Q3 2023 Medpace Holdings Inc Earnings Call
Speaker 1: All right. Thanks, everyone.
Yeah.
Speaker 2: Good day, ladies and gentlemen, and welcome to the MedPACE Third Quarter 2023 earnings conference call. At this time, all participants are now listening only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference call, Lauren Morris, MedPACE's Director of Investor Relations. You may begin.
Good day, ladies and gentlemen, and welcome to the mid paced third quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Reminder, this call may be recorded I would now.
I would like to introduce your host for today's conference call Lauren mid pieces director of Investor Relations you may begin.
Speaker 3: Good morning, and thank you for joining MedPaces 3rd Quarter 2023 earnings conference call. Also on the call today is our CEO , August Trendle, our President, Jesse Geiger, and our CFO , Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward-looking statements within the meaning of the Private Security's Litigation Reform Act of 1995.
Good morning, and thank you for joining my papers third quarter 2023 earnings Conference call and also on the call today is our CEO August Troendle, our president Jesse Geiger and our CFO , Kevin Brady before we begin I would like to remind you that our remarks and responses to your questions. During this teleconference may include forward looking.
Within the meaning of the private Securities Litigation Reform Act of 1995. These statements involve inherent assumptions with known and unknown risks and uncertainty as well as the other important factors that could cause actual results to differ materially from our current expectations. These factors are discussed in our Form 10-K, and other filings with the SEC.
Speaker 3: These statements involve inherent assumptions with known and unknown risks and uncertainties, as well as other important factors that could cause actual results to differ materially from our current expectations. These factors are discussed in our Form 10-K and other filings with the SEC.
Speaker 3: Please note that we assume no obligation to update forward-looking statements even if estimates change.
Please note that we assume no obligation to update forward looking statements, even if estimates change accordingly.
Speaker 3: Accordingly, you should not rely on any of today's forward-looking statements as representing our views as of any day after today.
Accordingly, you should not rely on any of today's forward looking statements as representing our views as of any day after today.
Speaker 3: During this call, we will also be referring to certain non- GAAP financial measures. These non- GAAP measures are not the period 2 or replacement 4, the comparable GAAP measures , but we believe these measures help investors gain a more complete understanding of results.
During this call we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results.
Speaker 3: A reconciliation of such non- GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the investor relations section of our website at investor.medpace.com. With that, I would now like to turn the call over to Jesse Geiger.
A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call.
They are available in the Investor Relations section of our website at Investor day that taste dot com with that I would now like to turn the call over to Jesse Geiger.
Thank you Lauren and good morning, everyone.
Speaker 4: Revenue in the third quarter of 2023 was 492.5 million, which represented a year over year increase of 28.3%.
Revenue in the third quarter of 2023 was $492 5 million.
Which represented a year over year increase of 28, 3%.
Speaker 4: Net new business awards entering backlog in the third quarter increased 29.9% from the prior year to $611.5 million.
Net new business awards entering backlog in the third quarter increased 29, 9% from the prior year to $611.5 million.
Speaker 4: resulting in a 1.24 netbook to bill.
Resulting in a 1.24 net book to Bill.
Speaker 4: Ending backlog as of September 30th, 2023, was approximately 2.7 billion.
Ending backlog as of September 30th 2023 was approximately $2 7 billion.
Speaker 4: an increase of 20.3% from the prior year.
An increase of 23% from the prior year.
Speaker 4: We project that approximately 1.46 billion of backlog will convert to revenue in the next 12 months.
We project that approximately 1.46 billion of backlog will convert to revenue in the next 12 months.
Speaker 4: and our backlog conversion in the third quarter was 19.1% of beginning back.
And our backlog conversion in the third quarter was 19, 1% of beginning backlog.
Speaker 4: Now with that, I will turn the call over to Kevin to review our financial performance in more detail, as well as our guidance expectations for the balance of 2023 and our initial guidance for 2024. Thank you, Jess.
Now with that I will turn the call over to Kevin to review, our financial performance in more detail.
As well as our guidance expectations for the balance of 2023.
And our initial guidance for 2024.
Thank you Jessie and good morning to everyone listening in.
Speaker 5: As Jesse mentioned, revenue was $492.5 million in the third quarter of 2023.
As Jesse mentioned revenue was $492 5 million in the third quarter of 2023.
Speaker 5: This represented a year-to-year increase of 28.3% on a reported basis in 27.6% on a constant currency on a constant currency.
This represented a year over year increase of 28, 3% on a reported basis and 27, 6% on a constant currency basis.
Speaker 5: Revenue for the nine months ended September 30, 2023 was 1.39 billion and increased 30.2% on a reported basis and 30% on a constant currency basis from the comparable prior year period.
Revenue for the nine months ended September 32023 was $1 three 9 billion and increased 32% on a reported basis and 30% on a constant currency basis from the comparable prior year period.
Speaker 5: EBITDA of 90.2 million increased 1% compared to 89.3 million in the third quarter of 2022.
EBITDA of $92 million increased 1% compared to $89 3 million in the third quarter 2022.
Speaker 5: Year-to-day EBITDA was 266.7 million and increased 17.1% from the comparable prior year period.
Year to date, EBITDA was $266 7 million and increased 17, 1% from the comparable prior year period.
Speaker 5: Even a margin for the third quarter was 18.3%. Compared to 23.3% in the prior period.
EBITDA margin for the third quarter was 18, 3% compared to 23, 3% in the prior year period.
Speaker 5: Year-to-date EBITDA margin was 19.2% compared to 21.4%.
Year to date EBITDA margin was 19, 2% compared to 21, 4%.
Speaker 5: Even in margin compared to the prior year period was impacted by higher reimbursement costs, personnel costs, and the foreign exchange benefit in 2022 behind the strong US dollar.
EBIT margin compared to the prior year period was impacted by higher Reimbursable costs.
Personnel costs and a foreign exchange benefit in 2022 behind the strong U S dollar.
Speaker 5: In the third quarter of 2023, net income of $70.6 million increased 6.9%.
In the third quarter of 2023 net income of $70 6 million increased six 9% compared to net income of $66 million in the prior year period.
Speaker 5: compared to that income of $66 million in the prior year period.
Speaker 5: Net income growth ahead of EBITDA growth is primarily driven by a lower effective tax rate of 15.2% Compared to 19.4% in the prior year period as well as lower interest
Net income growth ahead of EBITDA growth was primarily driven by a lower effective tax rate of 15, 2% compared to 19, 4% in the prior year period.
As well as lower interest expense.
Speaker 5: That income per deleted share for the quarter was $2.22 compared to $2.5 in the prior year period.
Net income per diluted share for the quarter was $2 22.
<unk> to $2.05 in the prior year period.
Speaker 5: Regarding customer concentration, our top five and top 10 customers represent roughly 23% and 29% respectively of our year-to-date total revenue.
