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ICON (NASDAQ:ICLR)
Q3 2019 Earnings Call
Oct 24, 2019, 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 Q3 results 2019 conference call. [Operator instructions] I also must advise you that this conference is being recorded today. And I would now like to hand the conference over to your first speaker today, Mr. Jonathan Curtain.

Thank you. Please go ahead, sir.

Jonathan Curtain -- Vice President, Corporate Finance and Investor Relations

Thanks, John. Good day, ladies and gentlemen. Thank you for joining us on this call covering the quarter ended September 30, 2019. Also on the call today, we have our CEO, Dr.

Steve Cutler and our CFO Mr. Brendan Brennan. I would like to note that this call is webcast and that there are slides available to download on our website to accompany today's call. And certain statements in today's call will be forward-looking statements.

Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, and listeners are cautioned that forward-looking statements are not guarantees of future performance. The company's filings with the Securities and Exchange Commission discuss the risks and uncertainties associated with the company's business. This presentation includes selected non-GAAP financial measures. For a presentation of the most directly comparable GAAP financial measures, please refer to the press release statements headed, consolidated -- Condensed Consolidated Statements of Operations US GAAP Unaudited.

While non-GAAP financial measures are not superior to, or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to the investors for historical comparison purposes. From January 1, 2018, the revenue recognition standard ASC 606 became effective for ICON. Consequently, current and prior-year comments made by both Brendan and Steve incorporate the impact of this revenue standard. All business win and backlog-related financial measurements comprise both direct fee and pass-through components.

This is consistent with financial measurement presented in Quarter 1 and Quarter 2 of this year. We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity to ask one related follow-up question. I would now like to hand over the call to our CFO Mr. Brendan Brennan.

Brendan Brennan -- Chief Financial Officer

Thank you, Jonathan. In Quarter 3, we achieved gross business wins of $1.079 billion. We recorded $148 million worth of cancellations. Consequently, net awards in the quarter were $931 million, resulting in a strong net book to bill of 1.31.

On a trailing 12-month basis, our net book to bill was 1.32. With the addition of these new awards, our backlog grew to $8.4 billion. This represents a year-on-year increase of 12%. Revenue in Quarter 3 was $710.4 million.

This represents year-on-year growth of 8.5% or 9.5% on a constant currency basis. On a constant dollar organic basis, year-on-year revenue growth was 8.4%. Year-to-date revenue in Quarter 3 was $2.080 billion. This represents a year-on-year growth of 8.5% or 10.3% on a constant currency basis.

On a constant dollar-organic basis, year-on-year revenue growth was 9.4%. Our top customer represented 11.4% of revenue for the quarter, compared with 14.1% in Quarter 3 2018. We expect revenue concentration from our top customer to remain in line with our previously stated guidance of 11% to 13% of revenue for the full year. Growth outside our top customer on a trailing 12-month basis remained robust.

Our top five customers represented 36.2%, compared to 40.5% last year. Our top 10 represented 49.1%, compared to 55% last year, while our top 25 represented 67.9%, compared to 71.2% last year. Gross margin for the quarter was 29.7%, compared to 29.4% in Quarter 2 and 29.9% in the comparable quarter last year. As revenue growth continues, we continue to leverage our global business support model.

As a result, SG&A was 12% of revenue in the quarter. This compared to 12% last quarter and 12.3% in comparable period last year. Operating income for the quarter was $110 million, a margin of 15.5%. This compared to 15.3% last quarter and 15% in the comparable quarter last year.

The net interest expense for the quarter was $1.5 million, and the effective tax rate was 12%. Net income attributable to the group for the quarter was $94.8 million, a margin of 13.3%, equating to diluted earnings per share of $1.74. This compares to earnings per share of $1.69 in Quarter 2 and $1.54 in the comparable quarter last year, an increase of 13%. On a comparative non-GAAP basis, days sales outstanding were 56 days at September 30, 2019.

This compares with 61 days at the end of June 2019. The primary reason for our improvement this quarter can be attributed to the conversion of billed receivables into cash. During the quarter, cash generated from operating activities was a strong $160.7 million. We remain focused on all elements of our DSO, particularly the transition of unbilled revenue to build debt.

And we feel confident that our full-year cash from operations will be in the range of $320 million to $360 million. As you all have seen from the press release last night, during the quarter, the group completed the acquisition of Symphony Clinical Research. This was for an initial payment of $31.6 million. In addition, during the quarter, capital expenditure was $13.7 million and $76.5 million worth of stock was repurchased at an average price above $151.80.

