Q3 2024 Medpace Holdings Inc Earnings Call
Good day ladies and gentlemen, and welcome to the mid-paced third quarter 2024 earnings conference call.
At this time, all participants are in the Sonony 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 Infrastrelations, you may begin
Lauren Morris: Good morning, and thank you for joining Medday's of 3rd quarter 2024 earnings conference call. Also on the call today is our CEO, August Troendle, our President, Jesse Geiger and our CFO Kevin Brady.
Lauren Morris: 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 of 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. These factors are discussed in our form 10K and other filings with the SEC. Thank you very much. Thank you very much.
Lauren Morris: 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 views as of any day after today.
Lauren Morris: During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or replacement for the comparable GAAP measures , but we believe these measures help investors gain a more complete understanding of results.
Lauren Morris: 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 investors.medbase.com. With that, I would now like to turn the call over to August Troendle.
Lauren Morris: Today.
Lauren Morris: Backload cancellations in Q3 were above our usual range, making for three consecutive quarters of elevated cancellations.
Lauren Morris: The Magnitudes of Consolations in Q3 were comparable to Q1 and improved relative to Q2.
Lauren Morris: As a net result of the elevated cancellations experienced in Q1 through Q3.
Lauren Morris: Net New Business Awards were depressed in Q3 generating a net book to build ratio of 1.0 for the quarter.
Lauren Morris: As mentioned last quarter, the elevated cancellations we've experienced are not limited to studies previously recognized in the backlog, but rather span our entire pipeline of awarded future work and therefore impact current and anticipated future backlog recognition.
Lauren Morris: This is expected to press our reported netback lug awards in Q4 as well as in Q1 of 2025.
Lauren Morris: Assuming cancellations return to a normal range, and the business environment remains stable, we will be able to rebuild our pipeline of opportunities and are reported booked to bill numbers should approach a more usual range. That is, greater than 1.15 in the second half of 2025.
Lauren Morris: The business environment, apart from the elevated cancellations, remains decent. Parts were down modestly on year over year and sequential basis, but quality appears good. We remain optimistic about future growth, although, as I indicated, it will take several quarters to replenish the flow of opportunities converting into backlog.
Speaker Change: I will now turn the call over to Jesse to provide narrative on the court.
Jesse Geiger: Thank you, August. Good morning, everyone.
Jesse Geiger: Revenue for the 3rd quarter of 2024 was 533.3 million, which represents a year of year increase of 8.3%.
Jesse Geiger: Net New Business Awards entering backlog in the third quarter decreased 12.7% from the prior year to 533.7 million, representing a 1.0 net book to bill.
Jesse Geiger: ending backlog as of September 30, 2024 was approximately 2.9 billion, an increase of 8.8% from the prior year.
Jesse Geiger: We've projected approximately 1.62 billion of backlog will convert to revenue in the next 12 months.
Jesse Geiger: and BackLOG conversion in the third quarter was 18.2% of beginning BackLOG.
Speaker Change: 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 2024. Kevin?
Kevin Brady: Thank you Jesse in good morning to everyone listening in. As Jesse mentioned, revenue was 533.3 million in the third quarter of 2024.
Kevin Brady: This representative, a year or year increase of 8.3%.
Kevin Brady: Revenue for the nine months and September 30, 2024 was 1.57 billion and increased 13.3%.
Kevin Brady: EBITDA, 118.8 million, increased 31.7% compared to 92.2 million in the third quarter of 2023.
Kevin Brady: Year to date, Ebeda was 346.7 million, and increased 30% from the comparable prior year.
Kevin Brady: Even a margin for the third quarter was 22.3% compared to 18.3% in the prior year period.
Kevin Brady: Year to date, even a margin was 22%. Compared to 19.2% in the prior year.
Kevin Brady: Even a margin for the quarter was favorably impacted by Ramersonal cost, which decreased by 350 basis points from the prior year.
Kevin Brady: Even also benefited from direct service activities in productivity.
Kevin Brady: In the third quarter of 2024, net income of 96.4 million increased 36.7% compared to net income of 70.6 million in the prior year period.
Kevin Brady: That income growth ahead of even a growth was primarily driven by interesting income, orcely offset by a higher effective tax rate in the quarter.
Kevin Brady: That income for the limited share for the quarter was $3.1, compared to $2.22 in the prior year.
Kevin Brady: Regarding customer concentration, our top five and top 10 customers represent roughly 22% and 29% respectively of our year-to-date revenue.
Kevin Brady: In the third quarter we generated 149.1 million in cash flow from operating activities.
Kevin Brady: and our net day sales outstanding was negative 62 days.
Kevin Brady: We did not reproach us any shares during the second quarter.
Kevin Brady: As of June 30, 2024, we had $656.9 million cash, and 380.8 million remaining under our share of purchase authorization program.
Kevin Brady: Moving now to our updated guidance for 2024
Kevin Brady: 4-year 2024 total revenue is now expected in the range of 2.09 billion to 2.13 billion.
