $13 up 8.2 to 9.1% versus prior year or 8.6% at the midpoint. And as we close out 26, we are sure we want some insight into 2027 expectations. So I want to take this opportunity to formally invite you to our upcoming investor day on December 1st, where as we normally do, we will share a broad framework of what we see shaping up for next year. And as always, 'll provide detailed guidance for 2027, concurrent with the release of our full-year 2026 and fourth quarter earnings in February 2027. But in the meantime, to help you with your models, I want to share the run rate assumptions we see exiting the fourth quarter for below the line item. We expect net interest expense for fourth quarter to be around $210 million We expect just over $160 million in depreciation and amortization for the quarter, and we are expecting our weighted average diluted share count to be approximately 169 million shares. And just as a reminder, Q4 compares are very difficult. So the implied growth rates should not be interpreted as a deceleration in our business, and we are confident in the momentum that the metrics that we highlighted previously would imply for the future. In both this guidance, this guidance assumes that foreign currency rates as of October 26th continue for the balance. So to summarize, IQVIA delivered outstanding financial results with third quarter revenue, adjusted EBITDA, and diluted EPS exceeding the high end of our guidance. Organic revenue growth rates accelerated year over year across both commercial and clinical segments, as demand continued to rise, AI continued to be a tailwind to our business and our win rates continue to improve. Adjusted EBITDA dollars grew 9%, and we expanded adjusted EBITDA margins 20 basis points in the quarter. We had strong free cash flow performance representing 120% of adjusted net income R&D's net new bookings were $3.2 billion growing double digits year over year. With another quarter of very strong full service bookings We raised our full-year 2026 guidance for revenue, adjusted EBITDA and adjusted diluted earnings per share. We look forward to seeing you in person on December 1st at our Investor Day. And with all of that, let me hand it back to the operator for Q&A.

Operator: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star then the number 1 on your telephone keypad. We request that you please limit yourself to just 1 question so that others in the queue may participate as well. Your first question comes from the line of Shlomo Rosenbaum with Stifel. Your line is open. Please go ahead.

Shlomo Rosenbaum: Hi. Thank you very much for the question here. Ari, I wanted to ask you if you could go into a little bit more about the uniqueness of IQVIA's ability to deploy data and technology in an agentic world. And, you know, you touched on some of the examples, but can you just talk about things that just other competitors just cannot do because they do not have the data whereas IQVIA can do some of these things. And then also, maybe discuss how your clients view this and how you think about this in terms of being able to charge for this differentiation. Okay.

Ari Bousbib: Well, look, this is a-- would be the subject of very long conversation. But, look, how can I put it? AI is not just another technology. it is a new way of doing business. it is changing the way customers engage with their own activities and how they engage with IQVIA. So stepping back to successfully deploy AI there is a prerequisite in knowing the business. You understand AI simply as an opportunity to do business a different way, Meaning, first, content is important. You need the proprietary information that powers AI. That means you need a globally sourced, de identified curated, fit for purpose, integrated, interoperable, you know, compliant with regulatory privacy, etcetera, etcetera, etcetera. And ready for extraction data. Now we got all of that. Second, in addition to content, you need context. I think people are realizing that to do business effectively, you need context. You need deep expertise in life sciences, to understand that information. We have got that too. And thirdly, importantly, I am looking for a new starting with content, context, what else here? Comprehension. You need to comprehend what you are looking at. That is you need to interpret what the information is telling you and know how to apply it to make decisions faster and more accurately. So when you think about AI agents, you know, they are not just. it is not that you can use an AI tool, whether it comes from Anthropic or OpenAI or anywhere. AI agents are constructs that operate a workflow. A loop of humans. We build them using all these tools. We do not have to expand it to the tools that are available. You know? We spend money with all of these massive AI companies. They just have generic tools, and we utilize them to construct, depending on the use case, obviously. Again, the agent is only 1 part. You obviously need the content You need the context. And you need the interpretation and insights that enable you to construct the agents and operate them. And very often, because of all the specific issue related to operating workflows in healthcare, the transparency, the traceability of the data, etcetera, etcetera, the compliance aspect, you do need humans in the loop. You do many other industries, but in our industry in particular. So that, I think, is you know, what makes and by the way, we have been at this for a while, as you know. Oh, so it is not that we are trying to catch up and do not need headlines. We are working with our clients. And it is slowly but surely changing the way we do business and changing the relationship with our clients making us even more integrated within our clients' workflows. Thank you.

