Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA Q3 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. As a reminder, this call is being recorded. Thank you. I would now like to turn the call over to Nick Childs, SVP , Investor Relations and Treasurer. Mr. Childs, you may begin your conference.
Thank you. Good morning, everyone. Thank you for joining our Q3 2022 earnings call. With me today are Ari Bousbib, Chairman and Chief Executive Officer, Ron Bruehlman, Executive Vice President and Chief Financial Officer, Eric Sherbet, Executive Vice President and General Counsel, Mike Fedock, Senior Vice President, Financial Planning and Analysis, and Gustavo Perrone, Senior Director, Investor Relations, who has succeeded Ryan Stangl. Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call in the Events and Presentation 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 the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent SEC filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Bousbib.
Thank you, Nick, and good morning, everyone. Thank you for joining us today to discuss our Q3 results. IQVIA delivered another quarter of strong financial results despite market concerns about slowing demand, broader macroeconomic challenges, and the various global geopolitical issues. In fact, indicators of demand, both from customers and in the market generally remain healthy. Industry clinical trial starts continue to trend ahead of last year, rising almost 7% year-to-date. The pipeline of active early-stage and late-stage molecules are both up 8% from 2019 pre-pandemic levels. EBP funding, which has been a lingering concern since the beginning of the year when one of our smaller competitors raised alarms. EBP funding improved, in fact, in the quarter. According to BioWorld, Q3 funding was $18.7 billion, the highest of any quarter this year.
Year-to-date, funding is running at about a $60 billion annual rate, which exceeds the average of the last five years pre-COVID. Our own RFP flow grew mid-teens in Q3, and RFP flow in both the large pharma and EBP segments are up double digits on a year-to-date basis. Our Q3 book-to-bill was 1.39, excluding passthroughs, and 1.27, including passthroughs, continuing our strong results from the first half of the year. As a result, as you saw, our backlog grew 5.4% versus prior year on a reported basis and 9.4% excluding the impact from foreign exchange. As you can tell, we are not experiencing any signs of slowdown in demand. It also helps that we are extremely diversified.
Remember, we serve over 10,000 customers in more than 100 countries, including all top 25 large pharma clients across the spectrum of therapeutic areas. Now, while demand remains very healthy, as you know, and as we have been saying throughout the year, we have been dealing with operational challenges caused by the global macro environment, including wage inflation, high levels of attrition, obviously the ongoing Russia-Ukraine disruptions, recurring China lockdowns that are still going on, and perhaps that's a newer development, some staff shortages at certain investigator sites.
As you know, we have been able to overcome all these issues as reflected in our results for the first nine months of the year. Although, as we end the year, we are anticipating some minor delays in the timing of deliveries caused by these macro disruptions and specifically by the bottlenecks that are created by staff shortages at certain sites and that are delaying the execution of our deliveries. This is why we decided to tweak the guidance a little in the final stretch to the end of the year. A note on our capital allocation strategy. As a result of persistent high levels of inflation, interest rates have been increasing sharply. In response, we are adjusting our capital allocation strategy to include some debt pay down, in addition to continuing the M&A and share repurchase opportunistically as in the past.
In summary, the underlying demand in the industry and in our businesses remains strong, and we are managing through the headwinds caused by the factors I just discussed. Now let's review the Q3 in more detail. Revenue for the Q3 grew 5% on a reported basis and 10.5% at constant currency. The $22 million beat above the midpoint of our guidance range was driven by operational upside in both TAS and R&DS services, offset by continued foreign exchange headwinds. Compared to last year, and excluding COVID-related work from both periods, our base businesses grew 14% at constant currency on an organic basis. Notably, on the same basis, the R&DS business was up 18% and TAS was up 12%.
Q3 adjusted EBITDA increased 11.8%, reflecting our strong revenue growth and ongoing cost management discipline offsetting the headwinds of wage inflation that are persisting in our business. Q3 adjusted diluted EPS of $2.48 grew 14.3%, driven by our adjusted EBITDA growth. Let me provide some color on the business, starting with the commercial and technology side. The exponential increase in industry data access and complexity has created tremendous new opportunities for insight and evidence generation. Making this data usable requires robust information management capabilities and as you know at IQVIA, we've been building these capabilities for decades. In the call, the top ten pharma clients selected IQVIA's Human Data Science Cloud to power large scale data and analytics programs by centralizing and harmonizing data for 35 large countries across their primary care and specialty medicine portfolio.
