Medpace (MEDP) 25 Oct 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Medpace Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this call may be recorded. I would now like to introduce your host for today's conference call, Lauren Morris, Medpace’s, Director of Investor Relations.

begin. may You

our thank earnings And is joining third Geiger; Medpace's CEO, Good call. you Also XXXX and Jesse President, conference Troendle; today Kevin on quarter Brady. August morning. our for CFO, the our call

XX-K like note forward-looking statements, begin, with this Act that during ongoing no forward-looking our our remind of we date you and statements the Reform could discussed as our update assumptions include may involve XXXX. COVID-XX and from forward-looking of materially responses current that Before These obligation as well after our rely cause factors with differ the to to estimates your as Private meaning Litigation on actual today's if Form should and are any of other to SEC. any you risks the we not unknown These and expectations. of statements on views filings including would assume today. to Please the Accordingly, results I as known change. questions teleconference remarks impact statements business, important within even our inherent Securities factors, uncertainties, representing other in that of

we the Investor of section referring complete like financial August I non-GAAP most With today's these call, Troendle. to available more to slides measures but reconciliation at site measures financial are call comparable earnings of provided connection over measures to the directly our call. to this press or the a that, to with Relations not is help A gain understanding a will the Web comparable During call release presentation believe the also are now measures. in of slides we in measures, The would turn earnings measures be GAAP in available investor.medpace.com. GAAP superior non-GAAP investors certain These non-GAAP results. replacement such for and

fraction slightly recovered faced was on the healthy QX. outcome bankruptcy a challenges which Headwinds reprioritization strong, eventually and that we higher continued quarter, funding, in but in call in a of from challenging yet concerned a a of rapid though were award third RFP The is flows to and escalation notifications, revenue our described were metrics will prolonged down and I large business This weak, in Initial clients. in strongly the financial sequential a in to quarter. depressed funding given quarter project were by was surprising delayed not morning. Good reasonably level at basis period second broad based. our even environment remain lead the delays.

growth Our caution and year. initial anticipate slowing review XXXX Kevin financial results reflects this will for and QX. next we now guidance Jesse our

adding continue the in review We XXXX. year. as Kevin? prior million, guidance billion, over XXXX that, entering backlog the in And $XXX.X the prior September call as Thank the year and initial I'll count net end the expectations financial quarter for Kevin from that to you. our well for for Ending the was morning, beginning XXXX to which to increased XX% of performance the a approximately detail, prior third more and year XX.X% XX.X% of resulting everyone. August, $X.X book of XX.X%. Revenue of $X.XX bill. the in Backlog we $XXX.X backlog balance as our XXXX of convert revenue head XX year. over next turn the of with of to months. guidance of backlog approximately billion new third represents increase from Net progress project XX.X% from backlog. X.XX to make to was in XXth will conversion an to And a in million, XX.X% increase from third year was hiring, good the and quarter business awards in quarter

Thank everyone in. to listening morning and you, good Jesse,

$XX the headcount prior third the XXXX, the driven the $X.XX effective in XX.X% for was and prior EBITDA margin compared million basis, comparable in The rate. increased basis share basis expense million EBITDA, XX.X% In the period. on September was period. to and year. quarter period. quarter for the Year-to-date per the third offset revenue nine compared slower constant prior higher third million Revenue $XX.X to net of the year a tax XX.X% $XX.X quarter million increased benefits period. constant a strong in growth the constant of year compared compared quarter year was income higher XX.X% XX.X% XX.X% currency by and XX.X% to XXXX growth growth, $XXX.X income to prior diluted compared of third revenue was in dollar driven on on the period. increased and in of XX, and reported constant year prior XXXX. compared was reported behind primarily and prior a quarter to reported net on XX.X% in year year mentioned, Jesse the income of currency On $X.XXX basis Net XXXX. interest currency As over Net US EBITDA basis foreign date This EBITDA third XX.X% EBITDA XX.X% period. $XXX.X XX.X% a basis. compared quarter over a billion, basis year year the XXXX. to of increased by $X.XX represented $XX.X XX.X% months net on EBITDA EBITDA income for a to on by a million year XX.X% ended from the to comparable was and exchange prior prior of increased was increased the was margin Year currency the the million from margin increase

flow revenue. year net Board and activities the the quarter, our concentration, five authorized negative represent cash was of days. $XXX.X stock. roughly outstanding company top the In In date company's up from repurchase we top to not of XX.X third repurchase XX% operating XX% any to million our customer respectively generated Directors Regarding and We during customers did XX million shares of the in and day October, to common XXX third quarter. sales our our

