Good day, and welcome to the ICON Second Quarter 2012 Earnings Conference Call Results Presentation. Today's conference is being recorded. At this time, I'd now like to turn the conference over to Mr. Sam Farthing. Please go ahead, sir.

Thank you, Sara. Good afternoon, good morning, ladies and gentlemen. Thank you for joining us on this call covering the quarter ended 30th of June 2012. Also on the call today, we have our CEO, Mr. Ciaran Murray; and our CFO, Mr. Brendan Brennan. I'd just like to note that this call is webcast, that there are slides available to download on our website to accompany today's call. I will now make the customary statements in relation to forward-looking statements. Certain statements in today's call are, or may, constitute forward-looking statements concerning the group's operations, performance, financial condition and prospects. Because such statements involve known and unknown risks and uncertainties and depend on circumstances and events that may or may not occur in the future, actual results may differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, and as forward-looking statements are not guarantees of future performance, investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation includes selected non-GAAP financial measures. For presentations of the most directly comparable GAAP financial measures, please refer to the press release statement headed Consolidated Income Statements, unaudited U.S. GAAP. 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 investors for historical comparison purposes. We will be limiting the call today to 1 hour and will therefore ask participants to keep their questions to 1 each with an opportunity to ask 1 related follow-up question. I would now like to hand the call over to our CFO, Mr. Brendan Brennan.

Thank you, Sam, and good day, ladies and gentlemen. In quarter 2 2012, net revenue was $277 million compared with $233 million in the same period last year, which represents an increase of 19% year-on-year. Constant currency growth from the same quarter last year was 25% and on an organic current constant-currency basis year-on-year, growth amounted to 19%. Year-to-date, our top client represented 14% of our revenue, up from 13% for the full-year 2011. At Top 5, the clients represented 45% of revenue, up from 37% last year. The Top 10 clients represented 62% of revenue, compared to 52% last year, while our Top 25 accounted for 77% of revenue compared to 69% last year. We continue to expect client concentration levels to increase in the short to medium-term, given the shifts towards deeper partnerships with our clients. Year-to-date, 58.1% of our revenue was generated from outside the U.S., broadly in line with last year. 45.9% of our revenue was generated in the Europe, Middle East, Africa region and 11.2% in Asia Pac and Latin America. During the quarter, we hired 250 people and closed the quarter with over 8,900 staff. In the quarter, our gross margin was 35% compared with 35.7% last quarter. Gross margin in the Clinical business continued to expand quarter-on-quarter, but the group margin was impacted by lab and integration costs related to acquisitions. For the first half of 2012, gross margin was up 80 basis points to 35.3%, compared to the second half of 2011. SG&A amounted to $69.4 million in the quarter or 25.1% of revenue. This compares to $67.5 million in quarter 1 2012 or 26.8% of revenue. Depreciation and amortization was $10.8 million in line with quarter 1, which includes approximately $2 million related to acquisition-related amortization. We continue to expect this…

Okay. Thank you, Brendan, and good morning or good afternoon, everyone. I'm pleased to report that our gross wins in Q2 were USD 477 million, which is a gross book-to-bill of 1.7x. Following on from the record quarter in Q1, we have now reported $962 million of gross bookings in the first half of the year. Our strategic business wins continue to be strong and our transactional business continues to perform to target. Cancellations in the quarter were USD 103 million, which is 4.2% of opening backlog. Net book-to-bill for the quarter was 1.35 and backlog at the end of the quarter was $2.5 billion, which is up 22% in the last year. Looking at demand, the market remains healthy. We're seeing significant opportunities from both our strategic and transactional accounts and the total level of business in our sales pipeline remains at the same level of this time in Q1. We continue to focus on the operational efficiency of our business and get the benefit of leveraging our cost base on increasing revenue. Consequently, we have seen further sequential improvement in our operating margin from 4.7% last quarter to 6% in quarter 2. And we continue to work on the Central Lab turnaround, which is going to plan. In quarter 2, the Lab reported very strong net new business wins of $36 million, which grew the backlog to over $200 million and that's an increase of 31% since quarter 4 of 2010 when we started the turnaround initiative. In quarter 2, the Lab reported over $21 million of revenue for the first time. And as a result of the high level of business wins and revenue growth, we had some increase costs in the quarter related to sales commission, lab reagents for assay development and logistics and this led…

[Operator Instructions] We will take our first question today from Ross Muken from ISI Group.