We continue to advance digital marketing in healthcare. We're deploying a privacy-first open ecosystem that delivers healthcare information in a timely and personalized manner to meet the fast-changing needs of the healthcare consumer. In the quarter, IQVIA acquired Lasso Marketing, which developed an operating system that's purpose-built for healthcare marketers to coordinate and execute omni-channel digital campaigns from a single platform. In addition, DMD Marketing Solutions, which you will recall we acquired about a year ago, was recently selected by a top 10 pharma client to bring to market 13 oncology and biological brands using digital insights to deliver personalized brand content to HCPs that are relevant to their practices and interests. Demand for our commercial technology solutions remains strong. This quarter, a top 20 pharma client selected IQVIA's commercial technology ecosystem suite to transform its commercial operations into an AI-enabled commercial model.
The customer will deploy IQVIA's Orchestrated Customer Engagement Suite, IQVIA's Master Data Management and Orchestrated Analytics in more than 30 countries. Driving the 20% efficiency gain in customer coverage and boosting the speed and precision of their order management process. In the real-world business, IQVIA continues to lead in innovative study designs that combine multiple IQVIA capabilities. For example, in the quarter, we were awarded a multi-year portfolio of real-world studies in psychiatry from a mid-sized pharma company. We are combining faster data-driven recruitment timelines with a comprehensive home health infrastructure to reduce the burden on both the patients and the sites. In another example, we were awarded a significant contract with a major med tech company to identify early markers for organ transplant rejection through a non-interventional study that combines our med techs, real-world and translational sciences capabilities. Moving to RDS.
Our Decentralized Clinical Trial, DCT program, has received independent compliance validation from EU General Data Protection Regulation, GDPR, from TrustArc, which is the leader in GDPR validation. This is a big deal. This program is highly recognized in the industry as it requires two separate independent audits. It's a key achievement for IQVIA as it is the first time any DCT offering has received this European data privacy validation. In addition, we've now expanded our DCT capabilities by launching the first self-collection safety lab panel for U.S. clinical trial participants in collaboration with Tasso, Inc., a leader in clinical-grade blood collection solutions. Participants in clinical trials can now provide a blood specimen for lab testing in the comfort of their own home without the need to visit an investigator site or have a healthcare professional visit them, expanding our DCT offerings and capabilities.
Of course, as you've seen, the overall R&DS business continues its strong momentum with services bookings in the quarter exceeding $2 billion for the first time ever. This translated into a quarterly book-to-bill ratio of 1.39, excluding pass-throughs. Including pass-throughs, the business delivered over $2.5 billion of total net new business in the quarter, with a book-to-bill ratio of 1.27. Over the last 12 months, our contracted book-to-bill ratio was 1.35, excluding pass-throughs, and 1.29, including pass-throughs. I will now turn it over to Ron for more details on our financial performance.
Okay. Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. Q3 revenue of $3.562 billion grew 5% on a reported basis and 10.5% at constant currency. In the quarter, COVID-related revenues were approximately $220 million, down about $160 million versus the Q3 of 2021. In our base business, that is excluding all COVID-related work from both this year and last, organic growth at constant currency was 14%. Technology and Analytics Solutions revenue for the Q3 was $1.4 billion, up 4.7% reported and 11.6% at constant currency. Excluding all COVID-related work, organic growth at constant currency in TAS was 12%.
Research & Development Solutions' Q3 revenue of $1.979 billion was up 6.8% reported and 10.7% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 18%, as Ari mentioned. Finally, Contract Sales and Medical Solutions, for CSMS, Q3 revenue of $183 million declined 9% reported but grew 1% at constant currency. Excluding all COVID-related work, organic growth at constant currency in CSMS was 3%. Year-to-date revenue of $10.671 billion grew 4.2% on a reported basis and 8.1% at constant currency. COVID-related revenues were about $850 million year to date. In our base business, that is excluding all COVID-related work, organic growth at constant currency was 14%.
