MEDP - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to Medpace's Third 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 in 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 actual results to differ materially from management's current expectations, including the impact of the changes to the revenue recognition standard. These factors are discussed in the Risk Factors section of our Form 10-K for the year ended December 31, 2017, and our other filings with the SEC. to change. statements obligation even the any estimates if disclaims update in forward-looking future Management should rely any you representing Accordingly, not management's statements today's views as forward-looking as of date today. on after any of

reconciliation a as its opening call, measures attachments the management measures. non-GAAP such are Troendle, the a press believes most help at financial of Executive replacement I these this that, certain to website comparable slides Investor results. turn the available connection gain not in call Chief These Officer release management and referring for comparable measures company's measures be to investor.medpace.com. directly Troendle, slides During begin. measures call to August is With Mr. more also provided presentation financial Dr. GAAP The now over of earnings to today's will non-GAAP to for Medpace's superior A on are available complete understanding of call. or the will and non-GAAP measures, investors please section but the with President remarks. the GAAP earnings Relations

Dr. August Troendle

Jesse With you, Medpace's Third Call. I cold. welcome message operator. quarter. and the little and this me Operating Financial Chief to on Also Good call Earnings XXXX Thank nursing a Officer Quarter day, is Chief Geiger, Labs. everyone, Officer, have a

a continues rate, a for providing at activity brisk New business nice set-up XXXX.

XXXX Jesse a will the remaining least not with into few performance a for timing in service the and million our is update the problem backlog current Replacing month, $XX that QX a review However, significant we an earlier now be at delayed going XXXX of our but and approximately in the one quarter should headwind will unperformed program for financial see headwind guidance. of of revenues fees. replacement this be occurred the environment, quarters. ongoing cancellation,

Jesse Geiger

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

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

business transitioning continue the ASC new present basis the $XXX.X book beginning XX.X% was awards for basis were X.XX $XXX.X fully million, ASC only, third to book the this a bill. was the or represents constant-currency in ASC to XXXX X.XX. an previous reported before third entering XX.X% in to ASC ASC XXX, under Net $XXX.X which quarter XXX On under the resulting XXX basis, representing on quarter will We were in of XXX a Net XXX backlog XXXX. basis. XXXX. net to million million, new $XXX way a net of business revenue million, growth on awards duration net of Revenue of a under standard, year-over-year in service bill organic

with prior XX.X% was to versus for share for net margin in Adjusted the compares the was $X.XX, which by across XXX and net was income increased hire XXX income was to of million employee-related $XX.X XXX, period. year. in was share under to third Adjusted we growth, million, adjusted basis to driven continue XXX points XXX third XX.X% income primarily adjusted ASC end by X,XXX third $XX.X higher higher a of and basis, net Under increased the attributable and compared by ASC ASC employees offset ASC the year. GAAP ASC adjusted momentum Third income the quarter fueled revenue per growth adjusted costs. employee-related net XXXX. In per prior of ASC third under million year quarter XXX, of net biotech funding EBITDA existing to by for which in On quarter $XX.X increased diluted to revenue the XXXX. net $X.X quarter, partially We share of was compared GAAP awards Adjusted partially of quarter costs. prior $XX EBITDA constant-currency in the environment, quarter XXX, income Under XXX, compared $XX was diluted of prior year compared income for of the at $X.XX was in XXXX. GAAP quarter quarter to Under $XX offset revenue, in XX.X% million was GAAP quarter Adjusted net was the higher $X.XX per $XX.X income for EBITDA headcount million projects. ASC the the third primarily EBITDA XXXX, continued Under under Adjusted million margin and under million third third EBITDA was the company. employee ASC the period. XX.X% to XX.X% solid third increased to quarter the third strong increase period. in of the XXXX. net income the XXXX. XX.X% This XXX, increased quarter $X.XX million ASC $XX.X under prior XXX, the net million quarter diluted year

XXX% share Third $X.XX XXXX diluted $X.XX. share versus of quarter grew net per adjusted quarter net XXXX income income third of adjusted per diluted

and growth by customer size, group. serving market where remain further quarter a a see segment opportunities third growth. Most we the Regarding focused represent customer the in was that continued small large portion revenue our on the customers small of biopharma total we in of of mix and our midsized for business the biopharma

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

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

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

X.Xx XX-month Our ratio net leverage trailing is EBITDA. approximately adjusted

XX. last ASC and based guidance of this gave the Turning quarter, rates exchange we year based rest September assumes guidance update. the of the updated presenting exchange for is are our guidance we XXXX now XXX, on to on the guidance rates with today as Consistent

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

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

Operator

with from Blair. [Operator the Instructions] Your question first line William of John comes Kreger

John Kreger

washed the little would be of you program? And next cancellation. bit could X it you August, what year elaborate the numbers? fairly maybe at point out more just on it just a expect Was to

