IQVIA Holdings Inc. (IQV) Earnings Call Transcript & Summary

[Audio Gap] thinking about both the R&DS piece and the TAS piece and then we can kind of dive in from there.

Sure. Well, you know that the TAS business went through a period of softening revenue last year. And Q4, I think, was our softest quarter of all. What we're looking for in the TAS business as we go into 2024 -- through 2024, it's kind of almost a mirror image in terms of growth from what we saw in 2023, which is to say 2023 started out strong and the growth rate trailed off as we saw pharma clients cut back on discretionary spending. We see demand coming back, but gradually towards the back half of the year. So you had the downward trend last year in growth, and we expect the revenue to bounce back growth as we go through the year. And you might ask what gives us confidence in that and really -- and we get that question frequently, it's hard to call a short-cycle business. On the other hand, we know that there were 55 new molecules approved last year and typically promotional spending associated with a new molecule, 50% of that will happen in the first 2 years. So there's work that just has to get done in terms of market access and pricing and segmentation targeting and so forth, even if it can be delayed some, certainly. And the tone with our customers looks -- sounds better, too. We even saw in Q4 a little bit where the analytics and consulting business, which is actually the most discretionary part of TAS, which had actually declined year-over-year in Q3 showed a small amount of growth in Q4. Real-world evidence lagging some behind there because it's a longer-cycle business. Now in the R&DS business looking out to 2024, we feel very comfortable. You saw we've had strong bookings continually for the last few years. Our backlog is in very good shape. We actually even had record bookings or second record. It was -- fourth quarter of 2022 was a little bit stronger, but very strong bookings. And we would expect R&DS to be a fairly steady growth rate as we go through the year. The only caveat I would say on that is we're still burning down COVID-related revenues. We expect the overall for the corporation to decline by about $300 million year-over-year. And most of that is in the R&DS segment. There's a little bit in Q1 in TAS because we still had some work last year Q1. But overall, we expect R&DS growth to be very solid as we go through the year and be fairly consistent. So none of the quarterly fluctuations that we expect to see in the TAS business.

Yes, maybe we can start on the TAS piece. You touched on analytics and consulting a little bit there. Obviously, you have the real world piece as well, maybe just talk about the different segments of TAS and what you're seeing in each and the expectation. Because, you're right, it's certainly a question we get a lot as well is just the visibility into that recovery, so, yes, maybe we can start just parse it out.

TAS is a more complicated business. A lot of it is the legacy IMS Health business. And depending upon how you look at it, it's 3 or 4 major parts. The -- about 1/3 of the business, give or take, is our information business, our data business, it's a core business. It tends to be high margin, good cash flow, strong backlog going in any given year, but not high growth. It's a low growth, typically low single-digit kind of grower. The -- that's about 1/3 of the business. You have the analytics and consulting, which call it, give or take, is 20% to 1/4 of the business depending upon the particular year. It's the shorter cycle business, tends to be pretty good margin business, but also is more discretionary in nature. So there are elements of that, that are certainly deferrable or cancelable by the client. And then the balance of the business, which represents a little bit less than 50%, is a combination of the real-world business and the tech business. And it's probably like 2/3 real world, 1/3 tech. And we expect -- going back to analysts and consulting, we expect that to come back as we go through the year, the growth rates. Real-world evidence is going to lag a little bit. What we saw was the bookings activity softened as we went through last year. And it's a little longer cycle, takes a little longer to burn. And therefore, we're going to see more persistent, slow, flattish, call it, kind of flattish sort of business into this year. And it will come back. We're seeing the bookings start to improve there, but it takes a while for that to flow through in revenues. And the technology business is fairly steady there. So you add it all up. We do expect the TAS business to improve as we go through the year as some of the more discretionary parts of the business begin to come back. And in real world, a lot of times you think of that as being Phase IV sort of trials that are -- some of which are required under regulation. But over half of that business is discretionary in nature. Our pharma clients use it to help them prove the efficacy of the drugs in real-world use, help them in terms of marketing and getting on to formulary and so forth. So there's definitely order to use a drug for additional indications or whatever. And there's definitely a discretionary component to that, that slows down when spending slows down in the industry, as we've seen recently.