Technology and Analytics Solutions revenue year-to-date was $4.247 billion, up 5.2% reported and 10.3% at constant currency. Excluding all COVID-related work, organic growth at constant currency in Tech and Analytics Solutions was 11%. R&D Solutions' year-to-date revenue of $5.863 billion was up 4.5% at actual FX rates and 7.1% at constant currency. Excluding all COVID-related work, organic growth at constant currency in R&DS was 19% year-to-date. Finally, Contract Sales and Medical Solutions, or CSMS, year-to-date revenue of $561 million declined 4.6% reported and grew 2.9% at constant currency. Excluding all COVID-related work, organic growth at constant currency in CSMS was 5%. Let's move down to P&L.
Adjusted EBITDA was $814 million for the Q3, representing growth of 11.8%, while year-to-date adjusted EBITDA was $2,426 million, up 10.6% year-over-year. Q3 GAAP net income was $283 million, and GAAP diluted earnings per share was $1.49. Year-to-date GAAP net income was $864 million or $4.52 of earnings per diluted share. Adjusted net income was $470 million for the Q3, and adjusted diluted earnings per share grew 14.3% to $2.48. Year-to-date adjusted net income was $1,413 million or $7.39 per share.
Now, as Ari reviewed, R&D Solutions delivered another outstanding quarter of bookings. Our backlog at September 30 stood at a record $25.8 billion, an increase of 5.4% year-over-year on a reported basis and 9.4% adjusting for the impact of foreign exchange. In fact, I might point out that without the impact of foreign exchange year-over-year, backlog would be $900 million higher. Next, 12-month revenue from backlog increased to $7.1 billion, growing 2.8% year-over-year on a reported basis and 6.7% adjusting for the impact of foreign exchange. Okay, now reviewing the balance sheet.
As of September 30th, cash and cash equivalents totaled $1.274 billion and gross debt was $12.394 billion, resulting in net debt of $11.12 billion. Our net leverage ratio at the end of the quarter was 3.42x trailing 12-month adjusted EBITDA. Q3 cash flow from operations was $863 million, and CapEx was $165 million, resulting in a strong free cash flow result of $698 million for the quarter.
You saw in the quarter that we repurchased $150 million of our shares, which puts our year-to-date share repurchase at slightly above $1.1 billion, and this leaves us with just under $1.4 billion of share repurchase authorization remaining under the current program. As already discussed earlier, we're adjusting our cash deployment strategy in the light of higher interest rates. Earlier this month, we retired $510 million of variable rate US dollar term loans scheduled to mature early in 2024. This was in October, so you don't see it in our end of September balance sheet. We will likely retire additional term debt during 2023 while we continue to pursue acquisitions and repurchase shares, as has been our practice since the merger. Now let's turn to guidance.
For the full year 2022, we continue to expect revenue, excluding COVID-related work, to grow organically at constant currency in the low- to mid-teens%. On a reported basis, the strengthening of the U.S. dollar has caused over $500 million of full-year headwind since our initial guidance last November. This $500 million includes a further impact since our Q2 earnings release. In addition, as already mentioned, global macro environment challenges such as wage inflation, investigator staff shortages, slower than expected recovery of patient visits, continued lockdowns in China, and the still unresolved Russia-Ukraine conflict are persisting. So far, we've been able to offset all of these challenges and absorb them in our numbers, but we're forecasting a modest residual impact in pockets of our business during the balance of the year, and we reflected this in the updated guidance.
For the full year, we now expect revenue to be between $14.325 billion and $14.425 billion. At the midpoint of our guidance, this represents an adjustment of about $100 million, with roughly two-thirds of this driven by foreign exchange impact and the rest by the global macro environment headwinds I just detailed. Our updated guidance represents year-over-year growth 7.4%-8.2% at constant currency and 3.2%-4% on a reported basis. As a reminder, this equates to low- to mid-teens organic growth at constant currency, excluding COVID-related work. Our projected revenue growth includes approximately 200 basis points of contribution from M&A. We're also updating our guidance on Adjusted EBITDA to reflect the revenue and cost headwinds mentioned.
We're now setting the guidance range to be between $3.33 billion and $3.36 billion, which represents year-over-year growth of 10.2%-11.2%. Lastly, we're raising the midpoint of our adjusted EBITDA and EPS guidance by $0.05 to reflect updated estimates of costs below the adjusted EBITDA line. We now expect adjusted diluted EPS to be between $10.10 and $10.20, which represents year-over-year growth of 11.8%-13%.