As you think about the pacing of new business, and it's obviously, you had [ph] Pfizer a pretty good trajectory in the last several quarters. The tone seems to be quite good and the hit rate seems to be, at least, a bit better than where it was early last year. I mean, do you feel like you've got the Business Development, sort of, organization where you want it to be? And given the environment, are you generally happy with, sort of, your share outcome and what you're seeing also in the Lab where it seems like you're probably -- have been gaining a bit of share, a bit of momentum?

Yes, I don't think I could ever sit here, Ross, and say, "I'm entirely happy with having Business Development where you want it to be." But I think it's fair to say, we have had a strong performance in the last few quarters. We saw some of the benefits, I think, of our differentiations strategy around the acquisitions we've made over the last couple of years in Bioanalytical and the assay labs and Oxford Outcomes, PriceSpective, the ICONIK platform and of course, Firecrest, as well as a very solid traditional performance from our core business in Clinical. So we're happy with the progress we've made this year. We're happy that it's fairly balanced across our strategic accounts and our transactional accounts and we spoke to some of the wins we had last quarter. And I think we're certainly taking our fair share of what's in the market in the Clinical business and particularly in the Lab, which has had, for some time now, has been doing a good job in booking good levels of business. So far so good. I'm happy with that but not complacent.

And just lastly, quickly, on the margin side. I mean, obviously, you saw a little bit of a headwind in the quarter on the Lab business. But I think, overall, your commentary on sort of the progression is encouraging. But if you could think about, sort of, your -- the lower end of, sort of, your long-term target and sort of that low double digits, I mean, do you still feel like we're on the right guide path even though it might not be linear? And do you feel like the new business momentum that you see, at least, gives you confidence in sort of your ability to hit that trajectory?

Yes, I think so. I mean as I look back over the last 3 quarters. If you use Quarter 3 last year as the starting point where margin was pretty much 0. I've been happy with how it has progressed. I'm happy that we've hit the most ones that we've set along the way. I don't think anything has changed to change my view of that in the longer-term business, still a 12% to 14% margin business. And we'll keep it going. We're sticking -- we're sticking to plan. The backlog is good. It's up 22% year-on-year. It's burning at a healthy rate so we're converting that into profit. The business pipeline looks healthy. So we're sticking to the plan and we're still moving on that trajectory but as you rightly say, it may not be as, as we've seen with the Lab this quarter. And progress of this nature does have speed bumps and can be lumpy in the way in terms of not being entirely linear. But if we look at this quarter, I think the significant point for me is that the Clinical business reported 6.3% operating margin compared to 4.3% last quarter. Of course, the Lab was higher last quarter and that just drive it back. So in terms of the overall direction that we want to go and the overall plan that we have, I'm happy that we're hitting the milestones.

We will take our next question today from Robert Jones from Goldman Sachs.

It's actually Stephan calling for Bob. Just quickly on the bookings. You mentioned the strong pipeline, I know last quarter there was some more transactional type business you won that you called out, anything worth calling out this quarter?

No, I don't think so. I think, this quarter, we're happy just to say -- I think last quarter there were a couple of things that were significant just in terms of scale. This quarter we're very happy that it's very balanced, strong, as I said, and strategic and hitting the targets in transactional. So I think we were happy to leave it at that.

Great. And on the strong pipeline, is it fair to think of the book-to-bill going forward, maybe the next couple of quarters, in sort of the 1.3 range and tying into that is the cancellation rate, it has been within your range but still maybe a bit high on the past couple of quarters, anything specific in that number this quarter? And how should we think of that going forward?

I think we've always said that our cancellation range is traditionally 3% to 5% of our opening backlog. So the fact that the numbers are even higher than last quarter, it sort of, the fact that the backlog's so much higher now. We have a lot of big trials. So when they get pulled, you get a higher number, so I wouldn't read anything into that. I think, last year, they were probably a bit lower than we expected the cancellations. But you kind of have to look at the cancellation part and go at a more extended level of time. We go back and look at the start patterns over the years, and I think we're in the range, and I would expect it to stay in that range, albeit that you might have 1 quarter where it's lower, and 1 quarter that it's higher and I wouldn't read anything into that. From the point of view of the book-to-bill, there's a good pipeline but it's a tough world out there, and all business has to be won. And we had good competitors so we won't go getting carried away making any extravagant forecast. I think we have a good view of the organization, a good product, a good company. We'll go into the quarter again, and we'll see where the number comes out. We still stick to our traditional number of our forecast in around 1.2 for book-to-bill, and if we get that, that's how we build our resource plan in our business. It has worked well in the past, and served us well to model that way so we're going to continue to model that way.

