MEDP - Earnings call transcript Q1 2018

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Operator

Good morning and welcome to the Medpace First Quarter 2018 Earnings conference call.

Before we begin, I will read Medpace’s Safe Harbor forward-looking statements.

During today’s call, management’s 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 other important factors that could cause the company’s future results to differ materially from management’s current expectations, including those discussed in the Risk Factors section of our Form 10-K for the year ended December 31, 2017 filed with the SEC. Management disclaims any obligations to update forward-looking statements in the future even if estimates change. rely views of after as not as forward-looking today. should management’s representing of you on today’s any statements Accordingly, any date

non-GAAP at Relations The to the to call. on slides are most With section now During referring of will comparable call GAAP of slides will website presentation management available Medpace Dr. directly press non-GAAP financial as release is certain President earnings over attachment such Investor today’s with and Officer the turn to its Troendle, this connection Dr. Chief available reconciliation earnings remarks. measures. please investor.medpace.com. Troendle, provided measures call I be that, Executive company’s financial in the opening begin. measures A for the call, to also and August

August Troendle

Good of dollar and a possible and like under as book employee as X.XX our earnings service XXX.X QX Please XXXX a to Thank call million. of of reported XXXX. distance on X me XXXX the Nobody and on lost Officer was old At XX.X% and at ourselves to Officer everyone slowdown call. X,XXX was was in of entering at XXX.X transition. over XXX our Medpace’s and Chief our XXX to ASC million Financial welcome the presentation. earnings good XXXX quarter QX first We Chief basis refer XXX.X bill first our would both as ASC a constant day XXX. applying ASC Operating on quickly start. you, QX from slide giving Labs. Operator. increase approach came end million quarter Net With the Under backlog a QX XXXX is Geiger, Jesse to organic headcount new in were revenue XX.X% the for Revenue business ratio. was awards of

QX. with anticipated growth forward rate. to However, ultimately of face at the growth. acceleration backlog revenue of we and QX conversion projects challenges expect revenue would the for more curve this like accelerating Therefore, trajectory steady achieving year, normalized quarterly a be fundamentally will ahead from consistent in not and recognize the some as we several pull smooth growth was of I growth we benefiting even

strategy sensitivity significantly in Our a full-service providing companies exclusively more outsourcing an pre-revenue our model. there offerings to We opportunities interesting funding. of is high large small biotech limits and concentration flexible greater have clients therefore of where in

one not a see no signs early at present, of XXXX, growth which slowdown resulted unexpectedly for in recognize that we Although at signs XXXX. we we of late revenue did must admit low

short-term to flows slowdown in earnings suggested this that growth decision leads reiterate more call which me quarterly service and bandwidth, and remainder an in ASC borrowing than on outsourcing flexibility strong on funding XXX funding through services sales experience strong growth we Our double-digit for in flows, the cycle of said, business to long effectively. going a continued will expect clients and our That last to forward. a volatility our clinical discussed are see our peers. we backlog demand XXXX be hard targeting in based improve the should development however funding mitigate expand changes All will basis revenue probably

RFP would attempt in would questions organic to our well with was the investments anticipating following. moving projects prospects. we funding in QX. environment strong I some optimistic progressing was growth Our as expect. business about by the good are forward we add time and volume are The save in Then

particular quarters. historical Our And concentration backlog with area were was was awards. Cancellations the our there through has competitive rate awards. for hit and line and expectation backlog therapeutic our strong was been in Oncology no three range. QX strongest among in our past

more in performance. review a Jesse? provide detail will Jesse over financial Now

