MEDP - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Medpace second quarter 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. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference call, Mr. Director Executive Medpace's Brady, of Finance. Kevin

begin. may You

Kevin Brady

our Medpace's Good earnings XXXX is Geiger. President Troendle; joining Operations, of the morning, thank you our and August CEO, and second and and conference Jesse today COO Laboratory quarter call for CFO call. on Also

with and may factors even section the not begin, we forward-looking with change. include assume representing within XXXX. known risk after cause are to meaning the the discussed of to estimates unknown results of changes any that Accordingly, our These remarks forward-looking update today. Please other today's statements Security of like if your any factors Litigation of the and of date other filings questions you that should form to from to These statements Before factors assumptions to important XX-K future, you the inherent statements remind Act and and during and views SEC. involve materially obligation we Private impact of including Reform would risk on as our note the in I responses revenue that this statements actual no teleconference current standards. our our the the could forward-looking as expectations, rely recognition differ

earnings section slides measures today's press in GAAP are directly presentation connection we The of on the Relations GAAP with but are results. A non-GAAP at of this of to During measures, measures non-GAAP release in a certain these the available slides or the non-GAAP call, to more call financial we'll investors website investor.medpace.com. also not such gain most available superior provided measures comparable comparable understanding our the replacement to measures. and These measures call. Investor be reconciliation financial complete referring a help earnings for believe is

Geiger. that, turn I Jesse to call the to With like over would now

everyone. Kevin. good And you, Thank morning,

healthy. earnings quarter the strong win release, in our mentioned August remained business the remains second competitive our also and in As environment rate

to the quarters. a the awards in Net range, the quarter returned second to which past a net XX.X% the ending XXth resulting within was from year. $XXX.X two as down X.X billion, million, from the level quarter of times year of in historical book-to-bill. backlog XX.X% in our prior Cancellations new prior business elevated the backlog $X.X And entering levels an increase increased from of were June

on of in the which basis. on Revenue organic of second a constant growth year-over-year a represents million was and basis $XXX.X XX.X% XXXX, currency XX% quarter reported

consistent $XX reimbursed quarter out-of-pocket XX.X% with expenses Second were million represented of of relatively QX revenue. and

quarter EBITDA quarter prior million basis constant points reimbursed declined the prior higher EBITDA EBITDA $XX.X in XXXX. quarter million increased and for currency compared the XX.X% XX a second period. the of versus margin $XX.X expenses offset out-of-pocket partially The to basis, to primarily higher increased year. XX.X% of to in revenue. year decrease by the was compared costs, XX.X% to attributable XX.X% On the employee-related second

EBITDA. 'XX, second not have to the any quarter of did adjustments For we

of in excluded was income transaction-related compared to million the EBITDA campus period. $XX.X net XXXX, $X XXXX million of net corporate payments $XX.X and income included prior quarter GAAP $XXX,XXX. Second expenses of of GAAP lease of year million quarter second In the

prior in per net second share by in to out-of-pocket growth offset partially Adjusted income by year revenue increased was to expenses. $X.XX the income million year. driven quarter XX.X% $X.XX the employee-related costs primarily in net net the compared of quarter diluted was million GAAP for Adjusted income and compared prior $XX.X higher period. $XX.X the reimbursed growth,

quarter. purchase grew per share quarter not per the any of income $X.XX, we income of diluted share diluted second XX.X% net and second $X.XX adjusted did net versus XXXX shares XXXX quarter in Second adjusted

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

In net first the days. quarter from to no generated cash sales second quarter, compared paid in we our quarter day term the the We activities, $XX.X $XX.X million days the quarter the to increase negative outstanding X.X operating and million ended negative cash. loan remaining flow debt in from X.X and off second and with of

guidance the the Moving revenue million range updated total now now our XXXX. XXXX total for XXXX, in to growth XX.X% $XXX over of representing revenue of $XXX.X million. XX.X% full We to $XXX forecast year for to million of