Moving to our Q4 guidance, we expect revenue to be between $3.654 billion and $3.754 billion, or growth of 5.5%-8.2% on a constant currency basis and 0.5%-3.2% on a reported basis. Excluding all COVID-related work, we expect organic revenue growth at constant currency to be over 10% at the midpoint of our Q4 guidance. Adjusted EBITDA is expected to be between $904 million and $934 million. That's up 9.2%-12.8%.
Finally, Adjusted Diluted EPS is expected to be between $2.72 and $2.82, growing 6.7%-10.6%. Now, all of our guidance assumes that foreign currency rates as of October 2024 continue for the balance of the year. To summarize, before we go to Q&A, the underlying demand in the industry and our business remain very healthy. We delivered strong operational P&L and free cash flow performance in the quarter. Revenue grew mid-teens% organically at constant currency, excluding COVID-related work. Our RDS business continues its strong momentum, with services bookings in the quarter exceeding $2 billion for the first time ever. Contracted backlog sits at a new record of $25.8 billion, up over 9% excluding the impact of foreign exchange.
We repurchased nearly $150 million of our shares while reducing our net leverage ratio to approximately 3.4 times trailing twelve-month Adjusted EBITDA. Finally, we retired at the beginning of the Q4 $510 million of our variable term debt. With that, let me hand it over to the operator to start the Q&A session.
At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We request that you please limit yourself to just one question so that others in the queue may participate as well. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Dave Windley with Jefferies.
Hi. Good morning. Thanks for taking my question. I wanted to focus on kind of speed of throughput in RDS, call it speed of studies, and thinking about major buckets that could fall both on the accelerator side and the decelerator side. You talked about your DCT capabilities, you know, more remote activity that could spur along throughput or recruitment of patients, you know, finding patients that are willing to participate in studies. Maybe, you know, clients that post-COVID are kind of pushing hard to catch up for things that were, you know, pushed behind during COVID. Then on the other side, these things that you've highlighted around staff shortages at sites, things like that, maybe therapeutic mix in your backlog might be lengthening. That's something that's a trend in the industry.
Just seems like, you know, relevant to how quickly you can convert your backlog into revenue or these factors. I wondered, Ari, if you could kind of help us understand, you know, the tug-of-war there and which one's winning.
Well, good morning, Dave, and thank you for the question. And there are many elements of response built in your question itself. You clearly know the industry and what's happening very well. Look, as a context, as you all know, in the field, patient visits have not fully recovered to pre-pandemic levels. That's point number one. I think it was presented at an industry conference recently. I think it was on October seventh, Society for Clinical Research Sites summit. This issue of staff shortages that are affecting investigator site operations was flagged as a development industry-wide. That if you will, is on the negative.
You're correct to point to our DCT as, obviously, the less we require the patient to actually visit the site, the better it is as a counter to this issue. Now, we don't see this issue as a sort of permanent or ongoing thing. What we have been dealing with and we've been talking about from the beginning of the year, which is very high levels of attrition. People have a hard time going back to work. We have a harder time recruiting the skill sets that we require. Plus the impact on cost of labor that all of that has. All of these factors in combination are a significant or the single most important operational challenge we have seen.
As we've mentioned many times, we've been dealing with that and offsetting the impact of these issues with our productivity initiatives and cost reduction programs. Now, we're not the only ones to experience these staff shortages. The sites also have staff shortages as a result of the same factors. You know, when they have to prioritize dealing with the incoming flow of patients versus dealing with clinical trials. That's a development. You mentioned also the complexity of studies as a new factors. I think this is also correct. There is the mix, not just in our backlog, I think it's industry-wide, that happens to be the evolution of the market. The mix of studies makes the factors I just mentioned even more acute.
As you know, recruitment of patients is much more correlated. The difficulty to recruit patients is correlated with the complexity of the study. Now, this is an area where we can shine because we've got our data analytics and our technology, and we've proven many times that we are able to address complex studies and recruit patients better than we would have had otherwise. You know, which side is going to win? It's hard to tell. Look, so far, I mean, through the year, we've been able to address all of those. I mean, you've seen our numbers every quarter. We have been able to beat our own expectations, and that's because we've been able to address it. We have a very diversified large-scale company, and we are able to address it.
