Medpace Holdings, Inc.

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, MedPace's Director of Investor Relations. You may begin.

Good morning, and thank you for joining MedPace's second quarter 2025 earnings conference call. Also on the call today is our CEO, August Trendle, our President, Jesse Geiger, and our CFO, Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward-looking statements within the meaning of the Private Securities 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. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the investor relations section of our website at investor.medpace.com. With that, I would now like to turn the call over to August Trendle.

Good day. RFP flow in Q2 continued to be strong. and we saw an increase in rate of decisions. Total pending RFP dollars were down on the quarter and our award notifications were strong. Cancellations were down across the pipeline and awards recognized in the backlog were the highest in the past five quarters with a book to bill of 1.03 in the second quarter of 2025. We continue to see a strong potential for book-to-bills returning to above 1.15 in Q3. 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. The funding environment has been stable to improved. Due to several factors, including better funding than anticipated fewer cancellations, accelerated client decisions, rapid project startup, shifting mix away from oncology and toward faster-burning therapeutic areas, and significantly higher investigator costs, we now anticipate accelerating revenue in the second half of the year. As a result, our revenue guidance has been raised by $280 million at the midpoint. Jesse will now add some additional detail.

Thank you. Good morning, everyone. Revenue for the second quarter of 2025 was $603.3 million, which represents 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 1.03 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. We project 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. 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. Kevin?

Thank you, Jesse. As Jesse mentioned, revenue was $603.3 million in the second quarter of 2025. This represented a year-over-year increase of 14.2% on a reported basis and 13.8% on a constant currency basis. Revenue for the six months ended June 30, 2025 was $1.16 billion and increased 11.8%. 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 reimbursable costs. EBITDA of $130.5 million increased 16.2% compared to $112.3 million in the second quarter of 2024. On a constant currency basis, second quarter EBITDA increased 18.5%. Year-to-date EBITDA was $249.1 million and increased 9.3% from the comparable prior year period. EBITDA margin for the second quarter was 21.6% compared to 21.3% in the prior year period. Year-to-date EBITDA margin was 21.4% compared to 21.9% in the prior year period. EBITDA margin in the quarter benefited from direct service activities and productivity, offset by higher reimbursable costs and foreign exchange losses behind the weaker U.S. dollar. In the second quarter of 2025, net income of $90.3 million increased 2.2 percent compared to net income of $88.4 million in the prior year period. Net income growth behind EBITDA growth was primarily driven by a higher effective tax rate in the quarter and lower interest income. Net income per diluted share for the quarter was $3.10 compared to $2.75 in the prior year period. Regarding customer concentration, our top five and top 10 customers represent roughly 21% and 31%, respectively, of our year-to-date revenue. In the second quarter, we generated $148.5 million in cash flow from operating activities, and our net day sales outstanding was negative 65 days. During the second quarter, we repurchased approximately 1.75 million shares for $518.5 million. Year-to-date, we repurchased 2.9 million shares for $908.4 million. As of June 30, 2025, we had $826.3 million remaining under our share purchase authorization program. Moving now to our updated guidance for 2025. Full-year 2025 total revenue is now expected in the range of $2.42 billion to $2.52 billion, representing growth of 14.7% to 19.5% over 2024 total revenue of $2.11 billion. Our 2025 EBITDA. is now expected in the range of $515 million to $545 million, representing growth of 7.3% to 13.5% compared to EBITDA of $480.2 million in 2024. The increase in our guidance reflects the impact of lower second quarter backlog cancellations. Improved funding on several challenge programs, which we anticipate will continue through the remainder of the year, and a shift in business toward faster-burning therapeutic areas with a higher concentration of reimbursable costs. We now expect reimbursable costs as a percentage of revenue to increase by 200 to 300 basis points over the balance of the year. We forecast 2025 net income in the range of $405 million to $428 million. This increase Guidance assumes a full year 2025 effective tax rate of 18.5% to 19%, interest income of $11.6 million, and $29.4 million diluted weighted average shares outstanding for 2025. There are no additional share purchases in our guidance. Earnings per diluted share is now expected to be in the range of $13.76 to $14.53. Guidance is based on foreign exchange rates as of June 30, 2025. With that, I will turn the call back over to the operator so we can take your questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. Our first question is going to come from the line of Anne Hines with Mizuho. Your line is open. Please go ahead.