Dr. August Troendle

I I to few that washed run was it's mean Yes, it's a what do years. going study. single obviously -- you a for know don't project mean out? by

in it, It's you come become in think, new would growth. revenue unapparent. As replace few see a reduction studies to quarters I it'll just, a where our

obviously I But replacement's from a So and it bookings not a perspective, we'll continue problem. like think I said, to was ongoing. have good timing

an into And startup the takes a phase. well it so a to study ongoing, get while in

So and again sort you're the it an then that should accelerate our quarters, a like has you'd inflection, see in growth talking of reduction of I maybe in revenue about past. couple think a

John Kreger

Great. Can or remarks that mentioned bit Jesse, And trends starting wage a then elaborate perhaps your higher recruit to a Are you to little refer during cost labor times to you talent? about or see few question. just cost. more. you higher higher second a had

Jesse Geiger

Yes, be competitive it John, mean to I environment. continues a

that's additions the I seeing of significant the cost heavy wouldn't wage say the in think that, than of I the with rate. more market. labor rates from is driver consistent headcount But inflation a we're cost,

Operator

comes Credit question with Erin next Wright Your Suisse. from

Erin Wright

should question. the I A think and margin XXXX? about next the a think and we gross guess, into quick if to about trends, both margin quarterly follow-up quarter progression of of on How kind an we that SG&A standpoint,

Jesse Geiger

yes, Erin, sure.

in QX to the for to for So kind a margin the for SG&A next give XX% QX, does We closer the midpoint we'll and of EBITDA our XX% guidance in of margin of and quarter's XXXX anticipate fourth would our to the quarter, guidance XX% gross in range XX% range. call. imply kind XX%

Erin Wright

Are it you of unchanged? or others, target that if in curious I'm customer the competitive guess, underlying landscape all? biopharma changes relatively entering seeing that Okay, any yes. have at you I you're biotech or is small base sort seeing

Dr. August Troendle

We difference. from for don't revenue's I I ratio, to going tail the to that and losing. look guess perspective, think really bill off. much market we're don't share notice our by pundits Obviously, But book

think So fine. I we doing are

Operator

with David next Your Windley Jefferies. question from comes

David Windley

able your against quarters that that at third year Are a raise that I the honestly kind curious beginning the hire for outlook, and than in year a fairly, that of plans date? depressed certainly your I anticipated bit. two results hiring getting little to of juxtapose to and to by was margin bit, quarter. are see margin of the done we you that, around a producing kind in to the you raise your able the seeing you're for still revenue I'd are margin guess, the outlook would aggressively to quite EBITDA performance that actual to guidance love the in you which to more by and row how speaks delivering be to you here we're

Dr. August Troendle

sure, Dave. Yes,

making I on progress think are very we hiring. good

I to we're staff XX% track hiring, think staff. is pretty hiring least I basis, an mean of I you hiring adding see XX% on for think. your base aggressive at organic on

I think a we're doing job there. good

we think to hires on the a earlier job the staff we'd addition year. doing planned in I that are in operational good

side And expect So stronger good we'd digit the a to really our What indicating against considerably be anticipated our beyond guidance anticipate is have we and is year. I think growth. utilization year, in and going above into XX%. we the were not growth the did that's quite market's up didn't did growth we've progress lot probably made We But we been bit. a taken cost we revenue revenue. things. double good anticipate The of than

we plan ramp want going I continue So hiring into will continue certainly, year, in our raised the and and to that we rates. have faster fact you'd think than we'd And year. say I to guess, hire into next we going

David Windley

a give in the more exacting so it XXXX that you press see the number And did clarify, I Is release, about says staff. just you on the number to ending? or have

Dr. August Troendle

We do an exact for number you. have

did I think slides. on the we

Jesse Geiger

XXXX employees.

Dr. August Troendle

XXX.

off, we're So one yes.

Jesse Geiger

One closing up.

David Windley

then so market short. moderate your it five a bill is appetites in an think what's as be move quarters? late you see market One to direction last continue funding we've XBI development rising the and and degree any the continue to to the into and be a in we how XXXX volatile do to to three, we I environment activity from of seen four, of that about like not mean But fortification to strong year, and and perhaps bookings that. things of tide happen do us business to if risk some, far that with this book in going predict

Dr. August Troendle

Yes.

then not opportunities. put most using have I'd in we're We're time, ability of funding this a biotech to Right don't I to again, know, cut going think opportunities. to see pull of I But term. I a sharply can guess at and and say, things ability we a growth on this off, greater have think, slowdown. it's lot so handle actually I year our short to we a despite on to the really the don't that we've the But early of untested. up I greater untested. projects see We expand things ways manage late But severity before that we're and being make a pretty did year is initiatives to think we lack think larger the the we of keep Dave, how now, back slowdown, and place sort think I only term. number beef And depending last of opportunity. our can So short over bidding done sense number -- selective, want

we're a I space. longer driver and in think than is industry, funding in the right going the term, to peers and because of in growth biotech our right we're grow this faster we're place,

obviously, -- term, eventually think there longer not sharp but I'm really concerned so be, funding pullback And not I'm I'm concerned. a about and I how will

