Categories Earnings Call Transcripts

IQVIA Holdings Inc. (IQV) Q3 2021 Earnings Call Transcript

IQV Earnings Call – Final Transcript

IQVIA Holdings Inc.  (NYSE: IQV) Q3 2021 earnings call dated Oct. 21, 2021

Corporate Participants:

Nicholas Childs — Senior Vice President of Financial Planning and Analysis

Ari Bousbib — Chairman and Chief Executive Officer

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Analysts:

John Kreger — William Blair — Analyst

Eric Coldwell — Baird — Analyst

Jack Meehan — Nephron — Analyst

Shlomo Rosenbaum — Stifel Nicolaus — Analyst

Dave Windley — Jefferies — Analyst

Dan Leonard — Wells Fargo — Analyst

Patrick Donnelly — Citi — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to IQVIA Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you.

I would now like to hand the conference over to your speaker today, Nick Childs, Senior Vice President, Investor Relations and Corporate Communications. Mr. Childs, please begin your conference.

Nicholas Childs — Senior Vice President of Financial Planning and Analysis

Thank you. Good morning, everyone. Thank you for joining our third quarter 2021 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Ron Bruehlman, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; Mike Fedock, Senior Vice President, Financial Planning and Analysis; and Brian Stengel, Associate Director, Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.iqvia.com.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. The 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.

I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.

Ari Bousbib — Chairman and Chief Executive Officer

Thank you, Nick and good morning, everyone. Thank you for joining today for our third quarter results. Our strong momentum from earlier in the year has continued despite the resurgence of COVID-19 due to the delta variant. This has not had an impact on our operations as we have learned to manage through these disruptions. Our outlook for the longer-term remains unchanged. The backdrop for the life science industry continues to be very strong. Biotech funding continues to run at record levels. According to the National Venture Capital Association, funding totaled $35.8 billion through September 2021, already exceeding the full year of 2020.

The pipeline of late-stage molecules continues to expand and is at an all time high with almost 3,000 molecules in active Phase II or Phase III development. Clinical trial starts are trending well ahead of recent years with year-to-date starts up 23% over 2020 and 13% over 2019. And finally, new drug approvals by the FDA are keeping pace with the historically high levels of 2020 with 40 new drugs approved year-to-date, which sets the stage for a strong volume of upcoming commercial launches. The bottom line is the dynamics in the industry are strong and we remain bullish on our outlook for our end markets and for IQVIA in particular.

As we think about our longer term plans, I want to remind you of our upcoming Analyst and Investor Conference on November 16th in New York City. At that meeting, we will provide financial guidance for 2022 ahead of our usual timeline, which is normally coinciding with the end of year results in early February and we will share as well, our mid-term outlook and plans for the next phase of IQVIA’s growth. We look forward to seeing everyone and hope you can join us then.

With that let’s review the third quarter. Revenue for the third quarter grew 21.7% on a reported basis and 21.1% at constant currency and was $64 million above the midpoint of our guidance range. The beat was driven primarily by higher pass-throughs, which as you know dilutes our margin somewhat, as well as by a stronger organic revenue growth. Third quarter adjusted EBITDA grew 20.5% reflecting our revenue growth, as well as productivity measures. The $8 million [Phonetic] beat above the mid-point of our guidance range was entirely due to the stronger operational performance. Third quarter adjusted diluted EPS of $2.17 grew 33.1% that was $0.07 above the midpoint of our guidance with the beat coming from the adjusted EBITDA drop through, as well as favorability in below the line items.

Let me now provide an update on the business. Our real-world evidence business continues to take a leading role in informing healthcare. In late September, the FDA released their drug guidance on how electronic health records and medical claims data can support regulatory decision making and it cited several IQVIA publications. With the growth of rare disease therapies and personalized medicine driven trials, the number of single-arm clinical trials increases every year and external comparators provide important context for these studies for both regulators and payers. Our clients recognized our leading expertise in this area. For example, we had a recent major win to deliver an external comparator in a cardiovascular study for top 20 pharma clients.

In another example, we were awarded a 15-year follow up study to demonstrate the long-term effectiveness and safety of a newly-launched gene therapy. Regulatory guidance requires extended follow-up for patients exposed to cell and gene therapy and IQVIA’s innovative real-world capabilities combining direct to patient solutions, as well as IQVIA’s technology platforms to capture secondary data was pivotal in this award.

