Good day, ladies and gentlemen, and welcome to the Medpace Third Quarter 2024 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. You may begin..

Good morning, and thank you for joining Medpace's third quarter 2024 earnings conference call. Also on the call today is our CEO, August Troendle; 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 Troendle..

Good day. Backlog cancellations in Q3 were above our usual range, making for three consecutive quarters of elevated cancellations. The magnitude of cancellations in Q3 were comparable to Q1, up and improved relative to Q2.

As a net result of the elevated cancellations experienced in Q1 through Q3, net-new business awards were depressed in Q3, generating a net book-to-bill ratio of 1.0 for the quarter.

As mentioned last quarter, the elevated cancellations we've experienced are not limited to studies previously recognized in the backlog, but rather span our entire pipeline of awarded future work and therefore impact current and anticipated future backlog recognition.

This is expected to depress our reported net backlog awards in Q4, as well as in Q1 of 2025. Assuming cancellations return to a normal range and the business environment remains stable, we will be able to rebuild our pipeline of opportunities and our reported book-to-bill numbers should approach a more usual range.

That is greater than 1.15 in the second-half of 2025. The business environment, apart from the elevated cancellations remains decent. RFPs were down modestly on year-over-year and sequential basis, but quality appears good.

We remain optimistic about future growth, although, as I indicated, it will take several quarters to replenish the flow of opportunities converting into backlog. I will now turn the call over to Jesse to provide narrative on the quarter..

Thank you, August, and good morning, everyone. Revenue for the third quarter of 2024 was $533.3 million, which represents a year-over-year increase of 8.3%. Net-new business awards entering backlog in the third quarter decreased 12.7% from the prior year to $533.7 million, representing a 1.0 net book-to-bill.

Ending backlog as of September 30, 2024 was approximately $2.9 billion, an increase of 8.8% from the prior year. We project that approximately $1.62 billion of backlog will convert to revenue in the next 12 months. And backlog conversion in the third quarter was 18.2% of beginning backlog.

Now with that, I will turn the call over to Kevin to review our financial performance in more detail, as well as our guidance expectations for the balance of 2024.

Kevin?.

Thank you, Jesse, and good morning to everyone listening-in. As Jesse mentioned, revenue was $533.3 million in the third quarter of 2024. This represented a year-over-year increase of 8.3%. Revenue for the nine months ended September 30, 2024 was $1.57 billion and increased 13.3%.

EBITDA of $118.8 million increased 31.7%, compared to $90.2 million in the third quarter of 2023. Year-to-date EBITDA was $346.7 million and increased 30% from the comparable prior year. EBITDA margin for the third quarter was 22.3%, compared to 18.3% in the prior year period. Year-to-date EBITDA margin was 22%, compared to 19.2% in the prior year.

EBITDA margin for the quarter was favorably impacted by reimbursable costs, which decreased by 350 basis points from the prior year. EBITDA also benefited from the direct service activities and productivity. In the third quarter of 2024, net income of $96.4 million increased 36.7%, compared to net income of $70.6 million in the prior year period.

Net income growth ahead of EBITDA growth was primarily driven by interest income, partially offset by a higher effective tax rate in the quarter. Net income per diluted share for the quarter was $3.01, compared to $2.22 in the prior year.

Regarding customer concentration, our top five and top 10 customers represent roughly 22% and 29% respectively of our year-to-date revenue. In the third quarter, we generated $149.1 million in cash flow from operating activities and our net days sales outstanding was negative 62-days. We did not repurchase any shares during the second quarter.

As of June 30, 2024, we had $656.9 million in cash and $308.8 million remaining under our share repurchase authorization program. Moving now to our updated guidance for 2024. Full-year 2024 total revenue is now expected in the range of $2.09 billion to $2.13 billion, representing growth of 10.8% to 12.9% over 2023 total revenue of $1.89 billion.

Our 2024 EBITDA is now expected in the range of $450 million to $470 million, representing growth of 24.1% to 29.7% compared to EBITDA of $362.5 million in 2023. We forecast 2024 net income in the range of $376 million to $388 million.

This guidance assumes a full-year 2024 effective tax rate of 15.5% to 16.5%, interest income of $24.4 million and 32.1 million diluted weighted-average shares outstanding for 2024. There are no share repurchases in our guidance. Earnings per diluted share is now expected to be in the range of $11.71 to $12.09.