We're not dependent on one single study. You know, had we been a tenth of the size, you know, we would be you know, highly sensitive to a big study win or a big study loss, and we're not. You know, we just tweaked a little bit the Q4 numbers here just because we want to make sure we anticipate everything and be transparent and put this out to investors. Thank you for your question, Dave.
Yeah, thank you.
Your next question comes from the line of John Sourbeer with UBS.
Hi, thanks for taking my question. I was just wondering if you could talk a little bit more on the inflation and hiring trends. You also mentioned some attrition in the prepared remarks. Just, how do you see this playing out into next year? I know you're not guiding on 2023, but do you see some easing on the trends there? On the other side, I guess, how is pricing looking, and are you able to offset any of these inflationary pressures on pricing? Thanks.
Thank you, John. That's a very good question. That is exactly the operational equation that we are dealing with. Again, there's no news here. We've been talking about this throughout the year. We've been saying this is the single most significant operational challenge we're dealing with, is talent and the cost of the talent. Recruiting, training, retaining, and compensating the talent that we need to execute our studies. The levels of attrition reached record highs. I mean, you're talking about almost 20% sometime in the first part of the year. We have seen those levels of attrition come down and stabilize. Now, they're still very high. It's now more in the, you know, 16%-17% type of range, and it's stabilized there. We hope that they are gonna continue to come down.
Obviously, we put in place a very large number of measures to retain people and those include, not only, but they include, you know, the compensation, upward compensation adjustments, which again places more burden and creates, you know, inflation that we have to deal with. This is as I just mentioned before, the same issue industry-wide and including at our partner sites where we execute the studies, which is creating the bottlenecks that we talked about for us to execute. As far as our operations, we don't know how long these attrition issues and, you know, employee turnover and headwinds will last. We are dealing with them.
I can tell you that many of the cost-cutting and productivity initiative programs that we were planning to launch in 2023, we have decided to accelerate, and we're starting many of them in this Q4 of 2022, in anticipation of potentially continuation of some of these, you know, employee turnover and wage inflation issues. We are going to address that as far as our operations. Now, you asked a balancing question, which is how are we able to reflect that on pricing? As you know, on the CRO side of the house, it's a long cycle business. The contracted backlog that was contracted a year, two years, three years, four years ago that's still in our backlog sometimes, that is at a certain cost assumptions which were different than the ones we're facing.
There are, in most contracts, cost escalation provisions and clauses that enable us to adjust the rates. I don't think anyone anticipated, you know, 8%-9% inflation. We're not fully able to immediately recoup. There is a delay, if you will. There is a lag between when we are suffering the cost headwind and when we can reflect that into our pricing. Now, it's a little less like that in the shorter cycle businesses on the commercial side. There also, we have long-term contracts. We have at least, you know, 1-year, 2-year contracts. We've got technology licenses at a certain rate. We've got data contracts at certain rates.
It is more likely that we are able to reflect price increases in analytics, in consulting, in services, which are 3, 6 months, 1 year visibility type contracts, and those we're able to. Again, it's not the bulk of the business. It will happen, and we've got plans to do so, but there is a lag. Thank you, John, for your question.
Thank you.
Your next question comes from Sandy Draper with Guggenheim.
Thanks very much. I guess, Ari, it'd be helpful to hear some commentary on the TAS side. Thinking about the three broad buckets you look at TAS. In terms of the demand drivers there, what do you feel like is improving, staying the same, potentially weakening? Just thinking about some of the commentary or concerns out there around, you know, okay, what's happening with the sales force? Is that gonna be accelerating in terms of cuts? Is that stabilized? Thinking about overall marketing budgets, how people are looking at using data in marketing. Just would love some commentary about, you know, how you see what's going on in terms of pros and cons, puts and takes on the TAS side as we head into next year.