Great. Thank you so much. 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. I know you probably want to give guidance for 2026, but do you expect an acceleration in bookings for the second half to support growth in 2026? Thanks.

Yeah. As I said in my prepared comments, we do believe that There's a reasonable chance of getting booked bills back over 1.15, 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, you know, if things continue in the trend, you know, we saw in this quarter, then yes, we expect bookings to remain strong through the remainder of the year.

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?

Yeah, we don't disclose the actual rate, but it was down across the entire portfolio. So both, you know, sort of the non-backlog awards, you know, before they get to 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 felt we were going to do in terms of both bookings and overall performance in terms of revenue and EBITDA.

Perfect. Thank you so much. Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of David Windley with Jefferies. Your line is open. Please go ahead.

Hi. Thanks for taking the questions. 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 increase guide is passed through versus direct revenue.

Yeah, 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. 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 that 200 to 300 basis point increase in expectations on the pass-throughs.

Okay. Um, so last night we, on this topic, we looked at kind of a pattern in 2023, where you also had, um, an increase in revenue and, and, you know, a good chunk of that coming from pastors sounds like, you know, maybe not quite that extreme, but similar and, and to get the EBITDA increase that you just mentioned on, you know, effectively the direct revenue portion, which sounds like the minority, um, you're having to get, you know, pretty high incremental margin, as you just alluded. 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. And then to support the revenue growth and your bookings expectations, I would guess that you're expecting to kind of take the shackles off hiring a little bit and accelerate the hiring, and how should we expect that to impact margin over the next couple of quarters? Thanks.

Yeah, Dave, you're right. I mean, I didn't expect productivity to continue from what we saw in 2024. Certainly, we've reduced our hiring expectations a little bit coming into the year, but we're also seeing improved attrition rates again. you're furthering in the past couple of quarters. And so all of that is contributing to, I still expect some headwinds on a net basis in 2025 relative to where we are in 2024. But you're right, certainly improved versus where we were coming into the year.

And then last question for me quickly is, August, your comments around funding are interesting to me. certainly, you know, our trackers, not the gospel, certainly, but we have seen some predictiveness out of it, and funding year-to-date is pretty bad, really. June was much better, but we're down, you know, over 40% year-to-date. So how do you get comfortable? I mean, I know you have a lot of visibility into the awards that you have in hand that aren't even in backlog yet, but how do you get comfort that the week funding through the first six months of this year is not essentially foreshadowing another downturn in demand activity for you as it did in 23 ahead of 24?

Well, I guess I don't get myself comfortable with that. I thought we probably hit a bottom in Q4, but then cancellation. Look, a big part of all of our the last year has been cancellations, not new projects and baseline level of business. Certainly the last nine months. So it's really been just really heavy cancellations. And if they get adequate funding, I don't know what subset that is of the total pool of funding you're talking about, but we get comfortable with that and we can make our numbers. But could things pull back again and really impact 2026? Sure. That's quite possible. I have no idea. I do know that we have a good pipeline of things awarded but not yet reaching backlog that should support good bookings through the remainder of this year, again, as long as, you know, cancellations don't rear their head excessively. And that should at least get us, you know, started into 2026. But, you know, is it possible there's a pullback in the future? And, you know, we run into another, you know, very weak booking, you know, quarters. I don't know.

Okay.

Appreciate the answers.

Thank you.

Thank you, and one moment as we move on to our next question. Our next question comes from the line of Jaylyn Dressing with Truist Securities. Your line is open. Please go ahead.

Thank you. Good morning, and congrats on a strong quarter. I actually want to follow up on the last part of David's question. It seems like macro environment and business pipeline, when we caught up in early June, was still choppy and pressured. Keeping that in mind, can you provide some color around how intra-quarter trends were in 2Q the majority of trends suddenly accelerate towards the end of Q2, essentially like latter part of June, and those trends have continued. Just give us some flavor how demand environment evolved in Q2 in particular.

Yeah, I mean, Q2 was, again, it was really a continuation of a Q1 in terms of, you know, the business environment was continuing to be pretty strong in terms of RFPs. I said in Q1 they were strong. It was really cancellations that, you know, 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, you know, uh, in the past, you know, and certainly in the, in the prior quarter. So it, it, uh, it was across the quarter. I mean, I, I didn't see any real, uh, trends of acceleration or deceleration in the quarter.