On the technology front, our suite of offerings continue to be adopted in the marketplace. You’re familiar with our OCE platform and other commercial technology applications and we have, of course, continued to expand our footprint here. We had 10 new client wins in the quarter, bringing the total number of OCE wins to-date to 169 customers. But we are also very excited to see increased adoption of our orchestrated clinical trial suite OCT. This quarter, for example, a leading biotechnology company in Asia selected our site portal module within OCT to power site engagement across all of their trials. We now have 165 customers that have bought the site portal module, representing 155,000 sites and 1,716 active studies that are using our site portal module.

Similarly, our award winning eCOA platform continues to experience strong demand. We have successfully deployed over 150 projects across 35 different therapeutic areas. To date, we have over 70 customers using this platform, including eight of the top 10 pharma clients. The platform has processed over 10 million unique patient responses in 65 countries and across 28 languages.

Now I want to say a few words about a fast growing part of our industry. You are familiar with decentralized trials or DCT. The IQVIA’s decentralized trial offering combined several tech modules within our OCT suite including e-COA, eConsent, telemedicine and connected devices, as well as other service capabilities, including home nurses and phlebotomy, along with our decentralized trial patient counselors and study coordinators, all organized around our decentralized trial platform. Importantly, we’ve developed innovative clinical patient engagement offerings including direct-to-patient services to accelerate recruitment and improve patient diversity and inclusion in clinical trials.

When we step back and look at the growing importance of DCT in our own portfolio, we find that up to 30% of our active full service trials utilize one or more components of our DCT Offering. Incidentally, when our competitors speak about their own DCT offering. This is often what they report as their DCT business. When we look at trials that actually fully utilize our DCT capabilities, meaning they are fully run on our decentralized trial platform. We’ve been awarded 89 trials to-date, totaling over $1 billion. These awards are with 34 unique sponsors of which 10 have multiple decentralized trials ongoing with us. These trials spent 12 different therapeutic areas, 32 unique indications and have recruited over 200,000 patients in 40 countries, our ability to combine advanced clinical technology with an extensive network of investigators and care professionals differentiates us in this space and makes us the partner of choice for decentralized trials that utilize the full capabilities.

Our overall R&DS business continues to build on its strong momentum. We had approximately $2.6 billion of net new bookings in the quarter, bringing our LTM net new bookings for the first time to over $10 billion including pass-throughs. This resulted in a contracted net book-to-bill ratio of 1.39 including pass-throughs and 1.28 excluding pass-throughs. At September 30, our LTM contracted book-to-bill ratio was 1.38 including pass-throughs and 1.37 excluding pass-throughs. Our contracted backlog in R&DS including pass-throughs grew 12.7% year-over-year to $24.4 billion at September 30, 2021. As a result, our next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter.

As we have signaled several times in the past, we’ve ramped up investments in our lab capabilities. We recently announced the opening of our new 160,000 square foot Innovation laboratories in North Carolina. This facility provides customers with access to cutting edge bioanalytical, vaccine and genomics capabilities, along with an expansion into exploratory human biomarker discovery services. These new services will enable us to partner closely with sponsors in the development of essential biomarkers to support new molecules moving into clinical development and throughout their life cycle. And this expansion of course comes on top of the investment we announced last quarter in our 130,000 square foot facility in Scotland.

I will now turn it over to Ron for more details on our financial performance.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Okay, thanks, Ari, and good morning, everyone. Let’s start by reviewing revenue. Third quarter revenue of $3,391 million grew 21.7% on a reported basis and 21.1% at constant currency. Year-to-date revenue was $10,238 million, growing at 27% reported and 25% at constant currency. Technology & Analytics Solutions revenue for the third quarter was $1,337 million, which was up 10.8% reported and 9.9% at constant currency. Year-to-date, Technology & Analytics Solutions revenue was $4,038 million, which was up 17.6% reported and 14.9% at constant currency. In the third quarter, R&D Solutions had revenue of $1,853 million, up 32.4% at actual FX rates and 31.9% at constant currency.

Excluding the impact of pass-throughs, third quarter R&DS revenue grew 24.7% year-over-year. Year-to-date revenue in R&D Solutions was $5,612 million, up 37.7% reported and 36.2% at constant currency. Finally Contract Sales & Medical Solutions or CSMS revenue of $201 million was up 12.3% reported and 12.8% at constant currency. Year-to-date CSMS revenue was $588 million, growing 6.5% reported and 5.1% at constant currency. And let’s move down the P&L to adjusted EBITDA, which was $728 million in the third quarter, up 20.5%, year-to-date adjusted EBITDA was $2,194 million, growing 33.1% year-over-year.