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

Elizabeth Anderson: Hi, guys. Good morning, and thanks so much for the question. I wanted to dig in a little bit to the gross margin improvement. Obviously, that was a highlight, particularly given the higher pass through mix So can you talk to us maybe in a little bit more detail about the pushes and pulls that you know, how much is the pass-through mix sort of causing, like, degradation of that and sort of what are the levers on the upside so we make sure we understand that trajectory properly. Thank you.

Michael J. Fedock: Yeah. Thank you for the question, Elizabeth. Yes. You are absolutely right, and thank you for pointing out the improvement in gross margins. The pass throughs across the enterprise were certainly a headwind on the gross margin line, probably about 70 basis points. So it really highlights the underlying strength in our operational execution. Okay.

Elizabeth Anderson: And then just in terms of that, just think of that as broad-based? We can.

Michael J. Fedock: I Elizabeth. Yeah.

Ari Bousbib: I just want to give you some. I mean, I have here in front of me the detail of the. I just. I know you asked about gross margins, around this. Adjusted EBITDA. Margin, which was also. Which expanded. 20 bps. What the non-operational items, which are the 70 bps, that Mike highlighted we also had, I guess, 10 bps of currency impact. So let's sort of say 60 or so bps of net nonoperational headwind to our margins was more than offset by 80 bps of operational improvements. So that is, again, the cost containment, the AI identification of our own processes, productivity programs, etcetera, everything that we. They are. That contributed in aggregate, 80 bps. So you see that underlying our margin, if you eliminate pass-throughs and if you theoretically were looking at margins, you know, without the pass throughs, just on the old basis, just on the service revenues, you know, that margin would have improved 80 bps. That adjusted EBITDA margin would have improved 80 bps. And, obviously, it is significantly higher than the delivered margin of 20 point to 2%. 23%. Right? So it would be, you know, more in the high twenties. But I am always pushing about 30%. Yeah. that is super helpful. Thank you for that context.

Operator: Thank you. Your next question comes from the line of Jailendra Singh with Truist Securities. Your line is open. Please go ahead.

Jailendra Singh: Thank you, and thanks for taking my question, and congrats on the strong quarter. I want to go back to bookings in the quarter. Very strong booking strength. Despite the normal seasonality you generally see in 3Q. Was there anything unusual in the timing or mix of 3Q awards in 3Q? Was this broad-based market strength or your win rate improving? Just trying to understand if we should expect a normal seasonal step up in Q4 from bookings point of view?

Ari Bousbib: Yeah. No. Thanks for the question. It really was broad based. You know that earlier this year, there were all these concerns that you guys all voiced about. Well, that is it, you know. it is over. Full-service is over. Everyone is going to FSP. People are insourcing and so on and so forth. We warned you that is not the case. And that the pendulum swings back and forth, but long term, the outsourcing trend is absolutely intact. And this is, the second quarter in a row that we see very, very strong bookings in full service. In fact, year over year, they were up by a lot. I do not even wanna give you the numbers because it is so big. Now the flip side, obviously, from an optic standpoint is full service comes with pass throughs. And so you know, back to Elizabeth's question, we then have an impact on the reported margins, and my caution you to make sure you look under the covers you understand the operational improvements there. Yeah, to your question, really, good strength across the board, and really that was true for large pharma where we see continued uptick in win rates. And consequence of all the strategic partnerships that we have structured over the past 2 years, which we have talked about at length. In prior calls. All of those are now starting to pay off as we continue to bid on the new growing stream of RFPs and continue to win more and more of those opportunities with large pharma. And again, with EBP similarly, we talked about strategy there. and that also has continued to grow. The bookings in EBP were very strong. Again, you know, if you look at. I would point you to our LTM net new bookings. Which this. At the end of this past quarter was $11.7 billion And you look at that number each of the past 5 quarters, that number has continued to grow. Consistently and it was up 14% year over year. We think this is an excellent metric to focus on in terms of understanding sustainability of long term growth in the business. And again, to outsource broad strength in FSO, FSP, strong outsourcing. Any other comments, Mike, or no?

Michael J. Fedock: No. I think and just no. And no other changes are expected in Q4 seasonality Yeah.

Ari Bousbib: From a trending Nothing unusual you know, therapeutically or otherwise. Really a good excellent work from a bookings standpoint. Thank you.

Michael J. Fedock: Great. Thanks a lot.

Operator: Your next question comes from the line of Eric Coldwell with Baird. Your line is open. Please go ahead.

