Q2 2025 Medpace Holdings Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the medpay second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star 1, 1 on your phone. If your question has been answered and you'd like to remove yourself from the queue simply press star 1, 1 again, as a reminder, this call is being recorded. I would now like to introduce your host. For today's conference, Lauren Morris medpac's, director of investor relations. You may begin
Lauren Morris: Good morning, and thank you for joining medpace the second quarter 2025 earnings conference call. Also on the call today is our CEO August troendle, our president, Jesse guyger, 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 meeting 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, 10 K 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 views as of any date after today.
Lauren Morris: Or replacement for the comparable gaap measures but we believe these measures help investors gain, a more complete understanding of results. 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.
Lauren Morris: The slides are available in the investor relations section of our website at investor.net cam with that. I would now like to turn the call over to August troendle.
Good day.
August Troendle: Rxd flow and Q2 continued to be strong and we saw an increase in rate of decisions.
August Troendle: Total pending RFP dollars were down on the quarter and our reward notifications were strong.
August Troendle: Cancellations were down across the pipeline and awards recognized in the backlog, where the highest in the past 5 quarters with a book to Bill of 1.03, and the second quarter of 2025.
August Troendle: We continue to see a strong potential for book. The bills returning to above 1.15 in Q3,
August Troendle: Although funding challenges remain acute for many of our clients, the large majority of those clients with ongoing studies were able to obtain sufficient funding to keep the trials running.
Speaker Change: Funding environment has been stable to improve?
Speaker Change: Due to several factors, including better funding than anticipated.
Speaker Change: Fewer cancellations.
Speaker Change: Accelerated client decisions.
Rapid projects startup.
Speaker Change: Shifting mix away monology and toward faster, burning therapeutic areas.
Speaker Change: And significantly higher investigator costs.
Speaker Change: We now anticipate accelerating Revenue in the second half of the year.
As a result, our Revenue guidance has been raised by 280 million dollars at the midpoint.
Speaker Change: Jesse will now add some additional details.
Jesse: Thank you. Good morning everyone.
Speaker Change: Revenue for the second quarter of 2025 was 603.3 Million.
Speaker Change: Which represents a year-over-year increase of 14.2%?
Speaker Change: Net new business Awards, entering backlog in the second quarter increased 12.6% from the prior year to 620.5 million resulting in a 1.03 netbook to Bill.
Speaker Change: ending backlog as of June 30th 2025 was approximately 2.9 billion, a decrease of 1.8% from the prior year
Speaker Change: We projected approximately 1.75 billion of backlog will convert to revenue in the next 12 months.
And backlog conversion. In the second quarter was 21.2% of beginning backlog.
Speaker Change: Now with that, I'll turn the call over to Kevin to review our financial performance in more detail as well as our guidance expectations for the balance of 2025.
Speaker Change: Kevin.
Kevin: Thank you, Jesse.
Kevin: As Jesse mentioned Revenue was 603.3 million in the second quarter of 2025.
Kevin: This represented a year-over-year increase of 14.2%, on a reported basis and 13.8, on a constant currency basis.
Kevin: Revenue for the 6 months, ended June, 30 2025 was 1.16 billion.
And increase 11.8%.
Kevin: Revenue for the quarter was favorably, impacted by higher reimbursable, activity, particularly at investigator, sites driven by studies, progressing ahead of projected schedules and the therapeutic mix shift to faster burning studies in areas like metabolic, which have a higher concentration of reimbursement costs.
Kevin: Ibida of 130.5, million, increased 16.2% compared to 1. 12.3 million in the second quarter of 2024.
Kevin: on a constant currency basis, second quarter, Eva increased 18.5%
Kevin: Year to date. Eva was 249.1 Million.
Kevin: And increased 9.3% from the comparable prior year, period.
Kevin: Even a margin for the second quarter was 21.6% compared to 21.3% in the prior year period.
Kevin: Year to date, even a margin was 21.4% compared to 21.9% in the prior year period.
Kevin: Even a margin in the quarter benefited from direct service activities and productivity.
Kevin: And foreign exchange losses behind the weaker US dollar.
Kevin: In the second quarter of 2025 net income of 90.3 million increased 2.2% compared to net income of 88.4 million in the prior year period.
Kevin: Net income growth behind ibida growth was primarily driven by a higher effective tax rate in the quarter and lower interest income.
Kevin: Net income for diluted share for the quarter was 3 dollars compared to 275 in the prior year period.
Kevin: Regarding customer concentration. Our top 5 and top 10, customers represent roughly 21% and 31% respectively.
Kevin: Of our year-to-date Revenue.
Kevin: In the second quarter, we generated 148.5 million and cash flow from operating activities and our net Day sales outstanding was -65 days.
Kevin: During the second quarter, we repurchased approximately 1.75 million shares for 518.5 million.
Kevin: Year to date we repurchase 2.9 Million shares for 908.4 million.
Kevin: As of June 3025, we had 826.3% authorization program.
Kevin: moving now to our updated guidance for 2025,
Kevin: 4 year, 2025 total revenue is now expected in the range of 2.42 billion to 2.52 billion.
Kevin: Representing growth of 14.7% to 19.5% over 2024, total revenue of 2.11 billion.
Kevin: Our 2025 ibida is now expected in the range of 515 million to 545 million.
Kevin: Representing growth of 7.3% to 13.5% compared to ibida a 480.2 million in 2024.
Kevin: The increase in our guidance, reflects the impact of lower second quarter backlog cancellations.