Third quarter GAAP net income was $261 million and GAAP diluted earnings per share with $1.34. Year-to-date, we had GAAP net income of $648 million or $3.32 of earnings per diluted share. Adjusted net income was $423 million for the third quarter and adjusted diluted earnings per share grew 33.1% to $2.17. Year-to-date adjusted net income was $1,264 million or $6.48 per share. Turning now to the R&D Solutions backlog. As already reviewed R&D Solutions delivered another outstanding quarter of net new business. Backlog now stands at $24.4 billion. In last 12 months, net new bookings including pass-throughs rose to over $10 billion.

Okay. Turning to balance sheet. At September 30th, cash and cash equivalents totaled $1.5 billion and debt was $12.2 billion. This resulted in net debt of $10.7 billion. Our net leverage ratio at September 30th came in at 3.65 times trailing 12 month adjusted EBITDA. Cash flow was again quite strong in the third quarter. Cash flow from operations was $844 million and with capex of $162 million, this resulted in free cash flow of $682 million. This third quarter performance brought our free cash flow year-to-date, that is through the first three quarters to almost $128 billion, which continues the strong improvement trend we’ve had over the past three years. In the quarter, we repurchased $125 million of our shares, which leaves us with $697 million of share repurchase authorization remaining under our latest program.

Okay. Lets turn to guidance. As you saw, we’re raising our full-year 2021 revenue guidance by $188 million at the midpoint, this reflecting the third quarter strength and the continued operational momentum in our business. Our new revenue guidance is $13,775 million to $13,850 million, representing year-over-year growth of 21.3% to 21.9%. Of note that included in this guidance is a $30 million headwind from FX versus our previous guidance. Now looking at the comparison to the prior year, FX is a tailwind of about 120 basis points to full-year revenue growth.

We’re also raising our profit guidance as a result of a stronger revenue outlook. We’ve increased our full-year adjusted EBITDA guidance by $20 million at the midpoint. Our new full-year guidance is $2,980 million to $3,010 million, which represents year-over-year growth of 25% to 26%. Moving down to EPS, we’re increasing our adjusted EPS guidance by $0.10 at the midpoint. The new guidance range is now $8.85 to $8.95, which represents year-over-year growth of 37.9% to 39.4%. Now, our full-year 2021 guidance assumes that September 30th foreign currency rates remain in effect for the balance of the year.

The full year guidance implies our fourth quarter guidance, which we show here and before getting into the numbers, I’ll say for context, you’ll probably recall that last year’s fourth quarter was unusual due to a snap back in the general business as we rebounded from the effects of COVID-19, picked up incremental demand from mega vaccine studies in R&DS and government-related COVID work within TAS. Fourth quarter revenue is expected to be between $3,537 million and $3,612 million, representing growth of 7.2% to 9.5%. FX in the quarter is a headwind to growth of about 100 basis points. We expect fourth quarter TAS revenue growth to be mid single digits, reflecting the expected year-over-year decline in government COVID related work and the FX drag. I’ll note though that underlying constant currency organic growth for TAS will be in the high single digits, which is a level that TAS has recently accelerated. R&DS revenue growth would be in the low teens with services growth in the mid teens despite last year’s difficult comparison due to the COVID vaccine work. CSMS will be slightly down. Adjusted EBITDA in the fourth quarter is expected to be between $786 million and $816 million, up 6.9% to 11% and adjusted diluted EPS is expected to be between $2.37 and $247, growing 12.3% to 17.1%.

So, in summary, we delivered a very strong third quarter with strong results results on both the top and bottom line. R&DS backlog improved to $24.4 billion, that’s up 12.7% year-over-year, next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter. We reported another strong quarter of free cash flow, which at $1.8 million through the first three quarters of the year is a market improvement over prior year. And finally, we are once again raising our full year guidance for revenue, adjusted EBITDA and adjusted diluted EPS.

And with that, let me hand it back over to the operator for questions and answers.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of John Kreger with William Blair.

John Kreger — William Blair — Analyst

Hey, thanks very much. All right, thanks for all the detail around the OCT and DCT offerings, that was great. Curious if you could just take that one step further, what do you think the operational implications are for you guys and your clients, as you see greater adoption of some of these newer technology tools?

Ari Bousbib — Chairman and Chief Executive Officer

Well, I mean, operationally, obviously, that one of the single most important challenge we and actually the entire industry has, is the ability to deploy people again with a strong book of business that we’ve all generated. And so this is a great development because what DCT does is it kind of increase productivity, reduces labor and enables us to essentially execute more efficiently. So I think operationally, we are just adapting to this. Now again, the full productivity only comes when the trial is fully decentralized trials as I explained because there’s a lot of confusion in this space.