$XXX the quarter, of $XX and we $XXX.X of was and the credit composed net million paid end quarter the million our which $XXX.X facility at against was During cash position debt million. of the debt of million,

last Our is EBITDA. times XX approximately net leverage months ratio X.X

guidance total $X.XX billion. revenue billion over billion, year $X.XXX now is growth total expected now representing XXXX. range the our Moving of to updated $X.XX to of XXXX for XX.X% XXXX Full of to revenue in XX.X%

diluted now range XXXX $X.X on shares average income expected weighted diluted expense $XXX repurchases no XXXX. XX% is in year of to range net of in is outstanding million, foreign tax million of per million compared EBITDA share XX.X% range the XXXX expected $XXX.X our XXXX for as to now in our debt. million, of We are There of forecast additional of XX% million million rates to Our is the exchange the in guidance. $XXX XX.X of on $X. includes a which million share rate XXth. Earnings of effective and in to $XXX $X.XX interest EBITDA based full This outstanding be to $XXX September assumes representing Guidance to XX% XXXX. guidance growth to

initial EBITDA. providing As guidance we and XXXX mentioned, are for Jesse revenue

in expect of be year to million. the XXXX, operator of in $X.XX For we the earnings guidance to year $XXX We additional $XXX $X.XX full and billion our detailed full range revenue call call in we so EBITDA your the to range the billion turn million plan will quarter to take on XXXX the questions. February. over fourth can that, I provide With back to

Windley Jefferies. question line of or from Dave [Operator Our from comes Instructions] first the comment

is line open. Your

August, I the financial think, of and in you bankruptcies, new weren't your guess, that or I somewhat mentioned that seems, guess, that mentioned you some mention even, remarks headwinds maybe broad. I intensified. but those even some

would be And like revenue at accelerating of metrics headwind. a little rate like bit. it the quite of seem burn looking a So those your some things sequentially odd. by a actually seem to at I'm bit

maybe much understand in Was any helped to pull help backlog rate third the the revenue how of quarter forward us the and like to sequentially. So accelerate in quarter? there the so jumped could you what burn margin

don't forward but pull did any there's I progress. projects think No,

got what things for really that haven't conversion. going growth were we we you on. broad we pass expected. well and delays but good and seen delays conversion made projects. them. higher we little slowdowns of extent had The starts, I what than were projects project less cancellations we think, a new We're think But very I than we expected, And two about the ongoing a driving progress amount good that's there. And progressing is bit but going ongoing I based very concerned even and the on what's service are estimated a than better nicely so throughs fees to and think very projects are

the is to on in the it And also from saw quarter. you The balance quarter. dollars impact margin revaluation in impact in the the addition other the strengthened revenue sheet. for FX the Dave, significantly in just to was third when gain factor consider thing that million we our FX us about of again $X.X

the the part is And that in last that income component? mentioned you other

that's right. Yes,

your solidified study years some about able have of addresses how there? renegotiated. amount time, you've margin margin. those able your before I headwinds -- have of baked the up contracts less of to to start. But be protect some anything kind and you talked be question. price maybe living you overwhelming into is then perhaps time in I FX expect may of on that of terms than those escalators But would case be certain others your guess, in to the been kind that would guess, probably negotiate that. inflation to those So that, with are yourself not if August, contracts contracts sometimes labor lead that one multiple

really on we're current Things any in in in the months haven't new projects, inflation burning. contracts that existing to extent. not addressed or between terms reflected labor pricing but in of are nine and tweaks really we sometimes they're bidding last We annually Obviously, small do even on our work. not not

increase pretty there's contractual of to address each So awards inflation way fixed were And no years amount much a a year. have that than in real this set generally back. few place terms, which other reflects the

Our from Sandy the next of line Draper Guggenheim Partners from question comes Draper.

bit to but admittedly which surprised, like was it ‘XX a conservatism. thinking of about follow-up that feels commented you was I a August, strong. Dave’s question, some guidance, your little pretty Maybe baked

is And to when burn shake trials bill but to granularity. what out give the that drive inputs I revenue, But think your et backlog the you've to of so implied be, growth, know mix to revenue complete about book and cetera. going also service not got the I are and you're going some bookings is, of what

so sort the picked some it of you us your ‘XX, on expectation about generally like healthy or about the in up your surprised burn up. book to pretty was it or Because saying is just when you build sort guidance, trying deceleration? at bookings maybe what I'm sort it sound stabling bit backlog I cancellations of to this levels it you little is of for or guidance. built expecting think types side, then guidance, thoughts that's stay because I'm are at triangulate of levels positioned level? you into darn And have it to in the because -- again, And just do these to of conservative trying give a continue implied, and an can