Yeah. Well, good morning, Sandy, and thank you for the question. Look, we are very pleased with the continued strong growth that we are seeing in TAS. You heard us, both Ron and myself, report organic constant currency revenue growth, excluding, you know, COVID from both years, of 12%. That's really, really strong. You know that if we think about the business in three buckets and the high growth bucket includes real world and commercial tech, and they continue to be strong drivers of growth. We continue to find innovative ways to utilize real world evidence for clients, as I described in my introductory remarks, and we continue to deploy more of our technology solutions. You talked about digital marketing.
It's true that sales forces, sales reps as a demographic in general are going down. Any parts of any business that are reliant on physical interactions between sales reps and physicians, those businesses clearly have a downward long-term trend. People who are dependent on CRM, for example, are going to experience headwinds. Now, as I have mentioned many times before, we have been long ago at the forefront of the transition to digital marketing. Interactions with HCPs are now rapidly evolving towards digital interactions. I mentioned in my introductory remarks some examples. We made investments in this area. We bought DMD Marketing last year. We bought Lasso this past quarter. These are unique.
This is kind of an operating system that enables pharma clients to buy and decide where to place promotional content. This is where the industry is going. We've made investments. We've bought technology and companies that we feel are unique and will enable us to you know claim our fair share of that market. We are here to support our clients in this transition. You're absolutely correct. Overall, the traditional mode of going to market is going away. It's a slow trend downward, but it is downward. It is more than offset by growth in digital marketing, and that's what we've been investing in, and that's what's growing in our business. Thank you.
Great. That's really helpful. Thanks, Ari.
Your next question comes from the line of Shlomo Rosenbaum with Stifel.
Hi, good morning, and thank you for taking my question. This one is actually for Ron. Given the rise in interest rates and your focus on retiring more debt, can you give us a little bit of color as to how we should be thinking of the blended interest rate that we should assume on debt? Are you targeting kind of a leverage ratio instead of the mid threes, low threes? Like, how should we be thinking about this just more of an ongoing basis?
Yes. Thanks for the question, Shlomo, and it's very topical given the interest rate environment these days. You know, we haven't provided comprehensive P&L guidance for 2023 at this point, but it's an important enough issue. I want to give you a little bit of color around that in addition to what our strategies are to deal with it. Let's start with the strategies. You saw that we paid down debt in the Q4. It was a term loan that was coming due $510 million in early 2024 and comparatively expensive. We'll be looking to pay down some additional term loan debt that's near term in maturity as we go through next year. You'll see us talking about that.
As far as you know, our leverage ratio, that's been gradually trending downward. It was at 3.4 as we exited 2023. You know, I would expect that as we go through next year, we'll hit that or get close to anyway that 3 target that we set for the end of 2025. I think we're gonna get down to that level sooner rather than later, and possibly by the end of next year. Now, as far as interest expense goes, look, we're not in the business of forecasting rates, so it's you know, and precisely forecasting interest expense depends on what you think is gonna happen with rates.
We can give you some help if we just look at where the market consensus for rates is and kind of project outward from that. We think that in Q4, interest expense will be about $130 million, give or take. You see that's a fairly substantial step up from where it has been. Actually the run rate exiting the year at the very end of the quarter will be about $140 million per quarter. If you extend that out, you don't have to be a math major to say it's you know, $560 million is kind of an annual rate exiting the year.
If there are further increases, modest increases in rates as we go into the Q1, which was what the market is projecting, we'll see then that number could go higher. We also have a swap rolling off at the end of Q3. You know, you could see interest expense next year getting higher than $560 million, you know, maybe approaching $600 million. We'll see. You know, you have to keep in mind that this depends on a lot of things. It depends on central rate actions, our cash flow, how we choose to use our cash flow next year, and so forth. This should get you in the ballpark anyway for your models.
I know some people have been struggling with that, so I wanted to be a little bit more explicit than we had been in the past when we said, you know, count on like $16 million for each quarter point of interest increase.
Right. Yeah. I mean, you know, that's the item that we've been working on. As Ron mentioned, we've decided that it was time to retire some of the debt that matures in 2024. We took that 5.10 just a few weeks ago, I guess.
A couple of weeks ago. We're probably gonna retire, you know, what is maturing in 2024. We will retire that in 2023. We will begin addressing the issue of interest expense. Of course, it's a one-year issue, right? From a comparison standpoint, we likely will have a step up in interest expense in aggregate for us in 2023 versus 2022. You know, from then on, hopefully, you know, rates are going to either stabilize or decrease. If you look at the forecasts by the individual governors of the Fed, then you have though you've got these charts with every dot representing each governor's anticipation of rates, and they are really all over the map, you know, for 2024 ranging from 2.5%-5%.