We will take our next question today from Jack Gorman from Davy, Research.

Two quick questions, if I may. Firstly, just on DSOs. I'm wondering if you can give us a sense, whether there's any material difference between DSO trends for your strategic relationships and your transactional relationships? And second question, is kind of a longer-term question, really. I'm wondering if you have any early comments to make on some of the proposed changes to EU trial -- trials legislation? I think the Commission came out over the last week or 2 with some revisions, or proposed revisions on those rules.

Jack, it's Brendan here. Just in relation to the DSO question, I think we actually have indicated in the opening section of the wording that -- and with some of the largest strategic relationships, we would see our DSO tending more towards the direction of 50 days. We were very pleased with where it is at the moment both overall and given the mix of our overall client base, we'd expect it to be more in that 50-day range. So we'll continue to do the good DSOs for as long as we can, but it is something that's part of these new type relationships.

Brendan, just quickly on that, 50 days across group, which would imply the strategic as greater than 50? Is that fair?

I think, actually, it depends on the individual negotiations, Jack. Certainly, when you go into strategic relationships, you're negotiating hard and it would typically be in that range, but again, it doesn't necessarily mean it's specifically lower across in some of the, like a biotech company. So across the group, 50 days is a good measure.

Yes, look we work already as a business, Jack, and we're using the regulations. I have no specific comment to make on the EU trial stuff that came out a couple of weeks ago.

It's not going to -- you don't anticipate that it may actually inspire some relocation, not relocation perhaps, making you even more attractive for trials going forward?

I think having no specific comment on it, probably means that no comment on...

We will take our next question today from John Kreger from William Blair.

Ciaran, it seems like you're hiring -- the pace of hiring picked up a little bit in the second quarter, can you just talk about what you -- what we should expect in the second half?

Yes, it did pick up. I mean, at the end of the day, we sell people who will service this business so when revenue goes up like that, it's generated by the people. So as we look forward -- and we have hired over 1,000 people, I think, since this time last year. And as we go forward, there's a fairly consistent ratio between our revenue and our headcount albeit that at times, it can be lumpy and spiky, depending whether you're -- on how close to the revenue curve you get to hire or the niche of what you're doing. So I think when we look towards the rest of the year, we'll continue to be hiring in line with revenue growth. So I think we we'll just track for that new growth and if we have another quarter with revenue growth like that, we'll be hiring roughly the same amount of people if that revenue lasts it'll be proportionate to that. So nothing different there than hasn't always been the case through the decades of us doing this business.

And I think, I'm guessing that your thoughts on guidance for the year really haven't change, but any nuances there that you could update us on? And I believe, last quarter you talked about kind of a longer-term margin objective of about 12%, maybe by the end of '13, is that still a level that you're comfortable with?

Yes, we're not updating our guidance. We're happy with the range. Longer-term, yes, we hold to that target. We set ourselves a challenge here but I think through the last year to grow the business, the backlog and to drive profitability. We've hit the milestones along the way but there's a ways to go and we're not complacent about that. But certainly, we've hit the milestones we've said so far and we're holding to the fact that we'll get to the guidance range this year. And our target at this point in time is to drive towards that number by around the end of 2013. So nothing has changed since -- over the last quarter that would disabuse us of that ambition.

And then lastly, Brendan, a quick question for you. It looked like currency had about a 6-point negative impact on revenues. Can you just update us on what impact it had on margin and EPS, and would you expect that impact to get a bit larger in the third quarter?

If I could tell what the euro or dollar was going to go in the third quarter, I probably wouldn't be here. The -- and in overall terms of the margin perspective in the quarter, as you know, we've always tried to manage our cost base and the rounds of the dollar-euro mix of our contracts so that we create a fairly valuable hedge in our P&L account. And again, that said, that's been consistent this quarter. And so while we had, as you say, a pretty significant headwind on revenue, we did have a good tailwind on our cost base. And while that pushes up the margins slightly, it does nothing much to the EPS so we wouldn't expect it to be a huge impact on the EPS line as a result of the FX movements in the quarter. And as for Q3, I don't know, looks like the euro's going down to that EUR 120 level versus the dollar, again, that would create some headwind on a comparative basis.

