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IQVIA Holdings Inc.  (NYSE:IQV)
Q3 2018 Earnings Conference Call
Oct. 22, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the IQVIA Third Quarter 2018 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. As a reminder, this conference is being recorded Monday, October 22, 2018.

I would now like to turn the conference over to Andrew Markwick, Vice President, Investor Relations. Please go ahead.

Andrew Markwick -- Vice President, Investor Relations

Thank you, Jennifer. Good morning, everyone. Thank you for joining our third quarter 2018 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer; Michael McDonnell, Executive Vice President and Chief Financial Officer; Eric Sherbet, Executive Vice President and General Counsel; and Nick Childs, Senior Vice President, Financial Planning and Analysis.

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 on the Events & 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. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with company's business, including the impact of the changes to the revenue recognition accounting standards, which are discussed in the company's filings with the Security 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

Thanks, Andrew, and good morning, everyone. Thank you for joining our third quarter 2018 earnings call. I'm pleased to report that Q3 was another quarter of strong financial performance, and once again, we reported results at the high end or above our guidance ranges.

To review the numbers, the third quarter revenue of $2,594 million came in at the high end of our guidance range, and that's despite a headwind from FX of approximately $10 million. Revenue growth was 6.3% at constant currency. Technology & Analytics Solutions revenue was strong, despite the traditional Q3 demand softness on the commercial side of the business. Constant currency Technology & Analytics Solutions revenue growth was 15% in the third quarter. And again consistent with the first and second quarter, organic constant currency growth was about 4%. I think actually year-to-date constant currency organic growth rate on Technology & Analytics Solutions was over 4%.

R&D Solutions revenue grew 3.5%, at constant currency. Early in the third quarter, we marked the anniversary of all acquired R&D businesses, and therefore this growth is organic. As you know, we've experienced some quarterly lumpiness associated with the timing of revenue recognition and pass-through under ASC 606. In fact, pass-through this quarter cost us several hundred basis points of R&D growth. As expected, third quarter Contract Sales & Medical Solutions growth was down about 12% at constant currency.

Switching to profits, adjusted EBITDA of $561 million was above our guidance range, and it grew 8.4% at constant currency. Third quarter adjusted EBITDA margins expanded 80 basis points reported and 40 basis points at constant currency, reflecting the continued impact of our synergy realization and cost containment initiatives.

Let's look a bit at our year-to-date margin expansion. Year-to-date revenue conversion contributed a 120 basis points of margin expansion and all cost takeout actions contributed a 140 basis points of margin expansion. As you know, we've been making investments in our technology suite, technology acquisitions, our next generation of clinical development offering, and the expansion of our real-world platform. All of these initiatives have a dilutive impact on our margins. These items, all net to 70 basis points of year-to-date margin expansion at current currency -- I'm sorry, at constant currency. Adjusted diluted EPS of $1.42 grew 19.3%, and was again at the high end of our guidance range. This result was driven entirely by our strong operational performance.

Want to spend a few minutes on a couple of important partnerships and how we're doing in the market. You will have seen that we announced the expansion of our partnership with Salesforce. This follows the successful launch of our new Orchestrated Customer Engagement or OCE platform, which is powered by Force.com, Marketing Cloud, and MuleSoft. The team is now working in close collaboration with Salesforce to develop orchestrated clinical trials or OCT, a first of its kind suite of integrated clinical applications designed to make clinical trials more efficient. We are very excited that this technology will be powered by Health Cloud, and we're looking forward to working with Salesforce on joint go-to-market initiatives

We continue to have success in the market with OCE, and the recent number of smaller wins continues to drive momentum. Since we launched OCE in December, we have now won 15 out of 20 competitions in this space. We will have seen -- you will have seen that we've issued a press release last week announcing that our OCE platform was selected by Roche for global deployment. In addition, the deal includes our ePromo, MDM, and Organization Manager applications.

We are committed to invest in the success of this milestone agreement, as obviously strong execution here we've strengthened the offering in the marketplace, and continue to highlight our global deployment capabilities. In the real-world space, the team signed an important collaboration with Genomics England, but we will work together to launch the first real-world research platform with integrated clinical and genomic data.

R&D Solutions had a record quarter of contracted bookings. Our third quarter contracted net new business excluding pass-through was $1.7 billion, which resulted in a book-to-bill of 1.69 for the quarter. Bookings growth was over 40% compared to the third quarter of 2017. We are excited about the trajectory of our contracted NNB, but remember, this is a long-cycle business, and bookings today will take a while to be reflected in revenue.