As soon as someone uses a digital platform, they say, well we’ve got the decentralized — DCT award here, but that’s not the case. Now if we do that, as I mentioned, about 30% of our full clinical trials, which is just — probably, we have a little bit under 1,000 trials that are full service clinical trials ongoing. So it’s a larger number that already utilizes one or several of our DCT modules: eConsent, eCOA or others, the connected devices. Our clients are experimenting quarter-on-quarter with smaller trials and trying the full DCT platform, which puts together all of the capabilities and the maximum utilization of the digital tools that we have at our disposal. I think hands down I believe we are leader in this space.

John Kreger — William Blair — Analyst

Sounds good. Thanks. And one quick follow-up on staffing. Obviously, we’ve — there’s a lot of talk about a tight labor market. Is that proving to be any sort of a headwind for you guys on EBITDA margins? And have you seen your staff attrition rates change at all as we’ve moved through this year?

Ari Bousbib — Chairman and Chief Executive Officer

I mean, there’s no question about it. It’s not a secret. This is true across industry sectors and in our sector, in particular, since we have such a strong industry backdrop. There’s a lot of competition for talent. We and all of the peers in the CRO space are hunting grounds for talent. So, obviously, we are responding. We are actively recruiting and hiring to meet this demand. We recruit thousands of the employees every year. So we’ve got whole talent acquisition capability that’s global and that’s activity at work.

Does it create cost pressure? Yes, and it’s already included in our guidance. That’s certainly a headwind, but as you well know by now, hopefully, you know that when you look at our overall results, you see that there has been margin expansion despite these cost headwinds. In fact, even when you see in this — past in these Q3 results that our operating margins are flat to slightly declining. When you actually take out the pass-throughs, you actually see that our margin, the operating margins expanded quite nicely. And this is despite the cost headwinds that we have. So, yes, it is a headwind and we have delivered it and offsetting with the usual productivity and efficiency programs that I hope we’ve been demonstrating we’re good at. Thank you very much. Next question.

Operator

And next question is from the line of Eric Coldwell with Baird.

Eric Coldwell — Baird — Analyst

Thanks, good morning. I have a couple as well. First one, I think the number one inbound this morning is on your M&A spend in the quarter, obviously, much higher number than we were anticipating with the myriad deal sizing being known, I’m curious if you could address that in a couple of ways. One, the type of deals, nature of deals, number of deals, but also what impact you expect on a revenue basis, both in the fourth quarter as well as any thoughts on the run rate of the companies that you’ve recently acquired? Thanks very much. And I might have a follow-up as well.

Ari Bousbib — Chairman and Chief Executive Officer

Okay. So let me take the latter part of your question first. In the quarter, the contribution of M&A was minimal. I mean, maybe a little over a point and that’s the same basically for R&DS and for TAS. in the fourth quarter a little bit more than that.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yes in the fourth quarter total company were a little over 1.5.

Ari Bousbib — Chairman and Chief Executive Officer

Yes, 1.5 of contribution to our revenue growth. Now, yes, we had a big spend this year. It’s going to be lumpy, when we announce the acquisition, this is binary, it happens or it doesn’t happen. I will note that we didn’t spend very much last year. I think in the entire year, we spent $177 million and there are quarters where we spent $10 million or $15 million. And this quarter and this year, actually we spent quite a bit more money. As you know, the largest acquisitions we’ve done is simply the consolidation of our joint venture with Quest in the lab business and that was a $760 million transaction, we did in the second quarter. So that represents really a very large portion, almost half of the spend to date.

In the quarter, we were very active. We were — we actually closed only a handful of transactions, the two largest account for the vast majority, I’d say almost 90% in sales, something like 90% of the spend, it’s two transactions only. One is the Myriad RBM lab, which we had announced during our second quarter earnings and it actually closed in the third quarter. It’s a lab that performs sophisticated biomarker detection and testing. It supports early and late-stage drug development in very specific therapeutic areas: oncology, CNS and immunology.

We also purchased DMD. DMD is a leading provider of analytics and digital marketing solutions to healthcare professionals. It brings advanced tech enabled analytics and insights for intelligence, omnichannel marketing and we consider that acquisition to be a strategic asset and yes it did company with a lot of cost benefit. So, these two transactions again is basically the bulk of the spend. [Speech Overlap] You have the second question, right?

Eric Coldwell — Baird — Analyst

Yes, just a clarification on the first one. So the last one, I think you said DMV, if I understood correctly.

Ari Bousbib — Chairman and Chief Executive Officer

DMD.

Eric Coldwell — Baird — Analyst

DMD. Okay, got it. And then is that actually a CSMS segment deal or is that a Tech & Analytics deal?