For revenue, it tends to be neutral on the margin level.

We will take our next question today from Sandy Draper from Raymond James.

A couple of questions. Brendan, can you maybe -- a little bit more on the charges. When you guys are looking at this, was there any specific, I mean, was it more just getting out of some things or were planned? I'm trying to understand, was there any surprise that it caused the charges, and looking forward, are there any potential things in the back-half of this year that you could maybe see coming on the charge side, on a one-time nature?

Yes, sure, Sandy, and on the specific charges that we had, it was the one as I said, there was a -- there was 1 lease break there. And the majority of the rest of it related to some of that resource fractionalization. I'm not really was just taking, stepping back and taking a look at the organization and making sure that we are appropriately staffed in terms of spans of control and that the management structure was appropriate for the size of the organization in totality. For the back-end of the year, there's nothing in the hopper as yet, but we were -- this was certainly a process, so it didn't come up as a surprise to us in the quarter.

I'd add to that, Sandy, we have said operational efficiency is one of our goals. And that's a sort of a medium-term goal. So I think it'd be fair to say that while there are no significant charges that we know about, we will be constantly rebalancing our organization, over time, to make sure we have the right people in the right place as the market changes and our ranges of services varies. So it's really, I would just see it as an ongoing part of the maturing of the organization and its drive for efficiency.

Okay. Great, that makes sense. So obviously, your growing net hedge as you hire and grow, but there may be either, as you said, shifts in geography or maybe overhead in certain areas that may not be necessary. So the overall goal is still to grow hedge, it just may be rejiggering that's going to cause the charges?

Yes, that's correct.

Second question and I'll jump off. As you mentioned, Ciaran, that your -- the Lab business performed sort of in line on the first half basis, better the first quarter, little bit lower the second. If I look at -- your running about $1 million of profit on a quarterly basis, you average it out, what do you think it takes to make the next step up? Is it really more pulling through the revenue or is anything on the cost side? But at what point do you think you can make the step where again, not necessarily every quarter, but you start averaging out quarterlies that are more than the $1 million of profit?

Yes, that's -- I think when you look at the Lab and go back to, sort of, when we started this initiative I think it last about, I think it reported $7 million-odd of losses in Q3 2010, probably about 4.5 and 4 of those were run rate. And since then, it's been a question of improving efficiency while trying to drive revenue through the cost base. And the lab team has done a very good job in both of those fronts. So as we look at it now you kind of get to the point where Lab costs can -- they sort of go in steps, so there's been a lot of work done in taking out cost, improving efficiency, in things like outsourcing, kit building and using certain services in some of the offshore labs. And so we've got a good handle on the cost base, I think it'll be fair to say, but there's been a fairly spectacular level of business wins in some of those quarters. I mean, the backlog was $150-odd million when we started this, so in a period of restructuring a lab fairly significantly and restructuring the cost base, the guys have also grown the backlog by 31% to over $200 million. So I think when you look at where it is, going forward, that's a fairly significant level of revenue growth. And historically, we know that at times when you're on board in that revenue, if it's around, assays that are perhaps not on your panel, there'll new work there with new customers. That level of business wins has been driven by being successful and expanding the customer base and dealing with some new people. That can tend to increase set up cost, so it's kind of a step level. So I think for the balance of this year, we're probably looking at continuing to drive the revenue through and concentrate on growing the backlog, which probably means that the margin -- that, that 5% where we're at year-to-date will become the target for the balance of the year. I think it's when we go beyond that and you get revenue that's up into the mid-20s that you'll start to see another kick on the leverage. But at the moment, I think it's fair to say, the turnaround is still in progress. So we don't have the same level of predictability that we might have in a steady state.

We will take our next question today from Greg Bolan from Sterne Agee.

Is the Early Phase unit profitable at this point?

