MEDP - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Medpace Third 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 at that time. [Operator Instructions] As a reminder, this call may be recorded.

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

begin. may You

Kevin Brady

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

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

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

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

Jesse Geiger

everyone. good and Kevin, morning, you, Thank

environment range. business third release, have in normal historical August and cancellations mentioned at earnings remains continued quarter, the steady our As the our in within levels

entering the billion, prior year the Net $X.X book quarter bill. XXth September from X.XX the was increase business resulting XX.X% in of net increased of awards to third as new an backlog Ending to million, a backlog prior in $XXX.X year. XX.X% from

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

anticipated higher XXXX As growth anticipated, a of air we revenue and QX. QX sequential for second slowed XXXX, projected cancellations XXXX. the in This QX basis of result on a in the half reflects pocket as

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

were no held the previously transaction. not which was and and Investors, offer of options changes employees In third now Medpace stock LLC, purchased Medpace options There the and completed of from to options, a tendered that Medpace, stock were terms held this is Medpace party still quarter, outstanding the employees. a approximately stock related to are LLC. same party Medpace and Investors, by vested XXX,XXX tender a the by

general This interest stock-based as economic third compensation at of to GAAP resulted values the issued recorded options company, Medpace for an in quarter. administrative employee account LLC, transaction an holder to of expense million as if Medpace by GAAP the initiated was and additional Investors, this stock fair date. were selling, of were recognition tender the options the Since new $X.X expenses in of and in stock the settled the requires

employee-related costs, the to XX.X% primarily prior in EBITDA compared The in quarter to revenue. higher $XX.X quarter X.X% quarter period. the margin offset XX.X% year. the decreased compared XXXX. a was was of million million partially the $XX.X On by for decrease third EBITDA of third constant compared year currency decreased EBITDA basis, attributable X% higher to to prior

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

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

XX concentration, our total XX% customer respectively year-to-date Regarding revenue. and XX% customers top our top roughly five represent and of

generated million quarter, and decreased days, $XX.X from operating ended cash. and cash outstanding day net the In the of second days our to in activities, with $XX.X quarter X.X compared from flow million quarter we we third to XX.X negative negative the sales

XXXX. guidance $XXX remains unchanged of for growth for updated in to million the range now XXXX, $XXX full million year XX.X% the our revenue XX.X%. Moving to Total representing to of

the of XXXX. remains range $XXX million million million $XXX.X EBITDA to of compared in unchanged in $XXX XXXX Our also to EBITDA

to our rate compared to to XX%. effective in XX% be tax XXXX the XX% of to our anticipate guidance of previous We range XX%

guidance, million of range in diluted $X.XX GAAP Due assumed in XXXX. earnings in basis, million, rates net of to $X.XX. to range $XXX range of of $XX.X the the an On fully guidance XXXX. per to in repurchases for the change now No $XX.X adjusted income we XXXX of million $X.XX exchange and $XX.X stock $XXX.X September adjusted as XX, in million adjusted our have million range GAAP in we net tax $X.XX. forecast EPS the forecast XXXX to to We and share and shares diluted income the

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

Operator

[Operator Jefferies. is from Dave Instructions] And from first question our Windley

now is line Your open.

Dave Windley

were the just interest demand your environment, standpoint? questions. then and fairly experience from of flows, as cancellations Good and for guess, characterization be morning. already also rate Thanks But I August, has taking I’d general interesting obviously, RFP normal. the usual, Jesse your in, win my said the both also for in

August Troendle

horrible. it’s really are bad. Things going Dave,

real [ph] fast. staff Going

Dave Windley

Clearly.