Kevin Brady: Representing growths of 10.8% to 12.9% over 20.3% to a revenue of 1.89 billion.
Kevin Brady: Our 2024 EBITDA is now expected in the range of 450 million to 470 million.
Kevin Brady: Representative Rose of 24.1% to 29.7% compared to EBITDA of 362.5 million in 2020-23.
Kevin Brady: We forecast 2024 net income in the range of 376,388,000.
Kevin Brady: This guidance assumes a full year 2024 effective tax rate of 15.5% to 16.5%.
Kevin Brady: Interest Income of 24.4 million and 32.1 million deleted weighted average shares outstanding for 2024.
Kevin Brady: There are no share of purchases in our guidance.
Kevin Brady: Her name is Purgoluta Geiger, is now expected to be in the range of $11.71 to $12.9.
Kevin Brady: Guidance is based on foreign exchange rates as of September 30, 2024.
Kevin Brady: We plan to provide 2025 Giants on our fourth quarter call in February.
Kevin Brady: With that, I will turn the call back over to the operator so we can take your questions.
Speaker Change: Thank you. At this time of view, would like to ask a question, please press star 1 when on your telephone.
Speaker Change: You will then hear an automated message advising that your hand is raised. If you would like to remove yourself from the queue, please press star 1-1 again. We ask that you limit yourself to one question and one follow-up as well please wait for your name and company to be announced before you proceed with your question. One moment while we prepare for the first question.
Speaker Change: And our first question today is coming from David when Lee of Jeffries your line is open.
Speaker Change: Hi, good morning. Thank you for taking my questions. I wanted to start August with the cancellations and perhaps.
Speaker Change: If you couldn't, I don't know, quantify what you're seeing.
Speaker Change: Talk about it if you're seeing, I think last quarter you said there wasn't really a trend in those cancellations I wondered if a trend has emerged in terms of either therapeutic area or otherwise the nature of the cancellations and how they, you know, if you can, how they break down between the cancellations of that actual backlog that we're seeing run through the book to bill versus the amount that's kind of being pulled out of your pre backlog. [inaudible]
Speaker Change: Yeah, sure, sure, Dave.
Speaker Change: Well, first, the cancellations we've seen.
Speaker Change: I guess usually cancellations are a wild card and they come out of a blue, it's kind of product performance, occasionally a company has financial difficulty but they kind of random and unexpected.
Speaker Change: The cancellation, we've never seen a period in which we had just across the board kind of elevated cancellations that weren't just kind of one off, so I mean, you have to kind of associate them all. And no, I don't see any trend across therapeutic areas or anything like that. I think it's only...
Speaker Change: Common Factor is these are companies that were funded during the COVID-19 high.
Speaker Change: and have run out of money, it was kind of the one common kind of element. And you have the usual routine cancellations that are random, etc. But I do think that the environment, we've had a great deal of cancellations that are...
Speaker Change: Many of them related to running out of funding and not being able to refresh from the capital markets. It is an unusual situation, but no, I don't see any particular trend in terms of therapeutic areas. It's kind of just type of company and when they were funded and lack of future funding would be the elevated level of cancellations that are unexpected. Then you've got the background kind of stuff.
Speaker Change: In terms of backlog, recognized portion of the cancellations versus that that has part of the pipeline, but not yet in the backlog either though.
Speaker Change: and the next episode of the series, we'll see you in the next video.
Speaker Change: Either the amount of revenue was part of a project that wasn't back long, but
Speaker Change: was not because of a regulatory threshold, you know, with withholding because of either time or some event that
Speaker Change: Prevented us from recognizing the remainder of the...
Speaker Change: Amount of that award.
Speaker Change: or just the things that hadn't gotten to start up, and so we're in the awarded status but hadn't started. The breakout between the two backlog versus the rest of it is probably roughly equal, maybe even a little bit higher in the amount that is pipeline not in backlog.
Speaker Change: So, it's been across the board, I don't have the numbers, I think maybe numerically a little bit larger in the non-recognized backlog portion but across the portfolio.
Speaker Change: Got it. Thank you for that, and then a follow-up question is...
Speaker Change: around pricing.
Speaker Change: It sounds like, as you said, the RFP flow may have been down a little, but generally holding up okay and quality good
Speaker Change: Um, I'm wondering what you are seeing.
Speaker Change: In the competitive environment and actions by competitors in an environment where it seems like there's maybe a...
Speaker Change: West Opportunities to go around for everybody.
Speaker Change: Um...
Speaker Change: and how folks might be chasing.
Speaker Change: Those fewer opportunities either by getting more aggressive about how fast they think their timelines can be, or more direct pricing, or offering better payment terms of the things that CROs tend to do. I just wonder if you're seeing any change in the pricing environment.
Speaker Change: No, I'd say if anything, we've seen improvement. I think that if you look back toward early in the year, we might have seen a little bit of that, but I actually think the business environment is pretty normalized if you take out the cancellations of stuff that was awarded during the COVID-19.