things and we we book Yes, that then still to our year. Diamond's pipeline know. the what going clients I environment how do -- for out yet and mean, similar some I been and to We have go starts looking work that. the given to actually on we we've flow to We are But we the said, cancellations of our at from been prior some made the they're been doesn't, it hopefully, in Jamie of there's gotten we're entire think seek we And meaningful, it they kind that of do kind what have for expect be below into largely feedback decision around pretty we're in did there's our guidance. upside guidance. and initial to we've what through us seeing. slow in If so also If come it we based we're think that going factors I well, to expect that financial given decisions if don't down. to be uptick what we've builds didn't we look and -- in and keep this expecting at awards expect model But date. not stronger hurricane. funding have hit they'd cancellations, a and that does, There's be lot a range to broad where expect of kind point. that slowdown

You do don't We that can't very broad enough about achieve think we've expecting -- I that. range. of slowdown do the anticipate guidance a will to kind there's we're But guidance based our we within cancellations can situation. nothing into substantial allow conservatism us put the

then or look guidance than obviously, at my maybe probably next next revenue. question the floor, then And for leave Kevin the EBITDA Jesse. I I'll growing When year, for slower

trying higher service of through maybe to is gross there thinking it's throughs, margin the of line, it through by the is throughs is it’s So that margin, service inflation? mostly pass Just just and that think more thinking or or pass the and pushing line? gross maybe is general mix margin SG&A -- coming driven the a revenue on is or side more what is in to sort revenue mix, inflation of some expenses

answer going One are gain that on. the the to your just that's in driven of that of miscellaneous income, by a FX see the you revaluation sheet. things balance Just couple questions, is

so And XXXX, negative positive influence a foreign extent year-to-date right consistent, rates we gains now. see don't that in currency expect the that or and from million stay $X.X there's in to to

to of make in is can retention continued that terms growth The in in sure the is support just some in anticipated efforts we component hiring of other 'XX. or installation on level building

comes Smock from from Our line next Blair. comment William the Mr. or question of Max

I deck, just by strong quarter. large the a wanted their quick on one it like midsize to ask were on revenue here both Care. and Customer seems pharma in Based really

as and percent obviously increased small revenue, like think of very X% a dropped percent. couple it seems year-to-date by but off on a revenue year-to-date I each based biopharma, impressive, of

if here? as we of should in could headwinds whether on wins aware already that terms some the seen what see notable to large wanted concern had there you term the or over last and any you off drop talked small for any detail to that just slowdown the beyond about in then percent of revenue a cause mid any the So not space provide around you've we've from the biopharma of funding in of in be pharma near quarters of, couple

biotech when good it bit nothing point small we drove of But to out that point nothing concentration population the revenue quarter. lumpier any that activity in in in than the the to and Max, Other really have do than therapeutic really concentration customer or mid specific across there customers. out there. activity spread I'd tends of really large, little be a how terms

term, and see that see near in guiding dropping to year-over-year back if here. from up, guide? pick guide relatedly to in XXXX? that wanted for other you the conservatism do be go to sorry XX% XXXX? of again and back Do near revenue the fair XXXX terms this And if going not lag range in here think for the then XXXX in the of And And bookings the actually and here XXXX few off it you funding actually it you've impact back about I given further projected quarters. that But built back growth of back we appreciate next would think pick some and growth see do up whether But there. we to more into we to think that's maybe a then an be upside between about term. assuming the pick there it could beyond? to Or you're in actually up pick revenue, back Is XXXX hand, reaccelerating up on couple in then funding, lumping don't or funding

The funding, the the longer think, biotech slowdown I us. the in for greater headwind

I So it do is cumulative. think

get revenues. we well of below. If of delays, we We've Again, could in cancellation very by where of to terms disruption, not had depression quite expected. growth yet prolonged kind kind that revenue there's snap deteriorate things would and starting some answer should some -- if the more last yes, be But be than we as we of funding of But down. are both be to don't slow programs, your baked XXXX. don't possible have disastrous And a look in that expectations, scenario to back, the kind impacted at in anticipating conservative as have guidance. down years have XXXX of there of tried So upside is or to things Does usual we snaps plus slow be the few funding question? upside would back. if the that or we terms that XX% certainly rebounded in

that's Thank Yes, very helpful. it I'll leave Thanks. there. And you.

from or comes the Our from UBS. line Sourbeer comment next of question John

and Congrats quarter on the the impressive guidance.

wondering, the provide can into was XQ think head recovery I is Just sustainable recovery color saw and in we you that you initial XQ, versus notifications do that there any you award is on additional that XXXX? as on

Yes.

