Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the ICON plc Q2 2023 Results Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. to Haven. conference like speaker to now Kate today, would hand over the your I

Kate Haven

will and you XXXX. this day, Dr. Brennan. are the website statements call Good I information there thank we economic Steve quarter call on today, to CFO, that current ended slides covering forward-looking call to in . today's and download Cutler; this management's our industry would available and and statements webcast on June Mr. currently These our like call's Certain XX, accompany have Also our call. today's the for on on CEO, current are joining be statements. to Brendan conditions. available, us based including and that note expectations

those statements differ and or of not due with may forward-looking statements uncertainties from forward-looking risks business, future the company's results that by are materially to cautioned implied and associated guarantees performance. are stated listeners Actual

only result date to update of are events obligation forward-looking either statements, Forward-looking the any new any made, a information, as they and do or future undertake publicly statements as of we not otherwise. are

and about statements be by these Brendan be includes presentation in measures, Steve to More the financial which may filed filed the referencing uncertainties and remarks. the will XX, SEC forward-looking reports Form including prepared This XXXX. information found company, in XX-F risks February relating on selected their non-GAAP

Statements Press operations. directly the section presentation a financial please Consolidated to most of GAAP of Release For measures, refer titled Condensed comparable the

losses, of per to the excludes and will non-GAAP and foreign and diluted costs slides, in tax measures, information adjusted release GAAP to in financial compensation adjusted comparison Adjusted benefit. substitute transaction-related measures earnings respective the income a their is currency investors we integration-related stock expense, earnings comparable and share gains purposes. costs, historical certain non-GAAP amortization press and measures. note not Included believe superior non-GAAP the for EBITDA, you or restructuring While are net more reconciliation a useful for

call ask X the opportunity limiting now each Steve CEO, over keep be follow-up. therefore with today the will their and Cutler. would brief hand hour our to a call to would to I for We Dr. to like questions to an X participants

Steven Cutler

in Kate, continue Thank on results demand quarter environment to project ICON segments. you, saw activity the delivered across innovative day, biotech positive RFP focus with a we activity and X, and good . The continued customers. two solutions delivery improvement in in success and pickup Overall customer we notable operational in experienced been X. everyone. of trends good quarter drive segment our excellence quality, solid quarter all for RFP end toward the as our sequential has industry the within

we spending uptick are present this noted regarding have cautiousness well behavior opportunities, encouraged on of segment. we as by the as overall While is delayed still within decision-making in the previously awards

we Within hybrid to quarter in the another biopharma with and a environment resilient and service functional large mid strength opportunities. see segments, of continue

this in see year. we We through are an second cautiously of half improving that the trend will optimistic bookings

activity positive early quarter, third its July. And RFP trajectory while it's have in seen the we in continue

specific We can continue that customized provide partner flexible level of a customers that for seeking solutions are engagement to see with high their and development a clinical needs.

partner plans customer evolve, outsourcing their development well. requirements priorities As as change pipelines, management and

strategic quarter strongly pleased customer new XX partnership top announce I'm scalable their To and very preferred with a most an and positions provider X. development customer existing in regardless Our with end, comprehensive differentiated position solutions development that us to and of of partnerships in pharma opportunities were expansion of successful securing we clinical model. as an the existing

solutions our offering as of now well services. includes and We a functional of multiple as scale partnership, our full under have and of services number increased the elements which service periclinical scope in

partnership, drives their development. number outsourcing augmenting both their have This were portfolio, XX begun contemplating we with of of existing other blended competitors. and which strategic this technologies towards remain in at model. entire scaled functional full solution often support. elements a alongside variety several active model development large to clinical forward, pharma going of as We move seek this of large our hybrid dialogue see services a accessing biopharma customers traditional that efficiency of Similar incorporates more companies we and recognized at customer for being type to unavailable top service for which replicated the clinical includes and infrastructure easily see outsourcing a value of this scenario a companies customers This

As provider positioned to these of driving partner and efficient is services, better a to uniquely specific leader achieve delivery in market customers their goals. of ICON and outcomes with services a more scaled

of organization. Our intelligence care to at learning stated forefront vision the we and is to leading technology recognize intelligence of application with specifically be development. being adoption And health potential the the artificial in machine clinical end, importance of world's this