At September 30, 2019, the company had net cash of $121.7 million, compared to net cash of $81.8 million at June 30, 2019, and net cash of $142.3 million at September 30, 2018. With all of that said, I'd now like to hand the call over to Steve.

Steve Cutler -- Chief Executive Officer

Thank you, Brendan, and good morning, everyone. Quarter 3 was another quarter of excellent progress for ICON. During the quarter, we delivered record growth and net business wins leading to a very healthy quarterly book to bill of 1.31 or 1.32 on a trailing 12-month basis. ICON's continuing positive development performance means we grew our backlog by 12% year on year to nearly $8.4 million and recorded a robust revenue increase year over year of 9.5% on a constant-currency basis.

As with recent prior periods, we continue to expand relationships and revenues from customers outside our top 10, which grew by over 20% on an annual basis. As we develop these new customers, we expect to see further revenue growth from them as we move into 2020. We believe this diversification leaves us well-positioned for consistent and sustainable future growth. The backdrop of a strong outsourcing landscape and continued biotech demand offers possibilities to broaden our existing customer base, and we are pleased to see new strategic alliance opportunities opening up across our clinical research, functional solutions, and laboratory service lines.

These customers are looking to leverage ICON's operational excellence, flexible partnership model and depth of therapeutic expertise across our global footprint, all underpinned by our differentiated patient site and data strategy. In anticipation of our operational delivery requirements, a significant proportion of our 2019 headcount hiring occurred during the earlier months of this year. This meant that during Quarter 3 we were able to improve utilization and expand our gross margin to 29.7% of revenue. Moving forward, we will continue to closely assess our hiring requirements in line with our project pipelines and will ramp our recruitment accordingly in line with project needs.

As we balance revenue growth with our requirements for additional project resources, we continue to leverage our global business support model. During the quarter, we saw further evidence of this with SG&A remaining in line with the prior quarter of 12% of revenue, down from 12.3% last year. As we have demonstrated over the years, our SG&A leverage remains a key industry-leading strength. We have developed a strong positive culture within our support structure that is focused on best-in-class service delivery and appropriate cost-saving initiatives.

As we move forward into 2020 and beyond, we will continue to balance our investment needs with savings opportunities in these areas. This continued focus on operational excellence and the proactive management of our cost base resulted in an operating margin of 15.5%, up from 15% last year. This led to an EPS increase of 13% year over year to $1.74. We continue to develop our patient, site and data strategy.

At this time I'm delighted to announce the acquisition of Symphony Clinical Research, a provider of site and patient clinical trial support services. This acquisition concluded in late September, further enhances our ability to help solve our customers' key challenge of getting patients into clinical trials faster and more efficiently. The acquisition of Symphony complements ICON's existing PMG and MeDiNova site networks in the U.S. and Europe.

Importantly, it means ICON can now offer patients at-home trial services, which will make it more convenient and accessible for patients to participate in clinical trials. This patient-centric approach helps reduce the travel burden for patients, broadening ICON's recruitable population and providing patients access to clinical research studies in which they may not have otherwise be able to participate. At-home trial services will improve our ability to recruit and retain patients in traditional studies, and crucially, it will also enhance our ability to conduct virtual trials as we move forward. Innovation and the ability to execute effectively in this emerging area will be a key differentiator in the future.

In Quarter 3, we repurchased $76.5 million worth of shares at an average price of $151.80. This means in total we have spent just under $141.6 million year to date, repurchasing 1 million shares at an average price of $141.57. During the quarter, we also generated strong cash collections, helping us to achieve cash from operating activities of $161 million. This helped drive our DSO down to 56 days from 61 days last quarter.

While the industry trends of customers looking to fewer billing milestones and elongated credit terms remain, we are committed to working with our partners to proactively improve our cash conversion cycle and lower this metric further over the medium term. As we look forward with optimism on the business environment and confidence in our ability to continue to execute our strategy, I want to take this opportunity to update our full-year guidance. We expect 2019 revenue to increase to a range of $2.79 billion to $2.83 billion, an increase of 7.5% to 9% year over year and earnings per share to increase to a range of $6.81 to $6.95, an increase of 11.8% to 14.1% year over year. Before moving to Q&A, I would like to welcome all the Symphony staff to ICON.

And of course, thank the entire ICON team for all their hard work and commitment during the quarter. Thanks everyone, and we're now ready for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] And we'll now take our first question, and this comes from the line of Elizabeth Anderson. Your line is now open. Please go ahead.

Elizabeth Anderson -- Analyst

Thanks guys. Good morning. Congrats on a good quarter. I just had a question.

How should we think about the acquisition contribution from Symphony going forward?