Okay. And my quick follow-up on these trials which were delayed or kind of put on hold, coming back, new trials, business wins. Are you seeing in any ways 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 EBITDA margin if the project comes at lower scope or reduced scope than previously planned?

Yeah, sure. A number of projects were downscoped. And, you know, we see that, you know, you see that in any environment. I don't know if that was particularly prevalent, but, you know, you do see some downscoping and largely delays. You know, I mean, slower startup holdoff on certain regions, you know, kind of you know, keep the study running, but don't execute as fast as you, you know, could otherwise. So, you know, those are the kind of, you know, things that clients do to try to, you know, keep things alive while they, you know, don't have adequate funding. You know, obviously, you know, your profit's going to be impacted by that. Yeah. I mean, that's You know, the most profitable project for us is a project that runs the fastest. And, you know, if it's delayed, if it's downscoped, if it's, you know, has some gating, et cetera, that, you know, impairs our ability to execute and to, you know, make a profit on it.

Great. Thanks for taking questions.

Thank you. And one moment for our next question. Our next question is going to come from the line of Max Smock with William Blair. Your line is open. Please go ahead.

Hey, good morning, everyone. Thanks for taking our questions. Just wanted to follow up on some of the questions that have already been asked around book to bill in the back half of the year, and in particular your commentary about 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 in funding or the demand environment to get there? And if you don't think about, or if you think about there not being improvement from today, what do bookings look like if the environment essentially remained unchanged from 2Q? Should we expect some more net awards in the back half of the year, you know, roughly in line with the 620 that you posted in the second quarter?

Yeah. I'll answer that. Bookings in the – give me the first part of that question again. Bookings?

Yeah. So, if I'm just thinking about, you know, your guide and your commentary about 1.15, book to bill in the back half of the year. I mean, that implies net bookings 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 outlook to get back to 1.15. Do you need to see further macro improvement? And if you don't, what does book to bill look like in the back half of the year? Sure.

You know, I think that it's, you know, macro improvement. It depends whether you – whether all of our cancellations have been related to funding. And I think a good part of them were, yes. So we do have to see cancellations remain lower. I don't need to see a strong business environment with new opportunities, but we need to see things progress along and not be held up by funding or other factors. The current quarter, Q2 was relatively low on cancellations. If that continues, I think we're going to be there. If it's in the mid-upper range of cancellations, we're getting right on the edge. I think prior to the prior quarter, Q1, in which we had a lot of cancellations, particularly in the pre-backlog, you know, bucket, things that we expected to be converting in this next quarter, in the next couple quarters. 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 slam dunk, but, you know, I think that... If things continue the way they have in this past quarter, I think we'll be there. And how much more weakness and increased cancellations can occur, I don't know.

But that answers your question. Yeah, it does. And sorry for the long-winded question on my end. Maybe just one on competition and win rate and what you saw there in the second quarter. And maybe how much of your results are more a reflection of you all taking share more so than a broader rebound in demand environment from small biotech?

Yeah, no, I was hoping not to have to talk about win rate. It was not great in the quarter, actually. It was more an issue of more decisions. As I said, in the prior quarter, Q1, things were not being decided. You know, things were being held up, a lot of funding issues and and the go-ahead was not being given on new awards. They weren't making decisions, and so our pending RFP dollars increased quite a bit. That came down in this past quarter because there was a lot of decisions. Our win rate on those decisions was not particularly high, but there was a lot of decisions, so actually awards were good. I mean, we actually had a very good new award – quarter, but on a lower end win rate, you know, competitive win rate. But, you know, that's something that bounces around quarter to quarter. And, you know, I never make anything out of a single quarter down, you know, prior quarter was fine. So we'll see. Got it. Thanks again for taking our questions.

Thank you. And one moment for our next question. Our next question is going to come from the line of Michael Turney with LeRinc. Your line is open. Please go ahead.

Good morning, and thanks for taking the question. So, maybe if I could just dive a little bit more on the trajectory in back half into 26, in particular on the step-up and pass-through business. I think, Kevin, please correct me if I'm off here, but you said 203 basis points of increased pass-through business based into the numbers in the back half of the year. Is this something, 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?