Speaker Change: It is a pretty normalized business environment. I would think that we can get back to...
Speaker Change: Robust Growth in the future, it's just going to take some time, but no, I've not seen lately any sort of trend toward dropping pricing or aggressive, overly aggressive pricing. I mean, it'll look at the competitive environment, but nothing unusual in the last quarter.
Speaker Change: That's interesting. Good to hear. Thank you for the question for the answers.
Speaker Change: Thank you for the moment for the next question.
Speaker Change: and our next question for the day we'll be coming from Max Smock of William Blair, your line is open.
Max Smock: All right, good morning. Thanks for taking my questions. Maybe just following up on Dave's first question there around the size of the cancellations in total. Last quarter, you mentioned double the normal range. I think if they had been within the range, you quoted a book to bill of about 1.24. Just wondering if you can give us a similar level of detail this quarter in terms of the difference between gross and net bookings and what book to bill would have looked like if cancellations were within that kind of normal four to five percent range that you've seen historically. [inaudible]
Speaker Change: Yeah, look, I don't have a kind of an analysis of that. Certainly, even if we didn't have elevated cancellations this quarter, which were not massively, they were outside of our range, but it wasn't a large diversion like last quarter, and we still would have had relatively
Speaker Change: You know, bookings somewhat below kind of what we've been running at, you know, sort of 1.2 sort of range. It would have been well below that just because of the prior, you know, the cumulative prior cancelations and Q1 and Q2.
Speaker Change: So, you know, it's a mix of the cancellations over that entire period, you know, Q1, 3, Q3, it causes the, you know, reduced, reduced bookings. Again, if you cancel stuff that's in the pipeline that hasn't got the backlog, it's going to, you know, show up and future backlog awards and book the bill. And that's what we've seen.
Speaker Change: Yeah, it makes sense. So it's basically, it's just a little tougher to come up with that metric this quarter, because you're also working off the elements of cancellations in the prior quarter. That's right. That's sorting it out between the two is, you know, but it would have been, I don't know, you can say, you know, look, if we, even if we had very low cancellations this quarter, we wouldn't have gotten to a 1.2. You know, that's the kind of.
Speaker Change: May be following up on that on the gross both the inside, August, have you seen any change in terms of your win rate for competitive dynamics today's point around pricing or just any other factors that would cause a shift one way or another maybe because in a little bit of pullback or maybe even a step up in your win rate year in the back after the year.
Speaker Change: Yeah, and no, look, our win rate was actually really strong in late last year, you know, the second half of last year, entire second half was very strong. Q1 was, you know, Q4 in terms of opportunities, we're pretty weak in Q1, we had a, you know, very low, you know, kind of awards, you know, you could kind of put it to that kind of context, you know, in terms of new, you know, authorizations. And then subsequently we've had win rates that are really right in the middle kind of the range, you know, in work, so we're, you know, we're doing fine in the last couple of quarters.
Speaker Change: You know, Windley and Felton, and then have any cancel, though, doesn't, you know, do you a lot of good in the long term, but you know, so it's really the cancellations. It's not our win rate. It's not the amount of awards. It's not, you know, the driver has been a lot of stuff that was awarded in that kind of 2000, 2001, you know, maybe early 2002 to 22, you know, 20, 21 and 22. You know, we've seen a lot of cancellations from things awarded in that time frame.
Speaker Change: I'll leave it there and hope I can do it. Thank you. Thank you. Thank you again, our questions.
Speaker Change: and our next question will be coming from Eric Hallwell, of Beard Your Line as Openers.
Eric Hallwell: Thanks very much. On average, over time, how much of your quarterly gross awards have come from awards that were previously made in prior periods, whether we call that pre-backlog or pipeline backlog, stuff that you would want in the past, but would put into backlog and into bookings and backlog in a future period? What was the normal cushion over time when you entered a quarter?
Speaker Change: I mean, basically nothing gets into that blog that is...
Speaker Change: First Awarded Met.
Speaker Change: in quarter, so everything comes in from...
Speaker Change: I think across the industry, you get in the ward and...
Speaker Change: Often, you don't even know how much it is, really, still you're refining, they're still changing specs and it takes...
Speaker Change: A while before, you know, from a ward to get to a point where you've got it locked down and for us, you know, get it started for others, it might be under contract, you know, with contract.
Speaker Change: If we did our backlog based on contract versus study start, it'd be about the same time frame. You get a contract, you're often working under a letter of intent or start up agreement and you don't really have a contract until about when the study's entering patients in the field, which is kind of our criteria for entering backlog. But, you know, that takes multiple quarters, usually. You know, I can, it's some things, yes, we'll hit the same quarter, but that they're the unusual, you know, opportunities.
Speaker Change: Okay, and then um...
Speaker Change: I guess the elephant in the room here is that the market has this impression that you've had growth strains on the organization that have led to quality issues and that these cancels are actually being caused by unhappy clients for not out of money, but in fact leaving you to go to another CRO. You've not indicated that on this call or prior calls, but do you have a sense on how much of the cancellations actually are projects that will still go on that they're just going to go on with another vendor?