Eric Coldwell: Thanks very much. Good morning. I think my only concern that I have had here recently is just the below the line items and you gave us an insight into your view on the fourth quarter. Should we be taking that $210 million I think you said, and just annualizing that into 2027 at this point? Or are there other parameters or dynamics to consider as we think about interest expense modeling for, next year? And then, just 1 other quick 1. I am curious if you can give us the parameters for the backlog scrub. What exactly made the cut or did not make the cut in terms of, your review when you looked at what to remove for now. If you could give us those details, would be appreciated. Very much.

Ari Bousbib: Well, I guess yeah. Maybe I will give that to Mike, but just, you know, the review of the backlog, and Mike could add any details you want, is basically trials that have been in the backlog for a long time. We review that in detail. And long time means long time means over 18 months plus. I think that was kind of 1 of the criteria. And in concert with customers, there was you know, no reason to assume that the work was going to resume in the near term. And so for clarity and cleanliness and more accuracy in visibility, we thought it was a good idea similar to what the competitor has done to just simply remove it. You know, in the past, we would have just left them there. We know that they are inactive. We would wait for resumption possibly of this, but, you know, it kind of becomes stale. And so it is better, and as I think Mike indicated in his introductory remarks, keep those trials come back, which sometimes they do, by the way, even when they have been around inactive for a year plus, they come back. Which is why we extend. We look at way more than a year. I think it is 18 months, 2 years type of inactivity. But when they do come back, if they do come back, then we will simply add them back to the backlog directly without, you know, taking that back as a booking. So that is the way we decided to make the adjustments. I hope that gives you more color.

Michael J. Fedock: And then the first question was on Just about below the line. Oh, the. Yeah. But you could And Yeah. So yeah, the Eric, your team actually does a pretty good job at reviewing our debt stack and looking what is coming up for next year with refinances and swaps and things like that. So I would focus mainly there. I would. there is nothing else below the line on depreciation or tax or anything really to call out there. But I think your question was about that kind of run rate more or less for this. And for us, and the answer is up to about, yes. You know, I do not know. But yes. And we have some have some flexibility. Yes. We do not know the rates of behavior from a rate perspective. Yeah. But that is that is the I think it is a good Yes. Yeah. it is a good number. Yeah. it is a start. And then, obviously, we use just whatever the publicly available forward curves are to do the projections. Thanks, Eric.

Eric Coldwell: Thanks, guys. Appreciate it.

Michael J. Fedock: Great. Thanks, Eric.

Operator: Your next question comes from the line of Luke Sergott with Barclays. Your line is open. Please go ahead.

Analyst: Great. Thanks for the question, guys. Just 2 quick ones here. unrelated. On the commercial solutions, you guys have been talking about you have had record backlog and strong bookings there over the last couple of quarters. Understand that it bounces around a little bit, but saw a little bit of a deceleration on Q3. Just trying to figure out when the timing of this? Is the conversion still elongated and how that is shrinking and when we could start to see this accelerated growth? Then the second 1 is on the backlog and the adjustments. Just to follow-up on Eric's question. I guess as you think about what is been in the backlog, are you guys getting any more stringent on what you are deciding to include there? Is it like a know, something that is going to start to progress within the next 12-months and just be. You know, so you can avoid these adjustments?

Ari Bousbib: Okay. So I guess everyone has 2 questions. So that. Thank you, Eric, for the. That set a precedent. Thank you for setting the precedent. Okay. You know, just because we allow Eric for 2 questions, I think we are going to allow everybody. You know? that is that is. Okay. Alright. On commercial, yeah, I mean, look. We do not get backlog for commercial. As you know, commercial is a more of a. Not short term necessarily, but it is a lot shorter cycle than R&DS. So, I mean, looking at backlog there, that makes. Obviously, we have performance obligations in some of the longer-term Longer term contracts that we have. On commercial execution, for example, commercial outsourcing, But, you know, we do the data contracts at PPP, you know, 1 year renewable, whatever we can type and so on. So we do not put that in backlog. You know, most of the business in our commercial business is not backlog. So we do not refer to that as backlog. No conversion, none of that. What we speak about is pipelines. I mean, you know, there are projects that are request for proposals. And our pipelines, as I mentioned, are record levels. And our win rates are also up, and the decision timelines are shortening, which these are the kind of the main demand indicators that we look at from a forward looking perspective. And we see those to be very strong I also mentioned from a market standpoint that approvals are up over 40%. Year over year. And, again, drug approvals typically are followed within 6 months to a year or thereabouts by product launches. And product launches are the bread and butter of what we do. This is where we are you know, spending a lot of time with our clients, you know, helping them you know, they. With their launch strategy, with their pricing, with their interactions with the channels, marketing to HCPs, We have promotional programs, multichannel marketing programs, with their interaction with payers, providers, country access, market access, all of those activities. That are on the bread and butter of our commercial business are really associated with launches. So the fact that we have product approvals that are up over 40% is a is a strong indicator of the overall market is strong. So that bodes well for our commercial business. Yeah. As I mentioned, the first quarter. The quarter is up very nicely. The organically doubled the rate that we had a year ago. The third quarter. I look at, you know, sequential. Yeah. Eespecially first quarter, to be honest, Third quarter is very volatile. So it was, like, up and down few points versus sequentially always if you go back many, many years. And that is just typical of the third quarter. Bear in mind, we have a very large business in Europe. Not that the Americans want any vacation in August but the Europeans do. For a long time, and it. Typically, it is it is just a slower thing. You know? In Europe that creates more volatility. But I would not read more into it. The business, again, is doing very well. You had a question again?