The next generation clinical development team continues to drive this. We had another strong quarter with gross new business awards of over $600 million, which excludes pass-through associated with this revenue. This means that less than two years into the merger, we have almost $3 billion of awards that leverage our core enabled capabilities, again excluding pass-through.

With that, let me turn it over to Mike McDonnell, our Chief Financial Officer.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Thank you, Ari, and good morning, everyone. As already mentioned, we reported strong third quarter financials. Let's review the results.

Third quarter revenue of $2,594 million grew 6.3% at constant currency and 5.2% reported. Year-to-date revenue of $7,724 million grew 6.4% at constant currency and 7.6% reported. Third quarter Technology & Analytics Solutions revenue of $1,014 million grew 15% at constant currency and 12.9% reported. Technology & Analytics Solutions, year-to-date revenue of $3,010 million grew 12.5% at constant currency and 13.8% reported. Year-to-date, Technology & Analytics Solutions organic revenue was over 4% at constant currency.

R&D Solutions revenue of $1,382 million grew 3.5% at constant currency and 3.1% at actual FX rates. Year-to-date, R&D Solutions revenue of $4,097 million grew 5.8% at constant currency and 6.8% at actual FX rates. Year-to-date, R&D Solutions organic revenue growth was about 4.5% at constant currency.

Contract Sales & Medical Solutions revenue of $198 million declined 11.9% at constant currency and 12.8% reported. Contract Sales & Medical Solutions year-to-date revenue of $617 million declined 13.3% at constant currency and 11.7% at actual FX rates.

Now moving down to P&L. Third quarter adjusted EBITDA of $561 million grew 8.4% at constant currency and 9.4% reported. Year-to-date adjusted EBITDA grew 10% at constant currency and 10.6% reported, resulting in adjusted EBITDA year-to-date margin expansion of 70 basis points at constant currency and 60 basis points reported. Third quarter GAAP net income was $60 million and GAAP diluted earnings per share was $0.29.

Adjusted net income of $294 million grew 13.1% in the third quarter. Growth was primarily driven by stronger adjusted EBITDA of tax efficiencies, partially offset by higher interest expense. Third quarter adjusted diluted earnings per share of $1.42 grew 19.3%. Year-over-year growth was driven by higher adjusted net income, which I just discussed, as well as the lower share count year-over-year. Year-to-date, adjusted diluted earnings per share of $4.05 grew 21.3%.

Let's spend a few minutes on R&D Solutions' net new business. Last 12 months contracted net new business excluding pass-through at September 30, 2018 was $5.37 billion, which represents year-over-year growth of 22.9%. As you know, we now report backlog including pass-through. On this basis, we have had good backlog progression over the last four quarters, and at September 30, 2018, closing backlog was $16.4 billion.

Now, let's have a look at the balance sheet. At September 30, cash and cash equivalents totaled $827 million and debt was $10.6 billion, resulting in net debt of about $9.8 billion. Our gross leverage ratio was 4.9 times trailing 12 months adjusted EBITDA. Net of cash, our leverage ratio was 4.5 times. Cash flow from operating activities was $344 million in the third quarter. Capital expenditures were $123 million and free cash flow was $221 million.

During the third quarter, we repurchased $133 million of our shares, resulting in $792 million of year-to-date share repurchase at an average price of $105.34. Since the merger, we have completed $4.4 billion of share repurchase at an average price of $86.07. At September 30, we had $889 million remaining under our share repurchase authorization.

Let's now turn to 2018 guidance. We are updating our full year guidance ranges for revenue, adjusted EBITDA and adjusted diluted EPS.

As you know, revenue guidance has been raised twice this year, largely to reflect our stronger organic performance. Unfortunately, foreign currency has now turned against us. But despite a $35 million headwind from FX for the balance of the year versus our previous guidance, we are reaffirming the midpoint of the full-year guidance range. We now expect revenue to be between $10,300 million and $10,350 million and that represents year-over-year growth of 6.2% to 6.7%.

Now it's still too early to guide to 2019 as we're in the middle of our planning process. But recall, at the beginning of this year, we guided 2018 revenue under the new accounting standard, including pass-through and our declining Contract Sales and Medical Solutions business. This guidance was 3% to 5% growth and included a tailwind from FX of about a 100 basis points. As you know, we are beating this original guidance despite the FX headwinds we are experiencing in the second half of the year.