Speaker Change: So we had, you said, the number of things that we've lost because of client dissatisfaction with our performance.
Speaker Change: in the last year is not a small number, it's zero.
Speaker Change: There have been years ago, they might have been a case where Climb was dissatisfied and moved to another Europe, but that hasn't happened.
Speaker Change: We have had a fair number of clients that have run out of funding.
Speaker Change: have had great deal of difficulty and we've provided notice of termination.
Speaker Change: and they've moved it to another zero and some of those subsequently have been funded and, you know, so maybe we made the wrong choice at the time.
Speaker Change: But you know, in the kind of...
Speaker Change: Early in the year, things were looking pretty bad, in terms of funding, we didn't feel we could just...
Speaker Change: except running the program continuing it with...
Speaker Change: Without Payment and...
Speaker Change: I would not expect that a company that is given notice of termination by their CRO is going to go to another CRO and say, you know, we'd like you to take over this work and the reason is because the prior CRO is terminating on us.
Speaker Change: I suspect they spent it in some different way, but the fact is that that is what what has happened so it isn't even necessary that if you hear this from another zero that they don't actually believe that this was a performance-based move but that's just not true.
Speaker Change: All right, that's a good response. And then on the last one, I'll squeeze them one more if you don't mind. Did I hear you say that you expected to get back to a quote normal 1.15 plus netbook to build next year in the second half?
Speaker Change: Correct.
Speaker Change: Yeah, because your average book to Bill since the IPO through the fourth quarter of 23 was 1.25. So I'm just curious on the disconnect between what you see as normal at 1.15, whereas history would say more like 1.25.
Speaker Change: I'm not targeting 1.15, I'm kind of putting that as the floor for expectations and that we would expect to see that. And hopefully based on the business environment it gets to 1.21.25.
Speaker Change: Okay, thanks very much, I appreciate it.
Speaker Change: And our next question for the day, we'll be, I'm sorry, our next question, we'll be coming from Anne Hiles of Mr. Who Your Line is Opened.
Speaker Change: Hi, good morning. I know the past couple of years you have provided forward-year guidance. Is there anything directionally you want to say about 2025 from maybe a merger perspective? So like for example, if we're in a maybe mid single digit revenue growth environment, how do we view margins in that environment?
Speaker Change: Yeah, and we're not going to provide any context on 2025 at this point, just given, you know, just the uncertainty around cancellation. We really want to have another quarter under our belts so that we can provide some good perspective and guidance on the fourth quarter call.
Speaker Change: All right, and then how should we think about margins like, for example, if you only grow mythical digits, how should we view, you know, this quarter you had a lot of cost savings.
Speaker Change: Kimmo's continue in a lower revenue environment.
Speaker Change: Yeah, I mean, certainly they can continue but remember there's a lot of other factors that come in to play on margins, you'll reimbursable cost.
Speaker Change: What's going on with utilization? What's going on with retention levels? We're kind of operating in a pretty optimal spot right now across all those different metrics and it just depends on on how those progress throughout this quarter and then to 2025 as well.
Speaker Change: Gross bookings were not up in the quarter. But again, the reason they weren't, the reason they were low was because of cancellations in the prior few quarters. So, I mean, it's, you know, cancellation of pipeline work. And so I should separate what I'm saying by cancellation. We, you know, we report a cancellation of backlog. And, you know, gross bookings in backlog would have been lower, but the gross bookings in backlog this quarter were lower because of cancellations in non backlog work prior to that.
Speaker Change: which we generally do not provide the non-back log cancellation magnitude.
Speaker Change: Thanks for joining us. Yeah, thank you.
Speaker Change: Thank you, one moment for the next question.
Speaker Change: and our next question, we'll be coming from Dan Leonard of the UBS, your line of open.
Dan Leonard: Thank you. First off, the dynamic you're describing where companies were funded during the sugar high of COVID are now running out of money. Any sense for a weapon that will be completely washed out of the system? I mean, the funding peak was three years ago at this point.
Speaker Change: Yeah, I keep hoping that's true, but look, we still have some...
Speaker Change: Some clients that are kind of taking it quarter to quarter.
Speaker Change: and continuing programs that were really funded in that period.
Speaker Change: are not, you know, well-funded companies. Again, we've, a number of them have, you know, gone bankrupt. You know, we gave term, you know, noticed a fair number of companies because of inability to pay and terminated. Most of those didn't make it, you know. Some of them eventually did get some funding and have continued on. But there's still a number of projects that we have that are...
Speaker Change: You know, a challenge to funding type situations. I'm hoping that that's done, but it kind of depends on the, you know, future of business environment, to things turn south again, you get more of these cancellations potentially. Certainly, the overhang is less, I guess you'd say, but I can't say it's entirely eliminated.