We have 3 Early Stage units, which we use to balance capacity in Phase I. Our Early Phase business, Greg, is made up of Bioanalytical and immunoassay labs division, the Phase I clinics, and then various scientific services and consulting services that wrap around the Early Phase. The 3 clinics themselves provide capacity, and taken together they are profitable albeit that within different quarters, you might be switching around capacity between one of the other so they might not all necessarily be profitable at the same time.

Got it. And is it the case where the Bioanalytical lab is driving profit higher or lower at this point?

They're performing well, be fair to say, they're bringing the profit higher.

Okay, that's great. And then just to go back to Sandy's question on Central Lab margins, you had referenced, obviously, after you kind of get through this restructuring and building the infrastructure to size, as it relates to the revenue, the bookings that are coming in on the Central Lab side. I think you used to talk about carrying it at a certain threshold, I think the sales number was something in the magnitude of maybe $80 million annualized, that there would be $80 million -- excuse me, so something to that degree, $80 million annualized. You would be probably closer to a 10% to 15% operating margin for the Central Lab, is that still kind of in line with what you had referred to earlier as it relates to getting past this restructuring moving on to next year assuming, of course, the orders continue to grow at a healthy pace?

Yes, it broadly is, Greg. I think what may have changed since we talked about that in the past, we have a bigger Lab footprint now because of more demand in developing markets. In the past, we would have thought about having our $80 million of revenue broadly going through sort of the New York and Dublin and part of the footprint. Now we have labs in Bangalore, in Singapore and near Beijing in China. It's out of cost to our cost base. But and then of course, we have a big panel of test now, a new commoditized safety test, which can be low value -- $5 or whatever, and you've high-end differentiated esoteric test for $1,000 to $15,000 so the mix, too, can significantly drive that. But I think it would be fair to say as we move through this, as we get to the end of this year and as the business stabilized and where we want it to be, I think we're kind of thinking 10% of that $80-odd million, $80 million to $90 million range. And then as you kick on from that, you would pick up margin in the longer term.

We will take our next question today from Todd Van Fleet from First Analysis.

Just want to make sure my numbers are right here. So Clinical research expanded -- the margin expanded in that segment about 200 basis points sequentially, is that right?

That's right.

Okay. And then on the Central Lab side, you said it underperformed, I think, you said 2.4% in the quarter -- was the performance. Was the amount of underperformance, I guess I'm just kind of thinking relative to my model here and where I had you, it looks like it probably cost you, I mean is it fair to say it cost you $0.01 in EPS?

Probably like more than $0.01. Do you think closer to 2...

Closer to $0.02.

Close to $0.02, okay then. Ciaran, it sounds like the back-half of this year, you're kind of guiding to maybe -- not really guiding, but suggesting perhaps, that we might be in the 5% range for that segment margin over the course of the back-half of the year as we kind of recover from the --

I'm certainly suggesting, Todd -- I certainly said that's what we were going to be trying to do, but we've seen the lumpiness in the Labs so I always take a deep breath and cross everything here that you can see, when I'm talking about that. But that's certainly where I think it is at the minute, when we're looking at the forecast and the scheduling, really we'd strive for it to come at.

Okay. And would the expectation be, or is the expectation at the moment then, that sequentially each quarter we'll see revenue improvement over the course of the rest of this year. So, We were $21 million-plus in the June quarter, will we bounce around that, do you think? Or should we see sequential step ups here?

I expect it broadly to be, I mean you expect, generally, it would end up be ticking up but there's always the possibility it can fluctuate up and down a bit towards the back-end of the year. As Ciaran said, we'll try our best to make sure that we're producing that 5% margin either way.

We will take our next question today from Douglas Tsao from Barclays.

Just in terms of the revenue acceleration. Was -- it largely related to transactional deals or was this strategic deals in nature?

The revenue is coming off about 800 projects, Doug, and I don't think I'd characterize it as being one over another. We have a lot of projects here, a lot of complicated projects. We'd just had a good quarter, where stuff started up and kicked in and some of that picked up quickly some of it was strategic accounts transitioning over, some of it was the transactional wins that we talked about in Q1, that started up. So I wouldn't overanalyze that and look at it too much. Certainly we haven't -- it's just a broad level of activity across the portfolio.

Okay, great. And then in terms of what you saw in the Central Lab, if you could give some directional color in terms of what you see as cost that will perhaps persist a little bit just given the robustness of the business and especially given your specialty and strength in esoteric testing versus costs that truly were one-time in nature, just so we can sort of think about that when we go forward for your modeling?