Again, it is too early to guide 2019. We expect to do this on our fourth quarter earnings call in early February. But we do want to share what we currently see on our top line for 2019 from a currency perspective. As we sit here and looking at rates today, assuming they stay unchanged in 2019, and compare these rates with the average rates of 2018, it would result in a headwind of about $125 million worth constant currency revenue growth in 2019.

Now back to 2018, adjusted EBITDA guidance has been raised by $10 million at the midpoint. We now expect full-year adjusted EBITDA to be between $2,195 million and $2,225 million, representing year-over-year growth of 9.2% to 10.7%. Adjusted diluted EPS guidance has been raised by $0.05 at the midpoint. We now expect full year adjusted diluted EPS to be between $5.45 and $5.55, which represents year-over-year growth of 19.8% to 22%. Our adjusted book tax rate is still expected to be approximately 23%. This guidance assumes current foreign currency rates remain in effect for the rest of the year.

So in summary, we delivered another quarter of strong financial results. Year-to-date, adjusted EBITDA margins expanded 70 basis points at constant currency. We extended our partnership with Salesforce to develop a suite of clinical trial technology. OCE continues to drive momentum in the market with Roche becoming an important reference client. Our RWI team signed an important collaboration with Genomics England to launch the first real-world research platform with integrated clinical and genomic data.

R&D solutions LTM contracted services net new business grew approximately 23%, supported by record contracted bookings in the quarter. We executed $133 million of share repurchases in the quarter, bringing the total post-merger repurchase to $4.4 billion at an average price of $86.07, and we've reaffirmed revenue guidance for the year and we've raised our profit guidance.

And with that, I will ask the operator to open the lines for Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) The first question comes from the line of Robert Jones of Goldman Sachs. Please proceed with your question.

Robert Jones -- Goldman Sachs -- Analyst

Great. Thanks for the questions, Ari and Mike. I guess, just appreciate the perspective, Mike, on FX, and I know you're not in a position as you mentioned to give guidance on 2019. But I wanted to just ask a question on the R&D segment specifically. You sit here today on a trailing book-to-bill of 1.38, conversion rates have been fairly steady ticked down a little bit this quarter for you guys. So just was hoping maybe you could share some perspectives on when we should start to think about the top line accelerating more commensurate to the levels of the type of bookings growth that you guys have been experiencing ?

Ari Bousbib -- Chairman and Chief Executive Officer

Hey, maybe I'll say a couple of words, and Mike and Andrew, feel free to chip in. Look Bob, we'd like to see this today. You bet. It is a long-cycle business. We always said since the time of the merger that we would begin to see the benefits of the merger on our top line exiting third year after the merger. That's not going to be before the end of 2019, and we are sticking to that plan and target.

Now, having said that, you are correct, we are actually doing probably better than we expected in terms of our market share gains and bookings, perhaps a little early than we had anticipated. But I do want to remind you that today -- and we're going to have this for the next quarter or two, we are executing backlog that was sold, booked before the merger, and you may want to have some perspective and recall that in some quarters before the merger we actually had book-to-bill ratios that were below 1. And so we are in a sense fighting that adverse set of bookings and had it been at least above 1, and maybe we would start to see some truck, some growth accelerating earlier than the end of 2019.

But again, we are delivering growth in R&D. Despite this backlog issues prior to the merger, we are delivering growth that's, I think, better than all of us were expecting. Year-to-date, what's our R&D growth?

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Year-to-date organic was about 4.5%.

Ari Bousbib -- Chairman and Chief Executive Officer

(multiple speakers) overall.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

And the only thing I would add as well is, don't forget we've moved to the new accounting standards on 606. This is our first year of implementing and we recast last year. We're seeing some lumpiness as we go through the year, that I think and Ari mentioned it in the prepared remarks, under 605, we would have been several hundred basis points higher.

Ari Bousbib -- Chairman and Chief Executive Officer

Right, right, right.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

We got to translate this through to the new accounting standard as well.

Ari Bousbib -- Chairman and Chief Executive Officer

Right. If you add that -- if you add -- the headwind -- again pass-throughs are pretty much where we thought they would be. They are kind of flattish year-over-year and it's -- that's creating a headwind to our growth of several hundred basis points consistent with what we've had since the beginning of the year.

Robert Jones -- Goldman Sachs -- Analyst

Got it. And then I guess, Ari, just one quick follow-up. You usually share a little bit the prepared remarks on the sources of bookings, obviously another big quarter as you mentioned of wins for you guys on the R&D segment. So just was hoping maybe you could give us a little bit on the sources of the strength, big pharma versus emerging biotech, and maybe if there was any individual single outsize wins in a quarter that really help bolster that bookings number.