We and technology scaling are trial significant in to management. growth appropriately our investing in volume seamless in enable the order accommodate to data infrastructure data collection

more released investigators content. and are utilize called potential market-leading ICONEX in our easily our enables connections tools latest that on We study developing alongside networks based active learning advancing and elements expertise. identify quarter clinical and machine quickly and teams In our X, physician which AI-enabled on of to focused AI we capability published

automation, industry disease will site important particularly integrations efforts therapeutic of our the progress automation, processing improving advancements such also rare considerable in with focused course such from and X XXXX systems in long-held is hours continued a to to robotic handling. support This on document areas activity we make double as ICON data and complex has in selection, as mastering, million challenge. areas process and of through expectation last our year in are with

for instruments. solutions to portal, communications direct well Icon release Firecrest features recently library released of with our the and as end-to-end validated This latest updates important also patient-centric other we as market-leading ICON trials. the assessment several site platform, Research outcomes includes while our and capture enable solution addition, as version clinical clinical and digital In Mapi the training Trust, integrating to such such decentralized new as other data

by also conducting other commitment released In are at to We our We've ESG sustainably progress senior program the cares. providing towards advancement our our we report, business of to notable of gender at made initiatives updates number May, great in on XXXX our ICON targets, parity ICON. our and achieve notably making progress in levels a most ESG XXXX. achievement the of further goal

validation. letter initiative, targets to We science-based have first submitting step commitment submitted the in the also targets our for

to company Russell XXXX be the at added process. further great we annual Index becoming It reconstitution opportunity ICON presenting June, a following end for of XXXX, a an to Separately, the in traded to milestone expand were publicly shareholder since its our base. delighted is

results revenue book-to-bill Turning revenue excess delivered a quarter growth on XXXX, X constant in over a resulting Direct single digits $X to a growth the X% our net of in X.X% grew high and was currency quarter, financial XXXX, X quarter our billion over performance solid quarter with ICON fee in net year-over-year X.X. in the first of bookings revenue. in basis

We X the basis points on and to year-over-year similarly Strong of our impressive bookings performance, of gross high XXXX. on basis on revenue, in key delivered growth margin with and focus were continued basis. revenue direct management company our Of across another EBITDA a adjusted in year-over-year a XXX quarter X. fee factors margin direct growth direct cost in expansion XX% the single grew quarter net margin digits on note, fee expansion Quarter

the leverage adjusted progress achieving XXXX We investment-grade end quarter well deployment capital of we and us Depending on remains to also debt into opportunities be as strategy on Our our to as EBITDA buybacks that get a to reduction unchanged focused rating. now priorities out to acquisition closed made X on will opportunistic X.Xx XXXX. with X, potential at ratio progress share and we we an these aligned are our is net target position strategically as further return tuck-in of our this floating in in level with as rate great of our areas, portfolio.

This our we the to positive payments XXXX. prior be the in revenue far so narrowing now in restructure our of billion in of guidance are first delivered financial X.X% this I year, to short the to to we of our for results expect the an $X.XX the XXXX. thereby with X.X% current -- return the We debt, increase debt half to interest range will part year. over of billion, year have for the full allowing reduce $X.XX to enable us market term us to

earnings This midpoint approximately margin This $XX.XX. guidance the in on assumes our by to our basis XXX Additionally, per share to of full adjusted the rate EBITDA progress we X.X% $XX.XX to per representing XXXX. increase of tax expect $XX.XX, adjusted and of of share range the year-on-year increases adjusted to a $X.XX over X.X%, an earnings year basis. includes on points be expansion

I month, highlight important with our Health PRA Sciences. milestone X-year we was recognized want this Finally, union which earlier an to anniversary of the

net on of our lines leverage cost our initial and of set announcement We time combination, target synergies ratio. have all the of delivered we targets the surpassing on at achievement the

our our performed key year also through to and for continuing for XXXX the patients. and or above financial at We targets full customers deliver

continued forward transformational call now market Brendan? our continue to We their of the employees our commitment build and all intelligence are leadership through of We progress success turn the look financial to I'll additional and to Brendan period for to as leading ICON's over to care world's our comments we on this proud organization. company. and for efforts grateful results. health valuable for our driving

Brendan Brennan

of ICON In and of $XXX resulted $X.XX awards quarter of worth in the recorded Steve. This $X.XX in wins billion of net a X.Xx. Thanks, gross and quarter billion achieved million cancellations. book-to-bill X, net business

increase of on X, X or grew XXXX addition awards the in year-over-year. X.X% quarter new record of the our With an X.X% an representing increase to of $XX.X backlog of billion a quarter

from was backlog one anticipated. burn down quarter as in X.X% had quarter, we levels slightly Our the

of concentration XXXX. on or decreased a from represents organic in a customers quarter was X.X% in top customer our billion. basis. Revenue X constant currency two XX X.X% and year-on-year at quarter increase This Overall,

customer top X.X% total revenue represented of X. quarter Our in

top represented of XX.X% revenue. X customers Our

of top quarter Gross margin Total to XX.X% X revenue. X XX.X% XX Our in compared over top the was or margin SG&A gross quarter represented basis XX.X%. in XXX XXXX. our X, in $XXX.X XX XX.X% expense while points X.X% quarter to million for Gross represented margin increased quarter XX.X%, of was XXXX.

margin of period In SG&A XX% million $XXX.X adjusted comparable was quarter the the revenue. or $XXX.X was was a of $XXX.X last a for expense million adjusted XX.X%. comparable margin year, over of $XXX.X the In total quarter points period basis or last or of XX revenue. of Adjusted quarter EBITDA Sequentially, XX.X% revenue, improved operating EBITDA XX%. representing XX.X% X year-on-year year, for million was margin of million, income X Adjusted increase EBITDA XX.X%.