Speaker Change: In just a quick follow up, possible you could frame your expectations on what book to bill could look like in the fourth quarter. I'm trying to triangulate your various comments on pre backlog and RFPs being down and thought it would just be easier to ask.
Speaker Change: What do we expect our book to build to be in Q4?
Speaker Change: Yeah, and understand you don't want to give an explicit number, but maybe you could just offer some frame of thoughts around that.
Speaker Change: Okay, so better than this...
Speaker Change: That's quarter. Better than one. You know, look, a lot of things do happen during the quarter. Like I say, most things are in that pipeline, but you know, what makes it the backlog and what gets canceled and all kinds of other things have a rather large effect on that, you know, between a one or a 1.2.
Speaker Change: But I think it's not going to be a 1.2, and it's not going to be a 1.0. It's going to be a more above a 1. And look, if you look at it, it's going to be depressed. So if it was going to be 1.2, I wouldn't say that was going to be depressed. So we're talking about probably under 1.1.
Speaker Change: Thank you.
Speaker Change: Thank you, one moment for the next question.
Speaker Change: and our next question will be coming from Justin Bowers of DB, your line is open.
Justin Bowers: Can you give us, and this is related to Dan's question, but...
Justin Bowers: Can you give us a sense of...
Justin Bowers: How much of the backlog is from that vintage from 2020 up to, you know, that's the 2020 and 2021.
and then this second part of that would be
Justin Bowers: of the sort of that not yet awarded, but impacting the Go Forward bookings.
Justin Bowers: What the impact of that is or frame how much of your typical bookings historically have reflected some of that not awarded.
Justin Bowers: I'm sorry, I don't, I'm left
Justin Bowers: and I'm not understanding exactly what you're looking for. How much of the recognize backlog is going into backlog, very good.
Speaker Change: Yeah, so part one is just like, if you look at the current backlog, how much of that is from the 20 to 21 vintage? And then that's the fact that you're sure, I think that's easier, that's an easier part.
Speaker Change: I, like I say, I think there still is a, you know, an amount there. And, and I do, I do point to that is as, because we've never seen an environment where there was, you know, three quarters in a row of, you know, kind of this high bed cancellation, and I, and I do put it together too. There was a disproportionate number that we're kind of funded during that period, but look, this is a, I don't want to make it sound like that's the only [inaudible]
Speaker Change: You know, it's only the, you know, the post-COVID sugar high that, you know, that we're coming up there. This is an ongoing thing, of course. You know, we do have a lot of clients that are dependent upon the capital markets to complete a project. Okay, so just even in normal time. Okay, so I think it was exacerbated, though, because there were a fair number of projects. [inaudible]
Speaker Change: you know, funded during that period. And um...
Speaker Change: and they still represent a chunk of our backlog. I don't think it's a majority of backlog, but I just don't have a breakout of just when things were awarded, etc. But that is...
Speaker Change: Enhances the issue in terms of the great rise in funding that was available and then the acute drop-off, you know, that's the issue and this happens all the time even now we're getting projects that are
Speaker Change: Funded because things are better than, you know, than they could be for that company a year from now.
Speaker Change: So I don't want to make it into it just that.
Speaker Change: All one time event.
Speaker Change: But I do think that contributed to the size and duration of these cancellations.
Speaker Change: and then with, so just trying to make,
Speaker Change: Part two of that would just be, okay, historically in any given quarter, you know, if what percentage of your bookings
Speaker Change: are related to this dynamic of in the pipeline, but not yet awarded, for example, is at like 10% or 20%. Virtually 100%.
Speaker Change: I'm excited. I'm excited. I can't say that just a little bit ago. The almost, it's very rare that a project is awarded in a quarter. And...
Speaker Change: and then, you know, it's recognized in the backlog in the same quarter. It generally takes a few to several quarters for that to happen. You know, because our backlog recognition is the project really, beginning to, you know, enroll patients, you know, in that within the next quarter. So, and that usually takes, you know, you can say six months or whatever, but it's very rare that it's only a month or two.
Speaker Change: Hey, understood? And then with just based on what you're seeing now with the current back log, how does that impact your view on employee growth over the next quarter or so? And can you give us a sense of maybe like re-aversible cost now, or we at like steady state given what you're seeing, or would there be any change with sort of the mix there?
Speaker Change: Yeah, I can speak to employee growth. We did increase headcount, it's about 1.8% from the prior year. That's likely where we're going to end the year, given that Q4 is historically a slower hiring period for us. We do expect accelerated growth in 2025. Putting a finer point on that is something we'll do as we issue our 2025 guidance on the next quarter of recall.
Kevin Brady: and Kevin, you want to speak to reimbursement costs? Yeah, and in terms of reimbursement, we'll provide more context on 2025.
Kevin Brady: Next Quarter, but historically, we've been in this 33 to 35 percent. It's always been volatile. Certainly, our ability to predict it has been challenged and late. It was very high in the last recorders of 2023, approaching 40 percent and then it dropped in Q1 and then back up in Q2 and back down in Q3. I don't think it's going to get back to that 33 to 35 percent range. The fourth quarter, our modeling would suggest it picks back up not to the levels that we saw a year ago, but higher than what we saw on the third quarter.