Yeah, I mean, certainly in the near term, it's going to be the new normal. And again, it's heavily influenced by just the mix that we're currently seeing and areas where there is a higher concentration of reimbursable costs. So, yes, in the near term, I would say it's going to be elevated. How long does this last? I'm not going to provide commentary on 26 at this point, but certainly the balance of the year we do expect it to be and continue to be elevated.

Understood. I won't poke further at the implied 26 numbers at this point in time. But maybe just a follow-up, August, to your last comment regarding the win rate and the win rate dynamics. I certainly understand how it can bounce around on a quarter-by-quarter basis. With the win rate, was there anything from a disease state perspective or any other pieces perspective that characterized why you think the win rate shook out where it did? Or was this also just a random dispersion across your book?

Yeah, it wasn't, I mean, look, it is always concentrated because, I mean, the factor is very large programs were less likely to win, okay? So, I mean, we're talking about, and there were some very large programs in that. And, you know, so size of project and, you know, our experience in the area and our experience with the client, you know, obviously if it's a new client and it's very large and they've got existing providers, our win rate is going to be lower. That's what bounces around quarter to quarter. We won the projects we expected to win and unfortunately in that quarter, in this past quarter, there was some very large And we're talking about dollars. I talk about win rate. It's dollar-based. And so a very large program is a good part. Actually, a single program can be a substantial part of the total win, wins or losses in the quarter. So it just happened to bounce down in this past quarter. We did lose. It was two very large projects in that quarter. But, no, I can't – you know, it was not like we're weak in a particular therapeutic area or, you know, some trend or subset. It just happens to be, you know, what projects we're close to and which ones we're really large.

And one last really quick one, if I may, as the market's opening, your stock's up a lot. I know the guidance does not assume any more buyback, but conceptually, given the outstanding – authorization you still have, how are you thinking about near-term balance sheet utilization and the potential for incremental buybacks?

It's more of the same, Michael, that we'll continue to be opportunistic in buying at levels that we see to be very accretive. And if our plans don't execute, then we're okay building cash. We're very happy with what we were able to execute in the fourth quarter, first quarter, and second quarter of this year.

Got it, thank you.

Thank you, and one moment for our next question. Our next question's gonna come from the line of Eric Holdwell with Baird. Your line is open, please go ahead.

Thank you very much. I have a few, hopefully not too repetitive. I was hoping we could start with talking about, following on that last line of questioning, just talking more broadly about the bookings dynamics this period. There was some speculation going around last night based on the big increase in revenue that maybe you had picked up some large studies. It does not sound like that happened this quarter, anything particularly crazy large. But I was hoping you could just maybe more specifically tell us what your largest win individually was in the quarter. If there were any rescue awards or losses that you could talk to, maybe talk just broadly talk about competitive 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 bookings mix and breadth of those bookings to start.

Sure. Yeah. And Eric, I think your question kind of, I don't know, in my head confuses some of the moving parts here. So when we're talking about competitive wins and we're talking about wins, et cetera, those are awards. 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, you know, a new award this quarter is not going to influence our revenue or anything like that. You know, a booking, you know, would, you know, probably because that's when we're starting to, you know, get revenue, you know, if we, 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 that's going to impact. So, If I look at just sort of new notifications this quarter, no, nothing particularly stands out. There's nothing particularly large. It was a pretty usual quarter. In fact, the really large stuff, we lost. So our win... Competitive win rate was actually on the lower side, but completely understandable. If you took out, you know, a couple, those two outliers, our win rate was, you know, was great. I mean, it was fine. So that's, you know, that's not an issue. And, you know, what went into bookings this quarter? Nothing particularly, you know, unusual or, you know, notable, but, You know, the big, 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. It was just, you know, kind of usual stuff that, you know, stuff that progressed that, you know, a lot of it we did not anticipate it might progress. You know, so sort of good upside news on things progressing and, you Um, you know, we thought might not, things went faster than expected and we maybe didn't do as great a job at, at projecting what, uh, um, you know, some of the pass 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, et cetera. Um, so, you know, that, that part of it, I think on a, on a direct fee basis, we were probably pretty good at projecting it, but, uh, there were still projects that went forward that more than we expected and faster than we expected. So there was some upside. But there was nothing kind of unusual in terms of short-term, quick, or interim, or rescue work or anything like that.