Ari Bousbib -- Chairman and Chief Executive Officer

Yes, I mean, I've got some numbers here. Thanks for the question. Year-to-date, if you look at gross new bookings in the EBP segment, which continues to be very, very strong, frankly, in the marketplace, and for us in particular, as you know, we put renewed emphasis on the go-to-market in EBP, since after the merger. Year-to-date, we're up 73% or 75% whatever (inaudible).

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Year-to-date, 78%.

Ari Bousbib -- Chairman and Chief Executive Officer

78%, right. So, almost 80%. In the quarter, actually growth is, even I'm afraid of mentioning the number, but it is just under 90% growth in the third quarter for EBP our gross new booking. So again, I think I mentioned that year-to-year, maybe I didn't mention this, on a year-to-date basis, gross new business awards which probably is the best way to look at market share, this is awards, not contracted and is on a gross basis, they grew year-to-date 30% in aggregate. So again, very, very strong. But again a big, big piece comes from the growth in EBP. So, yeah.

Robert Jones -- Goldman Sachs -- Analyst

Okay. Thank you very much.

Andrew Markwick -- Vice President, Investor Relations

Next question, please.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Thank you.

Andrew Markwick -- Vice President, Investor Relations

Next question, please, operator.

Operator

Our next question comes from the line from Ross Muken with Evercore ISI. Please proceed with your question.

Ross Muken -- Evercore ISI -- Analyst

Good morning, gentlemen. So, I wanted to go back on the technology business. Obviously, you had the phenomenal Roche announcement. It seems like that will give you more sort of selling cloud in the universe, and obviously you talked about sort of the competitive wins. Just help us paint a picture of kind of where we are in that process, and how this sort of competitive sell-through is going? Obviously, you have the very dominant market position already, and now you're selling in kind of a new technology capability. And so see someone like Roche take everything on obviously quite impressive. Do you think there will be more things like that? Do you think it's going to help you on sort of singular replacement? Just give us a little bit of flavor for how you're going to use that as a means of trying to push others in industry in a similar sort of direction?

Ari Bousbib -- Chairman and Chief Executive Officer

Yes, thanks for the question. Look, I want to answer the question more from a strategic standpoint. If you look at what we've been doing and if this was true before the merger of IMS, and certainly has continued and accelerated since the merger of IQVIA. A very significant area for investments for us is to embed data analytics and technology in everything we do. And the reason I believe this is very important to understand is, look, we don't want to be in commoditized businesses. We want to add value to our customers. We want to sell based on outcomes and value and on performance. We want to embed strong intellectual property in everything we do and build long sustainable partnerships with our clients well into the future, and gain a bigger share of their spend.

If you step back, our pharma clients globally spent well over $200 billion in the type of stuff that we offer. We are the largest provider of these services by far across the board at over $10 billion of revenue a year versus our competitors in any of the segments that we compete in. And so even we are the largest in any of these businesses and that still represents less than 5% market share of the total spend. There is no one in the world of pharma that doesn't buy something from us. So we already are present, as you say, in all of these clients, and we have a great commercial footprint that we can continue to leverage and try to gain share of that spend. That's our strategy.

And technology is front and center of the core of these. So with respect to the segment -- narrow segment of CRM, and as we redefined it, OCE, our strategy has been to integrate applications across the board to make it a seamless experience for our clients, and deliver SaaS applications that are very easy to use, easy to plug in that leapfrog what's already in the market. We've had this great collaboration with Salesforce that led to the OCE platform we launched in December. We believe it's the next generation solution.

It obviously is built on a more advanced Salesforce platform than anything that was in the market before. So, it benefits from that added functionality and standardization, and we think that this is what we want at Roche, and this is a large global deployment in over a 100 markets. It's very significant in every dimension you can think of, and you can be sure that we've been discussing similar type of engagements with all of the large pharma. Now regretfully, we are on a different platform now, and it's a higher ramp and we need to get to the point where they are going to consider switching over and we are working on that. Having said that anyone else who is looking for a new platform typically we've been winning in the vast majority of the cases, and we will continue that.