Yes. We had higher costs this quarter but I don't think we characterize them, particularly, as a one-time in nature. I think the higher cost that we saw was really a question of lumpiness. And what drove the higher cost this quarter was the BD people outperforming their target quite significantly, so that allocated commissions. What's driving the cost and doing the short-term, as you add new customers and new testing panels it's just more set up costs. That can happen in 1 quarter but it might not necessarily happen in the next quarter. So some of the costs are to do with the timing of what you recognize cost. Quarter 1 was a more stable quarter for the lab, they generated revenue, there wasn't as much timing issues on new costs so that a higher margin. So I think as we look forward, we're at 5% for the first half of the year. When we looked at the Lab a bunch of times at the start of the year, pretty much would've been where our thinking was but then turned out that Q1 was particularly strong for margin, which caught us by surprise then. So I look forward, it will depend on how much business you win and how much of it is new, how much of it's on panels that we're adding. And we constantly develop our panels in the Lab and constantly add new tests to it. And so I would think, directionally, we'll continue to see the revenue at about that level. Maybe, as Brendan said, tick up a little bit or maybe just bounce around depending on how the pull-through happens, we know the Lab can be volatile. And we'll target that 5% because at some quarters we might set up a bunch of new panels and other quarters we won't. So it should all wash out towards that in the medium term.

We will take our next question today from Steve Unger from Lazard Capital Markets.

A quick question just on, sort of, what's going on out there as far as the formation of new strategic relationships. It seems like as an industry we've sort of gone quiet in that regard. Perhaps even over the last 6 to 9 months, and I was just wondering, is this -- are we in a pause period here? And as far as the formation of new partnerships, do you see any potential for something in the back-half of the year?

Yes, it's hard to say, Steve. It's difficult to be on the center, we have our fair share of this relationships that we found and built in the past, and they take some time and you're never quite sure of what point they will accelerate. I think, at the moment we -- and probably, in common with everyone in the industry, we're involved in a number of discussions, with a number of companies that are looking at this. I think, too, there's possibly the second wave of these deals we're all trying to work on learnings from the first wave of CRO's and the Pharma and Biotech customers. And so, there are ones that, potentially, if you won them with a fair wind, would close this year. But it's sort of beyond our control, these are huge change projects for the customers, a huge transformation. It's just a minefield of issues when you get to the tactical level that the strategic decision is often made very early in the process, then it's down to partner negotiation and choice and that is ultimately down to very detailed tactical change in management plans with all the legal and employee issues and things that go with that. So it's always hard to know just how quickly they'll roll, but there's certainly enough on the discussion that have us heartened and you couldn't preclude that someone will close this year, but you couldn't guarantee it either.

Got it, okay. So then, the last question I have, as far as -- you guys set out some revenue guidance before the year really started and the dollar just gotten stronger, obviously, and it's the currency impact is obviously, greater than what you had expected. Would you characterize the core business then, right now, excluding acquisitions really running a lot faster than where you thought you would be at this time? And as far as organic growth in the back-half of the year, are you looking at 20%-plus to be sustainable now going forward?

We're happy with how the core business is running at the minute, and we're happy with the way we're onboarding some of the bigger strategic deals. I think when we did the revenue guidance, so there's a lot of moving parts in here. I think you sometimes subscribe more, get to it when it comes to forecasting this things and you may actually have. So we did our best shot at the revenue guidance back -- I think we first talked about it on the October call, which was actually quite early. And perhaps there was an element, too, with a couple of new changes in the management team or changes in roles for some existing members. So that there's perhaps caution around the revenue. So we've been able to absorb the foreign exchange impact and still post those numbers but that's probably good fortune as much as anything else. When we look forward to the rest of the year -- that was a strong quarter and we got a lot of stuff up and running this quarter right across the portfolio of that and that came on board a little bit earlier than perhaps we might expected, so I would be reluctant to say we're going to be bumping it up 20% in every quarter from here on in. There's a lot of big studies in our portfolio and the difference between just 1 or 2 slipping out a couple of months, are starting and not starting can change the number quite significantly.

And then maybe, I guess, could you perhaps -- since you've made a couple of acquisitions here give us some sort of range as to what you think the acquisitions are going to impact the business in the back-half of the year?