Okay. On the reimbursable indirect revenue commentary, and 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 two 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 41, 42 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, I'm not 100% clear what that two plus two to 300 basis points specifically is in reference to. or what the absolute percentage you're targeting is.

Yeah, Eric, yeah. Thanks for asking the question. To clarify, that's relative to what we saw in the second quarter. So, yeah, we could see this in the low 40% the back half of this year.

Okay. And then last one for me for now. So you have, obviously... You know, it's kind of shocked the street with this update. You have enormous backlog conversion already. Now it's going up to 41.5%, 42.5% in the second half. Your backlog is 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 the mixed shift in reimbursables, which are seemingly clearly driving the majority of the revenue increase, and those may or may not continue next year. But 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 think – well, I'll admit at least I'm scrambling to understand what kind of a growth rate we might be looking at in the next year. It doesn't feel sustainable, to be honest, but then again, I didn't see this quarter coming, so –

Eric, you broke up a little bit in the middle of that, but I think I heard enough of it. So if I don't cover it, then jump back. I think that, yes, we have had a significant shift towards faster burning stuff. Part of it, our conversion rate is high overall. because, you know, the lower denominator. And of course, that, you know, does that mean that we're going to, you know, burn off our backlog, and then we're going to have a, you know, real gap? I don't think that's necessarily true. I think that, you know, we do have an adequate business environment to 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 fine. If that pulls back, then I think that it can challenge growth rate, but that's because of a drop in reimbursables. And I think on a direct fee basis, we're going to do fine. So I think our profitability is going to, there's no reason to see it dropping off. And I think that we could have growth rates similar to this year, X, the, you know, pass-through stuff, right? But, you know, I don't know. We don't have the model next year. You know, it's really dependent upon stuff that's, you know, coming in now and over the next couple quarters. So, you know, 26 is, you know, not really addressable, but we don't have a reason to believe that we're going to have a challenge next year to and have our growth go to zero or something. Unless pass-throughs drop drastically and all of our growth is direct fee, but I don't really see that as a, you know, on a 605 basis, we'd be fine.

Completely understood. Appreciate the commentary. Thank you.

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Luke Surgat with Barclays. Your line is open. Please go ahead.

Great. Thanks for the questions. I just kind of want to figure out, you know, we've talked a lot about the moving parts. Everybody's focused on the burn rates, et cetera. 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 SG&A for the type of revenue growth that we would typically think. You had... Dsos 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 like what actually drove you know this this this step up and everything and and trying to to foot all these different metrics well I think a drop in cancellations I mean look we've been running

We've been running at, you know, 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 pretty good X a lot of unusual cancellations. Now, that's part of the same package. You know, I mean, the same, you know, environment that causes the cancellations reduced, you know, opportunities to some extent. But, you know, I don't know, you know, how you have, you know, you know, close the, you know, the loop on those things. The environment is reasonable if, you know, cancellations are reasonably behaved. You know, our conversion rate is up because we have, you know, dropped cancellations uh, both two, two major factors. Um, you know, the denominator has not grown as expected and we have a, 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 are, uh, you know, particularly in the obesity space or, uh, you know, uh, important part of the market. Um, So that's made things have a faster burn turnaround. But otherwise, I think the big step up from our expectation was less cancellations than we anticipated.

Okay. And then I guess just to follow on that, your backlog that you guys report, so like anything over 12 months – That's included there. Took a pretty big step down in the court. It's been declining the last few quarters. And that makes sense with everything you're saying, like faster burn rates and so more near-term stuff. So as you think about it, as 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's like to Eric saying, like we're all trying to model here of what we're thinking for 26 and the range just gets... pretty, you know, really wide.

Yeah, I mean, I can't give you an average for, you know, overall, you know, categories or something like that. But look, you know, long studies are, you know, can be six to ten years in duration, you know, and oncology studies are classically kind of, you know, that, you know, run a very long time and it's a slow burn. You know, metabolic studies, some of these can run in, you know, two, three years. and have a larger proportion of indirects as a part of it. And indirect, usually the model is the direct fees burn a lot faster up front, you know, toward the beginning. That's when a lot of work is being done in organizing and setting up and getting the trial ongoing and recruited. But a lot of the investigator fees are later on when, you know, patients are, you know, enrolled and having lots of visits. So there's usually a You know, acceleration, you know, the direct fees are the first half of the study, heavy, and the second half, it's investigator costs. 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 one, 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... and you have a really strong culture where the attrition rates are really low. So how should we think about your hiring needs in the back half if you're going to be able to sustain these type of burn rates and elevated growth?