Operator

Securities. comes question Twizell next from Your with Jason MUFG

Jason Twizell

capital Just deployment. quickly around

of the looking EBITDA is on priorities down like paid buybacks net top front Are going your aggressively order line? you another to be more Looks growing under You the to chunk inorganically debt debt. or in the new M&A Xx. like towards to

Jesse Geiger

Jason, organic paydown yes, on focus investments right now, and we're foreseeable continuing future. for to the debt

If repurchases, an tend systematic short we opportunistic you pay to more to pattern do authorization cash look approach. we're our our than of from right now, But using debt. down have board. in at the share past We be flow

Dr. August Troendle

not future a of debt of be out terms because in debt means foreseeable long. we're quarters guess, going few I And in paydown to too

Jesse Geiger

Mid...

Dr. August Troendle

Given that...

Jason Twizell

and you IT guys there and infrastructure just sequential the for then been the I the sequential done follow-up or U.S. in out know that CapEx. Is decline outside building think, decline? have, a so your I largely have reason is another on problem to --

Jesse Geiger

-- it's No, it's some Yes. continuing.

the as We it's U.S, until the a to really pick not building we're are then from lot comes different of CapEx we with enter continuing But which new geographies we a little build back a bit facilities. as of new some of offices. things through some the a expand And outside number when at up on the -- that take in here headquarters. corporate we XXXX,

Operator

from Your comes next Hooker KeyBanc. question Donald with

Donald Hooker

Great.

XXXX to guys got you terms guess, trying So terms cancellation, of of I cancellation kind I hear that. of help discussed can trends. any that -- that us around project you in outside visibility about in bookings of kind the of provide maybe I

the It I of bit X.X little like or of a to like December of book mentioned think looks are strong the another looks something a last in quarter, quarter thinking mean you I you're half. you, think in quarter. ahead it's that, I the of sort north that bookings? bill second for in we September like

Dr. August Troendle

what'll the of rest environment happen quarter. the The hasn't changed. don't I know

what predict to bill to is to exact strong. expect try wouldn't would going But it I So be. to the reasonably book I be

to X.XX, than like higher -- X.XX look that, going great, very not quarter, We we're we was last which for X.X that do good. it's think the to it I something is prior quarter, high. target not

our looking range not bill kind remains book of but the environment we'll we're book to I that's So in strong. a well think those numbers, suspect, I within to have nice and like next little quarter. under we'll And the next year, into even they're a don't then know going guess, XXX. look what XXX, bit switch I they to I be higher.

Jesse Geiger

Little higher.

Donald Hooker

enterprise? thinking maybe of can think then your of what that that the outside of still. I -- Sure. profitable And Phase sort the overall the that now? quarter, value that that talk that something small is loss? is facility Is -- business Is a unit around to I about

Dr. August Troendle

It's things. Our drag so probably Phase on X year-over-year, not a this operation profitable. that's the area is only actually down been year, it's

So small it's very material. not and

Donald Hooker

I guess. mean, you I to what does do strategically that

thought behind is -- what So having I the that I guess mean business?

Dr. August Troendle

lot is are operates many bids. the important a filling -- that were bids, There important performed individual on and never it volunteer mean of fill low. don't is interaction so certainly a lot fill of studies. our of Well, I to focus, bids, so making bioequivalence kind I well, stage. you complements studies those of more later a that, you've strategically I either or have in lot But a to metabolic of do relatively and kind there. to a our some normal programs the it's occupancy of do and work many very we've of complementary -- a studies of of be other got the can healthy clients got with. a drug matter so it's done But our think generic niche studies unit lot to think studies, it And we

So and time, does think But do add I time the to with evaluate probability just value we've it is it. we think that I there. kept not why what we but it, that's should

Operator

Coldwell calendar you single either sense I'm or share in Coldwell revenue concentration risk study Your Q largest what percentage next Eric Baird. framing the get calendar your next expectation study 'XX, just comes of - Eric is? trailing XX, to or trying with 'XX, from Could XX? single a question concentration the on

Dr. August Troendle

largest than is Q It our revenue. think less of Eric to that. would X% about client Coldwell I be - have

Dr. August Troendle

On year a to revenue basis, largest I date client, X.X% exactly, our recall think if of I is correct.