Jesse Geiger

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

a reminder of investigators recognize fees obligation, are percentage approach arrangements now other the revenue standard, from and an on customer. using new on as our XXX were revenue acts indirect and item As out reimbursed of agent modified of this a retrospective ASC and service with January costs. revenue, line pocket XXXX, we performance adopted and paid Under single a within revenues related a revenue reported inclusive single the of we to where completion behalf the company expenses Xst revenue on basis and presented

experience or did XXXX. upfront EBITDA on XX.X% XX.X a EBITDA the the revenue business across which basis. a comparisons new adjusted reporting Under on will For continue we quarter in million will to million XXXX the were be activities backlog was constant XXX.X basis. so represents ramping was million basis. disclosures period compared previous in under XXX heavy the Net than reporting XXX, first activities. quarter was if million projects driven related XX first XXX Revenue to of ASC under service can with increased ASC basis quicker XX.X% we XX.X We on up anticipated we XXXX. first quarter In which metrics the increased reported future, as XXX provide million Adjusted that the first quarter consistent ASC of made ASC currency provide of a under on also XXX year-over-year by XX.X% and elevated revenue awards the XXX.X XXXX. net an several the standard partially of was in ASC in growth a

and was first under the EBITDA XX% first increased increased currency for increase in ASC EBITDA XX versus for an XXXX ASC quarter Our margin a the first points the primarily XX% When XXX, in and XXXX. adjustment year. includes that margin the Adjusted quarter XXX of of related mind percentage, under adjusted for adjusted costs. was employee quarter of are to prior period. impact XXX by given inclusion revenue lease from in fees paid higher EBITDA XX.X% XX.X% prior the Adjusted EBITDA campus XXX revenue compared to the and calculation our related and differences ASC reimbursed cost This between of adjusted XXX corporate has period. constant any margin the EBITDA recognition timing of to On the higher there year EBITDA investigators basis the and comparing calculation to revenue attributable keep quarter revenue, the in ASC potential out-of-pocket adjusted on the between basis offset ASC payments. an in partially

compared year XXX first growth costs. year. the $X.XX income net of per employee revenue XXX, the million income and million XXX, the of $X.XX in year In in period. net GAAP adjusted GAAP million the offset diluted XX.X ASC net XXX quarter prior was to XXXX first this million by primarily to our of XX.X the not XX.X% of ASC underlying XXX does income $X.XX share the first prior net was Under and higher by driven contract. increased prior of Adjusted economics under XX.X XX.X quarter over of the was life in net was However, Under the XX related ASC the contracts income X.X the ASC share income impact in income diluted net period. quarter income which quarter was under Adjusted growth GAAP ASC XXX, under compares million partially net compared of income to adjusted per diluted net XXXX. was $X.XX, quarter under for first for in million per XXXX, GAAP share ASC the

slide grew First we three of across per our per by have share share quarter first XXXX, $X.XX diluted diluted ASC concentration adjusted revenue seven, income categories XXXX, income quarter On $X.XX. adjusted net of a XX.X% of of provided under breakdown XXX. key versus net customer

our Our we was revenue core remain With mix continued to market focused segment cardio of the driven size, small a business a see total portion and midsized growth large customers oncology areas. by where regard that customer on serving further growth metabolic by of primarily and our and market we growth. represent biopharma opportunities within for therapeutic our of

the period. quarter, well-diversified our flow quarter Slide XXX as flow day of summary XX first X.X basis compared increased our conversion and and roughly customer the compared the as X top the the we top our from our customers from prior our cash days revenue respectively days an well we first for trade and cash for operating net generated receivable. year. In to schedule XX.X the mix five Regarding increase liquidity quarter a experienced maintain in positions million activities of to a and of accounts we provides total of as representing with leverage fourth sales XX% free ASC year XX% outstanding concentration an X.X to on

cash was Our of net XXX.X end million. XXX.X position composed the of at million debt gross of and quarter debt XX.X of million the

with the Consistent times net ASC based presenting updated our on ratio was X.X given leverage is approximately we adjusted guidance quarter EBITDA. are XXX. Our last today guidance the XXXX

As net growth X.X% shown revenue range revenue for million. representing of year our in XXXX, to of XXX organic on full XXX.X million Slide million over to service XX.X% the XXX net of service reflects guidance X XXXX revised the