$XXX anticipate to our XXXX in EBITDA in range of tax XX% in %. XXXX range the to compared of EBITDA million the $XXX.X be million million to rate effective We our $XXX now We XX of forecast XXXX. to

million in XX.X share forecast XXXX GAAP net and diluted June stock of of $X.XX to per range earnings for have no shares $X.XX. and to million $XX.X $XX.X assumed of the We XXXX We the our fully guidance as exchange in diluted repurchases million GAAP XX, and rates range in XXXX. income

On basis, XXXX $XXX.X we net adjusted $X.XX. to million the range the $XXX.X million $X.XX in EPS of adjusted to an and adjusted in forecast income range of

will the the back call I over question. turn your operator, to take can that, so With we

Operator

with And first of Instructions] from question the Windley [Operator our coming line Jefferies. David

now is line open. Your

David Windley

disappointed questions. on what I’d they that's August call, to morning. be August, your Good my the remarks. is not thought get I Thanks believe curious, taking said. I for opening I'm

August Troendle

here, I’m David.

David Windley

environment on of a detail. little I more been I’ve have then the curious, do a mechanics. two bit on or And your in follow-up some - maybe description

August Troendle

Okay. been said badly it has deteriorated ever did talk, I has I've I business to compared -- think environment, year, think little last stable. a softer. think don't the all. lot But environment bit of at year I had that And pretty a this again, been not I Business there’s but been

environment look number quality This softened RFPs of business quarters had some the the that - strong. of very coming RFP if kind like QX three and year in. off flow, And QX, why it that's you I’ve first of said and the last both some, dropped was in at and

been has rate. us sustained outstanding win What

in overall of the flow win and competitive for Our has RFPs. quarters rate been several in up a high, softening of made very last the that’s bit

up tick a first in ongoing of little little a the a in latest it the that's Again, more strong I second the did bit environment early, would quarter. fact, than relatively weaker characterize but certainly still Things strengthened in strong XXXX, as half in bit the little and, pretty bit quarter.

David Windley

That’s Okay. Thank you. very helpful.

So on mechanics. the

likely outcomes couple elevated for be of the quarters some of a peers into So actually something if relative experienced disconnect and to of revenue. replace one cycle projects else revenue the they most cancellations of of and staff pretty the of out the a of that in near row kind in ability to backlog of revenue in loss term common kind your would and

- and than that described being headwind, actually utilization quarter And and and better so, it you a it looks yet, revenue was was like one importantly, as and expect last expectations. expectations, margin better would than

I guess they're be think if to basically the already last in ready don't these backlog not intuitively projects point start, guys because weren't as until would you it's teed I’d include projects up.

more has able you be So into help how nimbly me revenue what lost are to to transition from understand revenue? guys so

August Troendle

Okay.

our better pretty they if been revenue absolutely XXXX, have cancellations. you So sizable we would and could in on hadn't a QX, whatever and impact I into meaningful have would the had And year would substantially QX we -- say think have XXXX. we generation had were in this revenue cancellations

in half is impact revenue of expecting timing don't there still the material you drop-off out of the are in half the a from than delay, see But of the we that a first larger few a is of that. and bit year year And quarters that in a a till the often. second

But do we we can in lot bit to the much of later the the fill have very a we in a here do just environment of projects, in, how can of an that expect still moving little gaps. of fit whether a you’re at them really a been of how startup will slowdown the brings. timing enabling determine But air quickly of and good and year. how pocket other get right, lot things well And play, we in us has

and think, smoothly. than to generate there’s of projects And has expected. startup been, faster enough definitely for environments outstanding a I enough good been whatever slowdown win has would for very gone revenue growth operationally, have us our But the us from been rate

So impact, but lot the exactly there's of second we certainly half a I don’t think things what impact expect I know in on of year. some the in do mix. the the growth revenue

David Windley

I’m I’ll have yield questions. may Okay. other back. come floor. the I'll sure guys

Jesse Geiger

Dave. Thanks,

Operator

Draper from coming question of next our line with SunTrust. Sandy the And

Your line is open. now

Sandy Draper

Thanks very much.