in rate now XXXX expect the rate increase the This of -- rate $XXX of half market XXXX. was We XXXX from in total year rate XX.X% expense a approximately tax interest income an full change increases of tax XX% adjusted the expense now The full quarter XXXX. was quarter of in effective further XX.X% reflecting full effective $XXX.X approximately our interest of year operating tax in margin second XX.X% effective expectations net for X. We year the The the adjusted for to for $XX.X X XXXX, for million XX.X%. to be million expect was down or over of million quarter.

income million, XXXX. X. per for U.S. group amounted transaction group $X.XX balance to at per X compared a second receivable adjusted during to and $X.XXX $X.XXX year-over-year. $XX.X million period. at the of accounts X, to per quarter Net prior accounts GAAP $X.XX, for XX.X% This net quarter of billion or compares the net quarter the or recorded company attributable $XXX.X year with an $XXX.X share of integration-related margin the X.X% of in increase from of end income costs to earnings quarter, million a share XX.X% billion XXXX. the was was equivalent In the diluted net $X.XX share operations quarter the income GAAP equating XXth million $XXX.X U.S. Adjusted of of receivable attributable of the was to revenue June

Cash in improvement bonus $XXX XX% the increase of increased due lowest timing second over cash an with and further was at cash as flow XXXX, from this operating of of quarter XX, quarter is XX, in June XXXX, the year X expect typically second in conversion our XXXX. days to payments. decrease we from X March half XX was of XXXX, quarter Free the DSO the quarter XX activities June days days million at XX, a from

We to year XXXX. flow full cash the expect result $X free this for circa in of billion

quarter on levels year. progress progress will and improve with We to DSO activities made cash focused through we on to the obviously remain initial and continue collection are in ensure pleased the this billing

At just debt over had net XX, quarter of balance Capital net of of million during XX, EBITDA. quarter a of $XX.X June debt at we Loan payment to expenditure XX, the quarter June XXXX, of ended of at was debt and company leverage This and debt From cash $X.XXX deployment to $XXX position $X.XX compare of billion billion our a a X a the B million. $XXX a perspective, on XXXX. XXXX, net leaving made X.Xx facility in million billion, and $X capital with Term $X.XX ratio the debt adjusted March net billion.

our course on our XXXX, year. totaling B Term $XXX million the facility We of billion full payments expect for approximately over to the to Loan continue $X

As EBITDA, be of pursuing our debt. to met our initial options ratio X.Xx will leverage long-term restructure we we given target Steve mentioned, actively adjusted

billion, of key updated year million assumptions we free circa cash circa the this a flow year, level for opportunity in an very occur revising term XXXX, the ratings all financial of Alongside Given effective have the rate good favorable year. our current CapEx our $XXX see we tax XX.X%, secure and more guidance an full $X XXXX. floating for assuming loan a position are to which expense target interest B rate facility, investment-grade full $XXX of million, on spend now of

their quarter. move Before Q&A, this to the we contributions team to our extend thanks performance ready for are for to entire our want many we ICON to we Operator, now questions.

Operator

Instructions]. [Operator

Guggenheim The first question comes at Draper from Partners. Sandy

Alexander Draper

that any gross year. basis, Steve, improvement first your how by And you out potential Brendan, on on the the driven the are think, or is growth thinking net year-over-year you Trying half bookings primarily is, on of a Just back on in a to guess of on area. we'll or shake that? see about on biotech where see I comment bookings? question maybe that and bookings cancellations sort color more the is the

Steven Cutler

question seeing for last they're -- thanks business. business I'll across answer the -- your question. first. Sandy, well, we're the just opportunities the the biotech, really it's Yes, see and in The broad-based in We not that fairly

the on that's last early basis. we increase -- said in mean, think further we're quarter second as I reported I quarter. really, So in July, I an sequential we seeing RFP a continued in opportunities.

in cautiously certainly we're across back right the a segments. of various So optimistic strong business end the performance the development year of

slightly our in where And I gross don't new We would seen any historical -- be what cancellations abnormal. be what net new been levels. drives Ultimately, of business the say. haven't net above in is while terms of them revenues. have above is definitely all perhaps elevated it'd see to way -- We

cancellations a see don't issue. we so And being major

business what back across end for terms development in the on based optimistic improved an and year we really, we're as in opportunities the of seeing us of performance I So the cautiously business. say, see potential, for the

Alexander Draper

And the end Great. a good flow. helpful. for target follow a That's And unrelated or expect requires year? that of pretty just continued tiny of still have DSOs new billion, but then to free Brendan half follow-up $X driven you in on for Is quick a really improvement cash year. down? do would bit the the coming that DSO Down a back by the the just

Brendan Brennan

the will wanted We've to couple conversion, last that to need of down be where big We've like of mid-XXs. said the certainly, over we'd we see in said quarters in be the least back DSO And to that to be longer year. course, absolutely. Yes, term, part the on a get our come like we at couple continue that's to to I'd to we focus days. by management. of of a cash And that of coming as the end

that's our to given a the close given also our DSO we ICON, target optimal guide, customers. of and for . company the level structure So the that's I've think of certainly good but

back the much that's get of we focus the year. the So into half as very

important balance elements it's to think we'll the sheet. I also be carefully other our of looking at say

DSOs and the that our lines market we're focus terms in up own we're In credit making environment with of DPO and that that, that the sure in.

