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

Good morning, everyone. Thank you for joining our second quarter 2026 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Mike Fedock, Executive Vice President and Chief Financial Officer. Eric Sherbet, Executive Vice President and General Counsel; Cirsa Willett, Senior Vice President, Financial Planning and Analysis; and Katie Ward, Vice President, Investor Relations. Today, we'll be repeating a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following the Events and Presentations section of our IQVIA via Investor Relations website at ir.iqvia.com. Before we begin, I would like to caution listeners to have certain information discussed by management during this conference following 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 the comparable GAAP measures is included in the press release and conference call presentation. As previously disclosed, we implemented a new sector boarding structure effective January 1, 2026. In conjunction with this change, prior period segment 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.

Thank you, Gary, and good morning, everyone. Thank you for joining us today to discuss our second quarter results. IQVIA delivered an outstanding second quarter with revenue, adjusted EBITDA and adjusted diluted earnings per share or exceeding the high end of our guidance. Importantly, the momentum we saw in the first quarter continue with improving market conditions and strong operational execution. Organic growth for the company as a whole accelerated to 6% year-over-year, which is 3x the rate we delivered a year ago. Adjusted EBITDA margin began improving earlier than we had anticipated due to better operational performance. Let's look at the results for the quarter. Total revenue for the second quarter exceeded the high end of our guidance range, representing year-over-year growth of 8.7% on a reported basis, with FX much less of a tailwind than we had anticipated. At constant currency growth was very strong at 8.5%. Second quarter adjusted EBITDA was above the high end of our guidance as well represent a year-over-year growth of 9.2%. Second quarter adjusted diluted EPS of $3.15 also exceeded the high end of our guidance range and increased 12.1% year-over-year. The beat was driven entirely by strong operational performance. Let's discuss the results by segment. On the clinical side, R&D has delivered great results with revenue growth of nearly 9% and organically 7%. We had $3.15 billion in net new bookings, representing 19% growth year-over-year, and 27% growth sequentially with notable strength in full-service bookings, translating into a quarterly book-to-bill ratio of 1.2. If I may add, this 1.22 was in a quarter where our revenue was up almost 9% year-over-year, stronger than anticipated. I want to point out that the improvement in bookings is not just from this quarter alone. As you know, I always remind you that we are a long-cycle business and it's more meaningful to look at trends over longer time periods. And if you look at our last 12 months net new bookings, they have increased in each of the past 4 quarters with $11.3 billion of last 12-month net new bookings as of June 30, they are up 13% year-over-year. What this metric points to is a consistently improving demand environment as well as improving win rates for our R&D as business. On the commercial side, organic revenue growth accelerated year-over-year to 5%, which is more than a 4 point higher organic growth than a year ago. And these as clients launched newly approved products and expanded the breadth of services they utilize from IQVIA, Notably, Analytics and consulting grew organically high single digits year-over-year, the highest growth rate since 2022. Commercial engagement services and patient solutions, both continued to grow double digits year-over-year, and our AI offerings gained further traction with increased customer adoption. With 3 consecutive quarters of strong sustained and improving results and pipelines that remain at record levels, there is clear momentum in commercial solutions. Let me now give you a little more color on what we are seeing in the market environment and let's start with forward-looking demand metrics in the clinical environment. RSP flow growth