You know, hopefully at some point the rates will go down, and then it becomes a tailwind, so to speak. Certainly, going 2022 to 2023, it'll be a headwind that we have to address, and we're planning to address and take other actions on other fronts to mitigate that impact.
Thank you.
Your next question comes from the line of Justin Bowers with Deutsche Bank.
Hi, good morning, everyone. Just wanted to follow up on the comments around labor. With, you know, we're seeing obviously some turnover and some changes in, you know, in the Bay Area and then, you know, in some of your clients as well. Wanted to get a sense of if the labor pressures that you're seeing are isolated in any specific pockets or geographies, and if some of the, you know, the turnover we're seeing in those other areas provide you an opportunity to either hire talent, notably in TAS or just combat some of the inflation.
You know, the follow-up to that would be with some of the labor issues at the sites, is there a way to provide us some goalposts on what the backlog conversion would be, you know, over the next 12 months in light of what you're seeing at the site level?
Yeah. Thank you very much for your question. Look, given the strength of the industry backdrop, there's obviously competition for talent. All right? That's number one. That's in addition to the overall context of post-COVID, resignations and the inflation that, you know, drives an additional component of wage inflation. Now, we are actively recruiting and hiring, I mean, thousands of people. The numbers are staggering, the number of people we bring on board in order to meet the incremental demand. Of course, we've had this attrition issue that I mentioned earlier. You know, we have approximately 83,000 employees. We recruit, as I said, thousands and thousands of employees a year. We do have the capabilities. We are focused on it. Now, where, which pockets? Obviously, it's CRAs, it's operational people, it's project leadership.
It's really frontline execution field skilled professionals, and that's where the issues are. Now, because of that, we're seeing margin pressure from the labor cost increases, but you've seen we've expanded our margins. Really that's because of our productivity initiatives. We do intend to continue this trend. We are not just sitting here and watching the headwinds. We are countering them, and you know that we've done that throughout the year. Now, you know, we are, you know, we made a modest adjustment to reflect some labor cost increase that we're not able to offset entirely in the Q4. Again, very minor. Just because there is a lag. You know, you recruit highly skilled and expensive people.
It takes a little bit of time before they are actually deployed in the field and productive. Sometimes you just don't have the time to catch up with the cost reduction programs to offset those increases in costs. Now, with respect to the staff shortages at the sites, you know, we don't manage those sites and it's hard to do the same thing there. I do not, at this point in time, see that these trends are widespread or that they are gonna continue in such a way that all of a sudden the long-term conversion of our backlog is compromised. We do not see that because those staff shortages have been located in pockets. You know, we are operating in a lot of sites, and not all of them are experienced globally.
It's mostly the sites that have been affected are in the U.S., where we see most of the pressure. Frankly, some of the reasons we've had to make the little, very modest residual adjustments we made to our Q4 numbers is a lot of it is due to the lab business not receiving the flow of samples from the sites on the timeline that they had expected them. The reasons for that is because there were less patient visits at the sites. There were less patient visits at the sites because there was less staff to handle the patients. You know, that's what created the bottleneck. We know it's in specific sites.
It's too early for me to say this is a widespread, permanent change in the industry. Yes, the studies are more complex and that results into slower conversion by definition, but that was occurring even before COVID. It's not going to be a, you know, major, you know, step down in conversion. So far we cannot say that this is going to continue. We think that we'll be able to deal with it in the early part of 2023.
Thanks, I Appreciate the question.
Your next question comes from Patrick Donnelly with Citi.
Great. Thank you guys for taking the questions. Ron, maybe one for you in a similar vein there. You talked about, you know, the interest expense obviously jumping up with the variable next year. I guess when you think about the different inputs, you already touched on labor costs there as well. When you think about the ability to offset some of that down the P&L, can you just talk about, I guess, the margin structure for next year? Again, you have some of the inflationary pressures. Talked a little bit about pricing throughout the call. But I guess, how do you think about the P&L, defensiveness ability to insulate away from some of that interest expense jumping up on you guys as you get into next year?