But an the all be eye the the that, sheet. DSOs far and So we'll keeping balance on yes, of we'll targeting is elements be by piece of biggest mid-XXs.

Operator

comes The from next question Deutsche at Bowers Bank. Justin

Justin Bowers

the are the changes that I and environment, maybe be, are are well? is you any conversion you on improving year and what Just rate the of from guess think anticipate -- more is as then seeing half segments the would customer some XQ of what year? in that end of the as even in the year demand last the the sort in all of of changes -- XQ question do well? back And across Or you what

Steven Cutler

Yes, Justin, Steve. it's

said think mean are the the pharma biotech the in I our services, the phase as demand the and periclinical well. large increase, RFP the early business. lab in I across of our previous really I as segments more group group, in answer, opportunities

So it's as point -- a functional from that consistent well. view, of

I in conversion. that the change broad-based So of with know any don't I'm conversion, I as we pleased that -- in way that's, see significant say, terms

a of which the work in work. post-covid next-generation is the you of know, as in some There the sort out oncology there lot little are still burns large A space, slower. all opportunities

impact if, those. terms we're may And depend winning of there. That have fact, will so happens success successful it our some rate on rate in upon in in what burn

we're And well the wins in and realistically we our to the is which make will optimistic for the cautiously seen. It's half back on remains improvements XXXX of year, us up broad-based. business beyond. it's set main group. point the I the some think all that can across development But So across be that

Justin Bowers

Good to you your hear. to up? if that strategic that on show I And what on customer existing would And partnership, expansion start are the the when top to may, partnership? updates of expect -- any then in

Steven Cutler

to In this ones, what to of terms time that's There of of going existing the the various has little portfolio is. their terms flow a bit that expansion partner in of take are through. constraints

to dramatic drive medium to we speaking, don't -- partner. term think, a on from term, expect any so that But build see some basis certainly revenue broadly I And uptick for longer revenues the opportunities we and longer there. to forward the immediate

for But nothing certainly XXXX. nothing

we -- the to and continue well we're we large the top well seeing their the service positioned moving something that have that's are work the of provider basis, them we obviously very we hybrid industry we a feel some functional In we terms #X have space development typical of functional together number more perhaps the continue models can at they of our moment. There but them in and to somewhat customers customer, group. given be is they're of with accommodate adjustments putting to way that in space, able -- and strong but will of well. pharma We're sort across a to that ourselves trend the it's full the there, on that service

also full customers portfolio hybrid put service becomes some Where of their these hybrid. portfolio more a functional, but there's of typically, their solutions. a And part is in stays that and in part place

largest that any for whatever to wants positioned other work development model to our be So we're able that customer matter or we accommodate feel to with. well us

Operator

you. Thank

Barclays. Sergott Luke from at comes question next Your

Luke Sergott

Great.

kind of you to the wanted dig into reported I that on. customer classes So here guys

guess, assume wallet going top and it you XX now, thinking can that there? XX in about I'm last and picking just bit little So be you what's wrong underserved have are would up biotech probably might the that that guys you X these smaller guys, a winning quarters I here talk I on by they're the been really share. through are

of So the demand the you're talk especially light growth structure. industry about that seeing in there, overall

Steven Cutler

in a I effectively. are come customers in for all mix out. We in. going there's different large some jump that We to Luke, XX small. think don't our customers There's might on Brendan Let the And period group there want me with XX, of in dig a of on anything large then have customers. one, don't serve a then of customers I and that that know assume or go and that time. believe particular we fair

midsized the we the think I forward internal as their but going own obviously, to who to is development at those perhaps in are customers resources be don't that. we're opportunity having more interested, functional able looking have the do

but hybrid service. full about they're go they model. a so thinking also And more

in to... be so seeing And how market. are focusing Brendan our and the effectively think growing. in -- of what attention we're some I of that might more And midsized that our may we services want terms they're

Brendan Brennan

of Obviously, I I just businesses not add to next base the that, to No, outside the the again, customer speaks to growing and great of strength it of outside in growing just XX the top that XX. And your to expansion was cohort we broadening think Luke. the the going top have, generally see it's portfolio of sign a speaking. kind that top that we're XX, in but

better it's sure positive speaks combination that really and I selling and into think as we a X job we're we're last organizations point services I a right remarks, well across in can much the to managing think the much now Steve's over how and the the to do years of portfolio, all making customers. it opening our our really to So piece,