remains strong with double-digit growth both year-over-year and sequential with improvements across all client segments. Decision timelines continue to shorten and EBP funding continues to be very strong with the second quarter at $35 billion according to BioWorld, which is more than double the Q2 2025 number. I want to elaborate on this EBP segment. In response to investor feedback and reviewing publicly available information, we are taking the opportunity to update our own classification of customer segments to help you better benchmark IQVIA to our CRO peers. From now on, we are going to define large pharma by the top 20 companies by Rx sales, midsized companies will be the next 60 pharma companies by Rx sales and EBPs, everyone else. I want to give you the breakdown of R&DS revenue by customer segments, as I just defined them. Large pharma represents approximately 50% of our R&DS revenue, midsize approximately 15%, 1-5 of our R&DS revenue. And EBP represents 35% of our R&DS revenue. I guess you can see that based on publicly available information, it is apparent that we have more revenue in the EBP segment than any of our CRO peers. And this is extremely important because emerging biopharma continues to be where much of the industry's innovation is coming from. A decade ago, EBPs represented about 45% of all clinical trial starts globally. Today, EBP represent about 70% of all clinical trial starts globally. EBP R&D spend is also expected to grow at 2x to 3x the rate of large pharma R&D spend. And of course, EBP trials are full-service outsourcing. All of this creates a meaningful opportunity for IQVIA given we are the largest EBP provider. At the same time, Large pharma continues to be a significant segment for us. In fact, we are benefiting from the strategic outsourcing partnership renewals by large pharma over the past 2 years, which we've been discussing several times in the past. And we, as you know, have significantly expanded the number and the scope of our preferred partnerships. As a result, we have seen our win rate with large pharma improve materially, leading to an expansion of our share of wallet with those partnerships. And in several cases, replacing large CRO incumbent providers. Shifting now to Commercial Solutions. The market environment continues to improve, supported by nearly 45% increase in new drug launches in the first half of 2026 versus the first half of 2025. As you know, this is important because the launch activity is a significant driver of demand across our commercial portfolio with roughly half of launch-related spending typically occurring in the first 2 years post approval. Addition, as we shared before, there is an increasing trend from our large pharma customers seeking to outsource the full commercialization of certain therapies in select geographies. And given our global footprint and spectrum of capabilities across information, insights and engagement -- we have been winning a fair share of these opportunities. I want to take a moment to again remind you how to think about our Commercial Solutions business, especially in the era of AI. We help our clients in 3 main areas: one, in the standard market; two, plan their commercial strategies; and three, engage with their own customers. So one, we have our clients understand the landscape, primarily through our information ordering. Our information business represents about 30% of our Commercial Solutions segment and revenue typically grows at low single digits. Two, we help our customers plan their commercial strategies, primarily through insights from our analytics and consulting business. This business represents about 20% of our Commercial Solutions business, and it goes mid- to high single digits. And three, we help our customers engage with their own customers that is health care providers, distribution channels, patients and paints. And we do this through our patient solutions, technology and commercial engagement services. That, in aggregate, is about 50% of our Commercial Solutions business and growth at high single digit to low double digits. Now we'll continue to see increased demand for these services across the board, that is evident in our own commercial demand indicates. The pipeline continues to grow strong double digits year-to-date. Decision