Brendan Brennan -- Chief Financial Officer

Hi, Elizabeth. Welcome back to the analyst group. This is very much a strategic acquisition. So it will be relatively, relatively small in terms of quarterly contribution.

So really, you're really looking at a couple of million dollars on a quarterly basis. So we do see it as very, very important from a strategic perspective and, obviously, being there to really augment the patient experience, but it is relatively small in absolute terms.

Elizabeth Anderson -- Analyst

OK. Perfect. And then one sort of more broader question. Have you -- could you comment a little bit on the new changes and perhaps like site network competition in the quarter or any sort of changes in your offerings and the future margin opportunity there?

Steve Cutler -- Chief Executive Officer

From a site network point of view, Elizabeth?

Elizabeth Anderson -- Analyst

Yes.

Steve Cutler -- Chief Executive Officer

No real changes. We're bringing the PMG and the MeDiNova site network together. And then we'll overlay that with the services that Symphony offers from a patient point of view. So that whole patient and site network is coming together.

We're in the process of doing that. We're starting to see some good traction in terms of the increase in the proportion of patients recruited and the numbers of patients recruited into our trials, but there's no particular changes in terms of the cost base. At this point, we anticipate we'll get some efficiencies as we complete those integrations. That's certainly the aim.

But really it's around how we get patients into trials faster. That's the focus of that group.

Elizabeth Anderson -- Analyst

That makes sense. Thank you very much.

Operator

Thank you. And we'll now take our next question, and this comes from the line of John Kreger. Your line is now open. Please go ahead.

Jon Kaufman -- Analyst

Hi. Thanks. Good morning. This is Jon Kaufman on for Kreger.

I realize that you haven't completed budgeting for 2020 yet but do you have any broader observations on how you're thinking about next year?

Steve Cutler -- Chief Executive Officer

I believe that, Jon, no, we're looking at our business. We're actually just starting to go into our budgeting season. So we're going out to our business, looking at the markets, getting some input from various parties, and we've got nothing to announce right at this stage, although we expect our business to continue to grow as we outlined into 2020 and beyond.

Jon Kaufman -- Analyst

OK. And then if you look across all of your client segments, are you seeing any signs of caution? And if so, is that coming from large pharma, midsize clients or perhaps the smaller biotech cohort?

Steve Cutler -- Chief Executive Officer

We've seen -- I mean, demand for our services across all those segments continues to be very solid. Certainly in the biotech space, if we look at our year-to-date trailing 12-month numbers, the dollars are there, the dollars are up on a sort of mid-single-digit basis. So we feel good about that market. I recognize that as we look at the -- we look at the same data review from a funding point of view.

And probably, the growth there has come off a little bit from where it was perhaps a couple of quarters or a year ago, and we see that. But in terms of the opportunities we're seeing in that segment, over the period of a year or so, we continue to see opportunity, we continue to see growth, and certainly our backlog has benefited from that.

Jon Kaufman -- Analyst

OK, great. Thank you.

Operator

Thank you. And we will now take our next question, and this comes from the line of Tycho Peterson. Your line is now open. Please go ahead.

Tycho Peterson -- Analyst

Hey, thanks. I'm wondering if you can talk to the DSO improvement. In the past, I think you've talked about longer time and extended credit terms. So can you maybe just talk to some of the drivers of improvement in DSOs and how sustainable do you think that trend is?

Brendan Brennan -- Chief Financial Officer

Tycho, it's Brendan here. Yes, no, it was a good -- very good quarter in terms of the improvements. We would say we still have a lot of work to do and a lot of folks to put on there. I think we were particularly, as I mentioned in my prepared remarks, good at getting cash in on bills are out the door in the current quarter.

So it was very much focused on making sure that we were collecting as efficiently as we could, and that's where a lot of the improvement came from. As we have spoken about it in the past, those commercial pressures are still there around folks looking for those fewer milestones and milestones being pushed out further into the contract, and that is something that is still a pressure point as we look at our DSO and they make up of our balance sheet. But as we've said, it is something that we're very focused. It is something that we're working with our customers on particularly to ensure that we are seeing a good level of traction and pull-through of our cash conversion cycle.

But that said, it was a good quarter. We are very happy, as I said, $161 million of cash from operations this quarter gives us a very, very good cash conversion ratio of nearly 90% year to date on net income. So good pull-through from that perspective, but still work to be done, particularly on that on build debt side.

Tycho Peterson -- Analyst

OK. And then one more for you, Brendan, before I hop over to Steve. Just plans for further share repos, now that you've hit kind of the target for the year?