Regarding customer concentration our top five and top 10 customers represent roughly 23% and 29% respectively of our year to date total revenue.
Speaker 5: In the third quarter, we generated 114.4 million in cash flow from operating activities.
In the third quarter, we generated $114 4 million in cash flow from operating activities.
Speaker 5: And our net sales outstanding was negative 42.2 days.
And our net days sales outstanding was negative 42 two days.
Speaker 5: During the quarter, we paid off our outstanding debt.
During the quarter, we paid off our outstanding debt.
Speaker 5: And we have 95.2 million in cash as of September 30th, 2022.
And we have $95 2 million in cash as of September 32023.
Speaker 5: Moving now to our updated guidance for 2023.
Moving now to our updated guidance for 2023.
Speaker 5: 4-year 2023 total revenue is now expected in the range of 1.87 billion to 1.89 billion.
Full year 2023 total revenue is now expected in the range of $1 87 billion to $1 89 billion.
Speaker 5: Representing gross of 28.1% to 29.5% over 2022 total revenue of 1.46 billion.
Representing growth of 28, 1% to 29, 5% over 2022 total revenue of $1 $4 6 billion.
Speaker 5: Our 2023 EBITDA is now expected in the range of 353 million to 361 million.
Our 2023 EBITDA is now expected in the range of 353 million to $361 million.
Speaker 5: Representing grows of 14.6% to 17.2% compared to EBITDA of 308.1 million in 2022.
Representing growth of 14, 6% to 17, 2%.
Compared to EBITDA of $308 1 million in 2022.
Speaker 5: Guidance is based on foreign exchange rates as of September 30th, 2023.
Guidance is based on foreign exchange rates as of September 32023.
Speaker 5: We forecast 2023 net income in the range of 272 million to 276 million.
We forecast 2023 net income in the range of 272 million to $276 million.
Speaker 5: This guidance assumes a four year 2023 effective tax rate of 16.25% to 17.25%.
This guidance assumes a full year 2023 effective tax rate of 16, two 5% to $17 two 5%.
Speaker 5: In 31.8 million, deluded weighted average shares outstanding for 2023. There are no additional-
$31 8 million diluted weighted average shares outstanding for 2023.
There are no additional share repurchases in our guidance.
Speaker 5: Ernest Prodelittor's share is now expected to be in the range of $8.54 to $8.66.
Earnings per diluted share is now expected to be in the range of $8 54.
To $8 66.
Speaker 5: As Jesse mentioned, we are providing initial 2024 guidance for revenue in EBITDA.
As Jesse mentioned, we're providing initial 2024 guidance for revenue and EBITDA.
Speaker 5: For the full year of 2024, we expect revenue in the range of 2.15 billion to 2.2 billion.
For the full year 2024, we expect revenue in the range of two <unk>, one 5 billion to $2 2 billion.
Speaker 5: and EBITDA to be in the range of 390 million to 415 million.
And EBITDA to be in the range of 390 million to $415 million.
Speaker 5: In addition to continued growth and direct service activity.
In addition to continued growth in direct service activities.
Speaker 5: The Revenue Guidance anticipates, investigator site activity and cost remain elevated, similar to what we have seen recently in 2023.
The revenue guidance anticipates investigator site activity and costs remain elevated.
Similar to what we have seen recently in 2023.
Speaker 5: We plan to provide additional detailed four-year 2024 guidance on our fourth quarter earnings call in February .
We plan to provide additional detailed full year 2020 for guidance on our fourth quarter earnings call in February .
Speaker 5: With that, I will turn the call back over to the operator so we can take your questions.
With that I will turn the call back over to the operator, so we can take your questions.
Thank you.
Speaker 2: To ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment, please.
To ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment please for our first question.
Speaker 2: Our first question will come from Max Smok, a William Blair. Your line is open.
Our first question will come from Max Smock of William Blair. Your line is open.
Yes.
Okay.
Speaker 2: Pardon me, Mr. Max Smock, your line is open. If your phone is on mute, please unmute.
Pardon me Mr. Max Smock your line is open.
If your phone is on mute please UN mute your line.
If youre on a headset please turn on your headphones.
Speaker 2: Oh, Mr. Smokov, William Blair, are you able to hear me?
Hello, Mr. <unk> of William Blair are you able to hear me.
Okay.
Speaker 2: Operator, we can move on to the next. If Max back on the queue. Thank you. Again, Mr. Smok, if you want to get back on the queue, please hit star 11 again. One moment, please.
Operator, we can move on to the Max Max back in the queue. Thank you again, Mr. Chuck If you want to get back in queue. Please hit star one again.
A moment please.
And one moment for our next question.
Speaker 2: Our next question will come from David Wynneley of Jeffries. Your line is open.
Our next question will come from David Windley of Jefferies. Your line is open.
Hi, hopefully you can hear me.
Working.
Speaker 6: Yeah, we hear you, Dave. Okay, fantastic, great. Good morning, thank you. Thank you for taking my questions. I wondered if you could comment a little bit on environment. The, you know, kind of the rate of biotech, restructuring announcements and things of that sort has attenuated maybe ever so slightly and.
Yes, we hear you okay fantastic great.
Good morning. Thank you. Thank you for taking my questions I wondered if.
You could comment a little bit on environment.
The.
So the kind of the rate of of biotech a restructuring announcements and things of that sort has attenuated maybe ever so slightly.
Speaker 6: 2023 your, you know, everybody, I think is aware that your exposure to that part of the customer basis is pretty high. So I wonder if you could comment on that maybe qualitatively and then quantitatively, you know, are you seeing more activity at the beginning of the funnel? Are you seeing your win rates improve like from a metric standpoint, what would you attribute to your booking success? Thanks.
2023 your.
Everybody is aware that your exposure to that part of the customer base is pretty high.
So I wondered if you could comment on that maybe qualitatively and quantitatively are you seeing.
More activity at the beginning of the funnel are you seeing your win rates improved from a metric standpoint.
What would you attribute to your booking success. Thanks.
Sure sure.
Speaker 7: Yeah, the environment is kind of hard to comment on because it's pretty variable. I mean, we're still seeing quite a bit of funding challenges by Client.
Yes, the environment is kind of hard to comment on because it's it's.
It's pretty variable I mean, we're still seeing quite a bit of funding challenges by clients.
Speaker 7: And, you know, we've been through a period of a lot of clients in distress and a number of bankruptcies and challenges. I think that's actually de-risked our backlog quite a bit of those that are going to have a problem. I think most of them have. And on the other side...
And we've been through a period of a lot of clients in distress.
Number of bankruptcies and.
And challenges.
I think that's actually de risked our backlog quite a bit of those that are going to have a problem I think most of them as.
And on the other side, we're seeing.
Speaker 7: very strong business environment, just surprisingly, to see the disparity is amazing.
Very strong business environment.
Just surprisingly to see the the disparity is is amazing.
Speaker 7: We have a very strong RFP flow. I think our
We have a <unk>.