Just for one probably August. question, industry

bit more the lot, little August, end, wage competitor don't what a One hiring? - they're get wanted mentioned more Just of, on them compete front thoughts seeing? hate because you a guys on a they're think with pressure hiring or little you say your bit whole very large the to maybe to, difficult I are

obviously, change good across is industry growing lot notable of A of there the Is of any well. A looking hire. a board. people to book-to-bills demand, lot there lot

like. what get environment hiring is Just wanted to thoughts your on the

August Troendle

CRAs fair think It some when it’s and lot a years isn't oncology areas. was large amount anything. don't consistent. ago of like relatively in I there for in I think a pressure acute been there's wage bidding of several there shift a was

I don't see that currently.

are that think we I hiring aggressively.

it major grown don't as continue as barrier, meaningful rapidly see that. a in headcount to wages. have pretty I I don't tend But and You that inflection a see and

Sandy Draper

And helpful. the then unrelated. really follow That’s up Great. Okay.

Just the any any updated thoughts approach to seen recently. share repurchase haven’t Obviously or on program.

do think of capital where are how And deployment, have share in? what When you the fitting the Thanks. about you one repurchase priorities? see the outstanding. - use capital You and

Jesse Geiger

Sure.

the late kind higher of paid share allocation expansion second some part year But for the to share next We in half right. campus capital that, here. us year the The expenditures, we’ll you’re of be anticipated logical We So be of this have opportunistic into repurchases. timing capital of do in our next off about debt and step would relative repurchases. quarter. early beyond and

Sandy Draper

Jesse. Thanks, Great.

Operator

next our with Wright coming line Suisse. the question And Credit of from Erin

Your line open. is

Erin Wright

speak of about or or that influenced larger you business new Thanks. the win in one the Was contracts new the nature factors trends? business wins Great. bit quarter? the any Can there Thanks. off disproportionately little a

August Troendle

was no there. that anything It large diversified. award drove pretty really There was

Erin Wright

more Okay. of optimistic would not about and you're today? guess, of you RFP just Great. it’s call, kind seeing thereon, you mentioned that last And quality seem the how in you quality of flow mean, characterize magnitude, I out also the here. but that then, I the terms there kind on

August Troendle

first again, quite the as last a but reasonably of not exciting it’s, think I as two, three quarters strong, year.

kind of I So one think I strong. a focused I thing want we're And and - the do want and looked think think I should times, book-to-bills here that have moderated of that we're to of kind we put lot maybe X.X where to and remained see some, doing but on, think be. our it's great, Look, people point context. I it’s in out at they've I

There under of X.X our does But so what a full points. full it portion like translate very a provider of not is XXX was is and us that service lot a substantial is for doing times pass-throughs. service a into revenue - have all basis

characteristics basis points. - later projects the Book higher a be always and basis virtually substantially in bit pass-through and those XXX under will XXX are book-to-bill and

I’ve before, think to targeted times points. like so XXX past we’ve X.XX And under said times to in I basis X.X the

we basis points. so X.X times XXX think to I have under a target or

service a So this under at on times. been something points. if or fact, service this than basis X.X quarter revenue And represents basis less X.X would in did looking if times we you’re less basis, than our it book-to-bill have X.X times fee really XXX

don't times relative number high X.X historical to So very this a trends. into translate our

Erin Wright

we of And terms should second how then that mind, thinking in the half the be and bookings with into in trends pass-through about dynamic? Okay.

August Troendle

of would again, So, think times and achieve target - so, able we to anticipating we're that. being X.X or I kind I a

Erin Wright

Okay. That’s Great. helpful.