timelines continue to reduce double digits. And of course, we are also winning more with win rates up double digits. When we think about future trends across both of our segments, clinical and commercial, we see the outsourcing market continuing to grow in 2027 and the years ahead. And inside we think AI will continue to contribute to this market expansion, and we'll continue to see a strong tailwind for IQVIA. On the clinical side, clients are already telling us that AI in discovery will only increase demand for CRO services as more molecules with a higher predictable success are entering developments. Additionally, IQVIA's leading AI solutions are further differentiating our clinical offerings and deepening our partnerships across all customer segments, large needs and EBP. Our AI-enabled capabilities, which, as you know, we've been working on training on and refining for at least 2 years are already improving study design accelerating timelines and reducing our operational risk across complex global trials. Let me give you an example of how this is playing out with large pharma. One of our long-standing customers recently expanded its partnership with IQVIA to include our full-service clinical capabilities. That expansion led to an end-to-end award for large complex Phase III stroke outcomes stunning. These clients specifically told us that our AI-enabled capabilities in site start-up and enrollment along with our therapeutic expertise and global execution model cleans the deal because it will help manage risk and around these studies with greater predictability. In another example, an EBP awarded IQVIA a complex global Phase III oncology study across multiple treatment arms. And we won here because AI-enabled patient recruitment will help keep a complex study moving at higher speed with much better predictability. Another EBP selected IQVIA for a series of global autoimmune programs that bring together clinical, laboratory and technology-enabled patient and home solutions. Here, our AI enabled patient reported outcome capabilities made the difference because they have support patient retention, protocol compliance and higher-quality outcomes. In commercial, we are seeing AI begin to contribute more directly to top line growth as clients are moving beyond pilots and data foundation work and they're starting to deploy IQVIA AI agents more broadly. Let me give you an example of what that looks like in practice. The midsize pharma client is expanding its use of IQVIA AI across an immunology franchise in 95 contents. We are combining our global syndicate pharmaceutical market data with our launch planning conversational AI agents to give the client an integrated view of market dynamics and help teams get to actionable insights in near real time. Again, the benefit here is speed, precision and accuracy. Another example in commercial. We are working with a top 5 large pharma to deliver a complete AI-enabled enterprise analytics solution that seamlessly brings together data technology and advisory support. This will deliver customized workflows that accelerate decision-making and improved quality and accuracy. Beyond this broad and deep relationships with our customers, governments and regulatory authorities around the world look to IQVIA for trusted health care expertise and insights. Recently, IQVIA was the only CRO invited to provide our perspective on clinical trial innovation as a clinical trial round table with the U.S. Department of Health and Human Services as part of their trial blazer initiative. We will subsequently invited to testify at a hearing of the House Energy and Commerce Subcommittee on Health, regarding the FDA's role increasing a more efficient and accelerated path for early clinical development in the United States. We were the only CRO and also, by the way, the only representative from the biopharma industry to testify it. We are proud of the surest policymakers place in our leading expertise as they consider reforms to accelerate development timelines, modernize trials using AI and strengthening U.S. competitiveness in biomedical innovation. Finally, I'd like you all to mark your calendars for the upcoming IQVIA Investor Day, which we are planning for December 2, 2026. And now to Mike for more details on our financial profile.