Michael J. Fedock: Yeah. Was about the Obviously, the change for you did not know the short answer is no. We are very comfortable with what we put into our backlog. And in fact, being on an as contracted base, we feel that is best in class practice. So no change there.

Ari Bousbib: Yeah. Only contracted for and, you know, bookings are bookings. Otherwise, we wait for contracts to be signed, and sometimes, you know, the time a customer awards Something to us that is in the RBS business, then, you know, it could take a month, 2 months, sometimes before the. You know, all the dots and Ts are crossed and so on and so forth, and the contract is actually signed and executed. And only at that time, do we put it through our backlog, and there is no. Nothing's changed on that. Thank you. Okay.

Analyst: Great. Thanks for the questions.

Operator: Your next question comes from the line of David Windley with Jefferies. Your line is open. Please go ahead.

David Windley: Good morning. Thanks for taking my question. Ari, I wanted to ask kind of an R&DS horizon question, if I could. It seems like you have been through. You, the industry, has been through a couple years worth, maybe 2 to 3-year or 2023 to 2025, heavy reprocurement cycle among your larger clients, and that brought on a lot of focus on FSPs. And then biotech funding was low, and so the absence of them with FSP you know, was also, painful. And as we are coming back out of that, biotech funding is helping them to come back with FSO and maybe between the reprocurement, the big pharmas are also, you know, doing some FSO. I wonder if you agree with that. If biotech has been kind of the leader out of that trough, is pharma starting to catch up And are you still seeing reprocurement activity go on? Is there still opportunity. Wallet share opportunity for you? And how is that playing out? Thanks. Apologize for the multiparter.

Ari Bousbib: Yeah. No. I mean, it is a great question, but, you know, yeah, I mean, look. The answer to your question are in your question. You know the industry You know, you are 1 of the best observers of the of the industry, so you hit all the correct points. I mean, look. We are just coming out of a 2- to 3-year period of multiple headwinds First, we had the post COVID bubble deceleration. Both at large pharma and at e v. In terms of the EVP funding. Second, we had the IRA, which introduced those concerns about drug price negotiations and so on and so forth, which kind of started slowing down large pharma for sure. And in terms of their discretionary spend, which we observed in our commercial business immediately, and then sort of pausing large capital investments and new programs. And then we had the Trump administration's bringing up drug prices again through the MFN, and we have the tariffs, then we have all of that drama All of that drama created huge uncertainty. That uncertainty caused large pharma to pause. Their decision making. We saw decision timelines extend dramatically Okay. I mean, by a 1. And so and that kind of. All of that caused significant demand constraints. Now during that time period, pharma took the opportunity to step back and re-up their strategic partnerships. To reoffer their strategic partnerships. That lasted a year, year and a half. Maybe, and literally every single pharma did that and it just all. It was over not too long ago. We feel very good about that process and what happened We came out ahead of where we were before. In terms of the scope the number of partnerships we are in, the scope of what those partnerships includes even within the large pharmas where we work. So you know, I said this before, and I will say it again, the largest. It has further segmented the CRO industry. Into essentially let's say, 3 groups. The largest ones, and then the small or medium ones, And then you have a long tail of little players that are not part of this conversation. But the largest ones actually emerged ahead We believe we emerged more ahead than the others. On the back, I believe, of our broad spectrum of capabilities, AI, etcetera, And that is been proving out in our win rates today. Second, the smaller tier of CRO suppliers, I think, lost out overall. And that is gonna become apparent you know, over the next 2, 3 years. Even if it is not today. But I know that it is going to be apparent. Because we know who is out. And they are all out, basically. And that is what has happened with large pharma. Now on the EBP side, much more funding. Again, 85% growth funding year to date year over year. 85% increase in funding. it is a wide number. Again, you know, before COVID, the annual funding, the EVP funding, and this is using consistently the same source and the same exact parameters, Before COVID, the annual funding was in the $50 billion range. For between 2015 and 2020. It is this year, year to date, 3 quarters, $90 billion. So it is almost double. What the annual rate was before COVID. This is funding an increasingly large number of opportunities. We think there are, you know, almost 17 thousand EBPs around the world. it is a vast market. it is a great market. it is a dynamic market. Certainly, as you said yourself in your question, EVP is growing at a much higher rate because of spending than pharma, large pharma. We believe the long term growth rate of R&D spending in large pharma is in the low single digits, maybe 2% to 3%. Underlying growth, long-term, EBP is more in the upper single digits. Right? So I am thinking 8, 9%. And that is clearly driving growth in our business. And as you know, we have multiple strategies to grow that part of the business. Including the expansion of our capabilities to early phase engagement. And we beefed up our capabilities there with a large number of ex FDA to engage with biotech much earlier at the regulatory stage We have acquired the discovery capabilities We have acquired phase 1 capabilities, and I could tell you we continue to aggressively in that field to increase our engagements with EBPs with a set of capabilities that are required to further penetrate that customer base. Thank you for your question. And the opportunity to lay out our view on what is going on in the industry. Thanks. Thanks.