Kevin: Improved funding on several challenge programs, which we anticipate will continue through the remainder of the year.
Kevin: And they're shifting business toward faster, burning therapeutic areas with a higher concentration of reimbursement costs.
Kevin: We now expect re reimbursable cost as a percentage of Revenue to increase by 200 to 300 basis points, over the balance of the year.
Kevin: We forecast 2025 net income in the range of 405 million to 428 million.
Kevin: This increase guidance assumes a fleet 25 effective tax rate of 18.5% to 19%.
Kevin: Interest income of 11.6 million.
Kevin: And 29.4 million diluted weighted, average shares outstanding for 2025.
There are no additional share purchases and our guidance.
Kevin: Earnings per diluted share is now expected to be in the range of 13.76 to 14.53.
Kevin: Guidance is based on foreign exchange rates as of June 30th 2025.
Kevin: With that, I will turn the call back over to the operator, so we can take your questions.
Speaker Change: Thank you as a reminder, to ask a question. Please press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please. Press star 1 1 again. 1 moment for our first question.
Speaker Change: Our first question is going to come from the line of an hind with meizuo. Your line is open, please go ahead.
Speaker Change: Great, thank you so much. Um, could you just um, let us know what your booking expectations are for the second half and the reason, um, being is that you your burn rate, um, stepped up in um, 2 q and obviously you guys have some types of stuff up in 3, q and 4 q. And I'm just trying to figure out what that means for 2026 for Revenue growth. And I know you want to probably want to give guys for 2026.
Speaker Change: But do you expect an acceleration and, um, bookings? Um, with the second half to support growth in 2026? Thanks.
Speaker Change: Yeah, as I said in in my prepared comments, um we do believe that there's a reasonable chance of getting uh booked the bills back over 1.15% increase in bookings. Um as our revenue is also growing
Speaker Change: So, yes, we do expect bookings to increase. Now again, that's always dependent upon, you know, cancellations which were very well behaved, um, in this quarter. Uh, but last quarter, there were, um, you know, terribly High. Uh, so I, you know, if if things continue in the trend, um, you know, we saw in this quarter uh, then and yes we expect bookings to remain remain strong through the remainder of the year.
Speaker Change: And can you provide any more information on cancellations like what was the rate this quarter versus what had been trending? The past couple of quarters
Speaker Change: Um, yeah. I, I, we don't disclose the actual rate, but it was down across the entire portfolio. So both, uh, you know, sort of the non backlog, uh, uh, uh, Awards. Uh, you know, before they get the backlog, uh, was very low and, uh, our backlog cancellations, uh, that have been at or above the, uh, you know, upper range of what we'd consider normal. They're actually toward the lower end of, uh, expectations. Uh, or you know, usual history, um, in in this, uh, past quarter in, in Q2. So, there were actually very well behaved. And that, of course, uh, made us exceed. You know what we felt we were going to do in terms of uh um, you know, both bookings and overall, you know, performance in terms of
the revenue and and even
Speaker Change: the perfect. Thank you so much.
Speaker Change: Thank you and 1 moment as we move on to our next question.
Speaker Change: Our next question is going to come from the line of David windley with Jeffrey. Your line is open. Please go ahead.
David Windley: Hi. Thanks for taking the questions. I've got a few, I'll try to go through quickly, um, on the, on the burn rate, my I'm not quick enough on the calculator, I heard. Um, Kevin you say that you do expect pass throughs to be 2 to 300 basis points higher.
David Windley: Uh over the balance of the year and and that I think contributes in part to the higher burn rate. Um I I was hoping you could maybe walk me to water a little bit on how much of the increase guide is passed through versus direct Revenue.
David Windley: Yeah, Dave I mean you know obviously a large portion of the increase is going to be on the The Accelerated reimbursable costs and activity, right? Uh but we did increase also um,
David Windley: The Eva guide as well. So we're also seeing you have some pull through on just just greater productivity uh on the existing staff and and quite frankly, some programs that are uh progressing ahead of what we had projected uh, in our schedules.
David Windley: so the colonization of those but the the revenue in particularly heavily influenced by the 2 to 300 basis point increase in, in expectations, on on the passers
David Windley: Okay. Um, so last night, we on this topic, we looked at kind of the pattern in 2023 where you also had.
David Windley: Um, an increase in revenue and and it, you know, a good chunk of that coming from Pastor. It sounds like you know, maybe not quite that extreme but similar.
And and to get the Eva increase that you just mentioned on, you know, effectively the direct Revenue portion, which sounds like the minority.
David Windley: Um, you're having to get, you know, pretty high incremental margin um as you just alluded.
David Windley: Uh management has been talking for the last. I don't know year, at least that staff. Productivity has been increasing that you were at levels that were, you know, above historical records and probably not much upside room there.
So I'd ask you to elaborate a little bit on how you're able to squeeze additional productivity out.
David Windley: And then to support the revenue growth in your bookings expectations. I would guess that you're expecting to
Kind of uh, take the shackles off hiring a little bit and and accelerate the hiring and how should we expect that to impact uh margin over the next couple of quarters? Thanks.
David Windley: Yeah, yeah, Dave, you're you're right. I mean, I I didn't expect, you know, productivity to continue from what we saw in 2024, um, you know, certainly we we've reduced our hiring expectations, a little bit coming into the year. Uh, but we're also seeing improved attrition rates again uh your furthering in the past couple of quarters. And so all of that is contributing to um, you know, I I still expect some headwinds on a on a net basis uh in 2025 relative to where we are in 2024, but but you're right. Certainly improved versus where we were coming into the year.