Very strong RFP flow I think our.
Speaker 7: RFPs, you know, total RFPs pending is the second highest we've ever had.
Rfps.
Total rfps pending is the second highest we've ever had.
Speaker 7: and to fill the pipeline.
And.
To fill the pipeline.
Speaker 7: you know, new awards, initial awards, as we've talked about, that were awarded in Q3, were a record highest we've ever had. So we're seeing great business environment and a horrible business environment, so I don't know. It's just kind of, it gets fronted.
New Awards initial awards says we've talked about.
<unk> were awarded in Q3, where the where our record highest we've ever had.
So we're seeing.
<unk> business environment, and a horrible business environment, So I don't know.
Kind of schizophrenic.
Schizophrenic.
Speaker 6: Yeah, interesting. So we would suggest that
Yes interesting.
So it would suggest that.
Speaker 6: You're able, I mean, that you're taking share, you must be able to find enough of the positive ones to offset the absence of clients that are being hit by the financial concerns, any color that you could provide around.
Your.
You're able to I mean, you are taking share you must be able to find enough of the.
Of the positive ones to offset the absence of clients that are being hit by the financial concerns.
Any color that you could provide around.
Speaker 6: in a sales strategy or investment in sales force more recently. I know you did that years ago, but has there been further investment to try to cultivate more opportunity?
Our sales strategy or investment in sales force more recently I know you did that years ago, but has there been further investment to try to cultivate more opportunity.
Speaker 7: Now, I wouldn't say investment in terms of, you know, expanding the size and breadth of the group. I think we're pretty good shape there. I think we're much better able to address.
No I wouldn't say investment in terms of expanding the size and breadth of the group I think we're pretty good shape there.
I think we're much better able to address the.
Speaker 7: the challenges this time because I think we were scaled. And there has been quite a bit of shifting focus to funding capabilities on the clients part, so we have moved.
The challenges at this time, because I think we were scaled.
And there has been quite a bit of shifting focus to <unk>.
Funding capabilities on the clients part so we have moved to.
Somewhat different subset.
Small biotech.
That has funded programs.
Speaker 7: But that's really it. It's just kind of been a pivot on that side and found lots of opportunities despite the environment.
But that's really it it's just kind of been a pivot on that side and found.
Lots of opportunities.
Despite the environment.
Speaker 6: Okay, last question for me. The pass through the elevated pass through.
Okay.
Last question for me.
The pass through the elevated pass throughs.
Speaker 6: have maybe persisted to a greater degree than you expected. Can you...
Have maybe persisted to a greater degree than than you expected can you.
Speaker 6: Talk to that a little bit. Has the composition of work changed? Is it more client? I guess I'm wondering, is it a therapeutic area thing where...
Talk to that a little bit has the composition of work changed.
The more client I guess I'm wondering is it a therapeutic area thing where.
Speaker 6: You know, where the work that you're doing just naturally has more pass through associated with it. Is it an inflationary environment at the site level where, you know, those activities are just costing more. Or you being asked to do that more and just trying to understand, you know, why the significantly elevated pass through growth and your expectations for that to continue. Thank you.
Where the work that Youre doing just naturally has more pass through associated with it is it in an inflationary environment at the site level, where those activities are just costing more.
Or are you being asked to do that more I'm just trying to understand why the significantly elevated pass through growth and your expectations for that to continue thank you.
Speaker 7: Yeah, I think it's kind of a combination of all the above. There's been quite a bit of inflationary.
I think it's kind of a combination of all of the above theres been quite a bit of inflationary changes, particularly in some therapeutic areas and part of that is competition and all the rest of it.
Speaker 7: changes, particularly in some therapeutic areas and part of that's competition and all the rest of it. And so I think investigatory fees have gone up as a percent of budgets and higher percent than our costs.
And so I think investigator fees have gone up as a percent of.
Budgets and get a higher percent than that our costs.
Speaker 7: And there's obviously the mix of phase threes and large studies and particularly maybe more expensive patient populations has been a factor too, but I think it's really a combination of therapeutic area, the type of study, the cost of the patient and inflationary factors that are all driving up.
<unk>.
Obviously, the mix of phase threes and large.
The studies and particularly.
Maybe more expensive patient populations.
It has been a factor too, but I think it's really a combination of.
Therapeutic area or the type of study the cost of the patient.
Inflationary factors that are all.
Driving up.
Speaker 8: Uh, you know, the pass through, uh, the pre-funded investigator costs. I, I, I think that may, um, over time, you know, less than a little, but I, you know, I think kind of the percent of, uh, investigator, um, fees as a proportion of the total projects may remain elevated for quite a while. Okay, great. Thank you.
The pass through pre funded investigator cost.
I think that may.
Overtime, lessen a little but I think kind of the percent of.
Investigator fees as a proportion of the total projects may remain elevated for quite a while.
Okay, great. Thank you.
Thank you.
One moment please for our next question.
Speaker 2: Our next question will come from John Sauerbeer of UBS. Your line is open.
Our next question will come from John <unk> of UBS.
Your line is open.
Yes.
Speaker 9: Thanks for taking the question. I guess just following up there a little bit on the beat in the quarter and just some of the discosers. It seems like mid-sized biotech and the tabletism are very strong. And I guess also a couple of those large pass-throughs. Is the beat mostly driven by a couple larger studies? Are you seeing broad-based strengths here currently?
Thanks for taking the question I guess, just following up there a little bit on that.
In the quarter and just some of the disclosures it seems like mid size biotech in the title Tableau Ism are very strong and I guess you called the <unk>.
With those large pass throughs.
Is it mostly driven by a couple of larger studies are you seeing broad based strength Youre currently.
Speaker 4: It's pretty broad-based. We don't have Jesse Good. Yeah, I was just saying it's broad. It's not concentrated in anyone, any one study. And metabolic has been running a pretty hot, past couple of quarters, and it's continuing to contribute, but plenty of good contribution from other therapeutic areas as well in the quarter.
It's pretty broad based we don't have yes, Jessica yes, as I say, it's broad it's not concentrated in any one any one study and metabolic has been running pretty hot past couple of quarters, and it's continuing to contribute but but.
Plenty of good contribution from other therapeutic areas as well in the quarter.
Speaker 9: Thanks. And any funding was pretty good in 2Q, but race are higher again. You know, any additional color you can provide on where you see the funding environment going, maybe in the second half of this, or I guess with meter this year or into next year. And could there be any impact there on a lag basis?
Yeah.
Thanks, and any funding was pretty good into Q, but raise rates are higher again.
Unknown Executive: Good day, ladies and gentlemen, and welcome to the Medpace Third Quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference call, Lauren Morris, Medpace's director of investor relations.
Any additional color you can provide on where you see the funding environment going maybe in the second half of this year I guess with meter this year or into next year and could there be any impact there on a on a lag basis.
Unknown Executive: You may begin.
