Medpace Holdings, Inc. Q2 FY2025 earnings call

• RFP flow in Q2 continued to be strong with an increase in the rate of decisions. Total pending RFP dollars were down, but award notifications were strong and cancellations were down across the pipeline. Awards recognized in the backlog were the highest in the past 5 quarters with a book-to-bill of 1.03x in Q2 2025.
• Funding environment has been stable to improve. Due to better funding, fewer cancellations, accelerated client decisions, rapid project start-up, shifting mix away from oncology and toward faster burning therapeutic areas, and significantly higher investigator costs, revenue is anticipated to accelerate in the second half of the year, leading to a $280 million midpoint increase in revenue guidance.
• Revenue for Q2 2025 was $603.3 million, up 14.2% y-o-y. Net new business awards entering backlog in Q2 increased 12.6% y-o-y to $620.5 million, net book-to-bill 1.03x. Ending backlog as of June 30, 2025, was ~$2.9 billion, down 1.8% y-o-y. Projected $1.75 billion backlog conversion in next 12 months, Q2 backlog conversion 21.2% of beginning backlog.
• EBITDA in Q2 was $130.5 million, up 16.2% y-o-y. Net income in Q2 was $90.3 million, up 2.2% y-o-y. Cash flow from operating activities in Q2 was $148.5 million. Repurchased ~1.75 million shares for $518.5 million in Q2. Year-to-date, repurchased 2.9 million shares for $908.4 million. Remaining share repurchase authorization as of June 30, 2025, was $826.3 million.

Revenue for the second quarter of 2025 was $603.3 million, representing a year-over-year increase of 14.2%. Net new business awards entering backlog in the second quarter increased 12.6% from the prior year to $620.5 million, resulting in a 1.03x net book-to-bill. Ending backlog as of June 30, 2025, was approximately $2.9 billion, a decrease of 1.8% from the prior year. It is projected that 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.

• Full year 2025 total revenue expected in the range of $2.42 billion to $2.52 billion, representing growth of 14.7% to 19.5% over 2024.
• 2025 EBITDA expected in the range of $515 million to $545 million, representing growth of 7.3% to 13.5% compared to 2024.
• 2025 net income forecasted in the range of $405 million to $428 million.
• Earnings per diluted share expected to be in the range of $13.76 to $14.53.

• Funding challenges remain acute for many clients, although most ongoing study clients obtained sufficient funding.
• Cancellations could rear their head excessively, which could impact bookings and revenue.
• Win rate can bounce around quarter-to-quarter due to factors such as size of project, client experience, and disease state.

Q: Could you just let us know what your booking expectations are for the second half? And the reason being is that your burn rate stepped up in 2Q and obviously, your guidance implies a step-up in 3Q and 4Q. And I'm just trying to figure out what that means for 2026 revenue growth.

A: Yes. As I said in my prepared comments, we do believe that there's a reasonable chance of getting book-to-bills back over 1.15x, which implies a considerable increase in bookings as our revenue is also growing. So yes, we do expect bookings to increase. Now again, that's always dependent upon cancellations, which were very well behaved in this quarter. But last quarter, they were terribly high. So if things continue in the trend we saw in this quarter, then yes, we expect bookings to remain strong through the remainder of the year.

Q: Ann Kathleen Hynes: 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?

A: Yes. We don't disclose the actual rate, but it was down across the entire portfolio. So both sort of the non-backlog awards before they get the backlog was very low. And our backlog cancellations that have been at or above the upper range of what we'd consider normal. They're actually toward the lower end of expectations or usual history in this past quarter in Q2. So they were actually very well behaved. And that, of course, made us exceed what we thought we were going to do in terms of both bookings and overall performance in terms of revenue and EBITDA.

Q: David Howard Windley: I've got a few. I'll try to go through quickly. On the burn rate, I'm not quick enough on the calculator. I heard, Kevin, you say that you do expect pass-throughs to be 200 to 300 basis points higher over the balance of the year. And that, I think, contributes in part to the higher burn rate. I was hoping you could maybe walk me to water a little bit on how much of the increased guide is pass-through versus direct revenue?

A: Yes, Dave. I mean, obviously, a large portion of the increase is going to be on the accelerated reimbursable cost activity, right? But we did increase also the EBITDA guide as well. And so we're also seeing some pull-through on just greater productivity on the existing staff and quite frankly, some programs that are progressing ahead of what we had projected in our schedules. So it's a combination of both. But the revenue, in particular, is certainly heavily influenced by the 200 to 300 basis point increase in expectations on the pass-throughs.