Luke Sergott

guess Great. kind adds then follow-up the And of that. I on to

a back is thinking seeing the as high path now it and are industry So larger the growth. funding, talking -- that and hearing are guys large to and customers are conversations you're from you guys on the shoots growth you your pharma as really unlocking single-digit trying to how green what programs those side, getting about about

Steven Cutler

can drugs we them really spending money around how to there. help have get effectively we how market. and efficiently conversations their they're are The and

and an But we Luke, spending have I even opportunity. even say, So or even going not flat, I R&D more, get or this they're they're we as question, going have budgets asked opportunity. up staying an down when when when clearly are

when are their how fact, try opportunity and it's ours organizations for the at pharma of companies spending more sometimes In because like flat they're spend. look an budgets to optimize

upon So the really it depending customer. varies

I of in said, model the functional and with service course, those ones the some midsized the trend, how biotech, a a really perhaps optimize As in larger at of moment. best full the in towards the there's looking hybrid more highly middle to full-service those development -- pharma there's they're are at dollars. But

company depends it It And afraid. time. size upon fits the So really a in the that, that's all company. I'm the at the management of upon one shape their particular really depends and no the size and There's on portfolio.

Operator

Please next stand your question. for by

next Your Meehan Jack question Nephron comes from of Research.

Jack Meehan

customers. Thank impact And a just Steve, you trial consideration? as thoughts was we do think you. the to act could inflation into get up Good how with pharma your go as as reduction activity has morning. your you speak come curious, curious that I'm XXXX.

Steven Cutler

IRA Not years Jack. is the track. really the the out down some implications and Thanks, there IRA of specifically, obviously, the Yes. I say would

it suspect at thinking internally dollars about So organizing portfolio. while looking and their and I how they're development and it about talking their spending they're

there spend. as We IRA. say potentially going and they again, for money around haven't IRA any said before, an the the opportunity is drugs the forward I'll implications specific offers think they had And it, some us conversations I I the develop because

with a maybe track track we years think, the several some I of of models reaction see looking, down down And them to at about they'll that the specific And perhaps what that. sort the coming they IRA the had so forward conversations be coming with how up, haven't any we're seeing do but that that. -- they come carefully

Jack Meehan

Great.

just Okay. burn And then X for expectations. on question backlog Brendan

a that the kind how you would do beyond half as the kind for And think that you view? at backlog, this were look in is trends about X.X% call year? just -- previously, for this think your I of going back talking year, of your still you stabilization

Brendan Brennan

That's that current we're the number. a in full year there suppose at started we quarter. I Jack, at That we call obviously, means X.X%. X.X% X.X%,

half but year. from a think it move the XX% to we -- that, I going not it's be there's the get huge second thereabouts amount into will as So of

that made conversion talked in It's the Steve So point year. we past, an full a struggle the on. on not is -- this earlier about answer easy. our is

see of the to still be X see that in marketplace. trials lot We a years I those can X in oncology duration.

that's So our Against faster than a the revenue of lower a businesses, have X.X% lot mix mathematically, burn. some of our we quarter. that,

do we're as so we that, our for we how of efficient do we always as at in looking And optimize how can customers. projects be delivery our

do make up quickly starting and we're getting sure and trials with How on the we enrolled. them them getting

a constant battle. it's So

As give we we as mean been point. you the in that better that think get alternatives into battling XXXX, always a as can we'll insights trend in industry. get time as this But next that a has we'll to year, we to you do granularity declining into on give think the year. talk keep I it we'll flat as and but get and fair the to we're I that say as it's to possible, certainly later continue we try to we over

Operator

-- Leonard Daniel from apologies comes Suisse. question next at The Credit

Daniel Leonard

improved share the a could to any lag a thoughts whether any you you'd you you funding I'm curious, environment in change and expect between with business timing whether seeming think funding or opportunity bit, be real could improving see on time? biotech your

Steven Cutler

Sure.

I think the say, in of funding I the shoots opportunities. in of and the as to appear RFP sort biotech green we see as seeming

think this take of I time play to to bit is out. little a going

to business into -- development said, performance, then, we'll XXXX. will As those year, half us into I the which strong we'd think lead think, this opportunities we of think like I play second to get should I revenues as

you indicated, I sort as biotech think of stage. but focused at the of burn this typically on space help oncology give and can next-generation others highly in I That opportunities, may well. faster I timing Dan, all vaccines. around little is that's think a I these as us, more some are

pushed be track down to the tend will a bit. that little So

I I us expect, opportunities think optimism gives on say, impact XXXX. but we're see for wouldn't as much do year, this So I it the with seeing to

Daniel Leonard

of quarter? much was just Brendan, a Appreciate the backlog us point what that. in revenue associated question. how your the at can this COVID cleanup And remind is and COVID you

Brendan Brennan

at in Yes. our It's at X% year couple probably moment. percent It's this Dan? still of singles full that the I on of the Covid low backlog. year range the is mean a to the terms revenue for point. X% X% overall in --