So over it'd say just it's X%.

gears in So Coldwell Look, our Eric - no, shop. Now a nothing it's is shifting big small. quickly. Q

numbers to the to There we want a Just this appeared need probably double-check sure was it big be change, have right. a make math. such big to --

around prior this of I believe correctly? XX%. I am up in you've number believe, did and we've done small at if number concentration I throwing incorrectly? Am biopharma that in I Your about somewhere there wrong, total. years, correct to is -- XX% the math me that disclosing looking been XX%, quarter a the Or maybe

Dr. August Troendle

No, sure be change that a classification relate a some -- I to I'm of may and and that's may not true, think that.

Jesse Geiger

QX. XX% it's For think I for about QX? - Eric Q Coldwell

Jesse Geiger

Yes.

Operator

[Operator Instructions].

next Your comes Erin with Wright Credit from Suisse. question

Erin Wright

quick of areas medium hearing sort out recent Novartis I such what news and R&D rationalization you there potential research across Just guess, pharma, follow-up efforts rationalization large pharma. maybe in of I of broadly in any here I curious any late terms kind of understand insourcing, as building And the outsourcing are to saw any of infectious projects? changes and some large just in and of have much But you like cutting of a Just don't projects disease. you're exposure seeing more speaking, or really think.

Dr. August Troendle

have become But trends and to certainly those. general in no, I is more exposure focus, any less large exposure science and -- we that. don't we areas particular market as -- see have our and to reprioritization even don't don't Obviously, that pharma-based dynamics, see. of and among is not there large enough I our clients, think and to any changing pharma large medium

Operator

Your comes next with question from Jefferies. David Windley

David Windley

on in train get to chime I'll here.

wanted So ask to Jesse, a on XXX. question,

have on you you've XXX, you year. that guiding are the as So done all dynamic

but back there, first you different consensus I guess you call on -- wondering surprising, I you will kind have of in XXX through have -- full-service the that of a the because -- reflecting is like wondered of bill am and cost we like P&L doing that kind if little run Fortunately, to do to think reimbursed mentioned to P&L seems everything you looks amount that How and of go bit as of terms you peers? onion if direct a than decelerate? XXXX? are mentioned going more before you think things for Will accelerate, in I be that's the peel XXX. margin book about should we I which could work, go not basis, no your your you out-of-pockets to

Jesse Geiger

Dave. Yes,

as next How it do on impact be out experience will our in not quarter differs date pass be the work EBITDA a we're selling hit The the on We drag functional it work XXX, equation. we quarters investigator than our we basis will and in about call. have in XXX complicated our think I and as relative of layering a staffing different that has far selling don't it, we different have to investigator We're play percentage to full since really to the It's -- you outsourcing. that to offering. that doesn't of from more business mix as on going three all peers. don't of is XXX that and investigator But different it's it primarily. do relates formula. And and is how what payments not payments top Altogether, XXX is on amplified on with the mix in relative we're the we guidance our revenue. inputs, payments a giving to here the XXXX, service, pass-through business. a it in cost a throughs XX% larger just come

our going to here from But learning, the and forward best XXX, to our yes, into how XXXX, we're it in plays to model. still as and short that developing So next try out we're year. we'll quarter-to-quarter we're we continuing guide learn on can experience

Operator

question Draper next comes Sandy SunTrust. with from Your

Sandy Draper

backlog year, is And clearly pulling maybe more actually this earlier it talked backlog guidance margin. and to that, business about you study is think when we're was get about trying that quickly? faster by coming you to you about that just much outperformed to you you just in I obviously XX%, start question faster? and able to a this, think on go how is new about you coming raising follow-up But new today's right startups able Or Just better. and when well of revenue business out are about are things the this that got of it's Or away? able signed quickly? of to like out and start it winning

Dr. August Troendle

Well, rate I out rate, coming up. burn guess, by our definition, you of could look and burn our at by has backlog what's gone

That's timing, So quarterly project an has how of by type recruits, it our get to off how of and that. revenue to number Obviously, a things. of up easy it influence started increased. related proportional rapidly the all it's is backlog and burn

matter way a in upon going goes in. account the also bit timing based is course, I the projects not it's award backlog, future. an later time that's just there of of maybe of for but some different we of And than that, in that just we So think some a it --

active to backlog. pretty be get got to For it's into ours,

our So have anyway. recruit, in it how and the driver what well how they then type conversion project they and biggest rate just of of along with bookings. additional and But rather start with they're generally quickly quickly up, increasing that's burn at, the do burns stage shifts to

right, also. are bookings additional you So

material, Usually things but away there some that. bookings. of get revenue right that isn't the you Sometimes, same in come a is with quarter, new very

Operator

back call further for no are time. There at Dr. turn questions over this Troendle now remarks. to closing will the I

Dr. August Troendle

XXXX with us look on again And and their everyone February for to everyone thank to call. everybody. speaking want our full forward the interest bearing for in year I in to Thanks, earnings call. Medpace Right.

Operator

This concludes today's conference call.

disconnect. now may You

Medpace (MEDP) 30 Oct 182018 Q3 Earnings call transcript