XXX adjusted up down Our in to EBITDA XXXX is the revised Compared X.X%. this full-year XXX to to guidance is X.X% million of range million. XXXX range

basis diluted range growth operator the to this and the rates these per currency XXXX million constant exchange compared XX.X per on X.X% XX%. GAAP revenue XX that of representing range we to a of and EBITDA $X.XX assumptions With representing March XX.X% into be I adjusted exchange XX% $X.XX. adjusted GAAP turn adjusted X.X% questions. $X.XX net our the range growth growth rates. end share will tailwind XX.X% of XX back an over the to and the full-year expected for XX.X% XXXX diluted an On to still revenue range to assumes so our million Considering of your forecast X.X%. the income the the at range XX.X%. we in growth to in million $X.XX assumption is share, income to in of anticipate also guidance XXXX XXXX is template in to XXXX Our to of earnings tax headwind call of and guidance in of We basis a currency net forecast XXXX million EBITDA in adjusted range We XX.X% rate take to XX.X can of to effective the to

Operator

The John come Instructions] Kreger of will question William [Operator first Blair. from

open. line Your is

John Kreger

in is nature two that forward the able something change see? pull you can to little you that? bit quarter And What's quantify the saw you that these the drive are projects? tend August first a the just that to talk maybe of relating that you to more would

August Troendle

it -- It added And much services don't over I of quarter in think a I accelerates -- have the the related you of quarters unique have third going been was I startup, an good think get the heavier project will things a been things but of to a it expect of much it project how for and things we position the that that clues part some burn it up the guidance exact that came the of the was as quarter an forward think because kind add-on quicker it a second was earlier. just of but year how entire of was and a of from overall at why and of I was quarter was revenue would our the things to came and in second of I proportionately. number some lot quarter, increase that would it think our fourth much was idea and would quarter we've but certainly that hit as end doesn't into also to of to kind that's timing pull performed, how year, pull and number have

specific value have So, dollar a don't I but…

Jesse Geiger

probably the way conversion had one XX.X% about we the think range the or we XX.X% a had closer and it of expected burn first is rate a quarter. first in in quarter John to to conversion a

John Kreger

'XX. of one from the a in the I loss, a of it of the full-year we know quarter Jesse XXX you and to is point around have just or longer And is sense for sort think kind hit term in from EPS XXX. them XXX this saw should noise versus a 'XX about hurt XXX it earnings do lot 'XX in I and and $X.XX and to was conversion there about 'XX 'XX help will at XXX,

Jesse Geiger

to think was overtime too I it full QX difference early the tell ebbs adjustment on goes adoption, there and where QX, opening too can are think but the perspective piece flows impact estimates year now a point what impact, cumulative our how I cumulative XXX and thing points then two it $X.XX that's the reflected or in was right tell. to and on recognized one the XXX was then other little larger to that QX was impact one that, it's the it's there I is impact in the is from and what day early of than just

August Troendle

it of a we larger it not of larger wise larger growth dollar relative with If opening was were than grown, projects you sheet as have and all backlog, balance in have the larger the would these large that at times opening And much million several company. reference kind we to but level, made. look very the how ongoing sheet in adjustments expected XXX

Jesse Geiger

thinking for So impact as year overall or about far the for as what’s or XXXX. the it XXXX

here a some build I think as on basis. XXX experience we

economic over models based move of to have no our related will again help a begin effect is get cost it the -- the a a revenue matching yours and the you periods likewise from period life does We it to refine project the of idea but to impact going the some little and activities refine and just basis. disconnecting on bit period between better the

Operator

from question you. Wright Credit is of Erin Thank next The Suisse.

open. line is Your

Erin Wright

revenue. this progression much third progression pull how Just in forward quarter and and forward we maybe the that second here of guess out lingers thinking year I that looking fourth be does on what of guess the about quarterly come throughout the what and how should I'm follow-up quarter to terms of I the entry

August Troendle

so I much you how out pull can we are pulled versus guidance quarterly And I at that’s year things to to be say. accelerated coming issues to some so that that and them going is projected was think might been increased. in kind will give the so have not couple going don’t look and might both forward have later and a for of and why the forward in was that do for I of some QX -- overall guidance one-off we too. helps pulling are are projects the going quarter QX. prepared years think think year for to

think it’s I So, combination. a

quarter but you to under of what can be QX this expect a by giving are kind cadence. think not we I quarter QX