Operator: Your next question comes from the line of Michael Cherny with Leerink Partners. Your line is open. Please go ahead.

Michael Cherny: Yeah. Go ahead. Maybe just a direct follow-up to David's question regarding the market construct in particular, the role of AI As you have developed your own AI capabilities, are you seeing the dynamics of contracting changes showing up, I. E, a push and pull relative to how your pharma sponsors want to charge for your work that encompasses AI, Are there any thoughts about value based contracting and savings over time? What do you think the role is beyond just differentiating on winning share, AI will play in the way that you can essentially manage and contract at certain profit levels going forward. Thank you.

Ari Bousbib: Thank you. Well, look, Okay. This is a big question. On the commercial side, AI is essentially incremental revenue opportunity. Okay. We are providing our clients with new ways of doing business that enable them to automate and reduce the amount of labor that they themselves use. In their operations to conduct business. So it is a great opportunity for our clients to improve their productivity and improve their profit contributions, And for us, we are essentially providing additional services and subscriptions to our agents or licenses. So that is on the commercial side. On the. And this obviously, you should be at know, good margins. On the R&D side, I would differentiate between large pharma and EBP. EBP, as you know, is fully outsourced. And you know, it requires a lot more hand holding from the beginning. So the relationship is different. We will be using AI here to optimize timelines, to speed up processes, to ensure that clients get to market. The product gets to market a lot faster and to patients a lot faster. Know, I mentioned an example with a large pharma where we are gonna cut 9 months out of the trial. 9 months is huge in this business. Joe, you could just take a look at what 1 month of sales at a very, very high margin represent for a pharma company. And so 9 months is huge. In comparison, the cost of the clinical trial is nothing. Now that does not mean that our pharma client is not negotiating a contract. But large pharma essentially has negotiated in the process I described earlier of reviewing and renewing partnerships, the rates. Okay? So that is essentially done. Now, obviously, when we compete for a specific trial, so there always are negotiations at the end with procurement and so on and so forth. That AI play a role? No. AI is essentially a enabler of faster timelines, more accuracy, better visibility and transparency, in the process of conducting the trial. And we believe that this is what the conversation around AI are. Is it going to have an impact on our productivity for us in turn? Yes. We mentioned that. We are deploying agents at our clients' operations, and we are also deploying agents in our operations. there is no question about it. From finance to HR to a variety of other overhead activities. And automated tasks that we used to standardize and perform in offshore centers, a lot of them, you know, whether it is software development, whether it is software testing, all of that Yes. So over time, that will certainly help with our own margin expansion plans. And productivity programs. Thank you.

Kerri Joseph: Thank you, Ms. Joseph, I turn the call back over to you. Thank you, operator. You, everyone, for taking the time to join us today. We look forward to speaking with you again on our fourth quarter 2026 earnings call. Team will be available for the rest of the day to take any follow-up questions you might have. Thank you, and have a good day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.