MEDP - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to Medpace’s Second Quarter 2018 Earnings Conference Call.

Before we begin, I will read Medpace’s Safe Harbor regarding 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 factors important 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 obligation 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’s Dr. directly press non-GAAP financial as release is certain President earnings over attachments 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 also that, Executive Company’s financial in the opening begin. measures A for the call, to be and August

August Troendle

Good revenue faster Thank call rapidly the on me than in and we client. Officer and environment Bookings anticipated, strengthen. project Officer, everyone, call. Medpace’s with projects concentration Chief without our Financial continues welcome to the by earnings XXXX second The and with last unusual year. Chief ramped day, observed or Operating you, QX funding operator. quarter were With is Geiger, business broad-based that quarter Jesse hurdles to few progressing Labs.

we well the We done believe are in I we positioned forward past despite maintained overwhelming have as strong client bias biotech share serve. the a the five consistently to have we organically to continue going to oncology base to presence – the area have toward market but over years. continue capture successfully diversified respect limited a in oncology therapeutic portfolio small with in

for was now financial second over review last organic update constant-dollar in performance revenue and Jesse will Our quarter quarter guidance. XX%. our year’s growth the QX

Jesse Geiger

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

basis. net new backlog and ASC the XXX presenting on ASC We and awards both business XXX now are

basis. in were across XXX, million, the an XXXX. of for to $XXX.X in prior quarter XXX EBITDA before hire the entering increased XX.X% to awards which book-to-bill. XX.X% XXX the of activities increased XXX million, was X.XX in Net EBITDA EBITDA constant investments the ASC second quarter, XXXX beginning year quarter under new under headcount margin in second backlog year. the on XXXX. present compared XX% adjusted ASC in the year-over-year we the fully in second for a of bandwidth. new paid quarter currency and Revenue between or margin margin XXXX. differences accelerated the compared the basis, projects at end XXXX. the momentum X,XXX this to to company net given On net pace ASC existing as the the EBITDA second the second reimbursed $XXX.X We potential was biotech XXX second basis and recognition funding continue XXX, percentage, Adjusted $XX.X employees basis, points in resulting fees prior revenue higher by well will to across adjusted the to transitioning between XXX, the of strong to Under for higher business XXX only increased employee $XXX.X We to On keep robust there and adjusted business continue way revenue the was as second and of basis quarter Net ASC EBITDA duration Adjusted XXXX. net quarter quarter currency inclusion of million revenue development book-to-bill the timing in XX.X% XX.X% awards of continue a XX.X% quarter awards and of a net growth mind basis investigators was versus The ASC comparing ASC calculation XXX ASC represents on in $XXX.X XXX are representing environment, revenue offset service on in EBITDA million, any partially increase employee-related a a costs of reported of which revenue, XXX previous standard, the were When by period. a ASC continued increased a for constant quarter in XX.X% and impact This ASC $XX.X margin and an portfolio. $XX.X XXX, million and was from Adjusted has the revenue second period. of costs. to was million adjusted X.XX. out-of-pocket fueled the under million, ASC ASC that attributable business primarily the under related the was EBITDA aggressively under

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

adjusted growth $X.XX large and portion adjusted By by or per XXXX further see $X.XX. of income a the per continued antiviral, market opportunities share of XX.X% diluted revenue cardiometabolic a income AVAI. by where remain diseases, represent on of primarily versus of our XXXX grew net diluted With focused and we of area, anti-infectious our net market share second growth. small our total customers to mix therapeutic for biopharma business regard midsized we customer that our quarter serving and driven size, quarter oncology, segment Second was core

we maintain a Regarding and revenue. our total representing our with roughly top and top X of XX customers XX%, customer mix, respectively XX% concentration, well-diversified

Turning flow free operating second X.X to to our and our days compared outstanding conversion. In liquidity leverage to quarter ASC sales days. $XX.X X.X as first an now activities, from well we cash from in days the as flow and basis generated quarter, XXX the positions decreased million cash net on

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

XXX. trailing exchange now given And presenting Consistent XXXX update. Our with our that this for assumes June for XX. of based net are on as EBITDA. on year second rates we leverage guidance XX-month ratio the is rates approximately guidance is exchange the quarter, guidance times the last adjusted half based update And ASC of today X.X guidance the

reflects $XXX growth guidance the XX.X% range XX.X% $XXX.X service over revenue XXXX net full million to of revised Our XXXX, revenue $XXX representing service million net in organic to the of of year for million.