I really from thought come It We was QX. we consistent yet. up and the beginning dropped. that substantially didn't with the prior based broad think We slowdown, quarters, back not of numbers have understand were it's it did seen why sustainable. it and

just we haven't projects had as have extent. pretty do based been project. our and seen ongoing anticipate fault in we broad which to But is date, haven't it based and a We a guess, any have the could great signal, very of slowdown, to it large anecdotal thought I of beginning There's growth more. to at a delayed deal So was we bankruptcy, haven't even say, to date. we slowing. seen some we to be uncommon mentioned seen broad we a affect have we I there that -- it meaningful still least But additional an

again, leave So have that. it just I at to

far good. So look things pretty

And then increase burn and and XQ. just the on Q-over-Q and cash the year-over-year

thoughts hiring there color just some in what over additional just XXXX? of the any then the that Just given year on looks trajectory and last like

said cash You burn? the

Yes.

In context of… the

conversion little lower… being a bit cash maybe The

volatile a things We We Yes, the of in but recall, had earnings us. working bit since for generation, then. quarter free cash pretty quarter, just nicely and of by the a first really conversion, is blip had it flow capital. you positive recovered driven good cash if have little another

growth. down the headcount the the on going slowed John, just in comment in bit little bit a We the things third and I quarter, was or just little a did to environment. pause the uncertainty hiring given

ramping that hiring are a We in since in XXXX. challenging continue environment. to back and expectations expect healthy up do be It XXXX. does

we're So on hiring, tough market focused because we're the labor focused on is retention a really still one.

one -- think I pressure, on on or on increasing? wage just then the and And Dave you new on just that repricing of some pricing any for last maybe on for Any contracts, just existing it thoughts touched contracts. but there seeing are that

kind as think have of we current year than years. our the last I no, it's rates. back. environment, push we a as the in bump it And But do larger bit little each we evaluate several is seen -- much always haven't

competitive and no. at we've rates. this all, we're just environment But going for have they're to our is long dollars environment's as push is looking not I in conversation we seen looking, clients everyone inflationary current determine unusual in as our think where their it's a -- back the saving funding and obviously, how that environment about competitive, it's particularly down,

Our next Eric comes question or Instructions] comment from Baird. of RW from the [Operator line Coldwell

or with you are provide little maybe aggressive focus off biotech for environment? a consider some the about that. and the a of smaller in your business to in intend you a working to bookings possibly Do or to just more earlier On development mix on larger big the you larger and more pharma this there business additional quarter, avenues Do on growth clients jumping bit the open get worried client increasing -- on question was trajectory? if

situation focus well. a of we that matches it's model a not our new think really have not just out jump bad not we adjacency. where -- and really such -- just where into that's kind No, we it's to And we the where

So or move some it focus in focus. don't we there pay some maybe we're we a I us really We client, opportunities think terms but might lot kind that companies the out to really don't on to pharma occasionally market there. is of of with more the extent, large go [soliciting] come and up there. different biotech movement client But so size of any Those in moving do to the largely of size a funding mid group.

have XQ total many you year across could that, cohort curious, and how whatever in active did bankruptcies share many I'm How you clients total how number, to experience this many that you you in bankruptcies Bankruptcies, is? that date? or

like dollars up number, and and ahead laid much doesn't I and is lost opportunity not that amount a loss, meaningful And We very sized left bankruptcy don't one come something that few and was or there's that and of what mean, usually little had or just client because have work I we and very had early much it's on in on, revenue you're often. very impact. No, a was some project. it a very a a even that because know doing million meaningful ongoing that's of matters. how had work actually we

usual a we was much have the what I metric total a value. of number when I declared But more terms clients time than good again, of in you'd was it unpaid big rest have have that just the that. -- So don't don't to and how how of dollar And the that, over of and all look bankruptcy. just have it, impact the it course, on, them, but at have did with happened of backlog revenue

you But cancellation Did quantify And you it the I time. could of a most cancellation quantify give below above, I at, missed or was you -- and specifically rate then rates whether period? this. this if I don't know apologize normal

cancellation actually our a very but was I good did range. rate not, in

back a talked second we've should terms in about talked do we variably. and of step cancellation, what say I Now

cancellation don't give have although, a we it. formal We rate,

the of that's backlog, you actual talk a about in it generally, range. a X% but X%. that's And know, So to to being we that's X% so X% kind ongoing backlog

we clients talk hasn't it -- sometimes cancellation happens total what projects, is get initially that's anything us you we're the mean been it we're startup. and then a on a about waiting delay in and started, wait Sometimes not expand slowdown, backlog, can't things at And and not that's They they times to say, still so even off, we're holding start and funding, minute, that awarded though starting. eventually putting we we're and close to they just cancel of to of it.