August Troendle

nice Yeah, yeah, clearly. pretty a been along at RFP rate. a run off It is very really bit, pretty been latest sailing but a dropped strong saw flow it’s it a the quarter, in have kind been little of and strong. the has numerically reasonably No, slightly, just year And down still stable. just ago, reasonably and tipped but it stable. period things We is paved,

are things think along. going I

couple a is historical in in the the of range. Our win quarters, a in bit comfortable rate range. quarter has highs of from but dropped nice this some hit a in last little remained off It’s we

And I sailing. clear things think so, are

Dave Windley

I that persistent margin Okay, at, rate. looks, burn great. back guidance talk for pocket fourth But so what guess, your then I’ll one, off for midpoints And lower quarter? of in your drops stock-based beyond then on your this you, could backlog explanation fairly after From obvious, progression and fourth air yield and the significant a which apparent, -- if maybe your Jesse, from EBITDA the level, rate maybe how you and a up pop effect again, but fairly about, floor. I two guidance, is the quarter that; the of this that would the quarters as the is impact, if fairly conversion would the comp, imply one suggest burn be look and reduction

Jesse Geiger

Dave. Thanks, Sure.

basis XX% the revenue to right, a SG&A cost quarter. on first offer, expense do expenses So with inline it’s quarters, of you're of kind really in which or around more third address that of anticipate percentage elevated outside revenue. tender items, QX, percent be SG&A the of the the We so to other

in I We fourth you the we earlier the actually next in seen revenue normalize that expect as an side, the couple quarters, have yeah, part of was impact the cancellations tender, quarter, into have to the impact of some third of next again, for think early quarter. to And continue QX and then well. it year. you do the the the that's of where for if about on in

that result environment little that somewhat and a think be business that what of bit of nicely, you're the those we're seeing now are the but quarters right, will definitely we new of does projects, couple another couple in cancellations third that guidance new good there do rate progressing offset rate are the it conversion a is So affect quarter, through is in that But in ago. from in has by midpoint noticed flow and implies the quarter fourth you reduction projects a … a step-down And from burn being that kind that the quarter. of

August Troendle

range. high median know an back I rate how longer-term partially, but look at is towards don't of unusually it’s I’m to rate sure our burn than related drop burn the to also to its spiked think have -- more average. you high that. historically the the I returning much And

to expect I So above our don’t it XX% conversion go experience. not don’t rate, that’s at historical just back, look - I to

think I that the normalization got mean. - some it's So to you’ve

Dave Windley

Right.

was think you interest what, half like that cancellation momentum understand the I answered year in in was to assured my think. the that the question, given of specifically first stopped that momentum I [indiscernible]

Jesse Geiger

back something. in fact, outside dipping XX% accelerated to and may some give don’t think -- just come we’re of I - have that of you the to but down we're normal have I I impression Yeah, right, cancellations to or that the -- want range, going up

Operator

you. Thank

next Sandy from from SunTrust. Our is question Draper

open. now line Your is

Sandy Draper

guess, if your clarifications to excess I dotcom up of it SG&A cost in sure, Jesse, that was correct, much. make very was of none Thanks all in goods?

Jesse Geiger

SG&A. Correct, all in

Sandy Draper

hiring is you’ve great, bookings about to for added And the then people, sort here slow Okay, August of XXX I of strong expectation sure, just with adding, looks Jesse, even been not philosophy I’m sequentially either consistent growing of sort year. on the continuing the ahead like the hire the next guess, and you’ve down, revenue the or of another thanks. front,

the much hire and pace some how just comes Thanks. the And get to Just to pretty unless better thoughts around as it can business much hard changes you support something then, [ph] for it consistently figure is? worse, you’re trying that. it eventfully going as hiring, as up along dramatically to or of the

Jesse Geiger

less expect some et now right little rapid along kind haven’t at efficiency, but people some to along Sandy, because slowdown nicely think And XX% you rate revenue are think, targeted We point, growth rate a cancellations, between we that of have hiring and things that we XX% and of as this continuing dipped really of drop Yeah, year. of our the still are year, movement XX% but we’re much had those going we with say I of growth. a is target we’re bit there projects I of growing of about cetera, slowdown. off but a do growth forward

Sandy Draper

I’ll Okay. queue. jump really Thanks. the That’s helpful. back in

Operator

you. Thank

question from is from William next Blair. Our Kreger John

Your line is now open.