Brendan Brennan -- Chief Financial Officer

Yes. We'll keep our eyes to the market. It's been funny trading patterns over the last little while. I think opportunistically, we'll still look at the market in the fourth quarter.

And if the opportunity presents itself, we will go beyond the 1 million shares already done by end Q3 and get back in the marketplace if the need arises.

Tycho Peterson -- Analyst

OK. And then Steve, we're seeing a little bit of a resurgence on the Alzheimer's front here with the Biogen news. Can you just talk a little bit about your pipeline in CNS more broadly? How robust that is?

Steve Cutler -- Chief Executive Officer

Tycho, I'm not trying to get too carried away with Biogen now coming back into the submission state. I think there's certainly still some challenges there with regard to that. So I'm not going to get too carried away about the resurgence in the Alzheimer's market based on one sort of resubmission. However, if I look at our CNS portfolio, it continues to grow.

It's in the neurology space and psychiatry space. It's an area we're continuing to invest in, in terms of bringing in new medical experts and project managers. We feel we have a good network of sites that can do these sort of trials, a number of the sites than we have in our network are also skilled in the CNS area. So we feel we're very well placed to be able to benefit from any uptick in Alzheimer's trial or any other sort of neurological conditions or psychiatric conditions as they come through.

It's -- I think it's strength of ours and one that we are looking to bring forward.

Tycho Peterson -- Analyst

OK. Thank you.

Operator

Thank you. And your next question comes from the line of Robert Jones. Your line is now open. Please go ahead.

Robert Jones -- Analyst

Hey, great. Thanks for the question. I guess, Steve, just to go back to where maybe some of the growth or what you're seeing in the different cohorts on the demand side, clearly, bookings, very strong in the quarter as you guys highlighted. Cancellations, I know you guys characterized as normal.

But I mean, maybe just to parse those out a bit, did you see anything in particular from the smaller biotech cohort that either, a, drove the incremental booking strength in the quarter? Or maybe you had a disproportional contribution to the cancellation side of the equation?

Steve Cutler -- Chief Executive Officer

Yes. Hi, Robert. No. There was -- I mean, some of the growth as we mentioned outside our top 10 is very strong, very substantial.

But sometimes you kind of naturally think that outside of our top 10 customers are typically a biotech customer. That's actually not the case. So the growth we drove in that cohort that outside top 10 was across the spectrum. Certainly, there were some smaller customers in there, but there were also some large and midsized customers in there as well.

And that's what I was particularly pleased. One or two of the partnerships that we've been able to win over the last year, 18 months or so, moved into that and are moving up the league table, so to speak. So we got to -- I think we got growth across the segments in that space. They were all biotech, although, of course, the biotech business has grown recently substantially within our portfolio over the last -- really over the last couple of years I suppose 18 months or so.

Certainly, they are a larger part of our backlog now than they were a year ago, although still very much a minority around the 20%, 25% of our backlog. So the growth what I'm pleased about was the growth was fairly broad-based across the segments of our customer segments, and that is I think that's good for us and certainly gives us plenty of optimism in the future in terms of establishing or continuing to develop the relationship with companies who have a portfolio and have a budget that is not just around one or two projects, but around something much more sustainable of it.

Brendan Brennan -- Chief Financial Officer

Maybe just to add to that quickly, Bob, I think specifically on your point around cancellations in the quarter, I don't think we really saw a skew toward small biotech or large. It was a pretty normal mix. Some of the reasons for operational pieces, some for non. So there was nothing there I think from a therapeutic or a company size perspective that would indicate anything specific.

Robert Jones -- Analyst

No. That's helpful. Good to hear. I guess, just on -- I know you guys are not in position yet as you mentioned, to give specifics around 2020 but just so I think about the way things have trended so far this year, it looks like you're pointing to about somewhere north of 8% top-line growth this year.

You know you're on pace to grow the backlog in a similar range to what we saw last year. Is there anything unique or different about the type of wins or the progression of the type of wins that you've seen this year that we should think about as we look forward as far as it relates to conversion from backlog?

Steve Cutler -- Chief Executive Officer

I think broadly speaking, no. Bob, the portfolio that we've won, as I just said, it's been over the last 12, 24 months has been I think a larger proportion of biotech working there. But we have I think a good spread of work right across the segments. Large pharma remain a core foundation of our backlog.

That will continue. Mid-sized pharma very strongly represented as is biotech. So there's been nothing I think in the win profile over the last quarter or two that's going to mean we'll drive a different sort of profile as we get into 2020 and beyond.

Robert Jones -- Analyst

Great. Thanks so much.

Operator

Thank you. And your next question comes from the line of Juan Avendano. Your line is now open. Please go ahead.