Guidance is based on foreign exchange rates as of September 30, 2024. We plan to provide 2025 guidance on our fourth quarter call in February. With that, I will call -- turn the call back over to the operator, so we can take your questions..

Thank you. [Operator Instructions] And our first question today is coming from David Windley of Jefferies. Your line is open..

Hi, good morning and thank you for taking my questions. I wanted to start, August, with the cancellations and perhaps, if you could, I don't know, quantify what you're seeing -- talk about if you're seeing. I think last quarter, you said there wasn't really a trend in those cancellations.

I wondered if a trend has emerged in terms of either therapeutic area or otherwise the nature of the cancellations and how they -- if you can, how they break down between the cancellations of actual backlog that we're seeing run-through the book-to-bill versus the amount that's kind of being pulled out of your pre-backlog?.

Yes. Sure. Sure, Dave. Well, first, the cancellations we've seen, I guess usually cancellations are a wildcard and they come out of the blue. It's kind of product performance. Occasionally company has financial difficulty, but they're kind of random and unexpected.

The cancellation, we've never seen a period in which we had just across the board kind of elevated cancellations that weren't just kind of one-offs. I mean, you have to kind of associate them all. And no, I don't see any trend across therapeutic areas or anything like that.

I think it's the only common factor is these are companies that were funded during the COVID high and have run out of money. It was kind of the one common kind of element. And you have the usual routine cancellations that are random, et cetera.

But I do think that the environment, we've had a great deal of cancellations that are many of them related to wind -- running out of funding and not being able to refresh from the capital markets. So it is an unusual situation, but no, I don't see any particular trend in terms of therapeutic areas.

It's kind of just type of company and when they were funded and lack of future funding, would be the elevated level of cancellations that are unexpected. And then you've got the background kind of stuff. In terms of backlog recognized portion of the cancellations versus that that has is part of the pipeline, but not yet in the backlog.

Either the amount of revenue was part of a project that was in backlog, but was not because of a regulatory threshold, where there was withholding, because either time or some event that prevented us from recognizing the remainder of the amount of that award or just things that hadn't gotten to start-up and so were in the awarded status, but hadn't started.

The breakout between the two backlog versus the rest of it is probably roughly equal, maybe even a little bit higher in the amount that is not -- is pipeline not in backlog. So it's been, it's been across-the-board. And I don't have the, I don't have the numbers.

I think maybe numerically a little bit larger in the non-recognized backlog portion but across the portfolio..

Got it. Thank you for that. And then the follow-up question is around pricing. It sounds like, as you said, the RFP flow may have been down a little, but generally holding up okay, and quality good.

I'm wondering what you are seeing in the competitive environment and actions by competitors in an environment where it seems like there's maybe a less opportunities to go around for everybody? And how folks might be chasing those fewer opportunities either by getting more aggressive about how fast they think their timelines can be or more direct pricing or offering better payment terms or the things that CROs tend to do.

I just wonder if you're seeing any change in the pricing environment..

No, I'd say if anything, we've seen improvement. I think that if you look back toward early in the year, we might have seen a little bit of that, but I actually think the business environment is pretty normalized if you take out the cancellations of stuff that was awarded during the COVID high. It is a pretty normalized business environment.

I would think that we can get back to a robust growth in the future. It's just going to take some time. But no, I've not seen lately any sort of trend toward dropping pricing or aggressive, overly aggressive pricing. I mean, look, it's a competitive environment, but nothing unusual in the last quarter, I don't think..

That's interesting and good to hear. Thank you for the answers..

Thank you. [Operator Instructions] And our next question for the day will be coming from Max Smock of William Blair. Your line is open..

Hi, good morning. Thanks for taking my questions. Maybe just following-up on Dave's first question there around the size of the cancellations in total. Last quarter, you mentioned double the normal range.

I think if they had been within the range, you quoted a book-to-bill of about 1.24? Just wondering if you can give us a similar level of detail this quarter in terms of the difference between gross and net bookings and what book-to-bill would have looked like if cancellations were within that kind of normal 4% to 5% range that you've seen historically?.

Yes. No, look, I don't have a kind of an analysis of that. Certainly, even if we didn't have elevated cancellations this quarter, which were not massively. They were outside of our range, but it wasn't a large diversion like last quarter.