Speaker Change: And then last question for me quickly is, is the the August your comments are on funding are interesting to me.
Speaker Change: Certainly but but we have seen some predictiveness out of it and funding year to date. It's pretty bad really um June was much better but we're down, you know over 40% year to date.
Speaker Change: So, how do you get comfortable? I mean, I know you, you know, you have a lot of visibility into the awards that you have in hand that aren't even in backlog yet.
Speaker Change: But how do you get comfort that?
The weak funding through the first 6 months of this year is not essentially foreshadowing. Another downturn in demand activity for you as it did in 23 ahead of 24.
Uh, well I I I guess I'm I I don't get myself comfortable with that, you know? I mean, I, I thought we probably hit a bottom in Q4, um, but then cancellation. Yeah, and look a big part of all of our difficulty. The last year has been cancellations not new projects. And um, you know, Baseline level of uh, you know business, you know, certainly the last 9 months, you know. It's it's so it's really been, just really heavy cancellations and, you know, if, if, if they get, um, adequate funding, you know, I don't know what subset that is of the total, you know, uh, pool of funding, you're talking about, but we get comfortable with that and, uh, you know, we can we can make our numbers. Um, but you know, could uh, things pull
Speaker Change: Back again, and really impact 2026. Sure. That's that's quite possible. I I have no idea. Um, I I, I do know that we have
Speaker Change: Uh, you know, good, uh, pipeline of things, awarded, but not yet. Reaching backlog. Um, that should support. Um, good. Bookings. Through the remainder of this year. Again, as long as you know, cancellations don't rear their head, um, excessively.
Speaker Change: And that should lace get us, you know, started in the 2026, but you know, is it possible? There's a pullback in the future and, and
You know, we run into another um, you know, uh very weak booking uh, you know quarters, I I don't know.
Speaker Change: Okay, appreciate the answer. Thank you.
Thank you and 1 moment as we move on to our next question.
Speaker Change: Our next question comes from the line of Jaylen dressing with truist Securities. Your line is open, please go ahead.
Jaylen dressing: Thank you. Good morning and congratulations, strong quarter, uh, actually, uh, want to follow up, uh, on the last part of, uh, David's question. I mean, it seems like macro environment and business pipeline, when we caught up in early, June, but still choppy and pressured, keeping that in mind. Can you provide some color around how intra quarter Trends were into Q? The majority of Trends, suddenly accelerate towards the end of Q2, so essentially, like latter part of June and those Trends have continued, just give us some flavor. How demand environment evolved in Q2 in particular?
Speaker Change: Particular.
Speaker Change: Um, and I mean, Q2 was, uh, again it was really a continuation of a q1 in terms of uh, you know, the business environment was continued to be pretty strong in terms of uh, rfps. I said in q1, they were strong. It was really cancellations that, um, you know, backed off quite a bit and that was sort of throughout the quarter. As I said, back, you know, cancellations were actually low. Um, you know, on the low side, uh, this quarter, as opposed to being very high in the, in, you know, in the past, you know, and certainly in the, in the prior quarter. So it it, uh, it was AC the quarter. I mean, I I didn't see any real, uh, trends of acceleration or deceleration in the quarter.
David Windley: Okay and my quick follow up on the you know, uh these trials which were delayed or kind of put on hold coming back. Uh, new trials, business wins. Have you seen in any ways that uh the scope being different? Are you seeing like reduced scope of work? Or is it like a similar scope of work as you guys agreed on and related to that is there any meaningful variations around ebida margin if the if the project comes at lower scope or reduce scope than previously planned?
David Windley: Obviously, uh, there you're, you're even, you know, your profits going to be impacted by that. Yeah, I mean that, uh, uh, you know, uh, because that's, you know, the most profitable project for us, is the project that runs the fastest and, uh, um, uh, you know, if it's, if it's delayed, if it's Downs scoped, if it's, uh, um, you know, has some gating Etc that, uh, you know, impairs our ability to execute and, uh, um, and to, uh, you know, make a profit on it.
David Windley: Great, thanks. Taking questions.
David Windley: Thank you and 1 moment.
Next question.
Speaker Change: From the line of Max Smock with William Blair, your line is open, please go ahead.
Max Smock: Hey, good morning everyone. Thanks for taking our questions, just wanted to follow up on some of the
Speaker Change: Year in particular your commentary about, you know, getting back to 1.15. If you do that in the back half of the year, I think that implies bookings are up more than 40% year-over-year. So just trying to get a sense for, you know, when you're talking about getting back to 1.15, do you need to see further Improvement and funding or the demand environment to get there? And if you don't think about, or if you think about that they're not being improvement from today, you know, what do bookings look like if the environment is essentially remained unchanged from 2 Q, should we expect some more net Awards in the back half of the year? Uh, you know, roughly in line with the 620 that you posted in the second quarter?
Yeah. Um,
And I had to answer that. Um,
Speaker Change: Booking was in the.