Speaker 9: I'm sorry, the funding and how that might play out. Go forward. Yeah, what are your expectations around maybe for your 4Q and then for Phoenix?
I am sorry, the funding.
Trending and how that might play out going forward what are your expectations around maybe for <unk> and then the FERC.
Speaker 7: Things look strong. As I said, we got record levels of both RFP and awards. And we had a drop off in awards. So Q4, Q1, we had a very weak time period. And it was all a question of how quickly we could refill things compared to the...
Next year.
Things look strong as I said that we've got a record kind of levels of both RFP and awards.
Lauren Morris: Good morning, and thank you for joining Medpace's third quarter 2023 earnings conference call.
We had a.
Lauren Morris: Also on the call today is our CEO, August Troendle, our president, Jesse Geiger, and our CFO, Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward-looking statements within the meaning of the Private Security's litigation reform act of 1995. These statements involve inherent assumptions with known and unknown risks and uncertainties, as well as other important factors that could cause actual results to differ materially from our current expectations.
A drop off in awards so.
Q4, Q1, we had kind of very weak.
Time period, and it was all a question of how quickly we could refill things compared.
Speaker 7: the food moving through the Python kind of thing. I think things look pretty good. We won't see a drop off and we're hoping that the business environment holds up and we'll have a very strong 24.
No.
The.
The food moving through the Python kind of.
Thing.
I think things look pretty good and we won't see a drop off and we're hoping that the business environment holds up and we will have a very strong 24.
Lauren Morris: These factors are discussed in our form 10K and other filings with the SEC. Please note that we assume no obligation to update forward-looking statements even if estimates change. Accordingly, you should not rely on any of today's forward-looking statements as representing our reviews as of any date after today.
Speaker 9: Thanks. And you'll last one here on my end, just any additional color you provide on the 2024 even a margin guidance and just remind us even over the long term, I guess, you know, what is the margin expansion opportunity there or a target level?
Thanks, and last one here on my end just any additional color you can provide on the 2020 for EBIT margin guidance and just remind us even though over the long term I guess, what is the margin expansion opportunity there or target level.
Speaker 5: Yeah, John , this is Kevin. I don't expect, I mean, it's gonna be somewhat contingent on what happens with the re-emerge to the activities, right? Just given the impact that that has on margin for centers. But if that levels off,
Yes, John this is Kevin.
Lauren Morris: During this call, we will also be referring to certain non-gap financial measures. These non-gap measures are not superior to or replacement for the comparable gap measures, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of such non-gap financial measures to the most directly comparable gap measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the investor-relations section of our website at investor.medpace.com.
I don't expect that.
Going to be somewhat contingent on what happens.
The Reimbursable exit Russo.
Given the impact that that has on margin percentage.
But if that levels off.
Speaker 5: and kind of remains elevated consistent to where we were in the past in a couple of quarters here. I don't expect there to be a margin expansion. You know, we still have some one-world pressure problems from the wage and benefit situation. So I don't see 2020 for as being a huge margin expansion.
It kind of remains elevated consistent to where we were in the past couple of quarters here.
I don't expect there to be margin expansion, we still have some level of pressure from wage and benefit inflation.
I don't see 2024 has been a huge margin expansion opportunity.
Jesse Geiger: With that, I would now like to turn the call over to Jesse Geiger. Thank you, Lauren. Good morning, everyone. Revenue in the third quarter of 2023 was 492.5 million, which represented a year-over-year increase of 28.3%. Net new business awards entering backlog in the third quarter increased 29.9% from the prior year to 611.5 million, resulting in a 1.24 net book to bill. Ending backlog as of September 30, 2023 was approximately 2.7 billion, an increase of 20.3% from the prior year. We project that approximately 1.46 billion of backlog will convert to revenue in the next 12 months, and our backlog conversion in the third quarter was 19.1% of beginning backlog.
Speaker 9: And then I guess you even beyond 24 any color. Where long term targets. How many just to pound something we kind of said it's things kind of normalized. It's something in the high tunes, but you know, it remains to be seen just in terms of what the environment. And what hiring they look like too. Great. Thanks for taking the question.
And then I guess, even beyond 2000 and for any any color.
Long term targets.
I mean, it's just a balance.
We've kind of said if things kind of normalized.
In the high teens.
It remains to be seem just concerns youre working environment.
And what hiring it looks like.
Great. Thanks for taking the questions.
Okay.
Thank you.
Yes.
One moment please for our next question.
Speaker 2: Our next question will come from Eric Caldwell of Beard. Your line is open.
Our next question will come from Eric Coldwell of Baird. Your line is open.
Speaker 10: Thank you, good morning. Just a few quick ones here on the wage inflation. My understanding was that it had peaked a few quarters ago and
Thank you and good morning.
A few quick ones here on the wage inflation my understanding was that it had peaked a few quarters ago and was still elevated but starting to perhaps moderate a bit has that continued to I understand that correctly.
Speaker 10: still elevated but starting to perhaps moderate a bit, has that continued to I understand that correctly?
Speaker 4: Hey Eric, that's right. Um, kind of mid to high single digits.
Hey, Eric that's right.
Kind of mid to high single digit.
Kevin Brady: Now with that, I will turn the call over to Kevin to review our financial performance in more detail, as well as our guidance expectations for the balance of 2023, and our initial guidance for 2024. Thank you, Jesse, and good morning to everyone listening in. As Jesse mentions, revenue was 492.5 million in the third quarter of 2023. This represented a year-over-year increase of 28.3% on a reported basis in 27.6% on a constant currency basis.
Speaker 4: Do you, Jesse, what do you see on the next 12 months, stable at these levels, perhaps some continued moderation, just any sense on what the outlook is? Yeah, I think stable at these levels, at this point, I don't see anything that would drive that higher or lower.
Do you do.
Jessica what do you see on the.
Next 12 months.
Stable at these levels, perhaps some continued moderation just any sense on what the outlook is yes, I think stable at these levels.
At this point I don't see anything that would drive that higher or lower.
Speaker 4: The market, from a hiring standpoint, is more stable than it has been in the past. We've also had good success with lower turnover. So employee base is stable. We're continuing to grow. But wage pressures have moderated a little bit. And I would expect it to be fairly consistent.
The markets.
From a hiring standpoint.
More stable than it has been in the past we've.
We've also had good success with.
Lower turnover.
So employee base stable or continuing to grow.
But wage wage pressures have have moderated a little bit and I would expect it to be.
Kevin Brady: Revenue for the nine months ended September 30, 2023 was 1.39 billion and increased 30.2% on a reported basis and 30% on a constant currency basis from the comparable prior year period. EBITDA of 90.2 million increased 1% compared to 89.3 million in the third quarter of 2022. Year-to-day EBITDA was 266.7 million and increased 17.1% from the comparable prior year period. EBITDA margin for the third quarter was 18.3% compared to 23.3% in the prior year period.
Fairly consistent.