Okay. Yes. And, I guess, in terms of kind of the recovery, you mentioned the visibility is not quite obviously the R&DS is a different level of visibility given the backlog there. But when you look back to last year, you guys thought there was going to be a little maybe more of an improvement than we actually saw. So, I guess, how do you think about the visibility today versus what we saw last year? And what are the signs you're looking for in terms of particularly the analytics and consulting piece for that to start to pick up?

Well, yes, we did expect it to come back sooner last year, and there's typically a cycle in this business where when it turns down, it could be a short of 6 months or it could be as long as 18 months for it to start coming back. We expected it to come back sooner than it did, based on drug approvals and the size of pipeline that we saw out there. But we saw continued reluctance on the part of our clients to spend. It started to loosen up in Q4. So some of that loosening is the reason that we're encouraged. Discussions we're having with customers are reasons that we're encouraged. The number of new drugs coming to market is another reason because, ultimately, they have to be supported. And just looking at historical trends, you tend to find that these things don't last forever. There's pent-up demand and, eventually, it opens back up. So there's a bit of art in predicting when the market is going to come back, but you have to piece all of those elements together. And looking at that, we're saying -- being cautious in saying it's probably not a first half phenomenon, but we do expect it in the second half.

Yes. And then maybe just quickly on the margin profile inside TAS. You mentioned analytics and consulting tends to be higher margin. Can you just talk about the margin profile there? And again, I guess the impact as that recovery plays out.

Well, it should help. And overall, as TAS recovers, it should help some on margins because TAS and general tends to be a higher-margin business than R&DS, not terribly so, but somewhat higher margin. You have to be a little bit careful about driving margin expansion, overall, in the company to any one factor because there are a lot of things that can underlie that. The pace at which we roll in cost reductions, even foreign currency translation, for instance, because foreign currency tends to impact our top line to a much greater degree than the bottom line. So you can have fluctuations in margin just based on foreign currency, in addition to the sales mix, items we talked about. We right now, are targeting in our guidance at the midpoint, I think it's about 40 basis points of margin expansion year-over-year with the range from 20 to 50 basis points. So that's what we expect, somewhere in that range for the full year we'll have some continued margin expansion. And that's on top of, I believe it was 60 basis points last year. So good momentum there. And when we talk about our medium-term guide, we typically aren't forecasting quite that much margin expansion, 20 to 30 basis points in a normal year would be more like it. But we're not far from that range this year, and we have pretty good visibility into it, given what's going on and what we expect to go on in the mix of businesses that we have.

Yes. And, I guess, when you think about the margin cadence this year, since you touched on it there, I think 1Q is more flat, even slightly down, and then it picks up. What are the dynamics there? Is it -- because COVID should be more in 1Q, right? Which is...

Yes, the COVID impact has gradually declined through the year, but it's more in Q1. There are a couple of things there. One, you just have the volume leverage. As you go through the year and volumes pick up, that helps because SG&A doesn't stay, doesn't rise in concert with volume. We also have the TAS business gradually coming back, which should be helpful. And then lastly, we continue to be pretty aggressive around cost reduction actions. And as those -- we get the full impact of those as we go through the year, that should help as well. So I would attribute the improvement as we go through the year to those 3 factors.

Sure. Yes. No, that's fair. And then maybe we can flip to R&DS coming off, I think it was [ 13, 131 ] on the book-to-bill side in 4Q. Maybe just talk about the backdrop. I'm sure we can get into things like biotech and mid, large pharma, but just what you're seeing broadly on the order trends and how you're feeling about kind of the 1Q going forward.