Thanks, Ari. Good morning, everyone. As a reminder, we implemented a new segment reporting structure effective January 1, 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 Rev. Second quarter revenue of $4.368 million, grew 8.7% on a reported basis and 8.5% at constant currency. Revenue growth within the quarter includes about 2.5 points of contribution from acquisitions. Commercial Solutions revenue for the second quarter was $1.793 billion, up 8.6% on a reported basis and 8.4% at constant currency. R&D Solutions second quarter revenue was $2.575 million, up 8.8% on a reported basis and 8.6% at constant currency. For the first half of the year, total company revenue was $8.519 billion, up 8.6% on a reported basis and 7.3% at constant currency. Commercial Solutions revenue was $3,547 million, up 10.1% reported and 8.5% at constant currency. R&D Solutions revenue was $4.972 billion, up 7.5% on a reported basis and 6.4% at constant currency. Now moving down to P&L. Second quarter adjusted EBITDA was $994 million, representing growth of 9.2% year-over-year, while first half adjusted EBITDA was $1.926 billion. Second quarter GAAP net income was $256 million, and GAAP diluted earnings per share was $1.53. For the first half, net income was $530 million or $3.14 of earnings per diluted share. Second quarter adjusted net income was $527 million and adjusted diluted earnings per share was $3.15, representing growth of 12.1% year-over-year. And for the first half, adjusted net income was $1.019 billion or $6.04 per diluted share, up 9.8%. Now turning to R&DS bookings. The R&D Solutions' net new bookings in the quarter were $3.15 billion, a 19.3% increase year-over-year, resulting in a 1.22 book-to-bill which, as already mentioned, is all the more impressive given revenue grew 9%. I should also note that cancellations remained within the historical range. As of June 30, R&DS backlog was $34.2 billion and the next 12-month revenue from this backlog was $9.230 billion which is up 7.5% versus last year. The Ascos, given the long cycle nature of our business, it's more important to focus on the longer-term booking trends. In the quarter, the last 12 months net new bookings were $11.250 billion, an increase of 12.9% year-over-year. And importantly, this metric has been steadily increasing in each of the past 4 quarters and clearly points to momentum in our business. So let's turn to the balance sheet. As of June 30, cash and cash equivalents was $1.909 billion, gross debt was $15.999 billion, resulting in net debt of $14.090 billion. Our net leverage ratio ended the quarter at 3.59x trailing 12 months adjusted EBITDA. Second quarter cash flow from operations was $558 million, and capital expenditures were $198 million, resulting in free cash flow of $360 million representing growth of 23% year-over-year. And in the quarter, we repurchased $398 million of our shares, resulting in first half share repurchases of $950 million and this leaves us with approximately $2.8 billion of share repurchase authorization remaining under the current program. Now let's turn to guidance. To reflect stronger organic revenue growth, and changes in the M&A and foreign exchange impacts, 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 $17.275 billion and $17.475 billion, representing year-over-year growth of 5.9% to 7.1%. The new midpoint of the revenue growth guidance is 6.5% versus the prior guidance midpoint of 5.8%. This new guidance includes approximately 100 basis points higher organic revenue growth and approximately 50 basis points higher contribution from M&A, offset by of foreign exchange impact that is 80 basis points less of a tailwind than in the former guidance. The revenue guidance now assumes approximately 200 basis points of contribution from acquisitions and only approximately 20 basis points of a tailwind from foreign exchange. We are also raising our adjusted EBITDA to be between $4 billion and $4.05 billion growing 5.6% to 6.9% year-over-year, reconfirming flat margins year-over-year at approximately 23.2%. And finally, we are also raising adjusted diluted EPS to be between $12.80 and $13, up 7.4% to 9.1% versus prior year or 8.2% at the midpoint. Let me provide our third quarter guidance. For the third quarter, we expect revenue to be between $4.350 billion and $4.390 billion which represents year-over-year growth of 5.2% to 7.1%, and adjusted EBITDA is expected to be between $1 billion and $1.020 billion, representing growth of 5.4% to 7.5% versus prior year. And adjusted diluted EPS is expected to be between $3.19 and $3.29, which represents year-over-year growth of 6.3% to 9.7%. Both this guidance and the full year guidance assumes that foreign currency rates as of July 27 continue for the balance of the year. So to summarize, IQVIA delivered outstanding financial results. with second quarter revenue, adjusted EBITDA and adjusted diluted EPS exceeding the high end of our items. We accelerated organic revenue growth across both commercial and clinical segments. We delivered strong adjusted EBITDA margins in the quarter. We had strong free cash flow performance, up 23% year-over-year. The R&DS net new bookings were the highest since 2022 and $3.15 billion, growing double digits year-over-year and sequentially with very strong full service bookings. And as already mentioned, the demand environment for both clinical and commercial has significantly improved as reflected in our forward-looking demand integrators. We raised our full year guidance for revenue, adjusted EBITDA and adjusted diluted earnings per share and we're planning a December 2 as Investor Day, where we look forward to seeing you. Now with that said, let me hand it back to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Eric Coldwell with Baird. Please go ahead.