And we still would have had relatively, bookings somewhat below kind of what we've been running at sort of 1.2 sort of range. It would have been well below that just because of the prior -- the cumulative prior cancellations in Q1 and Q2. So it's a mix of the cancellations over that entire period Q1 through Q3 that causes the reduced bookings.

Again, if you cancel stuff that's in the pipeline that hasn't gotten the backlog, it's going to show up in future backlog awards and book-to-bill and that's what we've seen..

Yes, makes sense. So it's basically, it's just a little tougher to come up with that metric this quarter because you're also working off the elevated cancellations in the prior quarter.

Is that the right way to think about it?.

Sorting it out between the two is, but it would have been, I don't know, you could say, look, if we -- even if we had very low cancellations this quarter, we wouldn't have gotten to a 1.2. So that's the kind of..

Maybe following up on that on the gross bookings side, August, have you seen any change in terms of your win rate or competitive dynamics to Dave's point around pricing or just any other factors that would cause a shift one way or another maybe causing a little bit of pullback or maybe even a step-up in your win rate here in the back-half of the year?.

Yes. And no, look, our win rate was actually really strong in late last year, the second-half of last year, entire second-half, it was very strong. Q1 was a -- Q4 in terms of opportunities were pretty weak. In Q1, we had a very low kind of awards, you could kind of put it in that kind of context in terms of new authorizations.

And then subsequently, we've had win rates that are really right in the middle kind of the range. And we're -- so we're doing fine the last couple of quarters.

Winning something and then having it cancel, though, doesn't do you a lot of good in the long term, but so it's really the cancellations, it's not our win rate, it's not the amount of awards, it's not -- the driver has been a lot of stuff that was awarded in that kind of 2001 maybe early 2002 to '22, 2021 and '22 that we've seen a lot of cancellations from things awarded in that timeframe..

Got it. I'll leave it there and hop back-in the queue. Thanks for taking my questions..

Thank you. [Operator Instructions] And our next question will be coming from Eric Coldwell of Baird. Your line is open..

Thanks. Thanks very much. On average, over time, how much of your quarterly gross awards have come from awards that were previously made in prior periods, whether we call that pre-backlog or pipeline backlog, stuff that you had won in the past, but would put into backlog and into bookings and backlog in a future period.

What was the normal cushion over time when you entered a quarter?.

I mean, basically, nothing gets into backlog that is first awarded in that same quarter. So everything comes in from, I think, across the industry. You get an award and often you don't even know how much it is really. Still, you're refining.

There's still change in specs and it's -- it takes a while before from award to get to a point where you've got it locked down. And for us, get it started. For others, it might be under contract, but contract. Our -- if we did our backlog based on contract versus a steady start, it'd be about the same timeframe we get a contract.

You're often working under a letter of intent or startup agreement, and you don't really have a contract until about out when studies -- entering patients in the field, which is kind of our criteria for entering backlog. But that takes multiple quarters, usually.

I can, it's -- some things, yes, we'll hit the same quarter, but that they're the unusual opportunities..

Okay. And then I guess the, look, the elephant in the room here is that the market has this impression that you've had growth strains on the organization that have led to quality issues and that these cancels are actually being caused by unhappy clients who are not out of money but in fact leaving you to go to another CRO.

You've not indicated that on this call or prior calls, but do you have a sense on how much of the cancellations actually are projects that will still go on, but they're just going to go on with another vendor?.

So we've had -- so the number of things that we've lost because of client dissatisfaction with our performance in the last year is not a small number, it's zero. There have been years ago there might have been a case where client was dissatisfied and moved to another CRO, but that hasn't happened.

We have had a fair number of clients that have run out of funding have had great deal of difficulty and we've provided notice of termination and they've moved it to another CRO. And some of those have subsequently been funded. And so maybe we made the wrong choice at the time.

But in the kind of -- early in the year, things were looking pretty bad in terms of funding, we couldn’t -- didn't feel we could just accept running the program, continuing it without payment.

And I would not expect that a company that is given notice of termination by their CRO is going to go to another CRO, and say, we'd like you to take over this work. And the reason is because the prior CRO has -- is terminating on us. I suspect they spin it in some different way. But the fact is that that is what has happened.