Ari Bousbib — Chairman and Chief Executive Officer

Yes, it’s a Tech & Analytics deal.

Eric Coldwell — Baird — Analyst

Okay and then my follow-up is my typical burden on you to talk about COVID contributions in 3Q for revenue in bookings, specifically in R&DS, but also other segments as necessary. If you could update on the backlog of COVID work in total in R&DS and then talk about bookings in 3Q related to total COVID related activity would be great?

Ari Bousbib — Chairman and Chief Executive Officer

Yes, I mean, as we signaled COVID work is obviously going to — it continues, it will be, there is a tail to it, but certainly on the TAS segment, it’s a significant step down. We had signaled this before. The government-related COVID work is gradually going away and certainly will step down dramatically in the fourth quarter and going forward. And we’re just going to return — once you eliminate the noise about what happened last year, the TAS underlying organic growth rate is in the high single digits. You will remember TAS historically was a mid single digit grower and in our investor conference in June ’19, we said that TAS would accelerate to high single digits and that’s where we’ve been most of the year. We’ve told you that when we reported prior quarters that the TAS growth rate included significant COVID related work. And excluding that the growth rate was in the high single digits and it remains so when you take out the noise of the compares etc. On the R&DS, can you give us the number.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yes, sure. Look, first, we like to look at the contribution of our COVID to the backlog and if you strip out the mega vaccine trials, Eric, from the backlog of R&DS it’s less than 5% of the backlog. If you take out all COVID related work, it’s less than 10% of the R&DS backlog. And you were asking about the contribution of COVID to revenue I think too in the quarter and look R&DS had very strong growth even accepting the COVID related work. If you take out the large fast burning COVID work, you were in the high 20s for R&DS revenue growth and even if you take out all COVID related work, you were still strong teens growth. So COVID did contribute of course and the work will trail down over time. But the underlying business in other therapeutic areas is very strong and ramping up as we go forward in R&DS.

Eric Coldwell — Baird — Analyst

Thanks very much guys.

Operator

And next question is from the line of Jack Meehan with Nephron Research.

Jack Meehan — Nephron — Analyst

Thanks. Wanted to continue on the COVID conversation, but looking at the TAS business, I think you referenced when talking about the fourth quarter guidance, some headwinds versus the prior year, but could you just maybe talk a little bit about how you feel like the longer-term durability of COVID work in this segment? Just your thoughts around that.

Ari Bousbib — Chairman and Chief Executive Officer

Yes, again, there’s no headwinds in the fourth quarter for TAS. The growth rate is slower simply because it’s a math question, comparing last year’s fourth quarter, which was — which included the COVID work with — and a bunch of noise with the fourth quarter here which eliminates that noise. Again when you eliminate all of that, the underlying organic growth rate for TAS is in high single digits in the fourth quarter. So, there’s no headwind in the underlying business and we expect that trend and momentum to continue. We will, as you know, provide — we generally provide guidance on the year concurrent with the release of our fourth quarter earnings. Last year, because it was such an eventful [Phonetic] year, we decided to give guidance for 2021 concurrent with the release of our third quarter earnings. This year we plan to do it at our November Investor Conference, which is just three weeks away.

Jack Meehan — Nephron — Analyst

Great. And I don’t want to steal any thunder from the Investor Day a few weeks from now, but was curious if you could talk a little bit about some of the puts and takes for 2022. The funding environment as you’re referencing is very strong. Are there any takes that you consider? And then the one thing that stands out to me is pass-throughs. They’ve obviously been elevated this year. Just any color around how that might phase in the next year would be helpful?

Ari Bousbib — Chairman and Chief Executive Officer

Yes, so, I mean, look, it’s always the bother to put things in context and look at the longer-term trend as you’re asking. And if you go back to June ’19, we gave a three-year set of targets for revenue, profit, EPS, capital deployment, leverage etc. Now, no one could have predicted then, but six months later, we would be starting the pandemic, and we would have such disruption across the world for all businesses and including for ours. But when you — and I think people like to look at ’19 to ’21 to kind of try to eliminate COVID. I don’t think that’s fair because the whole COVID effect has not gone yet because you still have disruptions that I just talked about, I think it’s important to look at the three-year ’19 to ’22 timeframe.

And if you go back to the targets we gave, we certainly are running ahead, actually well ahead of the growth rate we predicted for 2022. We are ahead of that and little bit of this is because of COVID and the pass-throughs that you just referred to, but even if you strip that out, we’re still ahead on every single one of the metrics. Now, I don’t know if you are at conference, but as you’re doing now and as your colleagues were doing, trying to push me for even more precision on what the numbers would be, I said then that I was hoping to exit 2022 at a 10% growth rate for the company.