Speaker Change: You could give me, give me the first part of that question again with the bookings. Yeah, oh yeah. So if I'm just thinking about, you know, your guide and your commentary about 1.15, spoke to Bill in the back half of the year, I mean that implies that Philippines up over 40%. So just trying to get a sense for how much visibility you have into that and then what's embedded, you know, that, you know, that Outlook to get back to 1.15, do you need to see further macro Improvement. And if you don't want this book to go look like in the back half of the year,
Speaker Change: Sure. I I, you know, I I think that uh, it's, you know, macro Improvement. I it depends whether you, uh, whether all of our cancellations have been related to, you know, the, uh, funding. And I, I think they're a good part of them were. Yes. Uh, so we do have to see cancellations, um, remain lower. I don't need to see new, uh, you know, business, you know, strong business environment with new opportunities, but we need to see things, uh, progress along. And not be held up by funding or other, uh, you know, other factors. Uh, so I but the, the current quarter. You know, this is Q2 was relatively low, uh, on um, cancellations, uh,
Speaker Change: If that continues, I think we're going to be there. You know, if it's in the mid to Upper range of cancellations, uh, you know, we're getting right on the, you know, right on the edge. You know, I mean I think uh um, you know, prior to last quarter, the prior to the prior quarter q1, uh, in which we had a lot of cancellations, um, particularly in the um uh, pre- backlog. Uh, you know, bucket things that we expected to be converting. Um, uh, in this next quarter. Uh, the next couple quarters, uh, a lot of things dropped out and made it a lot closer on, you know, being able to get back to that 1.15, but I think it's, you know, it's still not anywhere near a, a slam dunk. But, uh, uh, you know, I, I, I think that, um, if things continue the way they have in this past quarter, uh, you know, I think we'll be there, you know, and, uh, uh, how much more, uh, weakness in and, and increased cancellations can occur, you know, I, I I, you know,
You know, I don't know. But um,
Speaker Change: that answer your question.
Speaker Change: Yeah, it does. I'm sorry for the uh, long-winded question on my end. Maybe just 1 on competition and win rate and what you saw there and the second quarter and maybe how much of your results are more reflection of you all taken care of more. So than, you know, a broader Rebound in demand environment from small biotech
Decisions are win rate on those decisions was not particularly High, uh, but uh, there was a lot of decisions. So actually awards were good. I think we actually had a very good new award, uh, uh, quarter. Um, but on a lower end, um, uh, win rate, uh, you know, competitive win rate. Um, but, you know, that's something that bounces around quarter to quarter and, and, uh, you know, I, I never make anything out of a single quarter down, you know? The prior quarter was fine. Um, so we'll see.
Speaker Change: Got it. Thanks again for taking our questions.
Thank you. And 1 moment for our next question.
Speaker Change: Our next question is going to come from the line of Michael trenee with lorinc. Your line is open. Please go ahead.
Michael trenee: Um, good morning, and thanks for taking the question. So, maybe if I could just dive a little bit more on the trajectory and back half into 26, in particular on the step up and pass through business. I think, uh, Kevin, please correct me if I'm off here. But you said 23 in the basis points of increased pass through business baked into the numbers of the back. Half of the year, is this something. Um, especially given the results this quarter that should be a new normal going forward. Or is this just a matter of luck of the draw timing on the types of contracts that are currently hitting your backlog?
Kevin: Yeah I mean certainly in the in the near term it's going to be the The New Normal. Um and again it's it's heavily influenced by, you know, just the the mix that we're currently seeing and and areas where uh there is a higher concentration of of reimbursable cost. So yes, in the near term, uh I would say it's going to be elevated. How long does this last? Uh it's not going to provide commentary on 26 at this point. Uh but certainly the balance of the year, we do expect it to be and continue to to be elevated.
Kevin: I I understood. Yeah. I I won't poke further at the implied, 26 numbers uh at this point in time it but maybe uh just a follow-up um August to uh your last
Kevin: Comment regarding the win rate, the win rate Dynamics. I I certainly understand how it can bounce around our quarter by quarter basis.
With the win rate was there anything from a uh disease State perspective from a um uh any other pieces perspective that characterized why you think the win rate shook out where it did um, or was this also just a a random dispersion across your book?
Yeah. Now it it
Kevin: if it wasn't, I mean, look, it, it it is always concentrated because it, it, I mean, the factor is, uh,
Kevin: very large programs.
Kevin: Were less likely to win. Okay? So I mean we're talking about and there were some very large uh, uh, programs in that. And you know, it's are are and, you know, so size of project and, you know, are experienced in the area and are experienced with the client, you know? Obviously, if it's a new client, uh, and it's very large and they've got existing, um, providers
Are win rates going to be lower, you know, just and it's so that's what bounces around quarter to quarter. I, you know, it's it's uh, you know, we won uh, the projects, you know, we expected to win and uh, uh, unfortunately and that quarter, uh, you know, in this past quarter, that there was some very large that, you know, and and we're talking about dollars, you know, I talked about, you know, win rate it's dollar based. And so a very large program uh, is is is a, is a good part. I mean, you know, it actually is, you know, a single program can be a substantial part of the total win, you know, or wins or losses in the in the quarter. So it just happened to, you know, bounce down in this past quarter, we did lose a, uh, there was 2 very large uh, you know, projects in that. But no, I can't, you know, it was not like we're weak in a particular therapy to area or, you know, some, uh, you know some Trend or or, or subset is just happens to be, you know what?
Kevin: What projects were close to and uh which ones were really large.
Speaker Change: And 1 last really quick 1. If I met as the Market's opening uh your stocks up a lot. I know the guidance does not assume any more buyback but conceptually given the outstanding. Um authorization you still have how are you thinking about near-term, balance, sheet utilization and the potential for incremental BuyBacks?