Kevin Brady: You know, I think cost are stabilizing and normalizing, there's still stress on sites, but you'll likely 2025 is still someone elevated but perhaps not as high as what we had expected exiting 2023. But we'll try to provide some more color on the fourth quarter call.
Speaker Change: Thank you.
Speaker Change: and our next question will be coming from Charles, where he of TVCAM when you're able to say something.
Speaker Change: Oh yeah, thanks for taking the questions. Just want to follow up, August, you talked about.
Speaker Change: I know he's not all of your backleg, but when we think about that
Speaker Change: Pioraden during COVID of...
Speaker Change: Fonding.
Speaker Change: and these companies running out of money, what about the significant amount of funding we had in the first half of this year?
Speaker Change: Did that not go to some of these clients, or has that money not been released? Could it be that some of that comes back for these companies that they're waiting on funding? Anything, if you connect, sort of.
Speaker Change: The companies that you're talking about here that are kind of running out of money versus maybe those that did get funding in the first part this year were they not necessarily the same.
Speaker Change: Yeah, no, it's looked, there's a lot of overlap, it's a fair number of companies that we,
Speaker Change: We work with did-get funding and their projects are continuing and they're the ones that didn't cancel And there's a fair number that
Speaker Change: didn't get funding and a few, actually, you know, two that I'm aware of that
Speaker Change: We had a great deal of difficulty. We, you know, served them, you know, kind of notice of our plans to move on because they were unable to pay us. And they eventually did get some of that funding. So, you know, some of them with us, some of them without us. And, you know, some did not get funding, but it's, you know, it's not, it's not like that funding was just, you know, evenly distributed. It was given to specific companies and not everybody got funded.
Speaker Change: Garret, that's helpful.
Garret: You know, maybe as a follow-up, you know, last quarter I think you guys talked about, you know,
Speaker Change: You know, looking to be opportunistic with share repurchase, you know, shares, since, you know, since, you know, since, since last quarter right have been, you know, under pressure, but then we look, I don't think you guys bought any stock back in the, in this last quarter. Any reason not to have been more opportunistic this past quarter, can you talk about sort of your thoughts on, find back shares. Thanks.
Speaker Change: Yeah, I mean, Charles, our strategy hasn't changed, and we try to put plans in place, and we're somewhat limited in terms of timing on one, we can put things in place, and we've got certain restrictions as well, and unfortunately, those plans did not trigger. We'll continue to be disciplined in our approach and opportunistically revying. Thank you.
Speaker Change: to the expense that we're able to execute on that plan with my shares.
Speaker Change: If not, we'll continue to build some models of cash here.
Speaker Change: Good, thank you.
Speaker Change: 3rd of June 2017
Speaker Change: Yes, we're in Gohan.
Speaker Change: Hi, thanks for taking my questions. So, I want to go back to cancellations.
Speaker Change: You called out Q3 trends were similar to Q1, but better than what experienced in Q2. I want you to put a finer point on the intra-quarter trends in terms of cancellation. Last quarter you called out trends were soft in June , but had shown signs of some stabilization in July . Did that not just actually happen as you wrapped up the month or was it really that trends got worse in August and September ? It looks like you're expecting book to build to improve in Q4. Does that mean trends were better? Exiting Q3 and likely continued in October versus what a book to build of one might imply just trying to understand that trends, recent trends and maybe something about October .
Speaker Change: Yeah, yeah, I don't have the exact dates. I think at the time of our last call, you know, we only had a couple weeks data into July and it looked fine and probably looked like it was going to be within the sort of usual range. But, you know, over the quarter, it's not like it's just all ramped in the last month or it suddenly spiked at any given time, but we didn't have a number of cancellations to the quarter that pushed us out of what, you know, we considered the normal range, but again, it wasn't, it wasn't, that wasn't the reason, you know, we have a 1.0, you know, booked a bill. That was more driven by the, you know, gutted pipeline from prior cancellations.
Speaker Change: Okay, then my follow-up. I want to go back to Eric's question around market competitiveness with some of your peers making a big push in EBP and biotext space with an argument that they are focused on providing specialized services to meet the unique demands of this customer segment. Okay, versus Medpace being the partner of choice for these customers in the past.
Speaker Change: 3.
Speaker Change: Jesse? Yeah, yeah, I'll jump in on that. We haven't, I mean, the wind rate's been been good, but as August mentioned earlier on the call, it is a competitive environment. You know, we're seeing good competition in the field, but nothing, you know, nothing that we'd point to in terms of any, you know, irrational behavior or, you know, irrational, you know, aggressive pricing competition in the market, competitive space, but no change really that we're seeing.
Speaker Change: Okay, great, thanks a lot.
Speaker Change: Thank you as a reminder, if you would like to ask a question please press star one one on your telephone.