Speaker 10: Okay, and then in terms of cancellation profile, if I misliphypologize, but have you returned fully to normal levels, which I believe are somewhere in the four to five percent of backlog or what's going on with the cancellations, anything abnormal there?
Okay and then.
In terms of cancellation profile, if I missed this I apologize but.
Have you return fully to normal levels, which I believer somewhere in the 4% to 5% of backlog or.
What's going on with cancellations anything abnormal there.
Speaker 4: Yeah, normal level, pretty, pretty, pretty well back to normal, at least for the third quarter and, you know, towards the lower end of that range.
Yes normal level pretty pretty pretty well.
Back to normal at least for the third quarter and.
Towards the lower end of that range.
Speaker 10: Okay. And then, hip rate, you know, my understanding from our visit a month or two ago was that hip rate was back to solid, but normal levels has that continued. And have you seen any change in rescue award activity? There was a lot of disruption in this sector over the last couple of years.
Okay, and then hit rate.
My understanding from our visit a month or two ago was that hit rate was back to solid but normal levels.
Kevin Brady: Year-to-day EBITDA margin was 19.2% compared to 21.4%. EBITDA margin compared to the prior year period was impacted by higher reimbursable costs, personnel costs, and the foreign exchange benefit in 2022 behind the strong US dollar. In the third quarter of 2023, net income of 70.6 million increased 6.9% compared to net income of 66 million in the prior year period. Net income growth ahead of EBITDA growth was primarily driven by a lower effective tax rate of 15.2% compared to 19.4% in the prior year period as well as lower interest expense.
That continued.
Have you seen any change in rescue award activity. There was a lot of disruption in this sector over the last couple of years.
Speaker 10: Some of your peers had obviously were giving up some work. I'm just curious what the rescue activity looks like these days.
Some of your peers had obviously, we're giving up some work I'm just curious what the rescue activity looks like these days.
Speaker 7: And no particular rescue activity, it's, it's, uh, it's been very little. Um, and, uh, yeah, it, it.
No particular rescue activity it's.
There's been very little.
Kevin Brady: Net income per diluted share for the quarter was $2.22 compared to $2.5 in the prior year period. Regarding customer concentration, our top 5 and top 10 customers represent roughly 23% and 29% respectively of our year-to-date total revenue. In the third quarter, we generated 114.4 million in cash flow from operating activities. And our net sales outstanding was negative 42.2 days. During the quarter, we paid off our outstanding debt and we have 95.2 million in cash as of September 30, 2023.
And yes.
That's been pretty.
Pretty well.
Speaker 10: Last one and I hate to go there. It's unfortunate circumstances, but I am curious about your Middle East exposure.
Okay.
Last one and I hate to go there so unfortunate circumstance, but I am curious about your middle East exposure just in.
Speaker 10: In case the situation that's unfolding continues to escalate, what kind of concentrations or exposures might you have in the Middle Eastern area?
In case the situation that's unfolding continues to escalate, what what kind of concentrations or exposures might you have in the middle Eastern region.
Speaker 10: Yeah, thanks. Thanks for asking, Eric. You know, all of our Israeli employees are safe and accounted for people working remotely at this point are concentration there. It's it's less than 1% of our total head count and less than 1% of of active sites, but activities continuing and we're keeping a close eye on it. Okay, thanks very much guys. Congrats on the good performance.
Yeah. Thanks, Thanks for asking Eric.
All of our Israeli employees are safe and accounted for people working remotely.
At this point.
Our concentration there, it's less than 1% of our total head count and less than 1% of active sites, but activity is continuing and we're keeping a close eye on it.
Thanks, very much guys congrats on the good performance.
Yes.
Thank you.
One moment please for our next question.
Speaker 2: Our next question will come from Jack Wallace of Guggenheim Partners, your line is up.
Our next.
<unk> will come from Jack Wallace of Guggenheim Partners. Your line is open.
Speaker 9: Hey, thanks. And then congrats on the quarter. Couple questions here. One around headcount. Looks like we're trending to the mid to high. New teams growth rate this year. And given the strength of the RFP awards and the pipeline you mentioned earlier, you think this is the right level of headcount growth over the next year or so or maybe said a different way. Are we on plan with hiring now? Is there any catch?
Hey, Thanks, and congrats on the quarter.
Couple of questions here, one around head count.
Like we're trending to the mid to high <unk>.
Teens growth rate this year and given the strength of the RFP Awards.
Kevin Brady: Moving now to our updated guidance for 2023. 4-year 2023 total revenue is now expected in the range of 1.87 billion to 1.89 billion representing growth of 28.1% to 29.5% over 2022 total revenue of 1.46 billion. Our 2023 EBITDA is now expected in the range of 353 million to 361 million representing growth of 14.6% to 17.2% compared to EBITDA of 308.1 million in 2022.
And the pipeline you mentioned earlier you think.
You have the right level of head count growth over the next year or so or maybe.
Said a different way are we.
You're on plan with hiring now or is there any any catch up that's needed. Thank you.
Speaker 4: Yeah, thanks, Jack. Yeah, would expect headcount here for the balance of the year to remain in that that mid to high teens level. And then for 2024, we anticipate headcount growing in line with revenue.
Yes, Thanks Jack.
Yes, I would expect head count.
Here for the balance of the year to remain in that mid to high teens level.
And then for 2024, we anticipate head count growing in line with revenue.
Yes, that's helpful and then just thinking about the.
Speaker 9: Yeah, the comments, you know, one hand, there's maybe some of the you know.
The comments on one hand, there is.
Maybe some of the.
Kevin Brady: Guidance is based on foreign exchange rates as of September 30, 2023. We forecast 2023 net income in the range of 272 million to 276 million. This guidance assumes a full year 2023 effective tax rate of 16.25% to 17.25% in 31.8 million deluded weighted average shares outstanding for 2023. There are no additional share of purchases in our guidance. Rains per deleted share is now expected to be in the range of $8.54 to $8.66.
The less promising.
Speaker 9: with lead targets and less or less funded companies have kind of sorted themselves out, but it does sound like you're promising lead candidates are getting funded and there's a good amount of jump balls for you to go after. I mean, it had to have any changes in your selectivity of trials and if so, is that played any role in your hiring plan and you're just thinking about how much hiring ahead is.
Lead targets.
Unless lessor funded companies have kind of sorted themselves out, but it does sound like.
Promising lead candidates are getting funded and.
A good amount of jump ball for you to go after it.
I mean, it had to have any.
It changes in your.
Selectivity of trials and if so has that played any role in your hiring plan.
Just thinking about how yes.
How much hiring ahead is taking place. Thank you.
Speaker 4: Yeah, I mean, we've continued to be selective always in terms of...
Yes, I mean, we can we can.
Continue to be selective always in in terms of.
Speaker 4: of targets and opportunities.
Okay.
<unk> and opportunities.