Now I also want to say a word about our expansion in clinical technology. We made a lot of investments right off the bat, immediately after the acquisition. That's why we spent a lot of money in acquisitions, the first year, last year. You see that this has tampered (inaudible). I don't think we did much acquisitions this quarter.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

$28 million.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, $20 million, $28 million, to get really nothing. And we've built, I think, a very, very strong set of capabilities which we are now integrating. We're going to do this on Health Cloud with Salesforce. We've expanded our partnerships. They are very excited about it, we are very excited about it, and it's going to be even more integrated on the commercial side because this is new. There is really no competition out there. People have point solutions once again, and we're going to take our orchestrated clinical technology or OCT to market as soon as we're ready. The technology will cover areas such as regulated content management, regulatory compliance, and of course, the virtual trials that we've been talking about. So, again, we're very excited about this, and we believe this will differentiate us in the marketplace and accelerate our penetration of pharma. Thank you.

Ross Muken -- Evercore ISI -- Analyst

Thanks, Ari. Very comprehensive.

Andrew Markwick -- Vice President, Investor Relations

Thanks. Can we take our next question, operator?

Operator

Thank you. Our next question comes from the line of Erin Wright with Credit Suisse. Please proceed with your question.

Erin Wright -- Credit Suisse -- Analyst

Great, thanks. How should we be thinking about the quarterly progression of some of the incremental expenses associated with some of the near-term investments? You called out an IT systems and other initiatives in the prepared remarks, and more broadly, where do we stand now in terms of those underlying cost savings or integration synergy targets. Thanks.

Ari Bousbib -- Chairman and Chief Executive Officer

Thanks, Erin. In terms of margins, you're right, I mean, all the things I just mentioned don't come for free certainly next-gen capabilities buildup continues to be a headwind because we continue to higher -- in a tight market, very expensive highly qualified data sciences, it's probably the single most sought after skill sets. Everyone wants to be in artificial intelligence and predictive analytics and machine learning, and that's what we're all about. We've been talking about this long before. It's become a buzzword. We continue to invest in this area. We continue to invest in our technology suite and development program with Salesforce as I discussed.

And of course the implementation, I mean, look the first year of implementing in our large deployment, like the one with Roche is not going to sell your profitable endeavor for us. So these clearly our headwinds, but we are committed to continue to deliver margin expansion. Obviously, as we deploy in the years ahead these technologies and there is less of that headwind, then obviously margins should continue to increase at a much faster speed than they are. If you eliminate, that's why I wanted to share with you the year-to-date margin expansion, at constant currency, you can see that absent the headwinds, we have expanded margins a lot more. There is a revenue drop too of course from accelerating revenue growth and then there is all the cost containment and the integration synergies, which we are very on track to deliver.

I think we are little ahead, probably on the cost targets, you will remember, we had $200 million of cost takeout, everything has been the same on the baseline we had at the time of the merger. And we said, this would be fully there exiting '19, and therefore you will get all the benefits in '20. However, I think we are seeing an acceleration of that and we are very much probably, I would say, Andrew and Mike, correct me if I'm wrong, how much of the $200 million has been executed, probably, I would say two-thirds.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yeah.

Ari Bousbib -- Chairman and Chief Executive Officer

We are on the two-thirds, 70% in our exiting '18 will be 70% in and that comes in in the '19 numbers already with the last 30% continuing so far. That's for the integration.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Thank you, Erin.

Erin Wright -- Credit Suisse -- Analyst

Okay, great. And just a quick one on the fixed price model. What percentage of new business, I guess are you applying that as it stands today?

Ari Bousbib -- Chairman and Chief Executive Officer

Fixed price. Let's see, I expressed the numbers here for you. On the next-gen awards this is in the quarter or overall?

Michael McDonnell -- Executive Vice President and Chief Financial Officer

No, year-to-date.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, yeah. Of all of it, I think about 50% approximately of everything that we've been awarded to date. So, I said before, it's almost $3 billion, since the merger. About 50% is on fixed price. Sometimes, it's not all fixed price, but let's say, call it fixed rate, of this $3 billion. And if you look across R&D bookings, all included, going forward, what we're trying to -- what we're trying to -- what we're seeing here based on the numbers we're looking at here going forward, I would say about a third of all of our bookings will have either all fixed price or some significant portion that's on a fixed price basis, about a third, all included, not just linked.

Erin Wright -- Credit Suisse -- Analyst

Great. That's quite interesting.

Ari Bousbib -- Chairman and Chief Executive Officer

Thank you. Yeah.

Andrew Markwick -- Vice President, Investor Relations

We take our next question, please, operator?

Operator

Thank you. Our next question comes from the line of John Kreger with William Blair. Please proceed with your question.