Juan Avendano -- Analyst

Hi. Thank you. Regarding the point on the cancellations, I mean, I'm calculating a 1.8% cancellation rate in the quarter, which is at the really low on historical terms. Am I looking at it correctly?

Brendan Brennan -- Chief Financial Officer

That's a opening backlog, Juan. Yes -- no, that sounds like it's around the right percentage.

Steve Cutler -- Chief Executive Officer

It was low teens I think with growth. Yes I think it was around our expectation. I don't think it was a bad effort in Tier 1.

Brendan Brennan -- Chief Financial Officer

Yes, yes. That was sure.

Juan Avendano -- Analyst

OK, got it. Now I just wanted to clarify that. And so cancellations are actually historically low. I guess, staying on the backlog, could you share with us what your gross win growth rate on a reported basis was year over year in third quarter and what it's been year to date?

Steve Cutler -- Chief Executive Officer

Yes. Gross wins were in the low double-digit range from a growth point view, Juan. You're happy enough with that. It's a little higher on a net basis, but we got back to some comparisons that we didn't provide that both the comparisons at the end.

So we were happy with the sort of low double digits on a gross basis.

Juan Avendano -- Analyst

Good. All right. Thank you. And then have you noticed any changes at all in recent months in the pace of bookings from Bristol-Myers Squibb?

Steve Cutler -- Chief Executive Officer

We don't comment on specific bookings from specific customers. One, so I'm not going to talk about any specific customer. We've seen continued progress across our large pharma a cadre of customers. It is a matter of public record that we are supplier to Bristol-Myers.

We continue to have a good relationship with them. We continue to work hard with them, and that relationship is ongoing but I'm not going to comment on specific customers and specific bookings.

Juan Avendano -- Analyst

All right. Last -- and lastly, if I may, can you give us an update on the percentage of patients that you're recruiting within your integrated site network in the quarter?

Steve Cutler -- Chief Executive Officer

Yes, it was -- we certainly increased that on a year-on-year basis. It's up around 30% from last year. So we're happy to see it input. It did come down a little bit in terms of the proportion of patients recruited, that was partly because there were more -- fewer vaccine studies in this quarter.

So it came down a little bit to closer to around 20%, 25% but only on a year-to-year basis, it's gone up. So we're continuing to see traction in that and I think with Symphony coming onboard, we'll get more traction around that because of the -- of these guys, our Symphony folks will be helping to support and helping to expand that integrated SMO network. So I'm really pleased to see those three companies, essentially three acquisitions, come together with our sight of patient recruitment growth to really solidify that offering and really make that key part of what we do.

Juan Avendano -- Analyst

All right. Thank you.

Operator

Thank you. And your next question comes from the line of Dan Brennan.

Dan Brennan -- Analyst

Great. Thanks for the questions. I wanted to start off with strategic alliances. I think it was mentioned during the prepared remarks, you see some new opportunities.

Maybe could you just elaborate a bit outside of your top client, how much of your business today is made up of what you would consider to be strategic alliances? And any light of sight -- or excuse me, any line of sight on these new opportunities which you mentioned?

Steve Cutler -- Chief Executive Officer

Sure. I mean, we're not going to -- I mean, we're not going to comment on specific negotiations, Dan, that we're having at the moment. But I've been delighted with the opportunity that things like the MeDiNova acquisition have allowed us to got us into some discussions with some large pharma potential strategic alliance customer on the lab front. So we continue to have those discussions and were ongoing.

And as we all know, these things take some time to come to fruition and certainly take some time before revenue starts to flow, and winds start open. So we're still in the discussion, negotiation phase, but we have a good reason to believe that we are very well-positioned on the lab front. Our functional services group, we're also in discussion with a couple of large, very large providers of the larger alliance partners, one of which would be a very much a new customer to us. So we are very optimistic about that.

But again, I don't want to get too far ahead of us on that front. And then the ICR, our Phase II Phase III businesses also been able to make some progress in that area and again I think we see some opportunity there. So these strategic alliances, I would say, make up around about a quarter of the revenues that we do in that sort of vicinity. I'd like it to be a little higher than that.

We certainly see some opportunity to be -- for that to be a bit higher going forward. It might be up to 30% I think as we go forward. It's not a figure I'm actually holding my head. And so I'm sort of thinking a little bit off the top of my head.

But I think it's around about a 30% 25% to 30% mark, maybe a third. And we see some opportunity I think to move that upwards, and that's certainly what we are looking to do as we go forward.

Dan Brennan -- Analyst

Great. Thank you. I wanted to ask a second question on kind of your customer breakdown and understanding that customers move in and out of the buckets that you kind of define when you release. But nonetheless, I think, clients No.