So it isn't even necessary that if you hear this from another CRO that they don't actually believe that this was a performance-based move, but that's just not true..

All right. That's a good response. And then on the last one, I'll squeeze them one more if you don't mind.

Did I hear you say that you expected to get back to a “normal” 1.15 plus net book-to-bill next year in the second-half?.

Correct..

Yes, because your average book-to-bill since the IPO through the fourth quarter of '23 was 1.25. So I'm just curious on the disconnect between what you see as normal at 1.15, whereas history would say more like 1.25..

Yes. Well, I mean, I'm not targeting 1.15, I'm kind of putting that as the floor for expectations and that we would expect to see that. And hopefully, based on the business environment, it gets to 1.2, 1.25..

Okay. Thanks very much. I appreciate it..

Thank you. [Operator Instructions] And our next question for the day will be -- I'm sorry, our next question will be coming from Ann Hynes of Mizuho. Your line is open..

Hi, good morning. I know the past couple of years you have provided forward year guidance. Is there anything directionally you want to say about 2025 from maybe a margin perspective.

So like, for example, if we're in a maybe mid-single-digit revenue growth environment, how do we view margins in that environment?.

Yes Ann, we're not going to provide any context on 2025 at this point, just given just the uncertainty around cancellations. We really want to have another quarter under our belts, so that we can provide some good perspective and guidance on the fourth quarter call..

All right. And then how should we think about margins? Like, for example, if you only grow mid-single digits, how should we view, this quarter, you had a lot of cost-savings.

Can those continue in a lower revenue environment?.

Yeah. I mean, certainly, they can continue. But remember, there's a lot of other factors that come into play on margins, your reimbursable cost, what's going on with utilization, what's going on with retention levels.

We're kind of operating at a pretty optimal spot right now across all those different metrics and it just depends on how those progress throughout this quarter and into 2025 as well..

Great. And one last question.

Did you, I might have missed this, but did you talk about gross bookings were they actually up in the quarter and the issue was just cancellations?.

Gross bookings were not up in the quarter. But again, the reason they weren't, the reason they were low was because of cancellations in the prior few quarters. So I mean it's -- cancellation of pipeline work and so I should separate what I'm saying by cancellation.

We report the cancellation of backlog and gross bookings and backlog would have been lower, but the gross bookings and backlog this quarter were lower because of cancellations in non-backlog work prior to that, which we generally do not provide the non-backlog cancellation magnitude.

Does that make sense?.

Yes. Thank you..

Thank you. [Operator Instructions] And our next question will be coming from Dan Leonard of UBS. Your line is open..

Thank you. First-off, the dynamic you're describing where companies were funded during the sugar high of COVID are now running out of money.

Any sense for when that will be completely washed out of the system? I mean the funding peak was three years ago at this point?.

Yes. I keep hoping that's true, but look, we still have some clients that are kind of taking it quarter-to-quarter and continuing programs that really were funded in that period and are not well-funded companies. Again, we've -- a number of them have gone bankrupt.

We gave term notice to a fair number of companies, because of inability to pay and terminated. Most of those didn't make it. Some of them eventually did get some funding and have continued on. But there's still a number of projects that we have that are a challenged funding type situations.

I'm hoping that that's done, but it kind of depends on the future business environment. If things turn south again, you get more of these cancellations potentially. Certainly, the overhang is less, I guess you'd say, but I can't say, it's entirely eliminated..

And just a quick follow-up. Possibly you could frame your expectations on what book-to-bill could look like in the fourth quarter. I'm trying to triangulate your various comments on pre-backlog and RFPs being down and thought it would just be easier to ask..

What do we expect our book-to-bill to be in Q4?.

Yes.

And I understand you don't want to give an explicit number, but maybe you could just offer some framing thoughts around that?.

Okay. So better than this past quarter. Better than one. Look, it -- a lot of things do happen during the quarter. Like I say, most things are in that pipeline, but what makes it the backlog and what gets canceled and all kinds of other things have a rather large effect on that between a 1 and a 1.2.

But I think it's not going to be a 1.2 and it's not going to be 1.0. It's going to be somewhere above a 1. And look, you can kind of, if you look at it, look, it's going to be depressed. So if I -- if it was going to be 1.2, I wouldn't say that was going to be depressed. So we're talking about probably under 1.1..