adjusted in in range range our of basis, can range income growth representing that, And an to $XX.X representing GAAP XXXX $X.XX adjusted range represents EBITDA organic XX% XXXX the to million rate the million, is XX.X% in of and with diluted to I million $X.XX. will million, range income On to of your net XXXX XX.X%. $XX.X of take XXXX. forecast to of be diluted of XXXX the XX.X% XX.X% to in $X.XX adjusted earnings to to $XXX million We growth share. the we to still $XX to over share so XX% $X.XX net million effective call GAAP $XXX anticipate forecast we $XX back XX%. per of over revised growth operator Our questions. of tax This in We per XX.X% the turn the to the guidance and

Operator

Erin the Wright question first Credit Our with from Instructions] comes Suisse. [Operator of line

open. line is now Your

Erin Wright

thanks. to influencing number? new the nature sizable any more factors and therapeutic mix, the were or Looking or latest business quarter? disproportionately Great, Thanks. there contributing you customer one-off, that your speak new win wins business mix in of larger at Can the

August Troendle

Yes.

to tried my As unusual There no either project. in client remarks, or diversified. opening pretty it concentration for I mention was was

broad. So it’s pretty

more portfolio. In a our than terms of bit therapeutic mix, overall it oncology was

that in real No broad, though. was moving lumpiness. It still We’re pretty direction.

Erin Wright

the And Were to environment? funding I that biotech, about, great. great. and seeing types that Is RFPs? that’s how then strong metrics? guess, this to midsized be give if you in guess, I converting you can environment broader RFP we trend contributing And of, RFIs think would biotech you to Okay, can a of how terms should discuss of seemingly Thanks. And wins bookings those sense accelerating?

August Troendle

Okay.

revenue. companies. – small is business It fact, biotech biotech It’s, progress strength strong overwhelmingly was more XX% a lot if small so did So over of going as smaller or our very and been think lot up. it We’ve of strong. was environment has We were I seen very of have XX% towards A the revenue good anything, of I client proposals. RFPs the our awards. biotech. And was more in said, on and

we’re think I share. winning our

market strong. very overall the think is I

due smoothly. had I us of the In off going sort rapidly did slowdown client to delays, and we not of delays, was the quite delays, clients, easy quite running mid-based surprised think things for growth, take along either moved we lot of steady as really on been think No surprisingly so no the funding was to start-ups second one that, number have seen was or no haven’t very by And reason, in thing that things whatever programs. which have last a quarter. year, rapidly. that a revenue we which

Erin Wright

great hear. It’s to Thanks.

August Troendle

Thanks, Erin.

Operator

with comes Our from question next Jefferies. David Windley

Your is open. line now

August Troendle

unmute? you are Dave,

Operator

Our comes MUFG next Jason with Twizell from question Securities.

now open. line is Your

Jason Twizell

good everyone. Hi, morning,

about the and over where wondered perhaps a in in which terms domestic you discussed that next capital deployed investments, prior year the or quarters. could and talk just to abroad, if Japan expect In if little I of you is see additional you’ve more China, bit

Jesse Geiger

Sure. Thanks, Jason.

this relates build-out require cetera. IT, to are expanding et year of some a outlays that abroad capital offices additional capital the equipment, of we’re more as it expenditures, furniture, some number space, As near-term

during So in larger up U.S. – and a outside an on we’ll building from expansion and office into another that lease real starts be putting year. the relates in here next offices begins the to as the U.S. space taking year U.S. largely in The perspective this XXXX

we laboratory, standpoint. in our of and Belgium space our into is the are So space this the both and expanding, our from office that’s an some U.S. year, year mix in facility. last started In also where

Jason Twizell

still a staffing market then you conditions little a of to that. bit that great. And XXXX? the you the abroad. on as for And about – Okay, and uptick are U.S. in I half you’re add expecting labor guess, in second talk seeing, the Thank sequential then headcount, the side, in about lives X% I

August Troendle

we’re Yes, aggressively. pretty hiring

far this so X% I think up year. our headcount is

the to we it in expect of course, are our of to hire year. the – year going the half to And, the quite We hire revenue, of be it’s the up easier so of kind year. second half through second of through the in range aggressively

– out. That think paid bit first in I tends have tends spike a turnover time to our late bonuses overall. of higher quarter we little turnover the to a the industry with be

we’ll with So I count. employee up catching be of revenue our terms think growth in

seen particularly about is it. labor difficult are actively haven’t and it the always We anything people good working to market, challenging on we find but

Jason Twizell

much. Okay, Thank very great. Appreciate the you color.