Yeah, back half of the year, we do expect accelerated hiring. We expect to hire more in the second half than we hired in the first half. 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. But then if we move into the third quarter and fourth quarter, depending on a lot of factors, including the business environment and new opportunities and activity, we have opportunities to accelerate that beyond that. But right now, we're very comfortable with current headcount levels and projections to handle the current and future projects. But it is dynamic and we can adapt as we go.

Great. Thank you.

Thank you. And one moment for our next question. Our next question is going to come from the line of Charles Rahe with TDCal. And your line is open. Please go ahead.

Yeah. Thanks for taking questions. I just wanted to follow up on some of the questions from earlier. You know, it sounds like what you're saying is that what we've really been seeing over the last year or so plus with the weak funding environment, that's really tied, really, that's where cancellations will come in, people that can't get funded, projects cancel. But that projects themselves, new RFPs, that flow has never changed. Has that always been constant? uh, over the last couple of years?

I wouldn't 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 years, it hasn't weakened from, you know, kind of the, you know, the COVID 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. You know, RFPs don't necessarily reflect what's going on. And so last year, there was certainly weak overall opportunities. And, you know, sometimes people looking for a price that they could get it done at, et cetera, and less opportunity. But, you know, the The biggest thing of late has been cancellations that just, you know, like I said, I thought we were past it all in Q4, and, you know, I thought this was the bottom, and things are improving, and, you know, the biggest gap hasn't been the improved fundamental opportunities that we started seeing in Q4. So the business environment started, before that, yes, we had real weakness and everything. But the business environment seemed to be okay on new opportunities the last several quarters, but cancellations were just, last quarter were horrendous. And that's what has been probably the biggest problem uncertainty in our modeling is cancellations rather than, you know, new opportunities and new awards. They're both components of it, but, you know, it's really been the cancellations that have thrown us off. And this past quarter, Q2 showed a great improvement in that. But, you know, we saw a great improvement in Q4. You know, I don't know. We'll see. Q1 was, you know, it spiked again.

And in terms of then this quarter cancellations were obviously much lower relative to Q1. Anything that when you look at reasons for cancellations, are the cancellations, are those all tied to funding or is that, how much of that maybe is changing priorities from sponsors?

You can never sort that out entirely. I think they're very highly related. Reprioritization is sometimes another reason a word for, you know, cutting back. And, you know, so, you know, I don't know. But I do think the funding environment has been a critical part of the vast majority of cancellations.

Okay. And then you talked about earlier, you know, faster burning therapeutic areas like metabolic. But, you know, when we look at revenue contribution by category, you know, that's sequentially the same in metabolic. It was sort of this other category we saw a big step up in the quarter, can you give us some examples of a therapy area in that other bucket that you saw this big pickup and just curious, like what kind of visibility you have or like how much of your upcoming pipeline of RFP activity is in this other bucket and what kind of visibility you have into that?

Yeah, no, I mean, it's a bunch of different things and there's nothing that sort of is the vast majority of it or something. But look, the big trend has been metabolic over the last year. You look at our metabolic revenue and awards, and they've been a higher percent of the overall. And they will continue, because of the awards, they're going to continue for the next couple quarters anyway, to be a growing part of our overall revenue base. And they tend to be, you know, overall, some of them are, you know, long-term, but overall tend to be faster burning and, you know, higher indirect fees.

That's great. And maybe last one for me. You talked about faster decision-making. 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 Just people deciding, hey, you know what, we can't wait forever. And so we just got to make decisions now or anything that could, you know, maybe point to why this why decision making maybe has picked up again.

No, I think that's funding again. I mean, I think we saw things somewhat seizing up, you know, our pending funding. you know, RFP dollars, you know, that is RFPs we've received, we made a bid on and are just sitting there waiting for a response and no decision and no go forward on things, even that we have been awarded. And they say they're going to, you know, yes, we're going to use us. They agree to the, but, 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 some other information on the drug, et cetera, another study, maybe completing, whatever. There's lots of reasons, but funding is a big part of it, and I think we've seen a more rapid execution on sponsors' sides to move forward and give us authorization and, you know, get us stuff that we need to move forward has been funding-related.