Appreciate that. Thank you..

Thank you. [Operator Instructions] And our next question will be coming from Justin Bowers of DB. Your line is open..

Thank you. Good morning and thanks for the question. So just one on backlog.

Can you give us -- this is related to Dan's question, but can you give us a sense of how much of the backlog is from that vintage from 2020, up to let's say, 2020 and 2021? And then the second part of that would be of the sort of that not yet awarded, but impacting the go-forward bookings, is there a way to quantify what the impact of that is or frame how much of your typical bookings historically have reflected on some of that not awarded, but it shows up in the gross?.

I'm sorry, I don't, I'm not understanding exactly what you're looking for.

How much of the unrecognized backlog is going into backlog?.

Yes. So part one is just like if you look at the current backlog, how much of that is from the '20 to '21 vintage? And then the second....

That's an easier part. So let me just take that. I don't know, I don't have it broken out. It's like I say, I think there still is an amount there. And I do point to that as because we've never seen an environment where there was three quarters in a row of kind of this high bet cancellation.

And I do put it together to there was a disproportionate number that were kind of funded during that period. But look, this is a -- I don't want to make it sound like that's the only, it's only the post-COVID sugar high that we're coming up. This is an ongoing thing, of course.

We do have a lot of clients that are dependent upon the capital markets to complete a project, okay? So just even in normal time, okay. So I think it was exacerbated though, because there were a fair number of projects funded during that period, and they still represent a chunk of our backlog.

I don't think it's a majority of backlog, but I just don't have a breakout of just when things were awarded, et cetera. But that it is, it enhances the issue in terms of the great rise in funding that was available and then the acute drop-off, that's the issue. And this happens all the time.

Even now, we're getting projects that are funded because things are better than they could be for that company a year from now. So I don't want to make it into a just all one-time event. But I do think that contributed to the size and duration of these cancellations..

Understood. And then with, so just trying to make -- part two of that would just be, okay, historically in any given quarter, if what percentage of your bookings are related to this dynamic of in the pipeline, but not yet awarded? For example, is that like 10% or 20%, but virtually 100%..

I thought, I answered that just a little bit ago. The -- almost it's very rare that a project is awarded in a quarter and then it is recognized into backlog in the same quarter.

It generally takes a few to several quarters for that to happen, because our backlog recognition is the project really are beginning to enroll patients in that, within the next quarter. So and that usually takes you can say six months or whatever, but it's very rare that it's only a month or two..

Okay, understood.

And then, and with just based on what you're seeing now with the current backlog, how does that impact your view on employee growth over the next quarter or so? And can you give us a sense of maybe like reimbursable costs? Now are we at like steady-state given what you're seeing? Or would there be any change with sort of the mix there?.

Yes, I can speak to employee growth. We did increase headcount, it's about 1.8% from the prior year. That's likely where we're going to-end the year, given that Q4 is historically a slower hiring period for us. We do expect accelerated growth in 2025.

Putting a finer point on that is something we'll do as we issue our 2025 guidance on the next quarter call.

Kevin, you want to speak to reimbursable cost?.

Yes. In terms of reimbursable, I mean, we'll provide more context on 2025, and next quarter. But historically, we've been in this 33% to 35%. It's always been volatile and certainly, our ability to predict it has been challenged of late.

It was very high in the last three quarters of 2023, approaching 40% and then it dropped in Q1 and then back up in Q2 and back down in Q3. I don't think it's going to get back to that 33% to 35% range.

The fourth quarter, our modeling would suggest it picks back up, not to the levels that we saw a year ago, but higher than what we saw in the third quarter. And I think costs are stabilizing and normalizing. There's still stress on-site, but likely 2025 is still somewhat elevated, but perhaps not as high as what we had expected exiting 2023.

But we'll try to provide some more color on the fourth quarter call..

Understood. Thank you..

Thank you. [Operator Instructions] And our next question will be coming from Charles Rhyee of TD Cowen. Your line is open..

Yes, thanks for taking the questions. I just want to follow-up, August, you talked about, I know it's not all of your backlog, but when we think about that period during COVID of funding and these companies running out of money.