And was In the blip projects. broad cancellations. talk backlog so have range in formal not that X% broader within for And sometimes we rate that. about of our to very seen scheme, X% we a well cancellation based

things they kind the actually pretty look So metrics, of look I on mean, from better. good those quarter.

Our QX. metrics better in were than QX

it's So hard are going. to things see where

pipeline? that say broad Can When if better, curious to also comment. you metrics, you give a I metrics rate say a would us and -- it number… look sounds when like the based translate I'm win you can

rate ticks came But slightly back. as RFPs, rate were down. Win mentioned, win I up.

down mentioned bit were not a last notifications strong. I But little think we it quarter, was award lot. but a

had very, distress in got it impairments that environment So lot looks financial also or two. in sort over like last quarter across we've and a usual than a but the of of things strong very -- clients we've more the are

and saw that our to the and think down was don't lot get so a a it deficiency The the real we've the to we get a clients. But that think cancellations. the our based And substantial a proceeds in I I if do we And eventually for I waiting the try keep that? seen did adapt, and we for we hopefully, -- a risk. it, be can far, it'll you saw done last we've to clients, a invest to limit of we slowing and hit. it haven't funding -- pretty outstandingly. know to subset rapid much How greater It's hit. view among I slowdown, to of and broadening rapidly development starts clients longer and think, broad slow There's we impact know. hit, I don't and I business of able So

So the our substantial. it I it depends do was The think duration. in clients. funding seen downdraft We've on in

been we've and avoid progression able far So to of of overall number affecting that bookings our projects.

a subset of Although, that are is clients our there impaired.

and delayed long have just able don't others. And we've so been those pivot can know. to that on? How go to been I

Our next question Dave a or is up follow comment Jefferies. Windley from Mr. from

over to you this last to to of quarter, if XQ to year's initial you're that well am book-to-bill I able understand sales -- having from about bad opportunity I'm Maybe a that how to and and And quarter and smooth last pretty you book-to-bill not just were to -- awards look to without you us better to down proceeds XX% step. that bookings, awards and moves guess XQ bookings within project how pipeline year's a of negative last saying initial context today of flow do misinterpreting? They're giving worth not a months this year, lock to it quarter's understand really to the that or probably project or [delay] your it X.X August, not project of below to that to XX% I'm what to help initial And all it's two XQ trying initial backlog, everything XX% growth that year going introduced challenging? sidestep or described awards think the make you full an But suggests project award that whatever. would to bookings metric we're we be a suggests able RFPs, you're is really months how bookings, going year-over-year have on at initial everything progression or of awards, three apply project that, four the next months last you're book-to-bill. rate bookings. you're going moving

in I mean, mean, a where by that line. which pipeline the to in that. the influenced. factors you And mean, duration glitch just I up to a have are trying a in rate can factor and a show can duration liquid changing it is see Things there's up get the isn't of has and backlog just to later and down the is out flowing I fall say have you they win through I go win the the pipeline. comes environment, much lower the deficiency rate that affected our certainly completely big and which, The late I lot of there. you're take this And eliminate flow. in before guess flow which down they in pipe.

I cancellation rate but I to metric. changing have That's back. they broader it guess, of notifications, I So -- quarters a are. -- don't not parts. of several projects the don't of are an we And on a context waits notifications. to context award We put very of know make part duration you if and backlog. why I There moving award just make know, out. of cancellations, in in because had strong the quarter. We a low but they very have initial mean, ever of there projects are the fall mean, of had win and they're amount doesn't decreased lot snapped it I our

RFP you changing toward number So got of have but have may projects and you've reduced rate. it notifications award the especially into win initial a lower heading attrition those make same if you and if somewhat number of a RFP,

it to can on doesn't factors last ways they're would anything, quarter. I of if average. around be what know they'd down think, that's be average visible. And that's don't lots awards it the ever I low in and to are said, work there quarters and quarter. average other If line on a couple change initial And that seen, be I a So nothing. mean a But

the rate revenue, what burn other [Technical Difficulty] is right, driver of just your is.

And be so combination burn burn it's just something your book rate a but -- rhat's to rate, considered your well. bill as of not to

the time. over I'm queue any this back like questions you. remarks. no turn closing in comments showing additional management I'd the for at or Thank conference to to

fourth on quarter speaking today's XXXX interest for again and you earnings joining Medpace. for forward our to call. us you We call with in look on Thank your

gentlemen, Ladies you for and conference. thank the in This concludes participating program. today's

Everyone, disconnect. a have now wonderful may day. You