Look, you know, the interest expense is going to be pretty much what it is, and it's gonna be based upon rate increases and so forth. We'll do what we talked about in terms of debt reduction. Really what you're looking for is what can we do up above, you know, the EBITDA line and above to offset some of the items below, like interest expense below the line that we have less control over in the short term. We see our demand environment, as we laid out today, is fundamentally being very healthy. Yeah, we highlighted a few executional challenges due to macro factors, but we don't see them as being permanent. We see the outlook for next year without getting into guidance for 2023.
Obviously at this point, it's being fundamentally strong on an operating basis. Nothing has changed there. We're gonna try to continue to drive cost reduction to offset not just what Ari said about, you know, the continued labor pressures, which hopefully will abate, but we can't count on that. But also, you know, to help offset some of what we see below the line in interest expense. We'll be coming out with guidance in the February timeframe and lay it all out for you then.
Yeah. Again, that's absolutely correct, Patrick. We are exactly working on this. I mentioned earlier that, you know, we have plans. You know, you will recall when we gave our 2025 targets, which by the way are unchanged. Nothing here is this in the slightest making us deviate from the goals we've set for 2025 for our company. You know, at least, you know, with the exception perhaps of the leverage ratio, we were targeting 2025 at a leverage ratio of 3. As Ron mentioned, it likely will be at 3 well before that. Other than that, our goals are the same. You know, the road to those goals may not always necessarily be a straight line, but the goals haven't changed.
Now, in support of these goals, we had over the next three years a series of programs and productivity initiatives internally. We've decided in light of both the increased below the line headwinds for 2023 and a continued labor inflation, which we are assuming as a given, we decided to accelerate the programs we were supposed to initiate in 2023, and we are initiating them in the Q4 of 2022. The answer to your question is absolutely yes. That's the plan.
Our final question comes from Luke Sergott with Barclays.
Hey guys, thanks for taking the question. So Ron, quick one for you. You guys had a big cash quarter. Can you talk about the drivers here? You brought your conversion up to 85%, which is kinda where you guys were targeting, I guess your long-term range. Is this a good spot to think about the jump off?
I'm not sure what you mean by the jump off, Luke, but.
For 2023, sorry.
I think at any given year, you know, we target 80%-90% of adjusted net income for cash flow, but cash flow is inherently volatile. You know, one year it may be a lot better, one year it may be a little bit less, and certainly from quarter to quarter you see that to a much greater degree. We had a not so great Q2 and a much better Q3. The reason's pretty simple. Timing of collections was just much better in the Q3 than it was in the Q2. You know, nothing has fundamentally changed in terms of our cash flow.
We're gonna continue driving towards maximizing cash flow, trying to minimize our days sales outstanding and remain a strong cash generator. My only comment there is don't put too much weight on the quarter-to-quarter fluctuations because that's the nature of cash flow. It's not like earnings. It's not accrual based. So it tends to be more volatile and more difficult to predict on a short-term basis.
All right. Lastly here, I'll leave the staffing shortages question for offline, but can you talk a little bit more about the color of the bookings? You know, any change in the duration or the size of the average win that you guys are seeing? Anything that would portend an acceleration or deceleration in an overall project quality and in size?
Absolutely nothing changed at all. Okay? Overall, RFP flow is 10% up year to date, 15% in Q3. What we call the qualified pipeline, which means it's advanced, it's not early stage, it's not speculative, is up 19% year-over-year. Awards in Q3. Should I mention the number? The awards in Q3 are 22% up. Second highest quarter ever.
Wow.
Plus 10% sequential growth. I mean, I don't know what else to tell you. I'm looking at every number possible. On the demand side, we're seeing no change. It's widespread, large pharma, EBP. We've been saying this from the beginning of the year. You guys are not believing us, but the numbers are showing are. I guess everyone else is coming to the story as well.
Oh man, appreciate it. Thanks. Sorry. Love it.
Okay.
There are no further questions. Nick Childs, I will turn the call back over to you.
Okay. Thank you everyone for joining us today. We look forward to speaking to all of you again soon. The team will be available the rest of the day to take any follow-up questions that you may have. Thanks everyone.
This concludes today's conference call. You may now disconnect.