Operator

Donald coming of question with Hooker KeyBanc. from our next And the line

is now open. line Your

Donald Hooker

base you. question plans? maybe great. looks your - Thank myself It employee you're year. orient I substantially the myself quarter’s, EBITDA guess reiterate your hiring want orient you Hey, to I you're increasing like again mean, this can pretty around I similar last just to around margins.

I last think you it quarter. XX% was mentioned

a margin normalized the margin all kind coming that right look beyond XX% talked with EBITDA or XXXX think I you we in for fair guys? to now growth out And Is a as in? the we've about EBITDA of what XX% is this past.

Jesse Geiger

Yeah.

flat good think I a QX in impacted is compared in normalized to range was XX% relatively the level level a The margin. something revenue increase. margin to cost XX% by pass-through the

view that did sustainable I up pop quarter. for The So it the XX.X%, that wouldn't a margin.

think I year, guiding midpoint a are at reasonable We about expectation. which to the is for XX.X% a the

Donald Hooker

be… to guys you Are going

August Troendle

to of farther want service to well. plan. lower hire have even of expected which growth I just right add, we ahead. We aggressively to don't normally is bit we've guess, sort I about fee be we've hiring, a on right line think in I And for and on was say had think kind Sorry. kind ahead and doing little than revenue of our to expected growth get employment planned. We along basis and Instead, to bit you'd I our would a path, little done we the wanted look closer the that.

I as expected. we're far we a in but So think good get spot, ahead we pretty as didn't

popped has a bit. margin So up

Donald Hooker

when mean, of sort think you I do your caught be Okay. hiring? with you'd up

August Troendle

to don't I really time I but of we think And it. get caught we're kind we to Again, up, want mean, I a I good do have buffer. something, want to that's above know. ahead. get

rest We’re year. of expecting here the and the it in

to the year. rest through ahead expect going We revenues of of the hire in

Although, reasonably good I spot a we're now. in think

Donald Hooker

of had last sort guys. might forward of you into is growth going labor. front. maybe, one use kind relied you rely use mentioned, Do same of contract the that third how I than any see trend have with labor you year, have I Okay, might that guess question now party last some And contract rates think think, you I labor you year? next or on - big your do on guys What contract and guys,

August Troendle

ago some a unwind we at large So that or some some will quarter - year know, I contract in. have a But have staff at still two fill some, so for that We that we we amount, have at hiring we or of do but we to say began wouldn’t it's hold when least. do staff a point. did that usually

So that’s place. still in

Donald Hooker

you. Thank Okay.

Operator

the Stephen Research. coming And our Wolfe Baxter of next line with question from

open. now is line Your

Stephen Baxter

Thanks. Hi.

Or in to insights the Have down back quarter up those those I this think said any to on had I see drove time you QX. didn’t had more look what levels? what levels? and resulted some rate to you rate guess QX in way, other cancellation normal back cancellation about additional returning the that I

Jesse Geiger

reprioritizations kind nothing under No, QX, come of of covering time at Nothing the elevated the drug we Stephen. Thanks, out nothing levels. was analysis. there. of A a were back and of of has those QX the Yeah. to what lot kind failures, out look driving project identified ordinary

a with yeah, larger course I really, QX And But nothing quarters just was just pretty it to level then a has them. of note. returned of to think normalized back kind ordinary those cancellations more in

Stephen Baxter

cancellation you about normal X% a you for somewhere I or In the way the guys, Thanks. normal. to are of still like what’s right around X% in rate think kind said think is past

Jesse Geiger

Yeah, that's right.