Kate Haven

just that's down well, quarter X.X% where to it revenue, as around this jump was as in, of quarter X is Dan, expected. for which And from

Operator

The Donnelly Patrick next Citi. comes from at question

Patrick Donnelly

in biotech just lot on Great. there the optimistic it's of about improvements together early, turning be a to seems a know putting comments little improvement. Steve, I potential your attention debate. potential There's bookings, of kind but a lot maybe the RFPs, some 'XX. of sound pretty to you

more current touched do What are you you kind next do as that environment well. next being at conversion year. high I see a guys framework single-digit grower a how Brendan high do seeing, as You you the little guess, kind a to And variables? of and see look level? the bit getting key year. more on the that that what of to back you're mid-single-digit of path in

Steven Cutler

talk I XXXX Patrick, think much about too quite point. to don't we're Yes, ready at this

that RFP And we can seeing. those we're cautious quarters. and of flow, good We the see think, flow into do rates, with optimism you outlined, win couple to converted our, optimism needs space, opportunities in coming RFP the next the and very quite obviously apply we if well wins we in a if that to I for that continue for reason in, be business you've well. sequential a As

a But shape I on in not we'll to XXXX. put good XXXX. be I'm for number think ready

and growth of certainly At we to does get the get on But feel long-term that this XXXX. feel point, our medium back we'll and Brendan end as but we the growth, about you include said, year. as we'll, we optimistic that medium-term towards certainly

Patrick Donnelly

then... And Understood. Okay.

Kate Haven

just we lost Patrick, Sorry, you.

try If you could that . just to second part. repeat

Operator

Patrick disconnected. meantime, we got next from Windley Jefferies. should David the at In the question take

David Windley

Or the opportunities to about been margin on XXX relative your essentially, you made seems made margin think leverage, way That points still are longer-term as to to get have scaled geared we progress on some G&A of as has, well. to wondering, to is some and toward gross there, year. on make progress? but be Steve, on that being there You've really this your expect guess you I solid what and largely some should margin aspirations gross improvement think well SG&A? room I progress margin more basis the I'm we

Steven Cutler

about Dave, think margin I the year-on-year quarter. from made XXX improvement gross we on bps Yes.

reasonable So made some basis. also SG&A. gross I margin progress that's on think a as progress we've you our on we've know, a -- And

margin profile, I on some it it bit depend that. some business, we work will little the upon will Certainly, a depend our of slightly therapeutic think of so that parts have obviously, mix different get. a areas,

to, help our talked how think margin see in can that and respect robotics, ability labor some still we it, modestly, learning I fee direct move the optimism to of us of have direct various with area. the I in terms forward about given we AI, options our gross sort cost machine of

most our the probably gain years next margin say SG&A. I'd be over around But of few will

in groups services best of the We continue business I think, X mobile the industry. to, have

have the they to I And so we're we processes in those say, leverage locating their expertise. and what that do, people, And terms continuing leverage abilities as I to around with. our of where think, opportunity,

of say So in progress of I'd it's sort the both, on SG&A really made be but the probably will level. majority

David Windley

do EBITDA, And than over you more for multiple Like points if had numerical be . to this target? year several hazard percentage you're a better you XX.X% are years? a on thinking

Steven Cutler

still think about me Not Dave. a I XX.X%. Don't heart attack... EBITDA give XX.X%,

David Windley

Right.

is didn't Sorry, if what I meant say I to I meant say, Yes. XX.X% that.

Steven Cutler

we'll floor, off don't delighted I'm see gross both it you get we'll in can towards it look progress the further some to we with we made at think make back SG&A done progress we as that I'll then year. we -- that just in really we've make that's some Thank of good get -- mind. and you. the And next the space. and the in -- on for towards we'll year, if it the number level. get that We've end

that on moment. at to I'm a not the not -- going I'm say target put going to

to CEO becomes front ceiling every right. continue challenge I'll a our becomes in ourselves get ceiling that a We former sorry, every floor, said floor, that as

continue any on And But challenge at ready think that so put I the don't on to particular to out we moment. ourselves front. that target I'm

Operator

at from ISI. question Evercore comes Anderson next The Elizabeth

Elizabeth Anderson

particular guys that that vis-a-vis have margin opportunities present of there mix. functional term, the -- of you sort that towards long what there? do was moving think about how Willy Like like Are to you at is think pharma hybrid can that pivot Maybe the about service just are just themselves Is that full longer-term asking. of opportunity? like offsets How is mix shift? up you other a of do there more sort

Steven Cutler

Yes.