2 through five, I think those were growing nearly 30% the last two years and year to date I think, they are up low single digits. So anything specific to call out there? I know you're not going to mention the customer. But just to kind of understand that bucket, which looked like it was a meaningful driver in the past.

Steve Cutler -- Chief Executive Officer

Yes. No, I think on that one, we're -- I think, slightly up in terms of the last quarter or so. But these things, [Inaudible], customers jump in and out of them. I think where we've seen most of the progress is on the, as I say, beyond our top 10, which is really where I want to see most of the progress.

We were moving some of those customers up, as I say, up the league table. But two to five remain, obviously, an important component of where we are.

Brendan Brennan -- Chief Financial Officer

And just to add to that. Typically, Dan, they're, obviously, a more mature relationships and they're kind of in that more mature relationship phase. You probably wouldn't expect to see quite the levels of growth. We've done well, as you've said, with then accelerating over time.

But as Steve said as well, we want to see more balance in our operation. So that's what we're looking.

Dan Brennan -- Analyst

And then -- and maybe just maybe just a few more quick ones just on the backlog burn. Looks like it was reasonable stable. I think it was down maybe 10 bps I think if I kind of look at the model right now on the slide. But how do we think about that? I mean, is it this right Zip code do you think from here given the backlog and kind of how things are progressing?

Steve Cutler -- Chief Executive Officer

Yes, I don't -- I think it's one we constantly look at. And to the extent that we win more biotech and small pharma business, Dan, we have the opportunity typically to increase the burn. So the biotech business is a tailwind from a backlog burn point of view, less so with large pharma and less so with the sort of mid pharma, and that remains the bulk of our backlog and the bulk of our wins still. So I would anticipate that we'll probably continue at around about the level we're at, 8.7%, I think was the percentage this quarter.

I don't, we're trying to push that up. I'd like to think we could push it up over the next 12 months or so, but with the proportion of oncology business we're getting, that's such an important part of such a large part of the landscape at the moment, and that's always a headwind for us. So this puts and calls on this, I would say, we'll be looking to maintain maybe as these opportunities slightly increase, but I'd say, at this stage, I wouldn't expect too much of an increase in the burn rate.

Dan Brennan -- Analyst

Terrific. Thanks a lot.

Operator

Thank you. And your next question comes from the line of Jack Meehan. Your line is now open. Please go ahead.

Andrew Wald -- Analyst

Hi. Good morning. This is Andrew Wald on for Jack. Just looking at the quarter, how would your growth have compared under the old accounting standard? And were there any notable changes from reimbursed expenses?

Brendan Brennan -- Chief Financial Officer

Hi, Andrew. I think as we mentioned in the past, there's only one type of revenue Andrew, and that's the 606 revenue reported, and that's why we talk about it year over year in percentage terms. So I don't think it's useful trying to parasite the revenue into different elements. We have to look at our projects in totality and work our percentage completions on that basis.

So we're happy with the progress we've made. As we've said, 8.5% year over year, and I think that's the number we should probably stick to and think about as we think about revenue growth.

Andrew Wald -- Analyst

OK, understood. And on the deal environment, in what areas are you looking to add additional assets for the site network?

Steve Cutler -- Chief Executive Officer

I mean, that's -- we're looking to round that. I mean, obviously, the Symphony acquisition moves us more toward patients, which has been a very specific and a very considered move. We do believe the virtual trial environment is going to be important going forward. So we want to be able to position ourselves well to not just follow and take advantage of that, but to actually get ahead and innovate in that area.

So as we look at M&A, we'll continue to look at organizations that similar type the connection with patients. We're continuing to look at how we develop our data resources, particularly in partnership with the various groups we've talked about in the past. That's certainly an area. But around recruitment directly to patients, there's immediate opportunities there, I think, to perhaps acquire.

But it will all be around -- most of it will -- sorry, will be around our patient side and data strategy. That's what we've done certainly this year with the acquisitions we've made, MeDiNova, the lab was a little bit out of that but the PNG and the MeDiNova and now Symphony very much in line with our patients under, and there are organizations around there that we'll continue to look at, in order to fulfill that particularly that patient connection going forward.

Andrew Wald -- Analyst

Thank you.

Operator

Thank you. And your next question comes from the line of Sandy Draper. Your line is now open. Please go ahead.

Sandy Draper -- Analyst

Thanks very much. And a lot of my questions have been asked and answered. So maybe just a quick one. I missed it, Brendan.

The constant dollar organic growth number, I got the constant dollar but I missed the constant dollar organic.