What about the kind of significant amount of funding we had in the first-half of this year? Did that not go to some of these clients or has that money not been released? Could it be that some of that comes back for these companies that they're waiting on funding? Anything if you can connect sort of the companies that you're talking about here that are kind of running out of money versus maybe those that did get funding in the first part of this year, were they not necessarily the same?.

Yes. No, it's -- look, there's a lot of overlap. A fair number of companies that we work with did get funding and their projects are continuing and they're the ones that didn't cancel. And there's a fair number that didn't get funding and a few, actually two that I'm aware of that we -- they weren't -- we had a great deal of difficulty.

We served them kind of notice of our plans to move on, because they were unable to pay us, and they eventually did get some of that funding, so you know some of them with us, some of them without us and some did not get funding. But it's not like that funding was just evenly distributed.

It was given to specific companies and not everybody got funded..

Got it. That's helpful. And maybe as a follow-up. Last quarter, I think you guys talked about looking to be opportunistic with share repurchase, shares -- since earnings since last quarter, right, have been under pressure. But then when we look, I don't think you guys bought any stock back in the -- in this last quarter.

Any reason not to have been more opportunistic this past quarter? Can you talk about sort of your thoughts on buying back shares? Thanks..

Yes. I mean our -- Charles, our strategy hasn't changed and we try to put plans in place and we're somewhat limited in terms of timing on when we can put things in place and we've got certain restrictions as well. And unfortunately that those plans did not trigger. We'll continue to be disciplined in our approach and opportunistically rebuying.

And to the extent that we're able to execute on that plan, we'll buy shares. If not, we'll continue to build some levels of cash here..

Okay, thank you..

Thank you. One moment for the next question. And our next question will be coming from Jailendra Singh of [Truist Securities] (ph). Your line is open..

Is it Jailendra Singh, just want to make sure, I didn't hear the name..

Yes, I'm sorry. You can go ahead..

Yes, hi. Thanks. Good morning. Thanks for taking my questions. So, I just want to go back to cancellations. You called out Q3 trends were similar to Q1, but better than what experienced in Q2. I want you to put a finer point on the intra-quarter trends in terms of cancellation.

Last quarter, you called out trends were soft in June, but had shown signs of some stabilization in July. Did that not just actually happen as you wrapped up the month or was it really that trends got worse in August and September? It looks like you're expecting book-to-bill to improve in Q4.

Does that mean trends were better exiting Q3 and likely continued in October versus what a book-to-bill of one might imply? Just trying to understand the trend, recent trends and maybe something about October..

Yeah, I don't have the exact dates. I think at the time of our last call, we only had a couple of weeks dated into July and it looked fine and probably looked like it was going to be within the sort of usual range.

But over the quarter, it's not like it just all ramped in the last month or it suddenly spiked at any given time, but we did have a number of cancellations through the quarter that pushed us out of what we consider the normal range. But again, it wasn't -- that wasn't the reason we have a 1.0 book-to-bill.

That was more driven by the gutted pipeline from prior cancellations..

Okay. And then my follow-up, I want to go back to Eric's question around market competitiveness with some of your peers making a big push in EBP and biotech space with an argument that they are focused on providing specialized services to meet the unique demands of this customer segment.

Just trying to understand like have you seen this market getting more competitive? I understand you might not have lost any client to a competitor due to client dissatisfaction, but what are your thoughts on your potential clients having more choices today versus Medpace being the partner of choice for these customers in the past?.

Jesse?.

Yes, I'll jump in on that. We haven't -- the win rate has been good. But as August mentioned earlier on the call, it is a competitive environment.

We're seeing good competition in the field, but nothing that we'd point to in terms of any irrational behavior or a rational aggressive pricing competition in the market, competitive space, but no change really that we're seeing..

Okay, great. Thanks a lot..

Thank you. [Operator Instructions] And our next question will be coming from Max Smock of William Blair..

Hi, thanks for sneaking me in for the follow-up. I wanted to ask, going back again the front-end demand environment. I think last quarter you pointed to RFP flow up about 16% year-over-year. Biotech funding maybe took a little bit of a step back in the third quarter, but still overall, September was strong.

Just wondering if you could comment on what you're seeing in terms of RFP flow so far in the fourth quarter as well as give an initial kind of update on how that initial award that pre-backlog or bookings number has trended over the last couple of months?.