We feel broadly very good about the industry. We just haven't seen any decline in spending and demand on the clinical trial side. We had a very strong Q4. I think our book-to-bill for all last year was [ 1.28 ] our backlog is at record levels. It's up 9% year-over-year. And of course, we're always on the lookout for what's coming down the road. And if you looked at our RFP flow, was double digit in the fourth quarter, and it was strong in both the large pharma and EDP segment. Our pipeline, our qualified pipeline was up high teens at the end of the year. So that's looking a little bit further back. EVP funding, and EVP is a big growth area for us and others. It has been strong. It was up double-digit year-over-year. And I know there's been a lot of concern around the EVP funding because a lot of people were comparing to the 2021 years, which were big outsized years in terms of funding, probably where more funding got done than was really justified by the science. But if you were to exclude those years and just look at pre-COVID and beyond, we've seen very nice, steady growth there. And we're seeing it in our RFP flow and we're seeing and what's happening in the pipeline that at least the EVP clients that we engage with are well funded and continuing to do work.

Yes. Maybe we can touch on EVP. Obviously, there's been a lot of deals even in the past couple of weeks in terms of fundraising on the biotech side. Maybe just to remind people, I think it's about 15% of R&DS, but what the exposure is on EVP and just what those trends look like? And again, how quickly something like what's happening now with the capital markets window seemingly open, how quickly that can kind of see that improvement for you guys?

Well, we have about -- actually, it's low 20% of our revenue is EVP related. And we tend to, over time, see stronger growth out of EVP than out of large pharma, so that is growing as a percentage of our total business. Now we're still 60% large pharma, 60-plus percent large pharma in terms of revenue, and then you have mid and EVP. But we're feeling broadly good about what's going on in that sector -- in the EVP sector and just don't see let up there. Our clients in EVP tend to be a little bit later stage than some others. And they are, for the most part, well funded, we -- I'd say if you look at our backlog, about 10% of our backlog is in pre-commercial that is pre-revenue EVP clients. So the exposure there isn't great. And we do a pretty careful job even screening those to make sure when we take an order, first off, that we're getting paid well upfront, so we don't have an exposure there. And secondarily, the clients we have are in a position to get good funding. I mean, yes, like any business, you're going to lose some clients because they don't get funding or the science doesn't work out. But on the whole, we think we have a pretty good base of clients.

Yes. Okay. And maybe just in terms of kind of the mix of different studies in terms of therapeutic types. I know there's been some shift, obviously, COVID was one. But even things like oncology, how do you think about the mix today and what that means for some of the conversion burn rate? I know some studies are a little slower than others. So maybe just talk about...

Well, that's important, too, because we've -- what we're seeing is we do a lot of work in oncology and rare diseases, neurology. There's -- I mean, there's immunology, certainly, but, in general, the studies that we're now contracting tend to be fairly slow burn, 4- to 6-year sort of study. So they're complicated trials. One of the reasons we do well there is because we have the ability to find the patients, which is more difficult in those kinds of trials than it is in primary care studies like cardiology or whatever. And so yes, we're -- our bookings are very strong there, but I wouldn't look at the EVP bookings and say, "Oh, wow, that has an outsized impact on 2024 or what we did in 2023". It's going to take 2 to 3 years to get the full momentum of that into our revenue growth.

Okay. And then another thing that comes up a lot with you guys and other large CROs, just this FSP shift. Maybe talk a little bit about what that makes up currently for you guys and what you're seeing there? I know it's always a question about margins, which we can get to. But just generally, with FSP, maybe let folks know where you are.