Speaker Change: No, it's it's more of the same Michael, that we will continue to be opportunistic, uh, in, in buying at levels that we see to be very creative. Um, and if, if our plans don't execute then, we're okay, building cash.
Speaker Change: we're very happy with what we were able to execute and the fourth quarter, first quarter and second quarter of this year,
Speaker Change: Got it. Thank you.
Speaker Change: Thank you. And 1 moment for our next question.
Speaker Change: Next question is going to come from the line of Eric Caldwell with beard. Your line is open. Please go ahead.
Speaker Change: Thank you very much. Um I have a few uh hopefully not too repetitive. Um I was hoping we could start with talking about uh you know go following on that last line of questioning just talking more broadly about um the bookings Dynamics, this period. Uh there was some speculation going around last night based on the big increase in Revenue that may be you had picked up some large studies. That does not sound like that happened. This quarter, uh, anything particularly crazy large but uh, I was hoping, you could just maybe more specifically, tell us what your largest win individually was in the quarter. Um, if there were any rescue Awards or losses that you could talk to, maybe just broadly talk about competitive de Dynamics. You did mention your win. Rate wasn't the best, but talk a bit about competitive Dynamics. Just hoping to get a little more flavor on the, the bookings mix and uh, breadth of those bookings to start.
Sure. Yeah. And and, uh, Eric I think your question kind of, I don't know in my head confuses, some of the, you know, moving Parts here, you know. So when we're talking about competitive wins, and we're talking about wins etc, those are Awards and, you know, notifications and, you know, they're not in backlog yet. We're not making any Revenue off them, and it's often multiple quarters before they come in. So right, you know, a, a new award. This quarter is not going to influence our revenue or anything like that. Um,
Booking uh, you know, would you know, probably because that's when we're starting to, you know, get Revenue. You know if we, uh, but it could be late in the quarter, it might not be much of a factor, you know, it's mostly in future quarters that uh, that's going to impact. So if I look at just, uh, you know, sort of new notifications, this quarter, uh no nothing particularly, you know, stands out, there's nothing you know, particularly large or, you know, it was a it was a pretty usual quarter. Uh, in fact the really large stuff. Um, you know, we lost, you know and and and you know so our our like, you know win competitive win rate was actually on the lower side but completely understandable. If you took out the you know a couple those 2 outliers or win rate was you know, was great, you know, I mean it was fine, you know. So that's uh you know, that's not an issue. Um, and you know what went into bookings, uh this quarter, uh, nothing particularly uh, you know what unusual or um,
Uh, you know, notable, um, uh, you know, the, the, the, the big, uh, you know, and there was nothing, you know, sort of a rescue or something, you know, a really short term project that we won during the quarter or something that added to it. Um, it was just, uh, you know, kind of usual stuff that, um, you know, stuff that progressed that, you know, a lot of it. We did not anticipate, it might progress. Um, you know, so sort of good good up upside, uh, news on, uh, things progressing. And, um, you know, we thought might not things went faster than expected and we maybe,
Speaker Change: Didn't do as great a job at at projecting what? Uh um you know some of the past through uh you know how quickly you know things were going to move forward on some of the uh uh you know, investigator, uh, fees, Etc. Um so you know that that part of it I I think on a on a direct fee basis. We were probably pretty good at projecting it but uh um you know, there was still projects that went forward that uh um you know, more than we expected and faster than we expected. So uh uh so there was some upside but there was nothing kind of unusual in terms of uh short-term quick or interim or we you know, rescue work or anything like that.
Speaker Change: Okay, um, on the reimbursable, uh, indirect Revenue uh, commentary. And I
Speaker Change: I hate to be this myopic especially since it's been talked about so much but I want to make sure I'm 100% clear when you talk about 2 to 300 basis, point increase in mix for the rest of the year. Can you clarify, does that specifically mean, you're looking at something 4142 plus percent in the second half? Or does that mean something more like 38.39% for the full year compared to 2024 total levels? I'm just
Speaker Change: I'm not 100% clear what that 2 plus 2 to 300 basis points specifically is in reference to or what the absolute percentage you're targeting is
Speaker Change: Yeah, Eric, yeah, thanks for asking the question to clarify. That's that's relative to what we saw uh, in the second quarter. Um, so yeah, we we, we could see this in the, in the low 40%, uh, the back half of this year. Okay? And then, um, last 1 for me for now, uh,
David Windley: % in the second half your, your backlogs down, 2% year-over-year, but you're seeing Revenue growth as much as 27% in the back, half at the high end of the range. I mean, there's just a lot of questions about sustainability and I know it's so hard to project with, uh, the the mixed shift in reimbursable, uh, which are, you know, seemingly clearly driving. Uh, the majority of the revenue increase and those may or may not continue next year. But what, what can you give us today? That can help us understand the jumping off point from these conversion rates and these growth rates as we look at 2026. I mean, everybody, I know you're not guiding now but we all have to build models and do assessments for next year and you've caught us so off guard, I I think
Speaker Change: Well, I'll admit, at least I'm scrambling to understand what kind of a growth rate. We might be looking at in the in the next year. Um, you know, yeah it doesn't feel sustainable to be honest. But you know then again I didn't see this quarter coming. So
Yeah, are you broke up a little bit in the middle of that? So I'm not so but I but I think I heard enough of it uh, to, you know so if if if I don't cover it then you know uh you know, jump back, uh I I
Speaker Change: I think that, yes, we we, we, we are have a, we have had a significant shift towards, uh, faster burning stuff. And, you know, part of it, you know, our our conversion rate, you know, is is high overall, uh, because uh, you know, the lower denominator and of course that, you know, is, does that mean that we're going to, you know, burn off our, uh, backlog. And then we're going to have a
Speaker Change: Real Gap. Um,
Speaker Change: I don't think that's necessarily true. I think that, uh, you know, we we do have a adequate business environment to, um, replenish things. I do think that our indirects are ramping because of, you know, a shift toward metabolic work. I don't know how long that's going to last. So if it if it continues, then, okay. I think our growth rate next year is probably, you know, fine. Uh, if you know that pulls back then I think that it can challenge, you know, growth rate, but that's because of a drop in, you know, reimbursements. And I think on a direct fee basis we're going to do fine. So I think our our profitability is going to, you know, uh, there's no reason to see it, you know, dropping off, uh, and, um,
Speaker Change: Orders. So, uh, you know, 26 is, uh, you know, not really addressable. But,
Speaker Change: Challenge next year, uh, and have our growth go to zero or something, uh, uh, unless pastors drop drastically and all of our growth is directly, but I don't really see that as a, you know, uh, on a, on a 605 basis, we'd be fine, you know?
