ICON Public Limited Company Q3 FY2025 earnings call

• Barry noted Q3 performance was broadly in line with expectations, with gross business awards totaling $3 billion, up mid-single digits year-over-year, broad-based across customer types. - Revenue increased sequentially and year-over-year, driven by therapeutic mix. Burn rate was flat at 8.2%. $250 million in shares bought back in Q3, year-to-date repurchases $750 million. Free cash flow was $334 million in Q3. - Net book-to-bill was 1.02x, impacted by $900 million in cancellations. - Focus on accelerating top-line growth, rigorous cost management, deployment of novel technologies, balanced capital allocation. Priorities include expanding opportunity flow and win rates in biotech, diversifying revenue streams in large pharma, increasing market share in midsized segment, and accelerating growth in labs, early phase, and FSP business. - Emphasized investment in enhanced resource demand management and allocation technologies to scale workforce. - Differentiation based on capability, expertise, solution design, and technological disruption of clinical trials process.

Revenue in Q3 was $2.043 billion, up 0.6% year-over-year and 1.3% sequentially. Adjusted EBITDA was $396.7 million, with an adjusted EBITDA margin of 19.4%. Cash from operating activities was $387.6 million, resulting in free cash flow of $333.9 million for the quarter, and year-to-date free cash flow was $687.2 million. Net debt was $2.9 billion at September 30, 2025.

• Full year 2025 revenue expected to be in the range of $8.05 billion to $8.1 billion, and full year adjusted earnings per share in the range of $13 to $13.20. - No 2026 guidance provided yet, but outlook influenced by RFP flow, cancellations, technology deployment, and ability to sustain positive trends. Focus on executing strategy with emphasis on top-line growth, cost management, technology deployment, and capital allocation.

• Elevated cancellations of $900 million in Q3, impacting net book-to-bill. - Pricing pressure and revenue mix weighing on gross margins in the near term. - Market volatility, including regulatory and geopolitical uncertainties, affecting customer spending and project timelines.

Q: Could you dive a little bit more into the cancellation dynamics?

A: Barry said cancellations were broadly in line with projections, biased towards studies awarded prior to Q3 and canceled before commencing enrollment, and expected conditions to remain similar through rest of 2025, with moderation expected in 2026.

Q: Dive in on some of the gross margin commentary?

A: Nigel said pass-through revenue mix was weighing on margin, pricing competitiveness increasing, and ICON managing cost base by adjusting resourcing and leveraging technology.

Q: Discuss industry environment bifurcating between pharma and biotech?

A: Barry said there were positive indicators like RFP flow and gross bookings, but environment was still mixed, with encouraging signs but still untangling consequences of past volatility.

Q: Get more color on competitive pricing environment?

A: Barry said environment was more competitive in 2025 but not worsening, with pressure more from large pharma, and ICON focusing on predictability for biotech customers.

Q: Follow up on margin question, pass-throughs?

A: Nigel said pass-throughs increasing in revenue mix weighing on next year's margins, pricing environment tougher this year but more of a factor next year, and ICON managing through efficiency and technology.

Q: Follow up on margin, pass-throughs percentage?

A: Nigel said they don't break out pass-throughs as a percentage of gross revenue, but noted increasing pass-through component, and Barry said RFP activity in cardiometabolic areas with high pass-through load increased.

Q: When looking at backlog and bookings, how have ratios changed?

A: Nigel said ICON books on award rather than contract, and cancels were a mix of non-contracted and contracted, with ICON closer to end of post-volatility disruptions.

Q: Follow up on biotech RFP flow and win rates?

A: Barry said biotech RFP flow increased, but win rates were materially flat, with ICON focusing on converting RFP flow to higher book.

Q: Pricing and pass-through component, short term vs long term?

A: Barry said environment is stable and competitive, driven by upstream dynamics, and expected to graduate to normalized levels as things normalize.

Q: Balance labor force stability and margins?

A: Barry said headcount moved slightly, attrition near historic lows, focusing on efficiency and resource management.

Q: Cancellations in 2026 risk? BARDA-funded trials?

A: Barry said cancellations likely to remain elevated in Q4 2025, and BARDA-funded trials change to upside, with confidence in normalized cancels in 2026 but not linear.

Q: Burn rate and bookings visibility?

A: Barry said cancels skewed towards 0% burn rate studies, gross bookings drag on burn rate, and Nigel said burn rate expected to be around 8% as anticipated.

Q: Strength in early phase work?

A: Barry said early phase work continued to show strength with double-digit year-over-year growth.

Q: Trial mix driving pass-throughs, automation progress?

A: Nigel said trial mix included cardiometabolic and other areas, and Barry discussed progress in automation and AI-enabled technologies for efficiency.

Q: Margin benefit from technology investments, customer conversations?

A: Barry said ICON is having conversations with customers about co-developing technologies and revisiting commercial terms as efficiencies increase, with Nigel noting scale and customer service philosophy in sharing benefits