So RFP numbers in the fourth quarters to-date..

Well, or third quarter? And then, yeah, any sort of look at how those flows have trended in fourth quarter would be great as well..

Okay. So fourth quarter, they were down a little bit sequentially. Not a great deal, but they did they did tick down. July, I'm sorry, October, we wouldn't really have anything yet.

It takes a standard turnaround for RFP coming in is 10-days, so you don't have any information on it till at least 10-days after it arrives, because you don't have any numbers on it. You could just count them. And of course, what I'm talking about is dollar RFP flow. So we really, we just have numbers for September, just very recently.

So I really don't have any kind of trend. Certainly, the RFPs have continued to come in. I just don't know how dollar-wise that would translate into in Q4. But Q3 was, it was bit down on the -- of more than 10%, but not a great deal..

So sorry, just to clarify on that.

So down 10% sequentially off a strong Q2 number, but were they up year-over-year in the third-quarter?.

They were down slightly year-over-year..

Got it. Thank you..

And they were down, they were down less than probably I don't know, maybe similar kind of pop down that they were had popped up in Q2..

Thank you..

Somewhere similar..

Thank you. [Operator Instructions] And we have a follow-up question from David Windley of Jefferies. Your line is open..

I missed the name.

Was that Dave Windley?.

Yes..

Okay. All right. Great. Thanks. So a follow-up. I appreciate Eric's question on kind of addressing some rumor that's been out there head-on. Another one is that you are pursuing or have won big pharma contracts. And I suppose if those, if a big pharma opportunity was a full-service opportunity and fit your model, that would be good.

But the odds of that are fairly low.

And so I guess, my basic question here is for -- to ask you to discuss your go-to-market discipline and is that still consistent in terms of your focus on biotech and your focus on full-service work?.

Yes. I will not run if nominated, I will not serve. I don't, I'm not aware of us being on large pharma work. So no, our go-to-market remains the same. We're not jumping and trying to do large pharma. We're not doing a partial service. We're not doing functional. We're not doing staffing, we're not doing any of that kind of stuff.

Our -- I think our core business is good and strong. It -- I think that there's been some funding difficulties that have translated into a number of cancellations here, but I think longer-term, we're on the winning strategy and we don't plan on changing it..

Got it. Okay. And further on clarification. So, I think your commentary has largely answered this around the kind of the nature and source of the cancellations.

One of the perhaps explanatory theories that we offered last night was that, because your -- excuse me, your pass-throughs have come in light of your expectations, a couple of the three quarters year-to-date that maybe some of this was a lowered forward expectation around your pass-throughs and therefore, maybe calling out some amount of pass-through -- sizing pass-through estimating in the backlog.

From your commentary, it doesn't sound like that is actually part of this, but I thought I'd give you an opportunity to clarify and confirm..

Kevin, do you have any kind of?.

Yes, David, it's not related to some kind of an adjustment on future forward pass-through activity, if that's your question..

Yes, it is. Okay. Thank you. And then lastly on labor, I appreciate, Jesse, your answer sounds like, if I understood correctly that your Q3 ending headcount is what you expect to end 4Q.

And in terms of kind of utilization of those staff, I presume that your margins have benefited from not having continual flow of new employees coming in and not being billable or being underproductive.

Is that correct? And is there still some of that benefit that you could squeeze out of the organization or is that kind of at a peak?.

Yes. You're right, Dave. There is continued efficiency. We got low turnover and good utilization of staff. So plenty of staff in terms of the individuals that we're sourcing and putting onto new projects and then also just good efficiency of existing seasoned staff because we're not hiring as much right now or haven't been hiring as much.

The burden then on the existing employee base in terms of training and mentoring and bringing up to speed those newer individuals is lower and therefore their productivity on billable work is higher. So in a good spot now.

As I mentioned, we do expect to accelerate hiring as we move through next year, but the rate of that and the size of that will largely to be dependent upon what the bookings look like and what the future opportunities turn out to be..

And so, sorry, thanks for that, Jesse. Sorry..

Let me just add, our turnover is the lowest, the last two quarters been the lowest possibly ever, certainly in the last five years. So it's just, it's really in the past year just come down to record lows..