John Kreger -- William Blair -- Analyst

Hi. Thanks very much. Ari, just to go back to your comments about the OCT suite of clinical products, can you give us a sense about timing, when do you expect to roll those out to the market?

Ari Bousbib -- Chairman and Chief Executive Officer

Well, look, we already are in the market again sending point solutions. You're familiar with DrugDev, and we also actually sold a couple of small pilot trials on the virtual trial front. We've also sold some very nice work on the compliance side to a few large -- top five European pharma companies. But look, it's going to take a little bit of time to develop. The program really calls for later in '19 to have our first fully integrated clinical trial technology suites.

John Kreger -- William Blair -- Analyst

Great. Thank you. And then, maybe Mike, you could maybe take this one. I think the last three quarters you've talked about next 12 months expected backlog to revenue conversion of about $4.6 billion. Can you just talk a little bit about what are the puts and takes that's kind of kept that number pretty stable despite the much stronger net awards that you've reported of late? Thanks.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yeah. I want to remind you about the FX comments that we made on this, Bob (ph). We lost about $35 million to FX for the balance of '18 from a revenue perspective. And as I mentioned in the prepared remarks, it's about $125 million, the headwind that we see based on current rates in 2019. So that goes right to that metric.

At the time that we recasted our opening backlog, it was about $4.5 billion, that's progressed to $4.6 billion. You know, I would note that we are seeing some very good success with NextGen as we talked about it, but that also ships the mix to some more complex businesses, and we have probably a larger mix of historically slower burning projects as a result of having these more complex trials that will take a little longer to complete. So I think overall, there's some rounding in the FX; it is really the primary thing that I would point to on that metric.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, I mean, I had the same frustration. Unfortunately, we're using -- I assume that without the FX, I haven't done the -- we haven't seen the number here, but I don't see the number here. But this $4.6 billion over the next 12 months should be higher, right, if we haven't had the FX rate, right.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Without the FX, yeah.

Ari Bousbib -- Chairman and Chief Executive Officer

So that's a big portion of the $125 million that we talked about, the headwind next year is actually in R&D. And again, I think that also the 2016 weak bookings is also a reflection of that. There were some of them, which we are again executing. This is why it's ramped. I mean remember when you book a $1 today, it does translate into maybe $0.09 or $0.10 of revenues the following year, and then it ramps up further $0.25, $0.30. So really '18, '19 is when we are seeing revenue from the bookings in '16, which I just remind you, we're not that special. So that's part of it, and it's the mix as well. But more complex projects which we -- more special staff which -- where most of the next NextGen capabilities applies, so it takes a little bit of time to ramp this up, but it's a mix issue as well. Mike?

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yes.

Ari Bousbib -- Chairman and Chief Executive Officer

So, it's a bunch of mix and match. But I agree with you, I would like to see this number tick up. And we would have seen it tick up significantly ups in the FX.

John Kreger -- William Blair -- Analyst

Excellent. Thank you.

Operator

Our next question comes from the line of Eric Coldwell with Baird. Please proceed with your question.

Eric Coldwell -- Baird -- Analyst

Hey. Thanks very much and good morning. I've had -- I think, a couple of people have asked around my topic, but I hate to be very client-specific, but since you do have named big pharma account with OCE, I'm hoping you can give us a little more sense on sizing, timing, cost impact, I think, Ari, you might have suggested that that will not be a profitable endeavor in year one as you obviously want to spend a lot of money to ramp that account up and do it the right way to be a good benchmark for future big pharma wins. But if we could get any kind of financial details or timing details around that OCE win would be very helpful.

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah. So I would love. That's a good question, Eric. To be honest with you, I would love to give you the number, but we are not authorized to share that number. And it's a large deal. We share the number of seats.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

We did. It's 14,000 --

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah, it's 14,000 seats, which is pretty large by CRM standards in one contract in over 100 countries. So you can try to figure out what the -- and again, it includes also a lot of other stuff, it's not just CRM, I mentioned, ePromo, and so on, MDM, Master Data Management. So it's a large contract. Okay. I mean I think the numbers for license for seats, this is a software business model, as you know, there is some implementation upfront, which is on a flat number, but then it's on a software basis. And the DDs there we mentioned how many years? It's three to five years, I don't remember.