Now I’ve said before, earlier this year that we reached our end of ’22 targets in ’21 and I believe that that momentum will continue into ’22. So that’s all I can say and I have to wait for more precision in three weeks, but I certainly sitting here feel very, very confident that we will certainly exceed those numbers that we gave you two years ago and set the stage for further acceleration beyond.

Jack Meehan — Nephron — Analyst

Great, thank you.

Operator

Your next question is from the line of Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum — Stifel Nicolaus — Analyst

Hi, good morning. Thank you for taking my questions. Hey, Ari, can you talk about where you are in general with the OCE implementations, particularly with like Roche and AstraZeneca? Have you done to the point where the implementations are not a significant drag on the margins that you have to offset in other areas and just where are you seeing the business progress in terms of hitting kind of a steady state of revenue or revenue exceeding the cost to implement?

Ari Bousbib — Chairman and Chief Executive Officer

I mean, you bring up a good point. Implementations are very costly and because we have a large number of wins and I referenced an additional 10 new wins. So every time you — a new award again you have to implement. So it’s not like generating the license revenue, you still have to implement the new one that you sold and we’re happy we did. So, we’re not past that headwind, if you will, in terms of the implementation costs. That’s a significant drag and we’re not seeing yet [Indecipherable] that inflection point where you now essentially plateaued your market penetration. And you’re essentially sitting tight and collecting license revenue for more of these installations, we’re not there.

Shlomo Rosenbaum — Stifel Nicolaus — Analyst

Okay and then just this one is for Ron. The free cash flow was incredibly strong, something just more this year, 33% more than you had all of last year, which was I think a record of quarter. Can you talk about what’s going on? There was a significant increase in unearned revenue and some other working capital changes and how should we be thinking about this on a go-forward basis, obviously very healthy numbers. Is this something that you can keep up or is it more adjusting in catching up on some of the working capital items?

Ari Bousbib — Chairman and Chief Executive Officer

Well, Shlomo, we’ve made a really concerted effort internally here to improve our processes around receivables, which of course is one of our largest classes of assets. We don’t have the inventory, we don’t have manufacturing or receivables there, really where we have a lot of our assets, other than our deferred software investment and that’s been — our efforts have been on several fronts. First off is collecting on time. We had a — you got back a little while, we had a large amount of overdue receivables and that’s just kind of focused to go and collect what to do for a must.

The next is billing on time. I mean we had a large amount of unbilled receivables and that comes down to internal processes about billing more quickly in a more timely fashion. So we get paid in a more timely fashion. And of course the third that you mentioned, is the deferred revenue, the customer advances that we get. We again made an effort internally to negotiate contracts with our customers. So, we get paid more upfront. So, we’re not out of pocket and this has helped substantially and I expect all three of those to continue to be a driver of strong cash flow in the future.

Now, of course, having said that cash flow is lumpy, quarter-to-quarter, it’s difficult to predict and you do get instances where you’ll get an unusual amount of advances because some of the work you’re doing that will burn out off over time and then rebuild up. So I would urge you not to focus too much on the quarter-to-quarter, but yes, what you’re saying is that fundamentally we’ve improved our collections processes and improved our underlying free cash flow generation as a result.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yes, I mean if I just — I’d do that very briefly, the performance, but let’s be honest. This was a bad point for us and I think some of you have pulled that out, the past three years or so. Our cash flow performance was simply very poor. So the fact that we are now performing very well, it’s not an unusual thing, I mean I think not too long ago in 2018, we generated just barely over $600 million of free cash flow for the entire year. And here we are, three quarters into the year, we believe we generated 3 times that number. Obviously, we’re a much bigger company and so on, but look our performance was just not good. And we said that and it was on us, and we worked on it and we continue to pay attention and have the right metrics and the right incentives and the team focused on it. And as always, when we [Indecipherable] something it improves and that’s what happened in the year and where we are now is the normal, not one year.

Shlomo Rosenbaum — Stifel Nicolaus — Analyst

All right. Thank you.

Operator

Your next question is from the line of Dave Windley with Jefferies.

Dave Windley — Jefferies — Analyst

Hi, thanks, good morning. Good morning, folks. Appreciate you’re taking my question. I wanted to follow up on, I believe, John Kreger question around DCT. He asked around operational, Ari. I wanted to ask around financial. As it seems like you now have a pretty substantial number of trials where you’re running pretty fully on your DCT platform. I’m wondering if you could relate to us what — how that changes the dollar value of a trial and does that give you the opportunity to garner more margin in that trial because of the technology enabled efficiency?