Brendan Brennan -- Chief Financial Officer

Hey, Sandy, the constant dollar organic in the quarter was 8.4% year to date, constant CDO, same basis was 9.4%.

Sandy Draper -- Analyst

OK, great. And then maybe for Steve, a follow-up to one of the earlier questions about the broader dynamics in the market. Just more specifically, have you heard any feedback from customers on their discussions around the DC issues around drug price controls, etc.? There's certainly some uncertainty there. If I look back to 2016, there was some noise around the election because some people to pause.

I'm just curious if customers are bringing that up or if you had that and you hear that out there in the market people are saying, "Hey, drug price controls come in, we have to sort of rethink how we do business." I'm just curious any thoughts on that.

Steve Cutler -- Chief Executive Officer

Yes. Sandy, we don't get much of that feedback from customers, to be honest. It's not to say that they don't have a wish to do things more efficiently and more cost effectively. That's certainly the case.

But it's not really on the basis of, at least, not expressed to us on the basis of drug pricing. I know it's a topic of conversation within your pharma industry, a constant topic of conversation of how that can potentially evolve going forward, but it really doesn't. They don't say it to us, at least not to me. So from my -- and it was one point of view.

I'm sorry, I can't give you much joy there at least much information there.

Sandy Draper -- Analyst

OK. No, that's helpful. Thanks.

Operator

Thank you. And your next question comes from the line of Michael Pollard. Your line is now open. Please go ahead.

Unknown speaker

Hey, good morning. I was going to ask for more detail on where we stand in the patient engagement site network evolution. But Steve, I think you've addressed a lot of that. So I will shift gears to a couple of others that I had.

So one for Brendan. We infrequently talk about debt with ICON because you have a net cash position and generate a lot of cash. The debt you do have is due December of next year. A note, I'm curious what opportunities you see.

Rates have, obviously, continued to grind lower for the most part. Should we consider that refinance as opportunity for accretion, roll it over, pay it down, pay some of it down, any initial thoughts would be useful.

Brendan Brennan -- Chief Financial Officer

I think, Mike, we'll certainly be looking to, at least, roll over. So we had good experience. As you know, it's a private placement last time out, and that's a market we're well familiar with. So we'll certainly roll it over.

We haven't, I suppose, completed our conversations around whether we extend or decrease. I think, at the very least, we'll keep it at the similar levels and look opportunistically again with what we could do with those dollars as we go into, I suppose, really it's -- as you say quite rightly, at the end of 2020. So it's really more of a tough conversation of what we might do at nearly late '20, early '21. So roll over, good PP market is there, good interest rates at the moment.

So we're pretty happy that we'll do at least that and then we'll explore, I suppose, further opportunities as we go to 2020 as to whether we extend that debt position or not.

Unknown speaker

Maybe a follow-up also for you, Brendan. So you've been asked and answered the question on DSO many times, and I think the response has been consistent and makes a lot of sense. You are presenting a non-GAAP DSO now. Can you remind us why it's a non-GAAP DSO? What are we missing? What are the pieces that we can dig up every quarter to align our calculations, which we were doing, say, last year and the years previous to the new calculation?

Brendan Brennan -- Chief Financial Officer

Sure, Mike. I mean, the reasons we're doing it that way is purely because part of our direct cost space now is something that previously would have been included in getting to our net revenue position, which is, obviously, investigator accruals. But investigators are an element of a direct cost now, and as a result, don't go into a DSO calculation and are kept as separately on the balance sheet. So that's where it is different.

That's now sitting in a different line in the balance sheet. So it doesn't impact and doesn't decrease our DSO in the same way we would have done in the calculation previously. I think that's appropriate from an accounting perspective, but obviously, it does have this impact. We're showing the DSO a like-for-like basis to give people more historical comparison of where we were in the past and where we are now.

We're going to continue to work on it. But I think working from a calculation of the balance sheet now that would give you a higher number of days is equally valid. I think what we're focused on is making sure that the trajectory of where both of those numbers are going continues to be in the right direction. And so we're very focused on making sure that if we bring a non-GAAP DSO down by one day, the GAAP number is down by one day as well.

So we're very focused on actually making sure that we're moving in the right direction regardless of what the number is. But the number what we quoted at the moment is very comparable to what we did in the past to give people some context given that it changed.

Unknown speaker

Appreciate it. Thank you.

Operator

Thank you. And your next question comes from the line of David Windley. Your line is now open. Please go ahead.

David Windley -- Analyst

Hi. Good morning, good afternoon. Thanks for taking my question. I'm catching up.