Speaker Change: and our next question, we'll be coming from Max Mach, William Blair.
Max Moch: Hi, thanks for speaking to the follow up. I wanted to ask going back to you in the front-end and demand environment. I think last quarter, he pointed to RFP flow up about 16% year-over-year. Bio-Tech funding maybe took a little bit of a step back in the third quarter, but still overall September was strong. I just wanted to give you a comment on what you're seeing in terms of RFP flow so far in the fourth quarter, as well as given an initial update on how that initial award that pre-backlog or bookings number has turned it over the last couple of months.
Speaker Change: So RFP numbers in the fourth quarter's to date.
Speaker Change: Well, Oregon's third quarter and then yeah, any sort of look at how those clothes have traded in fourth quarter would be great as well.
Speaker Change: Okay, so fourth quarter, they were down a little bit sequentially. Not a great deal, but they did take down July , I'm sorry October , we wouldn't really have anything yet. It takes a standard turnaround for a Part P coming in as 10 days, so you don't have anything information on it till at least 10 days after it arrives, because you don't need numbers on it. You could just count them, and of course when I'm talking about his dollar RFP flow, so.
Speaker Change: We really, you know, we just have numbers for, you know, September , you know, just very recently. So, so I really don't have any kind of trend, you know, certainly the bar fees have continued to come in. I just don't know how dollar wise that would translate into in Q4, but Q3 was, it was down on, you know, more than 10%, but not a great deal.
Speaker Change: So sorry, I'll just just clarify on that. So down 10% sequentially off a strong Q2 number, but where they up your rear and the third quarter.
Speaker Change: that they were down slightly year over year.
Speaker Change: And they were down, they were down less than probably, I don't know, maybe similar kind of pop down that they were head popped up in Q2
Speaker Change: Thank you. Number some more.
Speaker Change: and we have a follow-up question from David, when Leo of Jeffrey Geiger, Lauren is open.
Speaker Change: I missed the name, was that Dave Winlay?
David Lee: Yes, yes, yes. Okay, all right, great, thanks. So follow up, I appreciate your air-exquestion on kind of addressing.
Speaker Change: Some rumor that's been out there on another one is that you are pursuing or have one big pharma contracts and I suppose if a big pharma opportunity was a full service opportunity and fit your model that would be good but the odds of that are fairly low and so I guess my basic question here is
Speaker Change: to ask you to discuss your, you know, your go-to-market discipline and is that still consistent?
Speaker Change: in terms of your focus on biotech and your focus on full service work.
Speaker Change: Yeah, I will not run if nominated I will not serve.
Speaker Change: No, our good market is remains the same, we're not done.
Speaker Change: We're not jumping and trying to do large farm. We're not doing partial service. We're not doing functional. We're not doing staffing. We're not doing any kind of stuff. I think our core business is good and strong. I think that there's been some funding difficulties that have translated into a number of cancellations here, but I think longer term we're on the change in it.
Speaker Change: Got it. And further on clarification, so I think your commentary is largely answered this around the nature and source of the cancellations, one of the perhaps explanatory theories that we offered last night was that because your excuse me, your past threes have come in light of your expectations, a couple of the three quarters year to date, that maybe some of this was a lowered forward expectation.
Speaker Change: Around your pass-throughs and therefore maybe calling out some amount of pass-through sizing, passing through estimating in the backlog. From your commentary, it doesn't sound like that is actually part of this, but I thought I'd give you an opportunity to clarify and confirm.
Speaker Change: Kevin, do you have any kind of- Yeah, yeah, David, it's not related to some kind of an adjustment on future forward pass-through activity. That's your question. Yeah, it is. Okay. Thank you. And then lastly, on Labor, appreciate Jesse, your answer sounds like, if I understood correctly, that your Q3 ending head count is what you expect to end 4Q. And in terms of-
Speaker Change: kind of utilization of those staff. I presume that your margins have benefited from not having continual flow of new employees coming in and not being billable or being underproductive.
Speaker Change: is that correct and is there still some of that benefit that you could squeeze out of the organization or is that kind of a peak?
Speaker Change: Yeah, you're right, David. There is continued efficiency. You know, we got low turnover, you know, low turnover and, you know, good visualization of staff. So, you know, plenty of staff in terms of individuals that were sourcing and putting on to new, onto new projects. And then also just, you know, good efficiency of existing season staff, because we're not hiring as much right now or haven't been hiring as much. The burden then on the existing employee base in terms of training and mentoring and bringing up to speed, those newer individuals is lower, and therefore their productivity on, you know, billable work is higher. So
Speaker Change: In a good spot now, as I mentioned, we do expect to accelerate hiring as we move through next year, but the rate of that in the size of that will largely be dependent upon what the bookings look like and what the future opportunities turn out to be.
Speaker Change: and so sorry, thank you for that enough heat, I'm sorry. The last two quarters in the lowest.
Speaker Change: possibly ever, certainly in the last five years, you know, so it's just, you know, it's really, you know, in past year, just come down to record notes.