Speaker 4: But it's impact on hiring plans, not too much of an impact. I think we're well positioned for current work, we're well positioned with our hiring plans for upcoming work.
But its impact on hiring plans.
Kevin Brady: As Jesse mentioned, we are providing initial 2024 guidance for revenue in EBITDA. For the full year of 2024, we expect revenue in the range of $2.15 billion to $2.2 billion in EBITDA to be in the range of $390 million to $415 million.
Not not too much of an impact and I think we're well positioned for current work, we're well positioned with our hiring plans for upcoming work and and we've had really good retention and that's really helped us.
Speaker 4: And we've had really good retention and that's really helped us.
Speaker 4: as well in terms of the capacity that we have for trials. We've had good employee retention and that's always easier than hiring and onboarding new people.
As well in terms of the capacity that we have for trials.
We've had good employee retention and that's always easier.
Kevin Brady: In addition to continued growth and direct service activities, the revenue guidance anticipates investigator site activity and cost remain elevated similar to what we have seen recently in 2023.
And then hiring and Onboarding new people.
Speaker 9: hidden costs of running the business. And then lastly, more of a housekeeping item. It looked like the customers 6 through 10 were down sequentially from a revenue standpoint.
Yes, the hidden cost of running the business.
And then just kind of lastly here just to more of a <unk>.
Keeping item it looked like the customers six through 10 were down.
Kevin Brady: We plan to provide additional detailed full year 2024 guidance on our fourth quarter earnings call in February.
Sequentially from a revenue standpoint, I was wondering if there is any.
Speaker 7: trial roll offs in there or any kind of noise factors. Just looking historically, yeah, at the top 10 and like 60 to 10 category, looks like there's been some trading between, you see the top five, it didn't look like there's a graduate this year. So just wondering if there's any kind of timing nuances or anything going on there. Thanks. Yeah, I think there's anything. I think.
Trial roll offs in there kind of any kind of noise factors just looking historically.
Unknown Executive: With that, I will turn the call back over to the operator so we can take your questions. Thank you. To ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment please for our first question.
Yet the top 10 in six to 10 category. It looks like there's been some trading between say the top $5. It didn't look like there is a graduate this year. So just wondering if theres any kind of timing nuances or anything going on there. Thanks.
Yes.
Thank you.
Anything to add.
Maybe.
Speaker 7: Maybe we shouldn't provide the detail. I don't know. It's like, it's different subset of companies every time. You compare in apples to oranges. I guess you're looking at a nine month.
Maybe we shouldnt provide the detail I don't know.
Unknown Executive: Our first question will come from Max Smock, a William Blair. Your line is open. Pardon me, Mr. Max Smock, your line is open. If your phone is on mute, please unmute your line. If you're on a headset, please turn on your headphones. Oh, Mr. Smock of William Blair, are you able to hear me?
You can't it's different subset of companies every time, you're comparing apples to oranges, I guess youre looking at our nine months.
Speaker 7: 22 versus a nine months 23. I mean, if you look at a quarter by quarter, you know, what's revenues coming from our six, you know, clients six to 10, it's increased sequentially every quarter, you know, over the past year. I really don't...
22 versus the nine months 23, I mean, if you look at it quarter by quarter.
Whats revenues coming from our sixth client six to 10, it's increased sequentially every quarter over the past year.
I really don't.
Speaker 7: companies move in and out and up and down and you know, it's by the quarter and you're looking at a three month, you're looking at a three quarter, you know, trailing and it's, I just, I don't think there's anything there that's meaningful or represents any large role offerning like that. Gotcha, thank you, appreciate it.
The company's move in and out and up and down and it's by the quarter and Youre looking at a three three months youre looking at a three quarter trailing and it's.
I don't think Theres anything there thats meaningful or represents.
Any any large roll off or anything like that.
Unknown Executive: Operator, we can move on to the next question. Max back on the queue. Thank you.
That's it. Thank you appreciate it congrats congrats again on the quarter.
Unknown Executive: Again, Mr. Smock, if you want to get back on the queue, please hit star 11 again. One moment please. And one moment for our next question.
Thanks Jen.
Thank you.
Speaker 2: As a reminder, to ask a question, please press star 1, 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. One moment please.
As a reminder to ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
One moment please for our next question.
David Windley: Our next question will come from David Winley of Jeffries. Your line is open. I hopefully you can hear me working. Yeah, we hear you, Dave. Okay, thanks. That's great. Good morning. Thank you. Thank you for taking my questions.
Yes.
Speaker 2: And again, we have on the line max mock of William Blair, your line is open. Hi, thank you for.
And again, we have on the line Max Smock of William Blair. Your line is open.
Hi, Thank you for coming back to ask can you hear me.
Yes.
Speaker 11: Okay, great. Thank you. It's Christine Reigns on for Max Smack. So I was wondering now that you've paid off your debt, how should we think about capital allocation moving forward and then also relatively how much interest income could you earn next year?
David Windley: I wondered if you could comment a little bit on environment. The kind of the rate of biotech, restructuring announcements, and things of that sort has attenuated maybe ever so slightly. 2023, you're, you know, everybody I think is aware that your exposure to that part of the customer basis is pretty high. So I wondered if you could comment on that maybe qualitatively and then quantitatively, you know, are you seeing more activity at the beginning of the funnel? Are you seeing your win rates improve like from a metric standpoint? What would you attribute to your booking success? Thanks.
Great. Thank you is Christine <unk> on for Max Smock.
So I was wondering now that you've paid off your debt how should we think about capital allocation moving forward and then also relatedly how much interest income could you are next year.
Speaker 5: Yeah, the capital allocation, or methodology, pristine, will remain the same continued investment in the organic growth of the business.
Yeah, the capital allocation.
What are kind of our methodology pristine will remain the same.
Continued investment in the organic growth of the business.
Speaker 5: In 2024, in the next couple of years, we will have some increased capital expenditures related to the expansion of our headquarters here in Cincinnati. But beyond that, we'll opportunistically look for for share purchases. To the extent that we're not able to execute that, it's the levels that we want. We're okay, building some cash.
In 2024 in the next couple of years, we will have some increase.
Capital expenditures related to the expansion of our headquarters here in Cincinnati.
But beyond that we will opportunistically look for share repurchases.
August Troendle: Sure, sure, Dave. Yeah, the environment is kind of hard to comment on because it's pretty variable. I mean, we're still seeing quite a bit of funding challenges by clients.
The extent that we're not able to execute that at the levels that we want we're okay building some cash.
Speaker 5: and to your question on kind of interest and how to think about that. I think the fiftest way is to kind of think of it at current rates.
And to your to your question on kind of interest in how to think about that.
I think thats the simplest way is to kind of think of it at current rates.
August Troendle: And, you know, we've been through a period of a lot of clients in distress and a number of bankruptcies and challenges. I think that's actually de-risked or backlog quite a bit of those that are going to have a problem, I think most of them has. And on the other side, we're seeing very strong business environment just surprisingly, you know, to see the disparity is amazing. But we have a very strong RFP flow.