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yeah. I mean, standard contract can be three to five years, but I mean these kind of deals are very sticky --

Ari Bousbib -- Chairman and Chief Executive Officer

Right. And again, you can probably derive some kind of range. But it's a large deal. It's -- let me put it this way, it's larger than what my colleagues at the legacy Quintiles organization would call an elephant trial. So, it's a large number. And then, yeah -- so what's the market, more and more importantly look, I mean the market that has been dominated largely by one company, and that company, probably has 80%, 90% share of large pharma clients. We only launched OCE in December. So -- and we have not so much revenue here. So we see a great market opportunity. It's a large segment. People say it's about $2 billion. There is a large pharma renewal cycle that takes place over the next 12 months to 18 months. So we think one of the fair shot that's claiming not in significant share of the market, but we strongly believe we have a superior solution.

Eric Coldwell -- Baird -- Analyst

If I could shift gears and just quickly ask on Contract Sales & Medical Solutions, obviously, it's not a focal point for IQVIA, and it's not an area where I think your investor base is overly concerned. But I would be interested in getting the market update. What you are hearing in the market, what you're seeing in the market, where the bookings in that segment, I know, you don't report them per se, but what does the bookings profile looked like, when do you expect that growth to perhaps stabilize or even turn around a bit?

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah. So I just -- I can't speak to bookings or to the market in general. But I can tell you, it's not that it's not the priority, it's a smaller part of the business. But since we pulled this out of the market, as you know, we were -- our first go around was to try to divest and we decided that we are going to retain it for now. And we have actually put a lot of emphasis from a managerial standpoint over the past few months in turning around this business. Now, we are now executing whatever was sold before, but I think we are -- let me put it this way, I'm challenging the team to turn this trend around. I don't want to see any red next year, OK, and hopefully, I am -- we will turn this right. As we said, it's early because we are in the mid of the planning cycle but hopefully I am looking forward to putting a marker for '19 that's -- that's a bit more positive, I've to put it this way, than what you have seen to-date over the past few years in that business. And of course -- we are, of course, trying to drive the cost down and take it to market in a more accelerated fashion. So that's what I can share now. So, yes, I have good hopes and I am certainly targeting better performance in '19 . Thanks you, Erin.

Eric Coldwell -- Baird -- Analyst

Thanks, guys.

Andrew Markwick -- Vice President, Investor Relations

Next question please, operator.

Operator

Thank you. Our next question comes from the line of Daniel Brennan with UBS. Please proceed with your question.

Daniel Brennan -- UBS -- Analyst

Great, thanks. Ari and Mike just a few questions on NextGen. So, of your existing CRO customer base, how many have in pitched NextGen to date and how quickly can you roll out NextGen to the client that haven't seen it? Ad then just one more part to this. In terms of the wins you've seen, like how much -- how many of these wins are coming from existing customers versus share gains from new customers adopting? Thanks.

Ari Bousbib -- Chairman and Chief Executive Officer

Okay. Well, look, I've got a lot of data on NextGen because as you can imagine we spend a lot of time on this. As I said many times, what we did -- we wanted to prove this out, right. So to sell to our existing clients, would have been very hard to know whether we would have won anyway because we've got good relationships and so on and so forth. So we wanted to really go after so called locked-out accounts and try to win the clients who were not our clients. Clients who had been working this industry for a long time for too long and I'm only speaking about large pharma now. A function very much, I hate to say this -- I know there are lawyers in the room, but like a somewhat of an oligopoly (ph), OK. People, the market stabilized in a sense with these large pharma work with these two or three CROs -- these large pharma work -- and that's because they're dealing with this industry like a commodity type of service and they can't go out and have an RFP to 100 CROs and have a 100 pitches and shows from these CROs. They need to work with two or three to keep everybody honest and just they've peaked based on relationships and what have you -- and we came to disrupt this model.

We want to go after the entire market. We don't want to just work with our three buddies, OK, in large pharma. We want to work with everybody, we want -- because we want to compete on value and superior technology and we want to bring the differentiated value to the market. So, therefore, it was a little harder at the beginning because of the higher rent, but the good news is we've won with large pharma clients with whom we were not doing work; we haven't done work for many, many years, sometimes more than 12 years.

Now, we didn't -- of course, so we didn't spend much time with our existing clients and we have also limited capabilities. We are now getting to hopefully an inflection point where pretty much everyone has heard of NextGen and pretty one -- pretty much everyone has had the chance -- I'm talking about the top 20 pharma clients have had a chance to a get a pitch or a presentation from our teams, and in many cases -- now, they don't always have a trial that's suitable, they don't always have an RFP that's -- where they want to bring us in. But with less than two years into the merger, we've almost $3 billion of awards and a lot of it with people who were not our clients before, with new customers. We had some nice -- in the quarter, by the way, we had the top 10 pharma who was not a traditional client of the legacy Quintiles of organization (inaudible) whom we won a Phase III MS trial, as long as we are allowed to say, but MS trail, and again that was totally based on our capabilities, on patient density data and predictive analytics.