Okay, great. I really appreciate the comments. Thank you.

Thank you. And as a reminder, if you would like to ask a question, please press star 11 on your telephone. One moment for our next question. And our next question is going to come from the line of Justin Bowers with Deutsche Bank. Your line is open. Please go ahead.

Good morning, everyone. So, Jesse, just a quick cleanup question. On the employee growth, you were breaking up a little bit, but it sounded like accelerated hiring in the second half and mid to upper single digit. Is that for the second half or is that for the full year?

Yeah, accelerated hiring in the second half. So hiring more second half than first half mid to upper single digit for the full year.

Okay, so second half employee growth should be mid to high single digit year over year.

I think we're talking about the full year would be high single digit growth over the prior year. Okay, so then you're looking at... Obviously it has to increase some because we didn't have that kind of

For the six months, year to date, we grew revenue 1.5% or so. We expect that to accelerate. We hired 2.5% for the first half. The headcount growth is up 2.5% for the six months. We expect a growth rate in the second half at or slightly above that for the second half.

Okay.

So, you're expecting- Which would equate to, you know, a five, you know, five or six percent for the full year.

Okay. All right. And then, in terms of what's the growth this year, the top line that your forecast, what does the guidance assume for growth on a 605 basis for the top line?

Yeah, Justin, we don't provide a 605 basis look. I think if you just model it kind of using the guidance that we have out there and assume kind of the 200 to 300 basis point increase in reimbursable costs over the balance of the year, you can kind of back into what that could be.

Okay. And then in terms of, it sounds like the burn rate is fairly sustainable, likely to increase in the back half of the year. What does the pre-backlog or your current authorizations, but not yet in backlog, the mix look like? Is that similar to... what the revenue composition has been like this year, or are there any notable differences to call out in terms of therapeutic mix? We're seeing a move towards more metabolic, and that'll continue, it looks like, based upon anticipated awards, yeah. Okay. And then on the cancellations, there's really two things that jump out. One was just the the improved execution and the changes there during the quarter. And then, you know, clearly like the cancellations had cited as well. When did you, like, when did that start to really inflect or turn? Was that something that, you know, was that sort of May where things really started to change or did that, you know, was that exiting March or... Yeah. I don't have the monthly breakout and, and, you know, we, we kind of reconcile these things quarterly. So there isn't like, you know, good. I mean, we obviously do know the date of notification of a, you know, something, et cetera, but I, I, I've just not tried to, you know, sort out when, you know, exactly cancels and, and if they were low and, March before this quarter began or didn't start until you know May after the quarter was you know well into it or what but you know pretty much across the quarter you know we had lower cancellations but I can't I just don't have the you know good data of just when you know you call it again you know there's and what do you mean by you know when you know it's kind of 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, these are kind of things that, you know, have a period to them. But, you know, look, I think Q2 was much lower than Q1. Okay. And then maybe just one last one for me online. What was change order activity like during the quarter and how did that you know, change from 1Q or even what you saw towards the tail end of last year? 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, unusual 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.

Okay, nothing. Okay. I just... One thought was that, you know. Again, change orders, you know, sometimes they award something. You know, it's going to be a global study of this, but they want to award it first as, you know, just the first region or something, you know, and then we're planning in six months to, you know, and, you know, you don't have the budget for it until then. And, you know, so it's what's even a change order? You know, it's difficult. You know, it's when we get authorization, you know, and then when it meets our criteria for going into backlog. Okay, thanks. We'll catch up after the call.

Thank you. And one moment for our next question. Our next question comes from the line of Kyle Cruz with UBS. Your line is open. Please go ahead.

Hey, thank you for taking the question. You've historically disclosed around a high single-digit revenue exposure to cell and gene therapy. Can you talk about the impact of Sarepta recently having their clinical trials run on hold and kind of the pausing of the platform technology designation there and the impact to your company? Thank you.

It has no impact to us.

Can you maybe speak more broadly to the cell gene therapy market and what you've seen there and if you're still that exposed to it?

We don't have a great deal of exposure to the overall area, but, you know, we certainly do have exposure, but I don't think there's, you know, not to surreptitize, you know, it's not a, I don't think it's going to have an impact on, you know, our programs.

Thank you.

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.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.