I think it's all baked in, I've seen some commentary on that. All the acquisitions we made were well in progress last October and certainly by the year end. So anything that we kind of saw, we would have had baked into our original forecast. So if you look at the key ones, PriceSpective is on this year but it's a couple of pennies -- if you said 3 or 4 was it? Full year, and it hasn't been the full year. And the other acquisitions we've made -- if you look at them, it's not so much about the, what they're adding into the bottom line on their own. What we've been doing, we've been making very targeted acquisitions of smaller, high-value added companies with enhanced capabilities and intellectual capital which will help differentiate our total service portfolio and are leading to us being more competitive in this traditional arena where we deploy things like ICONIK and Firecrest where we add value right across the spectrum of development services by having offerings such as pricing and market access and health economics. So there's a couple of cents in for the small companies but they would have been very much in the forefront of my thinking when we gave the original guidance back in, at the end of October.

As far as the top line is concerned, I mean the $14 million is, I guess, is what I'm coming up with in the second quarter. That would be the, sort of, expectations for the next couple of quarters? Or even a little bit higher?

That sounds fair, Steve, yes.

We will take our next question today from Tycho Peterson from JPMorgan.

This is Ramesh Donthamsetty in for Tycho. Just first on those acquisitions within market access, reimbursement, PriceSpective, Firecrest, Oxford, can you talk a little bit about how big your business in sort of that area is today? And also how, I guess, penetrated within your accounts that it is today, particularly, since you've made these acquisitions relatively recently?

We don't really talk about the specific numbers, Ramesh, I think we gave some indicative numbers at the time we did each of them. And they tend to be businesses that are in that sort of $10 million to $20 million range depending on what it is. And some of them are better penetrated than others, I mean that's part of the integration process. We brought Oxford and Firecrest on board last year, this is the first quarter of PriceSpective and we go through a process of integrating the business in a number of ways, one of them being at the BD end. So we're working through a plan but it's work in progress.

And then you've gotten a number of questions, obviously, on Central Lab and just trying to parse through, obviously, the margins that you had in the first quarter, obviously, took a decline in the second quarter. Is that all attributed to sales commissions and logistics with bringing on business or is there anything else? And then is the expectation to get to that 5% just inherent in, I guess, better management structure of the business or is it related to, sort of, lower than expected sales commissions in the second half?

No, I mean the additional costs, I think, we said sales commissions and logistics and cost of adding new lab costs, revenue assays and telephonetics. And so that's with the additional costs side. As we look forward to the second half of the year, well if we keep beating the hell out of the plan in terms of business wins, traditionally, in our business you have elevated costs on that. So our target of 5% is assuming normalized levels of new business in normalized levels of activity to the extent that activity is below that and margin might be higher than we expect. We saw a bit of that in Q1 to the extent that it's above that, it might be a bit lower than we expect but it will come down to the specific activity in the quarter

And then just in terms of direct cost, I think with in terms of your Clinical research business, it looks like it's tracing relatively flat to the revenue growth. Do think we might see some more leverage, I guess, as you dig in further with your strategic accounts, not only in the second half but I guess into maybe first half of 2013, do you think you'll see some more leverage on, sort of, direct cost within that gross margin line?

Recovery on our overall operating margin from Q3 to last year has been basically about getting leverage from the, tends to be, the Clinical business as it's, by far, the biggest part of our business. So as we look forward and we think in line with our guidance and our ambition to increase the margins, it's going to be driven by getting leverage in 2 areas, leverage off the direct cost line and efficiency from resourcing. Albeit that, that can be lumpy by the nature of -- we're still adding staff and when do they start on that, and then getting leverage off of our more fixed cost base at the SG&A line. But we're still seeking to continue to expand margins and leverage in both of those lines, it's how we'll go about it.

We will take our next question today from Nick Juhle from Robert Baird.

Most of my strategic ones have been covered, just a quick clarification for Brendan. You said that the, I understand, about 6 points of headwind from FX at the top line and then based on what you told us, about 6 points of benefit from M&A, is that about right?

That's correct.

And I'm sorry if I missed this, but did you give the FX impact to backlog in the quarter?

I didn't, no. But it was -- there was an impact, though, probably $20 million.

And then just one big picture one, I guess, as you look out over the next 12 to 18 months or so, do you foresee any incremental investments that need to take place whether it's in systems or IT or incremental headcount above and beyond what you've had just for typical revenue growth and that type of thing? Anything on the horizon, we should be thinking about?