Yes. Well, FSP work right now makes up about 15% of the R&DS segment's overall revenues, that is including pass-through revenues. If you were to exclude pass-through revenues and just look at service revenue, it's about 20% or so. And it's true that FSP has been growing in importance. There has been over the past number of years here, a shift among large pharma clients to do more work on it. FSP basis rather than a full-service basis, although, to be honest, what you end up getting a lot of times is hybrid trials. So they'll come to us and say, well, we want to do FSP work, but we want -- you also need to do x, y and z on top of it that's leaning more towards a full service area. So you get a fair amount of hybrid work as well. Now I would caveat that by saying that it's really large pharma into a lesser extent, some mid pharmas that do the FSP work. EVP, almost by definition, is full service because, the EVP companies don't have the capabilities to run their own trial. And that's where you're getting growth rates in the industry that are double what they are for large pharma. So on the one hand, you have large pharma gradually shifting towards more FSP, and on the other hand, you have EVP taking a larger share of the market and growing faster. So that's somewhat of an offset there. I would also say that, even for clients that are -- you would think typically FSP clients, if they get into a trial where they feel they don't have the expertise or they don't have the marginal just the level of capabilities to do it. They'll still come to us. We've had clients that are largely FSP clients who come to us and give us full service trials. And that's one of the reasons. If you go back to 2015, right before we did the merger. Quintiles had largely turned away from FSP work because it wanted to focus on the higher-margin full-service work. And when we came in, we -- as IMS and Quintiles merged and already took over. He looked at it and said, "No, we want to participate in the whole market." And it's more than just the revenue potential for FSP. It's also that, for certain clients, you've got to play FSP to be in the full service. They might have 60% or 75% FSP, 25% to 40% full service. But to get the full service work, you have to be willing to do the FSP work, too. So we think that was obviously the right move over time to chase that work. And we can talk about the margins, but from a revenue standpoint and booking standpoint, we need to be there.

Yes. Yes. And, I guess, you kind of mentioned the margins is always a question just in terms of that shift, FSP being a little lower margin. I guess, how do you think about, I guess, the pace of that shift in terms of you mentioned the 15% and 20% pass-throughs. I guess, how quickly would FSP move up and what does that mean for the margins?

Well, look, let's talk about the margins, first off. If you look at margins on a service basis, that is you excluded all of the pass-through revenues from full service, you would find that there's a pretty big difference. I mean you can easily be 10 basis points difference in gross margin that is full service being higher, of course, than FSP. If you factor in the pass-through revenues and you look at margin as a percentage of total revenues, it narrows down to maybe 200 or 300 basis points difference. It isn't a huge difference. But there is still some difference in it and over time, all else being equal, that will put some pressure on your margins. Now it's incumbent upon us to find ways to do things more efficiently, to grow our lab business, to do -- grow the tech business, clinical tech business and all the things that can provide offsets for that. So like when we're -- and it's a very gradual shift, overall. So when we're putting together the, for instance, the 2024 plan for R&DS, yes, if you were to do a margin walk, you could see something for the increased contribution of FSP, but there are lots of puts and takes that go into that. So it isn't like it's driving a big margin degradation. It's just one more factor, environmental factor that we have to deal with.

Okay. Understood. And then another one on the pricing side. I guess, what are you guys seeing in terms of the environment out there currently on R&DS in terms of pricing? Are you seeing any additional kind of competitive pressures on that front on the pricing environment?

Well, it's interesting. If you go back to our -- the original thesis for the merger, which was to use our data to help inform clinical trials, run trials more quickly. It's definitely given us an advantage, it's helped us in the market share area. We were expecting we might get some price out of it, too. That's been tough to -- it's been tough to get. What we're getting is more volume at more or less the same prices, I would say. So we're not getting a big pricing advantage there. That being said, have we seen a lot of pricing pressure in the full service area? No, I don't think it's an unusual amount of pricing pressure. A little bit more pricing pressure, I think, on FSP. And some of that, I just attribute to, there are clients -- excuse me, competitors out there who have struggled some to get bookings and are really keen to get bookings and are pricing tightly. So yes, there's been a little bit more pressure, I think, on the FSP area, not so much on the full service area. We track those margins pretty carefully. The book margins, they've held up. And in fact, we always -- we do book margins and then we do realized margins. And our realized margins always end up being a few hundred basis points better than our book margins because you find a way to do the trial more efficient, you have change orders. You have all those sorts of things. So yes, a little bit of pricing pressure, but it's on this 15% to 20% of our business. Not so much on the entire business. I think it's just -- pricing is always an issue, but it hasn't changed dramatically from what it was before.