Speaker Change: Um completely understood uh appreciate the commentary. Thank you.
Speaker Change: Thank you and 1 moment as we move on to our next question.
Speaker Change: Our next question is going to come from the line of Luke sergot with Barclays. Your line is open, please go ahead.
Luke Sergot: Great, thanks for the questions. Um I just kind of want to figure out
Uh, you know, we've talked a lot about the moving Parts. Everybody's focused on the burn rates, Etc. But you know, you have this elevated burn rates, everything stepped up. Materially you have a big step up in bookings. You didn't need to hire additional sgna for the type of Revenue growth that we would typically think
Speaker Change: You had DSO, step up materially, also in the quarter. So and it doesn't sound like you picked up some, you know, ongoing work from from someone else or or share gains. So I'm just trying to figure out like what's going on. Like what what actually drove
Luke Sergot: you know this this
Luke Sergot: The the step up and everything and and trying to, to foot all these different metrics.
A a drop in cancellations. I mean, look, we've been running, we've been running it, you know, uh, growth rates of, you know, 20% plus for a long time. You know, things dropped back. We did have a, you know, weakening environment, but still, our fundamental growth rate I think is is pretty good x. A lot of unusual cancellations. Now, that that's part of the same package, you know, I mean the same, you know, environment that causes the cancellations reduced, um, you know, opportunities to some extent. But, uh, you know, I, I, I don't know, you know, how, how, how you you you, you know, you know close the, you know, the the loop on those things. Think the the the environment is reasonable if, um, you know, cancellations are reasonably behaved, um, you know, uh our our, you know, conversion rate is up because we've have uh, you know, uh dropped.
Um, uh, both well, 2 2 major factors. Um, you know, the denominator has not grown as expected. And we have a, a shift towards faster burning stuff. You know? I mean it's you know, we're we're, you know, we're in an era of, you know, uh, a lot of metabolic uh, type type of uh, programs or uh, you know, particularly in the Obesity space or you know, uh,
Luke Sergot: Important part of the market. Um, so that's, uh, you know, made made things have a, you know, faster, you know, burn turnaround.
Luke Sergot: but uh,
uh, you know, otherwise I think, uh, our
Luke Sergot: Big, the big, you know, step up from our expectation was less cancellations than we anticipated.
Luke Sergot: Okay. And then I guess just to follow on that you know, your backlog that you guys reports are like anything over 12 months.
Luke Sergot: um,
that's included. There took a pretty took a pretty big step down in the court. Has been declining the last uh, few quarters. Um, and that makes sense with everything that you're saying, like faster burn rates, and so more near-term stuff. So as you think about is this starts to roll off like what's the average timeline of these faster burning trials as we think about into 26 and 27? I mean that that's that's like to Eric saying like we're all trying to model here of what we're thinking of for 26 and the range just gets
Luke Sergot: pretty, you know, really wide.
Luke Sergot: I mean, I I, you know, I can't give you an average for, you know, you know, overall, you know, categories or something like that but look, you know, long studies are um, you know, can be 6 to 10 years in duration, you know, and oncology studies are classically, kind of, you know, that and they, you know, run, uh, very long time and it's a slow burn, um, you know, metabolic studies, some of these can run in, uh, you know, 2 3 years, uh,
Luke Sergot: Having lots of visits. Uh so there's usually a you know uh acceleration. You know the the the direct fees are are the first half of the study uh heavy and and the second half its uh uh uh um, investigator costs, uh, in a metabolic study like I said, they can be very fast and it all happens at once.
Okay, and then just real quick from the last 1 as as I think about like from the margin and the hiring needs, you know, to meet these trials. Like, we talked about the efficiency on your existing base and you guys don't do fsp. So, you know, and you have a really strong culture where the attrition rates are really low. So, um, how should we think about your hiring needs in the back half? If you're going to be able to sustain any type of burn rates and and elevated growth,
Luke Sergot: Yeah, that that's definitely.
Luke Sergot: We still think we'll be kind of in the mid single digit to kind of upper mid single digit growth rate for the year. Um but then as we move into the third quarter and and fourth quarter, depending on, um, you know, a lot of factors including the the business environment and and you know,
Talking to New Opportunities and activities. Um, you know, we have opportunities to accelerate that um, beyond that. But right now, we're very comfortable with current headcount levels, uh, and projections to handle the current and future projects. Uh, but it is dynamic and we put it down as we go.