Stephen Baxter

previous balance Okay. share sheet, return I wanted kind on repurchase. question the And to the to on of then

to guys and some the going I'd You you thinking you are - thoughts balance right the flow? just putting your hear the repurchase. without your allow share free on structure about on of to is do you why sheet pros for way ever doing Would to capital not trend curious more be than consider guys back cash that to the sort and forward? cons debt

Jesse Geiger

utilize un-drawn Yeah, would $XXX maintain we the saw if back balance we but sheet put like repurchases. the capacity we term do advantage do would take right And an we on for off that. maintain, we we just of certainly the revolver opportunity, debt, debt that to paid share the million something

Stephen Baxter

little something from a Okay. customer the Thanks. or group? has mid-sized plus small is some disclosures. smaller offset year-to-date. those looks mix year-over-year little And like XX% been me bit biopharma for biopharma by of was that on revenue Last one of a bit It just like up the

provide any it's competition Is space? and potentially numbers? of color in from just can mix guys there's the there's whether companies of or on classifications coming you in whether just in there out just the - Or those that noise Thanks. impact any

Jesse Geiger

in Yeah, composition. I the of it's companies mix just think

a biopharma of the we're the win space maintaining competitive more We as of are come well. small, midsize in seeing out rates growth but but

Stephen Baxter

Thanks.

Jesse Geiger

Thanks, Steve.

Operator

Blair. next with of our question the Owens Courtney line And Instructions] William [Operator from coming

open. is line Your

Courtney Owens

morning. Hi, guys. Good

of for questions couple Just a me. macro

we're it clients it's guess, over couple funding strong, biotech term? on absolute feeling not as on of level, year-over-year but you level strong any quarters. hearing been in has of Are I or is So - seeing kind commentary past the in as the still longer a softening an environment any from that

kind kind I strong, looking know now? heard guys from the currently they're any you clients you of have a when guys said quarters few pretty environment is out but of pushback from

August Troendle

environment delays funding. up in to perspective that seeing active for close continues – not it delayed any that The we’re currently a are opportunities strong, keep held projects look where overall very on. eye not but something we increased funding seeing and or We’re we’re is

Courtney Owens

then of Guys, with of one, great of clients are and like And kind of just and you Washington pushback another around well stuff though? pricing and more any hearing drug or continued that from Okay. macro guys kind that, just out like thanks. commentary commentary medical reform as and

August Troendle

No, not currently.

Courtney Owens

Okay, great. Thanks.

August Troendle

Thanks, Courtney.

Operator

coming Our Jefferies. with Windley the next from line David of question

line Your open. is

David Windley

I’m Hi, coming back around. thanks.

percentage or series those What from add So can to provide tried array your some question. C, probably small a of public follow-up we've top any are if funded? those don't there's VC B, to your biopharma composition some know help bit are tried you the better to kind a customer of know, Courtney's as In those of you within I metrics What kind bottom. And we've mix. that color understand to little of percentage series pass that to of the companies? -

funding types on? what to your of biotech the to for, trying get what a question, funding, sense relative of reliant of classifications majority I'm Courtney's are funding clients say,

August Troendle

think the ever past. About I have and time of good a partnered companies. in And of the prerevenue. I how many prerevenue think think have half kind that I But me, is projects chunk many how in of - a over you breakout. unpartnered are that I had sort don't bit, out. of - if quite programs we broken don't are in and about talked changes I about don't we've its it have private. that partnered, talked and - half front that, course, many But we past how public, I not have partners with versus of -- of and

thing for private. more again, or with public is? larger balance have the - important what But funding is have partnering on partner a the sheet cash they whether things the they their us It's or is not company a the or approach funding to that with

David Windley

helpful. thank you That's August, that. for

my account this On question. other was the mechanic's margin,

So between on and basis a talked difference put points book-to-bills the may about the points. XXX recognition you’ve the appreciate you basis and you emphasis XXX

And more to last pass-through comments I weight your or costs Is indicate bookings that your interpreted not necessarily? recent has some in or mix quarter of of that correct grown. the the

August Troendle

just That was one last off a quarter.

unusually quarter. to be versus be quarter a I would've always a think portion, is It’s think Not XXX higher it was to every an under basis. under been higher substantially Virtually going going this it last reporting large XXX the current I quarter. XXX. than on number

made was I quarter-to-quarter. called increase that's why and difference a was it obviously Last quarter-to-quarter, and does an in it like was it a out. actually it decrease But substantial bookings vary quarter in what bookings in looked it,

basis still say, true. this X.X did smaller revenue Things but XXX as a that's up - not a not last Service I than were large difference number than quarter. quarter the Like grow. bookings times, quarter. as This also