Yes. And maybe on that point, just in terms of pricing and how you think about the contracts. You mentioned change orders. How do you think about just generally how these are structured? I know no 2 contracts are the same, I'm sure. But is the view that when things like COVID happened and you have this massive inflation on the wage side, you guys are able to pass that through somewhat quickly? Or is it you raise it in the backlog and it takes a couple of years to play through. How do you just think about the contract...

Yes, it's more in the backlog. The issue -- in the TAS business, you can pretty much pass it on very quickly because it's a short-cycle business. In the R&DS business, you're locked into contracts. And the way our contracts would typically work, it will have annual inflation escalators, mostly for labor. And they'll be tied to an index. But the index, it isn't something where you're going to get a different escalator every year. You sign a contract in 2019, and you'll have annual inflation tied to whatever the inflation was in 2019. That's the way most of the contracts work because our pharma customers on the whole, like the certainty of knowing what the price increases are going to be. So you kind of -- you get stuck with a backlog that's got some old pricing in it, and that's something we've had to deal with. On the other hand, as soon as you had the labor pressure and the inflation, particularly the inflation we saw in CRAs and project leads and people like that, we are able to change our rate cards and start working that into the new contracts we're booking. So as we get further and further away from the COVID labor shortage peak, our pricing adjusts more and more towards where we want it to be. And in fact, you could, over time, get some benefit because the same thing that hurts you when you lock in at low inflation rates, pre-COVID, could help you going forward as wage inflation comes down and you have cards that were based on higher rates of inflation. And we've seen that in the past. So it tends to equalize over time. But in any given year, you can have either a benefit or a detriment because of the way the contracts are structured. And recently, it's been a detriment because of COVID. But in the past, it's been a benefit. And I would imagine there will be a modest benefit again in the future.

Okay. That's helpful. Obviously, we talked about the biotech piece, but maybe on the mid and large pharma, we're getting a lot of questions on that even into year-end and coming into this year. Everything from IRA, to some other pharma companies talk about maybe in-sourcing. I guess, what are you hearing just broadly on that to your point, has been seemingly pretty stable and healthy for you guys. But what do you -- how are you thinking about that mid and large pharma piece of the pie?

In terms of how they're going to be investing for the future, given IRA? Well, we haven't seen -- we've heard individual -- a lot of anecdotes of individual customers looking at their portfolio and trying to understand how they can rearrange it, to optimize, given what they expect out of IRA, but IRA is kind of an unknown right now, really how it's going to affect. There are multiple components to it. It's very complicated and we're even helping our customers work through some of those dynamics. And we haven't seen a big impact on investment yet. Like I say, anecdotally, you can look at a given client, say, yes, there may be some impact there. But overall, the funding levels and the amount of money spent on R&DS has continued to grow. So not saying it couldn't happen, but we haven't really seen it yet. It's been slow to work its way into the system. And we're mindful of that, of course, and we're -- we'll deal with whatever the environment is. The other thing you've got to remember, too, is that you have a potential for change in the presidency or Congress, things could change in the IRA going forward. We just don't know. There are a lot of unknowns about how it's going to play out.

Yes. And maybe broadly, mid and large pharma, just the tone from that customer base. Again, there were some pretty big headline R&D cuts from some COVID beneficiaries that seem pretty isolated. But how do you think about just that customer base, how they're thinking about the spend going forward here?

Well, we expect it to continue growing, but at a slower rate than EVP, probably half the rate. And that -- but our view on that really hasn't changed that much. And look, on the one hand, you'll see cuts because companies are suffering from the COVID hangover, the COVID cliff, if you will. On the other hand, you see this explosion in, now, diabetes drugs and weight loss drugs and so forth that are providing a lot of tailwind to some of our clients, too, the Novos and Lilies and the number -- or a number of biotechs are getting in the game now, too. So there are pieces moving in both directions.