Luke Sergot: Great. Thank you.
Speaker Change: Thank you. And 1 moment for our next question.
Speaker Change: Our next question is going to come.
Open. Please go ahead.
Speaker Change: Uh, yeah, thanks for taking questions. I just wanted to follow up on on some of the questions from earlier. Um,
Speaker Change: you know, August it sounds like what you're saying is that what we've really been seeing over the last year or so plus with the um,
We funding environment, that that's really tied. Really? That's where cancellations will come in people. That can't get funded projects canceled. Uh, but that projects themselves new RP that flow has has never changed. Has that always been, uh, constant, uh, over this last couple years? I would say that, I wouldn't say that's not changed. I'm saying that the I think the big outlier, the biggest component of us, uh, for for us has been, you know, very elevated cancellations. They've uh, held things back quite a bit. I'm not saying that uh, overall environment certainly over the last few, you know, hasn't weakened from, you know, kind of the, you know, the co High, uh, you know, and it and it came back and it's and it's been weaker, there's, you know, weaker funding overall. So you have less, uh, attractive opportunities. Uh, you know, rfps don't necessarily reflect what's going on. And so last year there was certainly weak uh, overall opportunities. And and you know sometimes uh,
People looking for a price uh, that that that they could get it done at Etc and less opportunity. But, you know, the, the biggest thing of late has been cancellations that just, you know, I like I said, I I, I thought we were past it all in Q4. And, you know, I thought this was the bottom and things are improving. Uh, and uh, you know, the, the biggest
Speaker Change: Uh, Gap hasn't been the improved fundamental opportunities that we started seeing in Q4. Okay, so the business environment started improve, you know, before that yes we had, you know, real weakness and everything.
Speaker Change: But, you know, the business environment seemed to be okay on New Opportunities, uh, the last several quarters. Um, but cancellations, we're just, uh, you know, last quarter. We're, we're horrendous. Um, and that's what what has, uh, you know, been probably the, the biggest, uh, uncertainty in, in our modeling, uh, is cancellations rather than, uh, you know, New Opportunities and new Awards. Um, they're both components of it. But, you know, it's really been, uh, the cancellations that have thrown us off. And this past quarter Q2, uh, showed a great Improvement in that. But, you know, we saw a great Improvement in Q4, you know, I, I don't know. Well, you know, we'll see, you know, you know, q1 was, you know, had spiked again.
and and in terms of then this quarter cancellations were obviously much lower uh relative to q1 anything that when you look at
Yeah, no. I I mean it's and it's it's a it's a bunch of different things and I don't there's nothing that sort of out, you know, is the is the vast majority of it or something. Uh but look the big trend has been metabolic over over the last year. You look at our um uh, you know, metabolic uh, revenue and awards. And they've been a higher percent of the overall, and they will continue to because through the awards. Uh, they're going to continue for the next couple quarters. Anyway, uh, to be, uh, you know, growing part of uh, our overall Revenue base and, um, and they, they tend to be, you know, overall some of them are, you know, long term is there but overall tend to be faster burning. And uh,
Speaker Change: Um, uh, you know, higher indirect fees.
That's great and and maybe last 1 for me, you, you talked about faster decision-making, um, anything that you can elaborate on, you know what that might be is that just maybe with drug pricing kind of being kicked out, you know with mfn maybe towards the end of the year and you know just people deciding hey you know what we can't wait forever. And so we we just got to make decisions now or anything that could
You know, maybe point to why? Why this? Why decision making maybe has picked up again.
Speaker Change: No, no. I I I think that's the funding again. I mean, I think we saw things, uh, somewhat uh seizing up uh, you know, our our pending, uh, you know, RSP dollars, you know, that is uh, rfps we've received. We've made a bid on and are just sitting there waiting for a response and no decision and, uh, no. Go forward on things even that we have been awarded. Uh, and they say they're gonna, you know, yes, we're going to use us, they agree to the budget. But, you know, then they want to hold off on things until I think largely. That's, you know, sometimes there's other reasons, there's drug Supply. There's other, you know, waiting on it. You know, some other information on the drug Etc and other study, maybe completing whatever there's lots of reasons. But, um,
Speaker Change: Uh funding is a big part of it and we've I think we've seen a, a more rapid uh, execution on on sponsor's sides to to move forward and give us authorization and you know get get a stuff that we need to move forward as uh has been funding related.
Speaker Change: Okay, great, I really appreciate the comments. Thank you.
Thank you. And as a reminder, if you would like to ask a question, please.
Star 1 1 on your telephone, 1 moment, for our next question.
Speaker Change: On our next question is going to come from the line of Justin Bowers with
Speaker Change: Bank. Your line is open. Please go ahead.
Speaker Change: Good morning everyone. So Jesse just a a quick uh clean up question on the employee growth. It's you were breaking up a little bit but it sounded like accelerated. High hiring in the second half.
And mid to Upper single digit. Is that is that for the second half or is that for the full year?
Speaker Change: Um, make your high mid single digit for the full year perfectly. Okay? So, second half employee growth, should be mid to high single digit year-over-year.
Speaker Change: I I I think we're talking about the full year would be high, sing grows over the prior year.