I'm reading notes. I don't think this question's been asked. Your gross margin has been under some pressure for a little while and ticked up sequentially in the third quarter, still down year over year, but maybe at a slower rate. Wondered is that just a tremble of the needle? Or is that actually a signal that some pressures have abated and maybe gross margin can stabilize or even turn higher?

Steve Cutler -- Chief Executive Officer

Dave, it's Steve here. Yes, I think from our point of view, gross margin has been under a little bit of pressure. And as I said in my prepared remarks, we recruited fairly actively, particularly in the second quarter to prosecute the work that we've won really over the last couple of quarters, 12 months or so. And that had a bit of an impact on our gross margin.

I think we attenuated or mitigated a little bit the hiring rate in the third quarter and very actively look hard at that, and that was what led to the uptick, I think, by 20 bps in our Q3 margin. I would expect our gross margin to remain at around that level over the next sort of in the immediate future. We continue to see some challenges as we've recorded our book to bill at 1.3 for the last, I think, three, four quarters. And so we've got work to do, and we need to recruit people to do that, and we want to make sure we do a really good job because a lot of this work that we're doing, doing it well, brings us repeat business, of course, or even more than that, brings us the opportunity to form strategic alliances and partnerships with these customers.

So it's important, obviously, that we do this. Well, that's a trite statement. So -- and I do think, as I say, I think we've said probably for quite a while. The gross margin is about where it's going to be.

We may go up or down a little bit, 10, 20 bps on a quarter-to-quarter basis, but I don't see much long-term progress in terms of that going back to 30-plus percent. I think that will be a challenge. Where we're seeing an opportunity to improve our overall operating income, of course, is we'll continue to leverage the SG&A and our global business services group, and we're able to do that. This quarter, we see some continued opportunity there in the medium to longer term, and we certainly intend to keep pushing down that road whether it'd be continued off shoring, robotics, process reengineering, all of those good things we've talked about quite extensively in the past.

David Windley -- Analyst

That's fair. I appreciate that, Steve. And you kind of stole the thunder on my next question which was to ask how much runway do you think you have, I think, ICON's increasingly viewed as one of the best, if not the best, operating manager of its SG&A. You mentioned robotics and off shoring.

Is this -- I hate to ask the trite baseball analogy, but still a lot of innings left in that path.

Steve Cutler -- Chief Executive Officer

I haven't had a lot of innings, but I don't think we're at the eighth or ninth. I would characterize it, if you use your baseball term, I'm more a cricketer, Dave, than a baseballer. But I'll use your baseball term for a minute. You know I would say we're the top of fifth or top of the fourth round, into the fourth.

So I think we're halfway through. I think there's still plenty of opportunity to continue to do that. And who knows, maybe there's a double header here as well, [Inaudible] analogy, and I think as we see further opportunities, we'll keep driving it.

David Windley -- Analyst

And one last one before I drop, the -- I think, you declined to answer questions about any specific plans. But as you think about maybe by client cohort, bookings and demand in your large pharma, your larger clients versus the small mid, is it kind of consistently balanced? Or are you seeing some rotation there?

Steve Cutler -- Chief Executive Officer

I would characterize that as saying in the large pharma cohort, it's stable. We are seeing plenty of demand or stable demand, I would say. I think you'd have to say that most of the growth has been in the biotech, the smaller customers, but certainly, the midsize ones are also I would think some opportunity, and I think I alluded to some of the partnerships that we brought on in the last 12, 18 months are now starting to really ramp up from a growth point of view. So that's growth outside of the top 10 is not all biotech customers, it's significant number of more midsize, I would say, customers.

So I'd say, let me -- to paraphrase it all, I would say large pharma, pretty stable; biotech, certainly moving on the up; and midsize sort of somewhere in between.

David Windley -- Analyst

OK. I appreciate that. Thank you very much.

Operator

Thank you. No further questions had came through, sir. You may continue.

Steve Cutler -- Chief Executive Officer

OK. Thank you, everyone, for listening in today. We are very pleased. This Quarter 3 was another strong quarter for ICON.

We look forward to building on this progress throughout 2019 as we consolidate our position as a CRO partner of choice in drug development. Thank you, everyone.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Jonathan Curtain -- Vice President, Corporate Finance and Investor Relations

Brendan Brennan -- Chief Financial Officer

Steve Cutler -- Chief Executive Officer

Elizabeth Anderson -- Analyst

Jon Kaufman -- Analyst

Tycho Peterson -- Analyst

Robert Jones -- Analyst

Juan Avendano -- Analyst

Dan Brennan -- Analyst

Andrew Wald -- Analyst

Sandy Draper -- Analyst

Unknown speaker

David Windley -- Analyst

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