Our blended rate of four 5% or so is a reasonable assumption to build into your model.
Speaker 11: Great, thank you. And then not to dig too deep in the details, but it seems like you had a relative jump in your metabolic exposure. It sounds like it wasn't just one larger study so hoping you wouldn't give any color there.
Great. Thank you and then not to dig too deep in the details, but it seems like you had a relative jump in your metabolic exposure and it sounds like it wasn't just one larger studies. So hoping you can give any color there.
Speaker 4: Yeah, Christine, a couple of studies in the category have been burning really well. Nothing to call out there other than this year, we've had good success in the space over the past couple of quarters and that's continuing.
Yes, Kristina a couple a couple of studies in the category have been have been burning really well.
It's not.
Nothing to call out there other than other than this year we've had.
August Troendle: I think RFPs, you know, the total RFPs pending is the second highest we've ever had. And, you know, to fill the pipeline, the, you know, new awards, initial awards, as we've talked about, that aren't, we're awarded in Q3, we're a record highest we've ever had. So we're seeing great business environment and a horrible business environment, so I don't know. It's just kind of schizophrenic. Yeah, interesting. So we would suggest that you're able, I mean, that you're taking share, you must be able to, you know, find enough of the positive ones to offset the absence of clients that are being hit by the financial concerns.
We've had good success in the in the space over the past couple of quarters and that's continuing.
Great. Thank you that's all for us.
Okay.
Thank you.
Okay.
Okay.
Yes.
Speaker 2: This will end the Q&A portion of today's conference. I would now like to turn the conference back to Lauren Morris for closing remarks.
This will end the Q&A portion of today's conference I would now like to turn the conference back to Lauren Morris for closing remarks.
Speaker 3: Thank you for joining us on today's call and for your interest in MedPace. We look forward to speaking with you again on our fourth quarter 2023 earners call.
Thank you for joining us on today's call and for your interest in <unk>. We look forward to speaking with you again on our fourth quarter 2023 earnings call.
This concludes today's conference call.
Speaker 2: Thank you all for participating. You may now disconnect and have a pleasant day.
You all for participating you may now disconnect and have a pleasant day.
Okay.
[music].
August Troendle: Any color that you could provide around, you know, sales strategy or investment in sales force more recently, I know you did that years ago, but has there been, you know, further investment to try to cultivate more opportunity? No, I wouldn't say investment in terms of, you know, expanding the size and breadth of the group. I think we're pretty good shape there. I think we're much better able to address the challenges this time because I think we were scaled.
Okay.
Okay.
Yes.
[music].
Okay.
[music].
August Troendle: And, you know, there has been, you know, quite a bit of shifting focus to, you know, funding capabilities on the clients part, so we have moved to, you know, to somewhat different subset of, you know, small biotech that has, you know, funded programs, but that's really it. It's just kind of been a pivot on that side and found lots of opportunities despite the environment.
Yeah.
Okay.
[music].
August Troendle: Okay, last question for me. The pass through, the elevated pass-throughs have maybe persisted to a greater degree than you expected. Can you talk to that a little bit? Has the composition of work changed? Is it more client? I guess I'm, you know, wondering, is it a therapeutic area thing where, you know, where the work that you're doing just naturally has more pass through associated with it? Is it an inflationary environment at the site level where, you know, those activities are just costing more? Or are you being asked to do that more? I'm just trying to understand, you know, why the significantly elevated pass through growth and your expectations for that to continue. Thank you.
Dan.
[music].
Okay.
[music].
[music].
Yes.
Okay.
[music].
Okay.
Okay.
August Troendle: Yeah, I think it's kind of a combination of all the above. There's been quite a bit of inflationary changes, particularly in some therapeutic areas and part of that's competition and all the rest of it. And so I think investing your fees have gone up as a percent of, you know, budgets and higher percent than our costs. And I, there's obviously, you know, the mix of phase threes and, you know, large studies and, and particularly, maybe more expensive patient populations have been a factor too.
Yes.
[music].
Okay.
August Troendle: But, you know, I think it's really a combination of therapeutic area, the type of study, the, you know, cost to the patient and inflationary factors that are all driving up, you know, the pass through the pre-funded investigator cost. I think that may over time, you know, less than a little, but I, you know, I think kind of the percent of investigator fees as a proportion of the total projects may remain elevated for quite a while. Okay. Great. Thank you.
Unknown Executive: One moment, please.
Unknown Executive: For our next question.
Unknown Executive: I'll next question.
John Sourbeer: We'll come from John Sauerbeer of UBS. Your line is open. Thanks for taking the question. You know, I guess just following up there a little bit on the beat in the quarter and just some of the discosers, you know, it seems like midsize biotech and the tablet, tabletism are very strong. And I guess, you know, also a couple of what those large pastures, you know, it is the beat mostly driven by a couple larger studies, or are you seeing your broad base strength here currently?
John Sourbeer: It's pretty broad base. We don't have, yeah, Jesse. Yeah, I'll just say it's it's broad. It's not concentrated in any one, any one study and metabolic has been running a pretty hot pass couple of quarters, and it's continuing to contribute, but, but plenty of good contribution from other therapeutic areas as well in the quarter. Thanks. And you know, funding was pretty good in two queue, but raise raise or higher again. You know, any additional color you can provide on where you see the funding environment going, maybe in the second half of this or I guess with meter this year or into next year.
John Sourbeer: And could there be any impact there on a on a lag basis? I'm sorry, the funding and how that might play out. Yeah, just what are your expectations around maybe for you and then for panic? Sure. Things look strong, as I said, but we got record levels of RFP and awards and we had a drop-off in awards, Q4, Q1. We had a very weak time period, and it was all a question of how quickly we could refill things compared to the food moving through the Python kind of thing.
August Troendle: I think things look pretty good, and we won't see a drop-off, and we're hoping that the business environment pulls up and we'll have a very strong 24.
John Sourbeer: Thanks, and you'll last one here on my end.
Kevin Brady: Just any additional color you provide on the 2024, even a margin guidance, and just remind us even over the long term, I guess, what is the margin expansion opportunity there, or a target level? Yeah, John, this is Kevin. I don't expect, I mean, it's going to be somewhat contingent on what happens with the re-emerge to the activities, right? Just given the impact that that has on margin for centers. But if that levels off, it kind of remains elevated, consistent to where we were in the past, in a couple of quarters here. I don't expect there to be a margin expansion. We still have some one-world fresher problems from the wage and benefits situation. So I don't see 2024 as being a few margin expansion opportunities.
Kevin Brady: And then I guess you'll even be on 24 or any color on what long-term targets? How many just a pound? I mean, we've kind of said if things kind of normalize with something in the high tunes, but it remains to be seen just in terms of what the environment is. In what hiring they look like too.