Almost feel like you're out in the call now. That was a pretty positive update. We can only go south, I think. So last quarter, you had some added disclosures around the bookings profile that helped, I think, help people understand the dynamics and what was optically a lower net book to bill. And this quarter, you're obviously putting up a bigger book-to-bill against a strong revenue growth rate, but I do have to ask, were there any chunky awards or other callouts within those bookings? And you did mention was very strong. What about FSP awards, what about pass-through mix and the awards? Any other notable callouts that you'd like to share with us?

Thanks again for your kind words. Actually, you have a good call in your note a few weeks ago. we have indeed a great quarter. I tell you in over 25 years of reporting earnings in these or other companies have never had as skinny a quarter as this 1 all around. I must tell you, there is absolutely nothing salient unusual abnormal odd awkward in our numbers anyway. . With respect to your -- the question on the bookings per se, there was strong literally across the board. Nothing unusual, pass-throughs or in the normal range, cancellations are in the normal range, good mix of large lead, I mean, really FSO was very strong, but again, see to what it was before all the multiple crisis erupted over the past 2, 3, 4 years. really good, strong outsourcing continuing from large pharma, good bookings again, strong around FSP, you as specifically low to mid-double digits kind of as usual percentage of total line. I'm really not going to not into core. I mean it's a fair question because the numbers are so good everywhere. I have to tell you, preparer call, we look and say, is there anything we can point to and there is nothing and all very strong. Mike, anything else?

I was just going to add that the therapeutic mix and all that stuff with the trends.

Great job, guys. I'll leave it there. .

Your next question comes from the line of Justin Bowers with Deutsche Bank.

Ari, in your prepared remarks, you talked about outsourcing penetration potentially increasing over the interim. Is that comment broad-based, more focused on some of the conversations you've been having with your large and midsized pharma customers? Just any more color there would be helpful. .

Sure. Thank you. Okay. So as you know, the EBP segment is 100% outsourced by definition. And again, as I want to reiterate, we are the largest CRO provider to the EBP segment. I think it's very clear from the numbers now. So that clearly is all outsourcing, midsized, pretty much similar except for some of the larger ones that some of themselves and lead of FSP. Large pharma is really where you've had the big in-sourcing, outsourcing, et cetera. Look, I tell you that large pharma clients are already telling us that because of the extensive increasing extensive use of AI. And by the way, use of a hyper-large pharma is not starting on July 28 with the presence. It's been going on for more than 2 or 3 years, okay? . So the use of AI in Discovery will only increase demand for CRO services. Our clients are actually telling us and asking us to gear up capacity as additional molecule will enter development. Some of our large pharma clients are predicting that will double their study portfolio and so they're asking us literally to ask thousands of FCEs in anticipation of those studies. So the additional demand with CROs is simply because, again, the dynamics of our sourcing remain the same. Some of these new molecules are identified the use of AI or incent therapies where the client may not have all the therapeutic expertise. The additional capacity required, no one is interesting in adding more head count for specific trials. It's always more cost effective to use the CRO. And then global footprint helps, the domain expertise, the regulatory internode for study design, the site relationships and the network of broad therapeutic coverage, the expensive data to land on the best design and successfully recruit more specialist patient populations. All of that lends itself to more outsourcing. So the current outsourcing for large pharma we'll continue to increase as we look at our conversation with our clients and we model it out.

Thank you. That's it for me. .

Your next question comes from the line of Michael Ryskin with Bank of America.

Great. I kind of want to follow up on just the last one. Thinking about your future investment and your future opportunities there. Like you said, you have been talking about AI for a number of years now. you've talked up some of the benefits you're seeing from the solutions you've developed internally. There's clearly some opportunity to partner externally or maybe do some M&A. There was a deal in the space maybe a week or 2 ago. Can you just talk about how you see the development of those solutions over time and where you're putting the incremental dollars. .