Speaker Change #100: Thanks for that, and I was just going to clarify Jesse on the productivity point so
Speaker Change #101: Is there actually still even room for productivity, for further productivity to lead to even higher margin in the near term?
Speaker Change #102: I guess you kind of guided to that, but I just wanted to ask. Yeah, I don't think a great deal. I mean, I think we, you know, we're at, you know, we're at good efficiency now. I don't think there's a lot more of, you know, margin expansion in terms of leveraging, you know, lower turnover and greater productivity than we, than we currently are experiencing. [inaudible] We're at good efficiency now.
Speaker Change #103: Thank you.
Speaker Change #103: 1-month race.
Speaker Change #104: and the next follow question will come from Eric Codwell of Beard Your Line is open.
Eric Codwell: Thanks, can you hear me?
Eric Codwell: We're getting here. Great. We have great. I wanted to just wrap up here with a backlog burn. You've over the last couple of years you've had a range from the mid-16% on a quarterly basis up to over 19% last three quarters you've run consistently at 18.2. What dynamics might be in play that would shift that burn rate upper down over the next 12 months just thinking about all the moving pieces of
Eric Codwell: These cancellations and then you know, pass through volatility, et cetera.
Speaker Change #106: I'm trying to get a sense on whether you're expecting...
Speaker Change #106: A similar low 18s rate going forward, or if you have reasons to believe that could...
Speaker Change #106: Go back to the lows of a couple of years ago where the highs of last year.
Speaker Change #107: Yeah, good question, Eric. I mean, certainly we continue to progress of studies, continues. It's very healthy for active programs. I think the burn rate is more influenced by what's going on with bookings.
Speaker Change #107: So when the period that you were stating was kind of in the 16%
Speaker Change #107: So that was in the period where our bookings were closed for the 1.4.
Speaker Change #107: You're putting all of the programs in the back, all of them, these are programs that are starting to to burn, but it takes a while for those programs to burn out. Now here, we're lately, you've seen the reverse of that where the burn rate started to pick up as kind of the bookings have slowed down. So it's not a function of how programs are progressing, necessarily more in our case as much as it is, just the calculation on how bookings are progressing. So I think the burn rate, you'll see just kind of kind of stay at this level, depending on what happens with future bookings.
Speaker Change #108: And then last, last one for me, just a technical one, would you mind sharing how many?
Speaker Change #109: Projects or Trials you're working on in the moment, just maybe on an annual basis, maybe quarterly. I get a lot of questions about how many studies or different programs you're running at a given time. I'd love to get an update for the total number if you have that.
Speaker Change #109: I mean, it's in the hundreds, it's in the 500's soon.
Speaker Change #110: Yeah, but 500 range.
Speaker Change #111: Yeah, I think I left on mine, you know, yeah, I did it for this moment.
Speaker Change #112: Perfect, okay, thank you very much.
Speaker Change #112: Thank you.
Speaker Change #113: and the last question of the day.
Speaker Change #114: Will be coming from the line of Charles Reheat of CO, sorry to be counting. Your line is open.
Speaker Change #115: Oh, yeah, thanks for taking this follow up. Just a question on the pastors then. Is is some of the issue with pastors falling? Is that really from delays and trials? So the service revenues because you're still overseeing the project. So you're building for them continues, but have you seen, you know, I think you've talked about in the past. Is that just a function of
Speaker Change #116: the Lays in study starts or other things that are kind of slowing that process. So the past year revenues haven't been expended yet, but arguably those would come back as those projects get ramped back up.
Speaker Change #116: Yeah, just curious on that dynamic, if that plays into it at all, thanks.
Speaker Change #117: It can be a number of things. It can be slower startup activities than expected. It can be a mix of programs across the portfolio.
Speaker Change #117: It can be the timing of when
Speaker Change #117: Sites are submitting their data files in their own voices.
Speaker Change #117: and there's a number of different factors.
Speaker Change #117: that can contribute to that, as I've said in previous calls and we're dealing with thousands of sites.
Speaker Change #117: and hundreds of programs.
Speaker Change #117: and some of these things are somewhat out of our control in terms of when the data submitted to us. It's a number of different factors and it's very difficult to predict.
Speaker Change #117: from Quarter to Quarter, and we've seen this volatility in the past, it's not something Charles that's new.
Speaker Change #117: We've seen this quarterly volatility in the past as well.
Speaker Change #118: and I actually Kevin one last for you. You said before, you know, you're looking for certain triggers to find back shares. Can you kind of dive into a little bit? What are generally the triggers for you to be able to come in and repurchase shares? Thanks.
Kevin Brady: Yeah, I mean, look, I mean we're not going to kind of divulge our strategy, but we try to pick different levels or we see value and put plans in place at those different levels, certainly the timing and when we do that, we've got some narrow windows to be able to execute that.
Kevin Brady: and again, if those plans trigger the trigger, something that we continue to evaluate and we're named pretty disciplined in our approach.