August Troendle

Yes. Jason. Thanks,

Operator

Donald Instructions] question line of the from comes [Operator KeyBanc. with Our next Hooker

is line now open. Your

Donald Hooker

your Is more Question you growing as you’re capacity its outsourcing? core from guys good a Are own business. seeing of your morning. could on central separately service full demand business lab expanding that there? be on that there sort Great,

Jesse Geiger

Yes. Thanks, Don.

demand, to the part comes with as a CRO works amount good lab full-service of engagement compared would some say, of the between seeing I stand-alone activity. lab We’re that activities balanced operation

in pull-through seeing a is does lab wouldn’t are growing more effect impacts that say the that both good the We’re overall outweighted, progress the that areas. one either positively. I business, but we more have

Donald Hooker

would Great. but to And if you’re ask. willing this, know don’t do able I or I

rest question guys normal sort mean, quarter ratio same funding sort given targeting? and on backlog client around assume moved there it’s was guys there normal In anomaly in kind is terms of burn to It continue – But you a a burn. an of I past, backlog trends – for kind this or what you and that in quarter for the we in of any talked in your book-to-bill of think XX%. of the be as about for of front. where past. kind to XXXX, might reason? like burn half that one-off Obviously, very, a the guess lot of should year? assume be Is book-to-bill of we backlog the like you the base, strong. seems is XX.X% very the outsourcing a second of into And of this sort should seemed look sort – should I of we I some Thanks. it

Jesse Geiger

Thanks, Don. Sure.

book-to-bill the so second second we’re a about half X.XX X, the quarter closer in the in assuming of X.XX of an year. We’re rate something outlier, targeting the Certainly, to was X.XX.

as the range. more is expectation for of that us – rate far – It XX%, normal kind XX% far us for XX.X% has trending so As around the been higher in up north burn goes, this year. of is

expect the it’s so. or XX% range year, to this probably would for stay of So around balance that I going that

Donald Hooker

Okay, thank you.

Jesse Geiger

Don. Thanks,

Operator

comes question Our with next Coldwell from Eric Baird.

line now Your open. is

Eric Coldwell

thanks Hey, much. very

headcount growth, comments also especially revenue at high, grow hiring. you’re margin the four cited considering to parity extremely is the in and headwinds is which you margin aggressive almost going incremental pretty earlier with year the that Your

getting how Is August there pricing? Thanks study much. helping exceptionally and the cited? be it So Is factor numbers? high to Is other you easy simple do very mix that? question, here it there that’s you start-up some are that

August Troendle

smoothly. It’s moved Yes. along think I things – just rather

a picked fair obviously, has utilization, up Our amount.

basis, So half, and the a year but last on it’s at high. high not particularly a historical in

lot So time, anticipate long now. if going utilizing think there of of bit why we’re capacity. that’s we I growing a lag forward, digits quite a is hiring we a double wanted capacity select We to because and keep are select

of necessarily We’re growth. be not particularly, kind for It’s now will year. people future hiring that utilized this

it keep so we growth. of curve more that to used But select can the So anticipated. than we of up we’re we our ahead maintain trying have

pricing It as business ramped a true selective gets more But faster Our our revenue projects, I on sort is there’s than don’t we strong, here. pricing any change. we anticipated. development but think that dynamic bit rather of doesn’t are

Jesse Geiger

you Eric, are there?

Operator

question Wright follow-up from Suisse. the Credit a with Erin of have You line

Your line is now open.

Erin Wright

when little or you sort I’m but And of RFPs seeing any a little competitor perspective? I comment competitively bit new curious a pricing the setting landscape? the competitive know you Could from suspect? far rationally the usual things. pricing, as what behaving on on commented everyone phases bit as see seeing you Are for is you’re a just those

Jesse Geiger

Erin. Thanks, Yes.

not We’re behavior competitively. pricing any seeing irrational

We’re the and up against been, the PPD. of and traditionally public peers characters that that have cast we same is largely

share. RFPs, good we’re we’re we’re noticing. and seeing so outrageous no that And behavior And a volume of our winning

Erin Wright

hearing, understand Okay, kind drug great. for follow-up, bit your is it broader Washington. one the base? biotech, I And is your more scrutiny if skewed of around then business pricing anything, too towards can. I’m little more I just but if customers curious a out Thanks. on of what early customer you’re Or from

August Troendle

don’t really we on anything hear Yes, that.

Erin Wright

great. Okay, you. Thank

August Troendle

Erin. you. Yes, Thanks, thank

Operator

turn I’m management closing showing the any to at not like time. back questions to call this for further I’d any remarks.

August Troendle

Medpace Dave everyone. our had interest again in Thank sorry speak in and earnings a somehow I ask at if your thank thank you, I QX got you I’m everyone, guess, call. Well, or October, you. everyone hope you, chance disconnected what. But questions. for to to

Operator

thank in and your concludes today’s Ladies gentlemen, participation for This conference. program. the you

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

Medpace (MEDP) 31 Jul 182018 Q2 Earnings call transcript