David Windley

you’re that mix of backlog the off pass-through and pass-through book-to-bill bookings grow mechanically, mean, pass-through mean, I quarter. And that that cost is kind that's so in math. than element cost continuing in dragging up, in burning adding I revenue if particular is to comes you're more a like means a of the

August Troendle

the growing, revenues you’re only you’re doing, growing, if because be going you’re going pass-through burned if If the doing, are if always you're those to be It's that’s in always to case late projects. case.

it’s late – we're the that burning burned. disproportionately so, a gets in pass-through And project

negative XXX would growth, higher have I book-to-bill company So there’s time, I’m over service - mean, be company, dropping going even true. If shrinking which any no I have bleeding see revenue I I it's we if basis. has full to I possible was if just are under had in situation will be can flat unless But I not growth, was reasonable higher. that XXX that was

David Windley

Okay.

if pass-through some out, the through is pass-through still am revenue suggests that steady you - the So a of bookings, at kind the And bookings dragging are you're bookings the and - and and growing me if state I project in in apologize. get pass higher mix that to the time. on point, stage the I this that's - that revenue over book-to-bill your later to But bolus. is pass-through of and than

August Troendle

years No, on XX% no. company. later larger Because it's three we're

ago. And only that cohort you're booking from studies of so only burning - you're years smaller three

You're burning I’m in booking this pass-through go new to now pass-through years burning and of going and lots their studies service from revenue now.

us, state. it's And years, than I of share unless for a are won't revenue - our going Quintel I three so market - steady over right. And guys out taken get right. all years, for flat revenue have for you then and [ph] And three we faster right flat we're has if mean, I business, have

David Windley

Right.

Okay.

above. be the second to The last more quarter first pretty an clearly current. quarter level for the to year guidance So margin XX quarter bring last is will this was updated guys or question way points below you said above at basis

August Troendle

wrong. was I

David Windley

in months? What's three changed

August Troendle

the right, Faster my of margin, bookings, about Revenues it's revenue things. expectations And true. you're new was et were number faster a burned I mean, no on question, up wrong. irrationally movement our high on cetera, on through growth, first quarter we I a than better analysts start quicker quicker commentary that projection, there's of expected.

this I depressed level, it expect gone it’s everybody last did it basis faster to lower last remain and And this QX expected, level, XXX year particularly than last points at than I far below not back what substantially so our margin quarter. snapped year, it looking But has in some. year's was is at.

David Windley

great… Okay,

Jesse Geiger

the flat elevated cost that And in Dave, the keep mind, to to sequentially QX QX on revenue. pass-through were

drove don't margin of the of So expect which points that continue. year, in costs pass-through basis the impact an expect to do half from have XXX to QX. to on QX will that grow We increase We latter margin. to just

David Windley

point, bookings outsized first were too pass-through for Is called quarter we burning because expect that the that's right? influence the in Jesse, of And that the costs. out, those wouldn't soon to that on pass-through QX

Jesse Geiger

right. That's right. correct. That's That's

August Troendle

past-through burn Those years now. will from

David Windley

Yeah.

right. Thank All for patience. your you. Okay. Thanks

Jesse Geiger

Dave. Thanks,

Operator

at this And time, Brady for to Kevin I'm showing Mr. turn remarks. would the no like further closing I to questions. back over conference

Kevin Brady

on Thank and your joining look earnings you our on quarter us you with forward in interest to for call today's call. XXXX third for Medpace. We again speaking

Operator

in you thank gentlemen, does program. This the conclude conference. and Ladies for participating today’s

disconnect. may have a day. You all great Everyone

Medpace (MEDP) 2 Aug 192019 Q2 Earnings call transcript