John Sourbeer: Great. Thanks for taking the questions. Thank you.
Unknown Executive: One moment please for our next question.
Eric Coldwell: Our next question will come from Eric Coldwell of Beard. Your line is open. Thank you. Good morning. Just a few quick ones here on the wage inflation. My understanding was that it had peaked a few quarters ago and was still elevated, but starting to perhaps moderate a bit, has that continued to I understand that correctly? Hey, Eric, that's right. Kind of made the high single digit. Jesse, what do you see on the next 12 months?
Eric Coldwell: Stable at these levels, perhaps some continued moderation, just any sense on what the outlook is? Yeah, I think stable at these levels, you know, at this point, I don't see anything that would drive that higher or lower. You know, the market's, you know, from a hiring standpoint is more stable than it has been in the past. We've also had good success with lower turnover. So employee base, stable or continuing to grow, but wage pressures have moderated a little bit, and I would expect it to be fairly consistent. Okay.
Eric Coldwell: And then in terms of cancellation profile, if I mislead this, I apologize, but have you returned fully to normal levels, which I believe are somewhere in the 4 to 5% of the backlog or what's going on with the cancellations, anything abnormal there? Yeah, normal level pretty pretty pretty well, back to normal at least for the third quarter and you know towards a lower end of that range Okay, and then hit rate you know my understanding from our our visit a month or two ago was that hit rate was back to solid but normal levels has his that continued and have you seen any change in rescue award activity there was a lot of disruptions in this sector over the last couple of years and some of your peers had obviously were giving up some work I'm just curious what the rescue activity looks like these days And no particular rescue activity it's it's been very little and yeah it's been pretty pretty mild Okay last one and I I hate to go there it's unfortunate circumstance but I am curious about your Middle East exposure just in case the situation that's unfolding continues to escalate what what kind of concentrations or exposures might you have in the Middle Eastern region?
Eric Coldwell: Yeah, thanks, thanks for asking Eric all of our Israeli employees are safe and an account for people working remotely at this point our concentration there it's less than 1% of our total headcount and less than 1% of active sites but activities continuing and we're keeping a close eye on it. Okay, thanks very much guys congrats on the good performance.
Unknown Executive: Thank you one moment please for our next question.
Jack Wallace: Our next question will come from Jack Wallace of Guggenheim Partners your line is open. Hey thanks and congrats on the quarter. A couple of questions here one around headcount looks like we're trending to the mid to high. The teens growth rate this year and given the the strength of the RFP awards in the pipeline you mentioned earlier you think this is the right level of headcount growth over the next year or so or maybe said a different way are we?
Jack Wallace: You're on plan with hiring now is there any any cash up that's needed thank you. Yeah, thanks, Jack. Yeah, I would expect headcount here for the balance of the year to remain in that that mid to high teens level and then for 2024 we anticipate headcount growing in line with revenue. Yeah, that's helpful and then just you're thinking about the comments you know one one hand there's you know maybe some of the.
Jack Wallace: The less promising you know lead targets and and less lesser funded companies have kind of sorted themselves out but it does sound like you're promising lead candidates are getting funded and you know there's a good amount of jump balls for you to go after. You had to have any changes in your selectivity of trials and if so is that played any role in your hiring plan you're just thinking about how much hiring ahead is.
Jack Wallace: Taking place. Thank you. Yeah, I mean, we've continued to be selective always in terms of targets and opportunities. But it's impact on hiring plans, not not too much of an impact. I think we're well positioned for current work, we're well positioned with our hiring plans for upcoming work. And we've had really good retention. And that's really helped us as well, in terms of the capacity that we have for trials. We've had good employee retention. And that's always easier than hiring and onboarding new people.
Jack Wallace: Yeah, hidden costs of the run in the business.
Jack Wallace: And then just kind of last year, just a more of a housekeeping item that looked like the customer's 6 to 10, we're down sequentially from a revenue standpoint, wondering if there's any just trial rolloffs in there or kind of any kind of noise factors, just looking historically. Yeah, at the top 10 and like the 6 to 10 category looks like there's been some trading between you said, a top five that didn't look like there's a graduate this year. I just wonder if there's any kind of timing nuances or anything going on there.
August Troendle: Thanks. Yeah, I don't think there's anything. Maybe we shouldn't provide the detail. I don't know. It's like you can't. It's different subset of companies every time. You know, you compare in apples to oranges. I guess you're looking at a nine months, 22 versus a nine months, 23. I mean, if you look at a quarter by quarter. You know, what's revenue is coming from our six, you know, clients, six to 10, it's increased sequentially every quarter, you know, over the past year.
August Troendle: I really don't, you know, it's companies move in and out and up and down and, you know, it's by the quarter and you're looking at a three, three month. You know, you're looking at a three quarter, you know, trailing and it's I just I don't think there's anything there that's meaningful or represents any any large role offering like that.
Jack Wallace: That's a thank you. Appreciate it. Congrats. Congrats again on the quarter. Thank you.
Unknown Executive: I have a reminder to ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw your question. Please press star one one again.
Unknown Executive: One moment, please for our next question.
Christine Rains: And again, we have on the line max mock of William Blair. Your line is open. Hi, thank you for coming back to us. Can you hear me? Yes. Okay, great. Thank you.
Kevin Brady: It's Christine Reigns on for max mock. So I was wondering now that you've paid off your debt, how should we think about capital allocation moving forward and then also relatively, how much interest income could you earn next year? Yeah, the capital allocation policy or kind of methodology Christine will remain the same continued investment in the organic growth of the business in 2024 and the next couple of years. We will have some increased capital expenditures related to the expansion of our of our headquarters here in Cincinnati.
Kevin Brady: But beyond that, we'll opportunistically look for for share purchases to the extent that when I'm able to execute that, it's the levels that we want. We're okay, build some cash. And peer to your question on kind of interest and how to think about that. I think the simplest way is to kind of think of it at current rates, a blended rate of kind of 4.5% or so is a reasonable assumption to build on your model. Great, thank you.
Christine Rains: And then, not to dig too deep in the details, but it seems like you had a relative jump in your metabolic exposure. It sounds like it wasn't just one larger study, so hoping you wouldn't give any color there. Yeah, Christine, a couple studies in the category have been, have been burning really well. You know, it's, you know, nothing to call out there, other than, other than this year, we've had, we've had good success in the, in the space over the past couple of quarters, and that's continuing.
Christine Rains: Great, thank you, that's all for us. Thank you.
Lauren Morris: This will end the Q&A portion of today's conference. I would now like to turn the conference back to Lauren Morris for closing remarks. Thank you for joining us on today's call and for your interest in Medpace. We look forward to speaking with you again on our fourth quarter, 2023 Ernest calls.
Unknown Executive: This concludes today's conference call. Thank you all for participating.
Unknown Executive: You may now disconnect and have a pleasant day.
Lauren Morris: Thank you for joining us on today's call and for your interest in Medpace.