Yes. Okay. And obviously, again, we talked about the FSP. Can you talk a little bit about the move, how you think about decentralized trials as well? There seems to be a little bit of a shift there. Just in terms of your guys' capabilities, how do you think about the market on that one?

Sure. Well, look, decentralized trials have gotten a lot of attention, probably less recently because people realize it's a gradual shift and not a step change. The whole idea behind decentralized trials -- the real driving force, I think, was to make trials easier on participants in the trials because the average person has to try about 60 to 80 miles to participate in the clinical trial. A lot of people are in rural settings and investigators aren't necessarily your local primary care physician, your investigators can be quite a ways away. So we're doing things. We're actively involved in various means of helping more work happen on a decentralized basis that is away from the clinical trial sites. It could be sending nurses to patients' homes, having the patients wear devices that can transmit data back. We do risk-based monitoring now where you'll -- for instance, instead of sending CRAs to the sites on a really rigid schedule, you'll be sending CRAs more sporadically to the investigator sites based on data that's popping out of the trials where you're monitoring the data, and this is kind of the opposite of decentralization, you're monitoring the data centrally and you're looking for where there are anomalies and you're sending CRAs to the places where there are anomalies. So you have less travel time, less CRA involvement and so forth. If you -- almost all trials now have some element of decentralization in them. And I'd say it's probably about 80% if you include risk-based monitoring. And if you exclude that, it's over 50% that have an element like wearables or nurses that visit patients and things of that nature. It's been a gradual shift. It hasn't been what people originally envisioned it to be, which is you see a dramatic step change in how trials are run. It's just something that makes it easier to recruit patients and, in the long run, that's a good thing, particularly when you start getting into diseases where it's harder to find patients.

Are there any big margin differential in terms of decentralized trials versus...

No, no. Really not. Because you're charging for your decentralization services, it's very similar.

Okay. Yes. And maybe just -- I know we chat a little bit about margins with the TAS piece. But just broadly for this year, you talked about kind of 40-ish bps or so this year. Can you just talk about the key levers? I mean, it feels like age inflation is stable, I would say. We talked a little bit about pricing. Is TAS recovery kind of the big driver? Maybe just talk about the...

Yes, that would certainly be a driver. Cost reduction efforts, which are ongoing. The TAS recovery is certainly part of that. Those would be the biggest things. It's tough to get margin expansion. We don't have volume expansion and volumes coming back. We see that as being a good thing. So Yes, modest margin expansion this year. We're comfortable with that, and those would be the biggest drivers.

Yes. And that's the right way to think about it. I think you touched on kind of modest -- the out years as well.

Yes. And I think you got to be careful not -- we want to be careful not to put -- over rotate on the issue of margin expansion. Because I've seen it before in my career, you start focusing on maximizing a ratio, maximizing dollars and you make poor choices. An example would be FSP. You want to take -- we want to take more FSP work. It isn't as profitable, but it is profitable. Now it can hurt your overall margin, but who cares, I'm worried about growing the top line and the bottom line in dollar terms and the margins are going to fall out where they may. Now we monitor margins because they're an indicator of how efficient we'll be. And we always want to kind of get a little bit of boost there. But it's not the be all and end all.

Yes. And I want to spend some time on the balance sheet. You guys -- maybe we can start with the Refi, which was nice to see kind of late last year. Cleaned up some of the debt. Maybe just talk a little bit about that. That was a nice impact on interest expense. I think it was a worry that was going to jump again this year. It's clearly not. But yes, maybe just talk a little on the Refi and the interest expense in that.