No, there's nothing on the horizon, which I'd be thinking about. I mean, I'll just say, we'll add in line with revenue. We've been investing in our IT platforms pretty consistently for many years now so as we continue that level of investment, I don't see anything on the horizon that's incremental. Of course, we're constantly scanning for opportunities and keeping in touch with what people want so something may arise in the future that will prompt us to make an investment decision but there's certainly nothing significant of that nature that we're aware of now.

We will take our last question today from David Windley from Jefferies.

So the first one is, on your cancellations in the quarter, was there a bias toward one or the other of Clinical or Central Lab or were they pretty evenly spread, kind of, proportionate to the revenue base.

They were pretty evenly spread. I mean the lab cancellations were about, I think about $8 million or $9 million. The gross lab wins were 43 or 44 or so. That was about it, maybe in the balance, was in the Clinical business. So I haven't done the sums, Dave, on the proportions there, probably looks like more on the Clinical side, where you'd expect it, it steadies.

On the Pfizer relationship, I know you guys don't want to get into great detail about individual clients, on that one large one, are you still progressing through the 5 waves on schedule, and are you on number 4 at this point, with number 5 still expected to come before the end of the summer? Just wondering how that's tracking relative to schedule?

It's tracking going on schedule at this stage so we have started with 4 and we have 5, it should start later in the summer.

Okay. The other trend, obviously, embedded in these strategic deals is your ability to cross-sell some of your other capabilities beyond the Phase II, III after you get in, we've see that happen in a couple of cases. Have you had enough experience with those tack-ons, those add-on services to see how that ramps the revenue within the relationship and moreover, how it impacts the profitability of the overall relationship?

I think it's probably fair to say we haven't had enough experience yet. And for those 2 questions, precisely for you, what I would say is that we have, if you look at some of the add-on services, what is it we want to push through -- what we want to push through to Early Phase services and get people to use the Phase 1 clinics. And I think we've had 2 quarters in a row now, where all of our businesses have made money, which is the first time in a long time we've seen that. So I think some of that is we're seeing the benefit of some of the deals that we've done certainly in the lab, where some of our big clinical customers are using the lab. In Phase I, we filled services there to our portfolio. And then we don't have enough information then on the newer pieces that we're pushing through, for instance: our health economics and Outcomes Research, and our pricing and market access, and our technology businesses is quite early in the process. But the initial reaction has been very positive particularly in some of the technology offerings where we are in discussions with a few customers about deploying them, and in some other customers we've already deployed them quite heavily. But it's early days to see the full impact in those terms. I would say, it's helping us and we're encouraged by it, but I would refrain from implying on the financial impact of those specific items. For another while, other than to say, it's not -- the fact that all the businesses are making money is not unrelated to that strategy.

Ciaran, so you've also talked about, I think over time, the business -- you've moved to some more regional service centers and consolidated or aggregated some of the support functions in the organization that is leading to an expectation of, kind of, a broad corporate number being flat in 2012 versus 2011. Wondering how your viewing that, kind of, the ability to leverage that fixed cost structure as we move into 2013?

I will say that it's working so far in 2011 -- 2012 compared to 2011. We've more detailed plans to do before I can talk about 2013. But certainly, the principle holds that we've put together models, which certainly will either stay flat next year or will grow at a much lower number than revenue. I mean some of it's going to be linked to specific activity even though a lot of the cost are broadly fixed. And there are elements that link to activity or there will be decisions we make as we finance our plans for next year around geographies and locations and range of services. But the model is holding out well, so far, this year and there's no reason to think that it won't when we get down to the planning for next year. But whether it's flat in '13 compared to 2012 or it just grows significantly less than revenue, we'll see as we work through our budget planning process.

As there are no further questions in the queue, that will conclude today's question-and-answer session. And I would like to turn the call back to Mr. Ciaran Murray for any additional or closing remarks.

Okay, well, thanks everyone for your time. I'll close by saying we continue to see opportunity in our market and we look forward to working through the rest of 2012. And continuing to progress towards our aim of being the global CRO partner of choice for the industry by delivering the best-in-class information solutions and performance in Clinical and Outcomes Research. So good day, everyone, and thank you very much.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.