Speaker Change: Oh, okay. So then then you're looking at Exit, obviously has to increase because you didn't have that kind of
Speaker Change: Yeah, for the, for the 6 months year to date, um, you know, we grew, uh, you know, we do Revenue, um, you know, 1 and a half percent or so.
Um, you know, we expect that to accelerate. We hired, uh, you know, I'm sorry 2 and a half percent for the first half. The headcount growth is up 2 and a half percent for the 6 months.
You know, we expect a growth rate in the second half, you know, at or slightly above that for the second half.
Speaker Change: Okay.
Speaker Change: 5, you know, 5 or 6%.
Speaker Change: For the full year.
Speaker Change: Okay, all right. And then in terms of um,
Speaker Change: What's the uh the growth this year at the top line that your forecast? What does the guidance um assume for growth on a on a 605 basis for the Top Line?
Speaker Change: Yeah, Justin. We we don't provide a 605 basis. Look. Um, I think if you just model it kind of using the the guidance that we have out there and assume kind of the 2 to 300 basis point, uh, increase in reimbursable costs over the balance of the year. Um, you can kind of back into what what that could be.
Speaker Change: Okay. And then in terms of it it sounds like the burn rate is going to is is fairly sustainable um likely to increase in in in the back half of the year.
Speaker Change: Um, what does the pre the pre backlog?
Speaker Change: um,
Speaker Change: Or or your your, your current authorizations. But not yet in backlog. Um,
Speaker Change: The mix look like is that is that similar to?
Speaker Change: Um, what the revenue composition has been like this year or are. There are there any notable differences to call out?
Speaker Change: There in terms of therapeutic mix.
Speaker Change: Yeah, we're seeing a, a move towards more. Uh, metabolic. And that'll continue. It looks like based upon, uh, anticipated Awards. Yeah.
Okay.
And then and then on the cancellations, there's there's really 2 things. Um,
Speaker Change: you know, the jump out 1 was just the the improved execution
Speaker Change: And and the changes there during the quarter and then, you know, clearly like the cancellations subsided as well.
Speaker Change: When did you like, when did that start to really inflect or turn?
Speaker Change: um,
Speaker Change: was that something that, you know,
Speaker Change: was that sort of May where things really started to change or did that, you know, was that exiting March or
Yeah, I I don't have the, the, the monthly breakout and and, you know, we we we kind of reconcile these things, uh, quarterly. Uh, so there isn't like, you know, good. I mean, we obviously do know that date of notification of a, you know, something Etc. But I, I, I, I'm just not tried to, you know, sort out when you know, exactly cancels and, and, uh, if they were low in March, uh, before
Speaker Change: For this quarter began or didn't start until uh, you know, may after the quarter was, you know, well into it or what? But uh, you know, pretty much across the quarter. Uh, you know, we had lower cancellations but I I can't, I I just don't have the, uh, you know, good data of just when a, you know, you call it again. You know, there's and and what do you mean by, you know, when you know, it's kind of uh, you know, they give us a notification but we don't really know what's happening. And then, you know, they finally reconcile. What? Exactly we're going to do to close this thing down or, you know, uh, you know, these are kind of things that that, you know, have a have a period to them. Um, but uh, you know I look, I I think Q2 was much lower than q1.
Speaker Change: Okay, and then maybe just 1 last 1 for me online with um what was change, order activity like during the quarter and and how did that, you know, change from from 1 queue or even what you saw. So towards the tail end of last year.
Speaker Change: I don't I don't have the
numbers on, you know, just what the magnitude of change orders were, but you know, there's nothing been particularly, you know, uh, when you
Speaker Change: Usual there.
Yeah, Justin. I wouldn't say there's anything unusual on change orders. They happen all the time, but nothing that would stick out.
Speaker Change: Okay, nothing. Okay, I just 1 thot again change or, you know, sometimes they award something. They, you know, it's going to be a, a global study of this but they want to award it first is uh, you know, the just the first region or something you know. And then we're going to planning in 6 months to, you know, and you know you don't have the budget for it till till then and you know, so it it's what's even a change order, you know, it's uh, it's difficult, you know, it's it's when we get authorization, you know, and then when uh, it meets our criteria for going into backlog
Speaker Change: Okay, thanks. Well. Uh
Speaker Change: I'll uh, jump. I'll we'll catch up after uh, after the call.
Speaker Change: Thank you. And 1 moment for our next question.
Our next question comes from the line of Kyle Cruz with UBS. Your line is open, please go ahead.
Speaker Change: Thank you for taking the question. Um, you've historically disclosed around a high single digit, uh, Revenue, exposure to selling gene therapy. Can you talk about the impact of, um, recently having their clinical trials, put on hold and, um, kind of the pausing of the platform technology designation there and the impact, um, to your company. Thank you.
Has no impact to us.
Speaker Change: Can you maybe speak more broadly, to the selling therapy Market in what you've seen there. And if you're still not exposed to it,
Speaker Change: Yeah, we we don't have a, a, a great deal of exposure to the overall area. But uh, you know, we we certainly do have exposure but I I don't think there's, you know, we we not to, you know, they're not, you know. I I it's not a um,
I, I don't think it's going to have an impact on on, uh, you know, our our programs. But,
Thank you.
Speaker Change: Thank you. And I'm showing no further questions at this time and I would like to hand the conference back over to Lauren Morris for any 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 third quarter 2025 earnings call
Speaker Change: this concludes today's conference call, thank you for participating. You may now just connect everyone have a great day.