The -- we won with another top-10 pharma that was -- that is a client of ours, several neurology trials, again using NextGen capabilities. We've got lot of EBP clients as well, people we've never worked with before, no oncology studies. So -- by the way, I would say, of the almost $3 billion of NextGen, I just want to -- I've always report the awarded numbers, I should say, of about 75% of these have been contracted. So not everything has been contracted yet this time. Okay, I hope this cover on NextGen and gives you some more details. We have time for another question?

Andrew Markwick -- Vice President, Investor Relations

Yes. Let's take another question please, operator.

Operator

Thank you. Our next question comes from the line of Derik de Bruin with Bank of America. Please proceed with your question.

Juan Avendano -- Bank of America -- Analyst

This is Juan Avendano for Derik. My question is, at your last Analyst Day, you communicated a net leverage target ratio of 4 to 4.5 times. Given recent developments in the interest rate environment, do you still see this relatively high net leverage as appropriate for the company?

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yeah. So, this is Mike speaking. I would say, absolutely, you may have seen that we ended the quarter, net debt at about 4.5 times. So, we're very comfortable at that level. We have a very good high visibility business with R&D, typically the better part of 80% of the expected revenue in years sitting in backlog. We have a subscription business, data and lot of the tech business. We just have very good cash flow visibility, only about 4% CapEx intensity. We've moved our maturities out to 2023 and beyond. And importantly, we fixed a lot of our debt. So, to your question about rates and potential increases, when you look at our elements of fixed debt and consider the swaps that we put in place and other protections that we have in the way of floors and caps and so forth, you get to remember that's about 75% or little higher of our debt that's effectively fixed. So, I think we're sitting right in the sweet spot of a logical leverage level we're very comfortable with it, and --

Ari Bousbib -- Chairman and Chief Executive Officer

With our average --

Michael McDonnell -- Executive Vice President and Chief Financial Officer

And our average cost of debt is running at about 3.8%. So, we've got very -- and after-tax probably closer to 3%. So, it's a very comfortable level for us.

Ari Bousbib -- Chairman and Chief Executive Officer

And what about our maturities?

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Yeah. Our maturities, there is nothing significant really until 2024.

Juan Avendano -- Bank of America -- Analyst

Got it. Thank you. And a quick follow-up on the R&D Solutions segment. Much of your focus has been on data-driven strategies around patient recruitment. But perhaps, if you could -- aside from data and analytics, can you tell us a little bit more your clinical research site strategy? Perhaps, how many sites, you have relationships with, how many of those sites you own, and how your site network strategy fits in your overall patient recruitment strategy?

Ari Bousbib -- Chairman and Chief Executive Officer

Yeah. I think we have that -- look, we run almost a 1,000 clinical trials -- full clinical trials and a few hundred more where we are involved not necessarily as full clinical but provided resources. I don't have those numbers here. But, I'm sure we can provide you with the number of sites we work with. And of course, we have strategy, that's a classical way we do business with all of our competitors. I just don't have those numbers right here. I'm sure you can follow up. Andrew will be happy to provide you with these numbers.

Andrew Markwick -- Vice President, Investor Relations

Sure.

Juan Avendano -- Bank of America -- Analyst

Thank you.

Andrew Markwick -- Vice President, Investor Relations

Thanks very much. I think, we take an end to call please, operator. We will be available for the rest of day to take follow-up questions from anyone if they have questions following the call. And we look forward to speaking to everyone again on our fourth quarter 2018 earnings call.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you kindly disconnect your lines.

Duration: 52 minutes

Call participants:

Andrew Markwick -- Vice President, Investor Relations

Ari Bousbib -- Chairman and Chief Executive Officer

Michael McDonnell -- Executive Vice President and Chief Financial Officer

Robert Jones -- Goldman Sachs -- Analyst

Ross Muken -- Evercore ISI -- Analyst

Erin Wright -- Credit Suisse -- Analyst

John Kreger -- William Blair -- Analyst

Eric Coldwell -- Baird -- Analyst

Daniel Brennan -- UBS -- Analyst

Juan Avendano -- Bank of America -- Analyst

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