Yes. We -- look, we refi-ed last year about $2.75 billion of debt. It had two benefits to it. One, it took some near-term maturities off the table. All of 2024 maturities and most of the 2025 maturities. And know they were wearing some investors. It also because we swapped a large chunk of this back to euros, we were able to get an interest rate that was very favorable on this debt. And we -- in the process, we're also able to get our percentage of debt that was fixed rate up over 80%. And so I think we accomplished a number of things with that. Where we were looking at interest expense growing year-over-year if we did nothing, now we see it flat to maybe slightly up. And it depends kind of on how quickly we -- Fed cuts rates. But what we do is we don't try to forecast that. We just bake in whatever the market consensus is on rate cuts. And take it from there. So yes, we feel good about that. And, look, if rates decline and we look out through additional maturities, we may have opportunity to do some more refinancing that's beneficial to us. We're always looking at that. But right now, our leverage ratio is -- well, was at the end of the year? 3.4x, it's very comfortable for us. And interest expense is stabilizing. And if rates come down over time, we should get some benefit there.

Yes. Yes. And you've touched on the leverage ratio 3.5, 4. Clearly, I know Ari is very comfortable, he even said some people ask them to go higher. But how do you think about just the priorities with being comfortable on the leverage that you guys have bought back some stock recently. There's always a deal appetite. If you can just talk about the priorities there and then we get into the M&A pipeline a little bit.

Well, yes, like on the share repurchase side, we repurchased, I think, very opportunistically in Q4. It was over $200 million at an average price of about $1.95 which looks pretty good right now. Our focus is kind of turning to M&A. And M&A is always hard to predict because you've got to be disciplined. You can't do deals for the sake of doing deals. But we have a pretty healthy pipeline out there, and we have, particularly in the TAS area, areas that we'd like to grow more in. You have, for instance, medical and scientific affairs area, you have digital marketing, you have patient support services, things where we think there's really good growth and maybe we aren't as heavily invested as we could be. So that would be number one. Of course, the shares are weak at any point in time. We'll always be opportunistic about share repurchase. And then we'll see how much cash we have left over. I'm not averse to reducing debt. If we end up with excess cash, I don't want it to just be sitting around doing nothing. On the other hand, that isn't a big priority for us. I mean our leverage ratio should naturally decline over time as our earnings grow, and we're comfortable with our ability to service debt. So -- and another thing I'd say about the M&A is what we found is the companies we bought typically have higher organic growth rates than even our base business. So they enhance our overall organic growth. Now, obviously, in year 1, will back out whatever revenue contribution they make and we'll give you organic versus reported revenue. But going forward from year 1 onward, these have been contributing to organic growth rates. So we're investing in areas that have relatively high growth potential for us. And it's -- I think it's paid off well. We track very carefully how we do on our acquisition service business case. And as a CFO, I'm very attuned to that. On the whole, we've done pretty well with that.

Yes. So maybe it sounds like maybe a little preference for TAS in the near term. How do you think about the size in terms of -- pretty comfortable leverage ratio, bolt ons?

I would say generally bolt-ons. You find that when you start getting up into the larger stuff, a lot of times you're running into PE competition and the price goes up. And the bolt-ons seem to be the best for us. It's not to say we wouldn't do a larger deal if the right thing came along. But for the most part, you're looking at bolt-on sort of deals that individually, none of them are going to say, wow, that's a huge deal.

Yes. And maybe last one, just in terms of thinking about the consolidation piece. Just on the market share front, how are you thinking about your guys' position there? Have you seen share shift towards yourself and the larger players, maybe just quickly.

I would say, certainly, in the R&DS side, we and the larger players took share from the smaller players and we're taking share from some of the larger players right now. So, overall, there's definitely been a shift there. On the TAS side, it's kind of market to market. And there are a zillion competitors out there in the TAS side in various portions of your business. But it's harder to make blanket statements about TAS, but we're comfortable with our market position there.

Okay. I think we're up on time, Ron, thanks.

Okay. Great. Thanks, Patrick.

Yes.