Ari Bousbib — Chairman and Chief Executive Officer

Yes, I mean, look, there’s a high degree of interest from clients, okay, on how to operation of DCT, and it’s not like it’s going to overwhelm and all of a sudden become 100% overnight. As I said, large pharma in particularly is experimenting, a lot of trials, are using one composer or the other. So it’s kind of fixed off. So this is not mixture or after that we’re going to have to face the issue that you’re raising. Our experience, customers are striving with how to make various point solutions fit together. So, we are actually very — been very aggressive here. We want to move to — we’ve said this since the merger opened five years ago, we want to accelerate and not slow down, technology introduction and changing the model.

Now obviously your question you asked is a question that was asked of us many years ago, which is, as you seek to replace labor in a model that where pricing is largely based on labor inputs then aren’t you lowering the value of the trial and etc., what I mean to get to the margin. So we don’t believe so. As you know, we had a long run efforts to switch pricing to value and deliverables and outputs, that’s number one and that has made substantial progress. Our clients, I’m not looking at saving couple of pennies here or there. They’re looking at getting what they need — the answers that they want faster, more efficiently with less error and with a higher quality. And they are willing to pay a premium for that. Now, they’re going to pay more than what they were paying before, but they’re not going to pay less that what they’re paying before.

And still, now, the margin implication is correct. Over time, the more we deploy technology, the less we need people, the more there is going to be material. So I think it’s too early to comment on the exact margin impact for this overall. We are monitoring. We do not anticipate these to disrupt our margin performance. R&DS is a very long-cycle business. We have — I mentioned 89 fully decentralized trial ongoing that we won, but we’re working on, if you look at, as I said, just on the, maybe 900 to also full service trials. So it’s a fraction of that. As you look at the total trials we’re involved in, it is over 2,500 clinical trials that we’re involved in globally. So it will take some time to penetrate. It is a slow moving business. But it’s a good point. We are totally focused on it. We do not anticipate the margin, I’m sorry, a value deterioration. We do anticipate the margin accretion over the long term.

Dave Windley — Jefferies — Analyst

All right. If I could ask a second follow up around — a question on COVID. It seems like a lot of focus on how much revenue now and how much in backlog now, it seems equally important to me, if not more so to focus on how that will phase out. And I think you’ve made comments in the past that you see projects booked out through ’22 and maybe even into ’23. Would it be appropriate to call the COVID contribution kind of a soft landing, so to speak, that it’s not going to drop off, it’s just going to slowly taper over time? Is that the right way to think about it?

Ari Bousbib — Chairman and Chief Executive Officer

On the R&DS business, absolutely. No question, what you said is exactly what I would say. It’s a soft landing ’22, ’23 and it’s frankly we get lost in the rounding.

Dave Windley — Jefferies — Analyst

Very helpful. Thank you.

Ari Bousbib — Chairman and Chief Executive Officer

Unless, of course, god forbids, there’s another variant or another COVID or another, but right now as we see based on what we know today, it’s a soft landing. We get lost in the rounding by ’23.

Operator

Next question is from line of Dan Leonard with Wells Fargo.

Ari Bousbib — Chairman and Chief Executive Officer

Thank you and good morning. Can you comment on trial site operations? Are there any continued bottlenecks you flag or is site activity normalizing? Ron.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Yes, look, the site accessibility numbers remain around 80% or so, but look — but we’ve managed to work around that and operate it close to normal and not all sites are equal, the larger sites are open and that hasn’t been any issue for us. We’ve seen site startups and patient recruitment at near pre-pandemic levels, not quite, but near pre-pandemic levels. The patient visits are still lagging a little bit, just gradually coming back. And so when we look at our overall operations, we’re not totally back to pre-pandemic level yet and we expect a gradual improvement over time back to pre-pandemic levels, but it really hasn’t been a major issue for our operations. As already mentioned in his opening remarks, we’ve learned how to manage through and around.

Ari Bousbib — Chairman and Chief Executive Officer

Yes, I mean, all the numbers that — I’ve got the numbers here in UK, but basically they’re over between 80% or so across all of those metrics and will be higher for site startup, which is more, again as percentage of 2019 base levels. Okay. So site startup is a little higher, is that more 85% or thereabouts globally. The bottom line is these metrics that we see provide confidence that the non-COVID trial pipeline is not only being awarded as you can see from the strong new bookings, but it’s also starting to be delivered. The sites are enrolling, the patients are enrolling and the patient visits are ongoing. So, I think there hasn’t been any major change in — change from this as a result of the new variants or anything like that.