-- different even with functional present do some some forward. certainly there's challenges, and the us around businesses think those hybrid going Elizabeth margin I

that to We challenges. those places, make of in sorts in some have our and the place locations right people sure the technology to right in have mitigate order right using plans significant we

to whether to customers to So challenges, believe on progress that, the term. that expecting -- the you're while or to speak, do do business business be full be front, to some but functional anything... faster, continue or are as cheaper even we service what is hybrid as taking working Do we business And future. want the things in us there steps better, add long always positioned organization going able we're margin into you are well go we to forward and always

Brendan Brennan

No, I it. that's think

under something review. constantly I we that it's keep think

is something just Steve in business, we earlier do our do thinking the we maintaining but profile As it's that and our ourselves of said best what we're the at margin make we sure also have part levels? that the technology both customer about the of right margin look we're strategy gross on, always trials deliver investment organization. our mix how efficiency of maintain that we to make of results, -- to challenging And part we're profile. sure is the And that our gross indeed

Elizabeth Anderson

Got it. sort in hitting... regards And to helpful. of That's then

Operator

Elizabeth too. at Smock Blair. there is Apologies William lost we the Max if next question [Operator the In Instructions]. from meantime,

Maxwell Smock

but than more customer about sequentially to XX% here your and and Sticking down it year-over-year smaller We X some quarter. like customer customers was theme. on top X looks talked revenue from customers, the second in the

in there's lack out if explain growth quarter. wondering Just customers of that to in the the call these anything particular second from would

Brendan Brennan

Max. Max, each they It out, on their with anything really are customer don't here. too projects. individual call depends I there's dramatic to where Brendan and think

on like a have example, segments X, in the you could have other -- change to could revenues X look cases the we a For customer and slightly particular often in -- the pickup accelerate different. order it house where that retro will make

don't the absolute we've there. think consistent number. as not an any So -- there's of extraordinary not in past, And kind said I it's it's math

tend to While that our much. top doesn't change X

do their -- customer. people have have in they people moving It coming And specific You are be specific in be out. profile. development and again, where that can the that can to to

up big they'll the they we'll folks, things come again. development in that in that don't the see customers from are come they large we Oftentimes, pipeline. chunks of where just One see period and in and even is of be our are shifts time, could of we that It burn work a back big they'll through reset. see their down then much,

research to there clinical So that is the just business. natural that is flux

Maxwell Smock

-- elevated you here or in And of here but X.X% slightly in quick indication? quarter? detail accounted the cancellations kind debt helpful. can did super of above, you've any target for on a what expense provide much then bit, Is second think, around size, how X.X%, or modality laid terms in me, bad little slightly for the cancellations. the relatedly, therapeutic out the there I customer Again, Maybe past. That's take X you Understood. Yes. another just nitpicking

Steven Cutler

a the you, bad business. But no, if cancellations that the or were level, sequentially fairly of mean, therapeutic terms cancellations the Max, I much area previously There's we the leave really, really across of particular customer cancellations. across to or any the Brendan. as up like, were segments pretty the you where consistent a debt I say or our no more on went on in segment various I'll year. X saw broad-based, historical the --

So as take concerned from as bad it's far you want the we're really nothing Do basis. a to see debt? to there cancellation

Brendan Brennan

Max. Yes. Sure,

provided a don't quarter. single the felt guys over you more As the first chunk on debt in do at time, consistently every adequately bad second that quarter. we quarter provision. were know, than We in it took we We

increase of a kind we on quarter-by-quarter We need provision feel it . that in at quarter. And didn't so basis. current the look the to

Operator

The JPMorgan. Woodring from next question at comes Casey

Casey Woodring

sequentially so XQ. in So in Steve, sounds given the RFPs in here on it in XQ XQ SMID like order upticks growth of your the based But through sequential July. flat was terms XQ far comments, now bottom and was

during back range just you improve conversations gives recently half deliberate the you can year? maybe the confidence bookings middle this half? that is some then Is that And the maybe in maybe back that book-to-bill you decision out the the where prepared can about closer goal? growth of be And just realistic So of back will that called XX% that making thoughts in had this talk on acceleration XX% customer you've to the half? to in guidance the

Steven Cutler

Yes.

I often mean, terms yes, X converting sequentially. have and take typically, work. But sometimes it months, winning do and then take these been -- flat -- of many customer to relatively take in the of lag and -- the RFPs sort RFP conversations terms we here there's work and longer does of rewards, a In is implementing

half development second improve XXXX. I business the So we we're of as that until much won't revenue but really impact -- can there into performance year, our be on in said, we optimistic the get

customer our in functional. sort and are but the and as just -- labs biotech, in out I some our lines. those conversations funding. large been in sequentially have RFP of midsized opportunity talked along indeed of Perriclinical, -- the certainly We shoots pharma terms well there. some So across not The in green mentioned and biotech up about board, There's opportunities

to I'm months So X I so believe words are optimistic, we've of couple cautiously got and bring think or in of important. it's terms in those X We opportunities -- as prosecute next and next to some the say, I now quarters. good wins

would it of that. into think the that have . we into us to we the that that deliver That revenue. to on get expectation, but have middle work, can be I our we and win And have then to to range, convert

the have to we certainly but to there's raw and it... certainly so do, primed the material we're for and do work up, And opportunity us

Casey Woodring

to Got just then FX it. Brendan. one for your the last And model, helpful. changes for me That's X assumptions. Any

changed embedding think point were the at top all? XX quarter, line, FX has a you from I just basis on last that tailwind

Brendan Brennan

we probably yes, we're it. at it There's year. still -- We'll around still. -- I I X.X% keep mean mean it's the for review look under current

review. that's there. on So keep We'll the still it

As know, as we go well the up as FX down. movements

FX on the But both . year. So reflects all current I it we view of other as the of our course think through our thinking keep the and at on the moment. we'll go elements guidance

Operator

by Bank comes De Bruin penultimate [Operator queue. question Derik America. stand The for the of next at question from in Please the Instructions].