Erin Wright

about obviously should And in the guess Is the how in aforementioned progresses we be of just ahead head up I year? the And that environment of quarter. some count speaking? in set throughout the how this I hiring acceleration guess is projects. thinking generally the how

August Troendle

said we hiring are backlog because environment we have the is down where and pretty strong, And now, can rather looks softened so we shut aggressively. So, be. that growth things aggressively business look are of right we we rapidly ahead we things but had hoped to something development very strong if hiring

pretty those we in doing in had investments also I luck employee of terms good talked are and think quarter. about departures first We we some

to So, effectively we able were add employees.

Operator

The of question Keybanc. Hooker David from next is

open. is line Your

David Hooker

me just bearings right trying here in where get kind I you am margin of because at Can margins investments around of sense of year guess the gross to forward? I margins back, about down, business level XX% guess I are going that’s right and this wanted get you gross can I over up, I you maybe for I if margins? the don’t bear above structurally look point. to for what's forward these know all, employee revenue terms [indiscernible] was -- going back gross but the a talk are if then some also going are from my are gross

Jesse Geiger

that gross while for it so expect or range, we in year. do the the growth our implies Don, in and the in margin do and so implies XX% year XX% was the quarter first XX% for profit to SG&A percent still Sure XX% range the EBITDA guidance lower anticipate we

David Hooker

expanded gross long for Is business? are that how I a think gross guys that term point, structurally Or right margins this we guess, margin you the do overtime given for this at you operating of some in? about geographies

August Troendle

think have pipeline. we of how maintain that we much of At capacity look about the this flat at the point as growth we what as do level in and we

expands the now. but development it’s now contracts which good hiring as I working that think pace think at we funnel right business Obviously a change a can are the working assumption. for good assumption, it’s and I

David Hooker

And -- Are had of in from this theme just can moving perhaps technology maybe outside driving things things hammering around you firing of managing other some and efficiencies, terms with your hiring use profitability. last success that your aside firing? do and of kind and hiring there or and you staff and IT of that

August Troendle

our use in systems it. We data are are software at to and we bit always we a and always looking and IT building quite invest partnerships analyze and

give think number half-dozen we and to don't I our and but adding are that we the recruitment think projects enhancing we trying a areas year investment project it. specific is I them, names I to of a this of would will So, that our to have say there initiatives key in yes lot have improve. is one there we are data a of so a continue, utilization

Operator

[Operator Instructions] Jason Securities. from of Twizell question The MUfG next is

open. Your is line

Jason Twizell

wanted just of the First cash given that cash an and use in of million strong just your update all, on to flow for year. get the pay cash a I revolver on to XX the want quarter a generation down

Jesse Geiger

on are remains prior deleveraging for out we've years so the pay Capital two with capital and allocation elevated reduction debt flow. We to our will expect so, expenditures to we and for us spoken year priority that debt our down continue the focus CapEx priorities. for top do relative cash

Jason Twizell

having where over avoid difficulties still project looking change I the last you few having are high recruitment is order else everyone is overtime some has the how difficult that How years. as challenging a level Has delays from guess that? then patient to And environment just in at it occurring?

August Troendle

oncology diseases industry of good business anyone's key the largely our deep that a differentiate the it's something ourselves. but and today, I and do so rare around we recruitment when how part we timing it disease a particularly into I very perfect solution think of get and in not a job solved, that got is and I that is has primary don’t at think rare you think clinical issue that's a it's more trial and

Operator

There remarks. are like queue the turn questions over for further time. in you. to I’d Troendle no at call back Thank Dr. this closing

August Troendle

everyone you you. call earnings our thank All you right, Thank of QX. end next on to our joining us and at well for talk earnings call

Operator

Ladies you. concludes today’s Thank gentlemen, this and conference.

now You may disconnect.

Medpace (MEDP) 1 May 182018 Q1 Earnings call transcript