Thanks. Thanks for that. And I was just going to clarify, Jesse, on the productivity point. So is there actually still even room for productivity -- for further productivity to lead to even higher margin in the near term? And I guess, you've kind of guided to that, but I just wanted to ask..

Yes, I don't think a great deal. I mean, I think we..

Okay..

We're at good efficiency now. I don't think there's a lot more of margin expansion in terms of leveraging lower turnover and greater productivity than we currently are experiencing..

Got it. That's very helpful. Thank you for taking my follow-up..

Thank you. [Operator Instructions] And the next follow-up question will come from Eric Coldwell of Baird. Your line is open..

Thanks.

Can you hear me?.

We can hear you, Eric. Go ahead..

Great. Yeah, great. I wanted to just wrap up here with backlog burn. You've -- over the last couple of years, you've had a range from the mid 16% on a quarterly basis up to over 19%. Last three quarters, you've run consistently at 18.2.

What dynamics might be in play that would shift that burn rate up or down over the next 12 months? Just thinking about all the moving pieces of these cancellations and then pass-through volatility, et cetera.

I'm just, I'm trying to get a sense on whether you're expecting a similar low 18s rate going forward or if you have reasons to believe that could go back to the lows of a couple of years ago or the highs of last year..

Yeah, good question, Eric. I mean, certainly, we continue to -- progress of studies continues, and it's very healthy for active programs. I think the burn rate is more influenced by what's going on with bookings. So when the period that you were stating where it was kind of in the 16%, that was in the period where our bookings were closer to 1.4.

And you're putting all of the programs in the backlog, and these are programs that are starting to burn, but it takes a while for those programs to burn up. Now here lately, you've seen the reverse of that, where the burn rate started to pick up as kind of the bookings have slowed down.

So it's not a function of how programs are progressing necessarily more in our case, as much as it is just the calculation on how bookings are progressing. So I think the burn rate, you'll see just kind of stay at this level depending on what happens with future bookings..

And then last one for me, just a technical one, would you mind sharing how many projects or trials you're working on in the moment? Just maybe on an annual basis, maybe quarterly? I'm just -- I get a lot of questions about how many studies or different programs you're running at a given time.

I'd love to get an update for the total number, if you have that..

I mean it's in the hundreds, Eric..

It's in the 500 or so..

Yes..

500 range..

Yeah, I think. I -- last time I….

Yes..

Perfect. Okay. Thank you very much..

Thank you. And the last question of the day will be coming from the line of Charles Rhyee of TD Cowen. Your line is open..

Yes, thanks for taking this follow-up. Just a question on the pass-throughs then, is some of the issue with pass-throughs falling? Is that really from delays and trials? So the service revenues because you're still overseeing the project, so your billing for them continues.

But have you seen, I think you've talked about in the past, is that just a function of delays in study starts or other things that are kind of slowing that process? So the pass-through revenues haven't been expended yet, but arguably those would come back as those projects get ramped back up. Yeah.

Just too curious on that dynamic, if that plays into it at all. Thanks..

Yes, I mean, it can be a number of things. It can be slower startup activities than expected. It can be a mix of programs across the portfolio. It can be the timing of when sites are submitting their data files and their invoices. So there's a number of different factors that can contribute to that.

As I've said in previous calls, we're dealing with 1,000s of sites and 100 of programs, and some of these things are somewhat out of our control in terms of when the data is submitted to us. So it's a number of different factors and it's very difficult to predict from quarter-to-quarter. And we've seen this volatility in the past.

It's not something, Charles, that's new. We've seen this quarterly volatility in the past as well..

Great. And actually, Kevin, one last for you. You said before you're looking for certain triggers to buying back shares. Can you kind of dive into a little bit? What are generally the triggers for you to be able to go in and repurchase shares? Thanks..

Yes, I mean, look, I mean, we're not going to kind of divulge our strategy, but we try to pick different levels where we see value and put plans in place at those different levels. Certainly the timing of when we do that, we've got some narrow windows to be able to execute that.

And again, if those plans trigger, they trigger, but it's something that we continue to evaluate and remain pretty disciplined in our approach..

Great. Appreciate it. Thank you..

Thank you. This does conclude the Q&A session. I would like to turn the call back over to Lauren for closing remarks. Please go ahead..

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 fourth quarter 2024 earnings call..

This does conclude today's conference call. Thank you for joining. You may all disconnect..