Derik De Bruin

already won't margins, asked. the RFPs are been the EBITDA on those I push

cash? How so these I'll ask my obvious we delevered deployment? the generation I mean are good nicely, you've -- ones. that's So of particularly got are about opportunities, about improving. But -- should more on on look, think cash you've flow the looking capital about at? color buybacks? should share uses What sort M&A of think bit there that you're the little side Just we technology how a

Steven Cutler

think to do think take we'll Derik, to that opportunity is back first and potentially you our thing Yes, grade. I moving down And of getting it's a the debt, -- part as we've mentioned. an nice I job in restructure I investment debt as done know,

into market from next In approach. be year will It year, and pearls terms already back view. point be capital we're of traditional surveying tuck-in as typical going end to of the -- deployment to we'll an certainly M&A the forward more the we of type get string of certainly

world and a real believe really together of we've parts of them the get ourselves business we've that those are And bringing can up, advantage, see we we past, can sorts where of I'd There we build in. to imaging, continue like think evidence, look that. are scaling to scale done That's I by areas significant what our up we'll those labs, still in and the areas unique us our and at business a advantage. talked about

for an the companies. In at the that. actually sort remains how be overpay we company but the how will valuations still look little the they we frothy M&A of are opportunistic market acquisition. probably terms of of in And going not Clearly, priority, third a is in that's we terms on buybacks, to that, notwithstanding we're

value sort we'll what at and look we'll our look much acquire what of we have we and pay look business. we'll them. in synergies opportunities, at proudly opportunities how we we So We as at they them bring to drive as the can for and to

as But if our our if at that we'll sense, that back And basis. a and that, would stock, priority. look makes the I we'll we have more buying do not, would they're be that, accumulating, potentially capital but be certainly opportunistic say, on

Derik De Bruin

particular. the I and X cover of Got And of follow-up. just Just headwind that of China in impacting certainly situation. Can biotech about you the been then you the we other concerns mean, region? that weak, think, coming out just opportunity? talk has I remind obviously, that it. us an been And on -- has a lot that that, market or China in activities companies that some in a so your can

Steven Cutler

huge mean a I of business. not China part our is Yes.

have is it, there, or percent, X,XXX so employees business. about We X.X% what roughly, our X of out

effectively. now more likely, in sort dissipating any And now, back seen particular problem to haven't sites wave China. opened to kind available us the Covid now So see are We with of it's business post-Covid, almost they've usual as we up obviously of really

It's it like the not contributing. in or to yet. case is to sort of Ukraine Unfortunately, Russia we'd back that's But where China be.

-- significant business there. We have a of functional out presence of number a in have there we people terms out

full-service as out well. customer increasingly, we're there. opportunities And a have out business We seeing there

almost back levels pre-Covid So China much pretty now. I'd say to is

Operator

Sourbeer UBS. The John comes from at question next

John Sourbeer

just any there drugs trial tracking there have are you and shortage trial on how certain reports ecology additional some one, those be on have press starts. and around one, might color out that starts do impacting Just been

can there. Just you provide any color

Steven Cutler

appeared in from perhaps dramatic III we've particular -- terms of little stuff, RFPs John, change terms I around a fewer haven't we've appeared don't opportunities. seen Phase hasn't think and of, clearly, but we we terms in in of see we said III seen customers going that hasn't the that data any around in trial Phase that industry what trials from what

have really that don't to on front. much So I contribute

of but that plenty still portfolio the and part and some being great still we of see new expertise being just through, sort have plenty cell of still -- We innovation not that of important in drug, and some of drugs space. coming market therapy opportunities, happening gene

no, would out that So anything call there to as nothing we but normal.

if don't to or cut Elizabeth back We wanted promise. off, in. I jump them know we Patrick didn't

I wanted But then otherwise, to jump think wondering I almost I in. we're operator? if So was done back

Operator

they again. Yes, the queue haven't joined

wish assuming they to. I'm don't [Operator Instructions]. So

assume remarks. to can their think for were questions Steven you perhaps Back answered following by we questions. I final

Steven Cutler

you, we forward call your into and further you through half updates today listening progress providing thank look Okay. ICON. and Well, all thank as operator, interest our to for of XXXX. in second the We

and all, a day. have you So good thank

Operator

you. Thank conference concludes today's call. This

now disconnect. Speakers, may by. stand You please

ICON Public Limited (ICLR) 27 Jul 232023 Q2 Earnings call transcript