Well, I mean, look, we've -- it's again, not news for us. We've been doing this for some time. The idea of inserting intelligence in the design and performance of clinical choice to accelerate outcomes and improve outcomes is really what prompted a merger 10 years ago. Now of course, with the advantage of frontier models, et cetera, this has just been accelerated over the past 2, 3 years. just to step back in terms of investments and where we continue to focus, as context, I've said this before, but I think it's worth repeating. There are at least 3 necessary requirements to effectively deploy AI models in our industry. Number one, we need proprietary expert content that is globally sourced, the identified, curated, fit-for-purpose, integrated, interoperable and ready for extraction that's proprietary health care data. And we've got that. Again, it has to meet interoperability, relevance, completeness, traceability, reliability and capacity standards under countless oncologies at a scale that has no comparison to any other industry. And this is why our clients trust us to work with them on their AI journey. Actually, we recently patron look at the book if you haven't already called Empire of AI. And the author says they are acquiring training data has turned into 1 of the most difficult, expensive and legally fraud activities a frontier lab and otic. There's a phrase in around that the web is empty because the frontier AI models essentially are close to in sorting everything that's out there. And so you got to turn out and proprietary data. And again, we've got that, and that's what we are continuing to invest. Number two, you need deep domain knowledge to read, understand and interpret these highly complex data sets in the proper context. And of course, we've got that too. And number three, you need to operate within the significant regulatory compliance and privacy frameworks that health care requires. And they vary across countries and geographies. And of course, we've got that expertise too. So our own agentic roadmap has continued to make great progress. In fact, we now have 294 agents deployed across 90 use cases. I want to remind you, an agent is not 1 model. An agent is built of multiple tasks that are all powered by different models. We work with every single AI company out there in this country and overseas. And you build that -- we've been building that with the help of NVIDIA very successfully. In fact, many of our large pharma clients are recognizing all of this and the limits of AI frontier models and instead, they are partnering with us to develop their AI road maps. 4 of the top 10 pharma companies have already contracted with us to codevelop AI solutions. And 19 of the top 20 pharma companies have already deployed IQVIA solutions in their workflow. So this has been and continues to be our priority area for investment and continues, we are seeing it in our win rates really differentiates us from the rest of the pack. We've been placing incumbents in the last deal, including large CROs.

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

Maybe to build on that last comment you had regarding displacing other CROs and competitive processes -- can you give us a little flavor of what that looks like? And when you go into these competitive RFPs or competitive displacements, what is the discussion looking like on price versus capabilities. First is technology and AI functionality, if you can break it down to those 3 buckets?

Yes. Thanks for your question, Michael. We've shared before that large pharma, literally every single 1 of the third 1 went through a very significant process to renegotiate all of their partnerships. They opened up all of their preferred relationships, and that process occurs over the '24, '25 time frame. We stated before that we were very happy with the outcome of those renegotiations as we both increased the number and the scope of those relationships. And so when there is a specific RFP in the context of those partnerships, a large pharma typically invites the 2 or 3 partners that they have selected in that prior process. And then the discussion -- by the way, the rates have been typically negotiated during those relationships. So I would say it's less on price on a specific RFP and more on delivery timelines capabilities, technology, site networks relationships, experience with that particular therapeutic area, the skill sets of the individuals involved, et cetera, and of course, our AI capabilities.

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

I wanted to ask a clarification and then more of a content question. So the clarification, I think, Mike, you quantified 2.5% of acquisition contribution. I was wondering if you could break that out between segments. And then Ari, you seem in the mood to talk about the expense of the business. The company has kind of quietly started to build some discovery capabilities. You're talking a lot about AI. I wondered if you might expand the discussion to talk about what your thoughts are in investing in and building out capabilities in the early part of the development supply chain and how you see that folding into your broader strategy leading into your clinical capabilities? And is there an AI angle there as well?

Well, Dave, it sounds like you've been in listening in, in our highly secretive strategy session. All I can say, all I can say is that, yes, we are working on those things, and I can leave it at that. And again, you would expect us to do that simply because we have great relationships with our clients. And we are expanding upwards and downwards, set of capabilities. You saw us buy discovery assets. In fact, we completed the acquisition of the Charles Miller assets in the quarter.. I guess that was the first part of the question to you, Mike, you want to say and that's basically what is normally our acquisitions, we had guided to 1.5 points for the year but now that we did and it's going to add at about $75 million, $80 million revenue.

Yes. And Dave, normally, our -- the acquisition impact is usually about 2/3 commercial, 1/3 R&DS. It's about the same.

Yes, about the same for this quarter.