Dan Leonard — Wells Fargo — Analyst

And as a follow-up, Ari, can you comment on perceived market share trends in R&DS in the quarter? You’ve been pretty open about the various strategic actions by your competitors potentially allowing an opportunity for share gain?

Ari Bousbib — Chairman and Chief Executive Officer

Look, it’s hard to look at market share in a given quarter, okay. It’s lumpy, a trial can be awarded at the end of quarter or the first day of the following year. I wouldn’t look at — we like — as long as — we’ve — we were defeated and Ron gave you quarterly book-to-bill ratios, but really we don’t — we believe we should focus on longer term book-to-bill ratios because it’s lumpy and focus also on the business from the backlog over the next 12 months. Now if you look at our competitors, there’s been a lot of disruption and yes, I mean that conversation with customers, but just as you’re going to win a new customer overnight, you don’t the CRO overnight during the middle of trials. Right? So some of those mergers will have an impact on market share. I think it’s favorable to us, maybe will remain the last CRO, I don’t know, but we feel that — we know from experience what a merger and the large acquisition does to the underlying business, there’s all disruption, there’s people who lose their jobs, people who don’t like the new arrangements and that’s just life and the result of that in some market share. We had that problem after our merger in ’16, let’s be honest about and we had some market share issues which we rebounded once we put together the company and integrated. I think we are — the future is very bright for us. We continue to gain new customers and the biotech environment in particular is extremely, extremely hot right now. We are gaining new clients. In Europe, we’re making imbalance with the customers we never had before in Asia as well. And the teams are extremely energized and I feel we are on a winning momentum here and there’s no doubt that we look back. We feel that our market share has improved.

Dan Leonard — Wells Fargo — Analyst

Appreciate all the context. Thank you.

Ari Bousbib — Chairman and Chief Executive Officer

This is going to be our last question of the day.

Operator

And your last question comes from the line of Patrick Donnelly with Citi.

Patrick Donnelly — Citi — Analyst

Thanks for fitting me in guys. Ari, I want to follow up on that last question. You talked a little bit about kind of all the mergers going on in the space, again headcount disruptions. Following up on one of the earlier questions in terms of labor costs. Does that position you guys better in terms of being able to acquire some talent pick up battled around during some of these mergers, kind of being stable shift there and kind of grab some people, maybe at not quite the inflationary costs we’re seeing in the labor side? And then secondarily to that, maybe with a focus on R&DS, how much can you pass some of these price increases on to customers? I know, full service contracts and backlog are particularly tough to adjust, but just wondering how much you can pass on in terms of some of the price pressure you’re getting there?

Ari Bousbib — Chairman and Chief Executive Officer

Okay. Well, on the personnel question, you’ve got to differentiate between the executive management leadership level and then the actual field force of CRAs etc. So on the first group, general, the first category. Yes, there is an opportunity to bring in talent that somehow, satisfied with where they are and then that will or may occur and it has happened already in few cases. Again, these are small numbers. On the CRAs and the project leads and so on that’s much more difficult because it’s driven by the book of business and by the execution that our competitors are also in the midst of trials and they need those people as much as we do. So there is no — not much, there’s just an inflation on wages, which is the result of all the factors we talked about before, but that doesn’t — the mergers don’t affect at least immediately the CRAs and the people in the field. Your other question had to do with…

Patrick Donnelly — Citi — Analyst

With pricing, if they’re willing to pass them on cost.

Ari Bousbib — Chairman and Chief Executive Officer

Yes, so as you noted yourself in your question, it’s very hard. You can — we sold projects as we sit on assumptions and there are some escalations and some factors built into those contracts. So that will be reflected. But by and large, the pricing was set based on different assumptions and when you have higher costs then you have to absorb that. But then as we move forward, obviously, the pricing is effective. There’s no magic here, it’s all going to get passed on and then there’s no secret. But it’s going to lag because of the nature of our business, certainly in the RMBS business.

Ron Bruehlman — Executive Vice President and Chief Financial Officer

Right and of course on the TAS side of the business, shorter cycle business, greater ability to pass along cost increases.

Ari Bousbib — Chairman and Chief Executive Officer

Right, but there’s less labor. So that’s incorrect. That’s right.

Patrick Donnelly — Citi — Analyst

Okay, thank you guys.

Nicholas Childs — Senior Vice President of Financial Planning and Analysis

Thank you very much. Thank you everyone for joining us today. We look forward to seeing everyone on our Investor Day in a few weeks. If you have any other follow-up questions, feel free to reach out, we’re happy to answer them. Thanks for joining today.

Operator

[Operator Closing Remarks]

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