John Kreger

Jesse, of where it would growth anything you rate the there to, be the you had or August kind lower trend? backlog of around assume Would now much. that? will XX%. the quarters seems like, backlog number very line is about growth or that’s next two, Or to I seen is over top Thanks the than Hi. much that else think, five in it perhaps, company year that cause reasonable

August Troendle

I into don’t the forward think future. far going that’s reasonable a expectation

I And around that’s see, believe in Jesse, year I that, long-term a add? the have do a will think cycle, current and our this I with some you growth next in do want next that where is softening. not to XX% certainty expectation. election the roll-off -- but we do is, suspect, we

Jesse Geiger

anything else. say I No. wouldn’t That’s --

John Kreger

do the of and then a thank That’s to calling terms concentration? August, bit kind in shift like what’s It off? therapeutic the hard of of seems maybe Great, see little else anything continued in what’s you. call in helpful. industry you’ve you out

August Troendle

that [indiscernible] easily blender other a diseases been things strong, see buckets I lot think strength -- very in of look, have aren’t areas don’t across consistent with remained -- and of, kind some think, the that other the But, one has areas in No, of reasonably we I have. of oncology. therapeutic oncology think you a are I rare fit the

John Kreger

then had change in the Jesse, you And debt lastly, that in Great. the Thanks. bad quarter? any accruals

Jesse Geiger

quarter. third the in debt bad no had We no. No,

John Kreger

Great. Thank you.

Operator

you. Thank

Wright from Credit next is from question Suisse. Our Erin

Your line open. is now

Erin Wright

Thanks.

out any you of from sort to seeing the any In I’m curious prior fairly a you’re are changes adjustments Is if environment? landscape, category? in rationale terms in seeing any just standpoint. pricing view? biopharma seeing it your And small competitive a you competitive of there changes are

August Troendle

group basis. remains pretty regular noticing unusual against new we’re it Nothing No, that it’s Erin. that no on pretty Thanks, consistent and competitors, up consistent. we’re a a

Erin Wright

an And, area central it I central how great. you I is so I guess guess, across heard on you the you. an business lab the while. then or Okay, also, And that of been, you? give Thank could us update you lab for the a business? for in talk further haven't about investment trends have

August Troendle

it’s along overall the Yeah, Sure. the growing rates. lab kind - right activities company of growing offering, with lab

made investments where expanding have in we're they’re facilities have some the business both with We consistent in in there different we and CapEx that locations. our expanding little people of this other lab growth to for heavy. of And year more parts

and investment growth, So platforms it's continue in some the along there is nicely, that the some but moving with estate real along rest of organization. to

Operator

you. Thank

Our next Hooker Donald is question from KeyBanc. from

Your now line open. is

Donald Hooker

morning. Good

So with labor are at or regards are you point to activity, contract FTEs? these the any guys this hiring all using

August Troendle

contractor costs. not it these then that bit just years, of are a couple we but in up bit contract costs, headcount has to fairly overall And over relative employee Little closed. of our from still included little this minimal clarify, what even been past labor, - the probably, to it’s the numbers

Donald Hooker

Would you. to that little taxes? any bit expenses real or a maybe minimal of that too head of Got a be have is

August Troendle

small, I an relative impact. it’s it's really not think not happened. that but having it’s On basis a

Donald Hooker

then, of there the that for appropriate other lot a getting super. you getting ratio lot sheet. What's of thinking And going terms you're to and I be an building been balance guess, question a the reserves? in debt cash now Okay, Medpace you're have current in terms the

August Troendle

we’re of a with the leverage churn sheet. in yeah, certainly we're longer-term, Yeah, cash or now, Right position. comfortable balance on net two a

of operating dividend. to estate, little to focus at as opportunistically and with funds a heavier. a spending would leverage little sheet. we then point, as The for third but that it organic the up longer-term, repurchases -- some It of quarter. But cash up that, some It priorities balance how are may bit or beyond investment. an then capital a picked Our as opportunity much we of capital comfortable and should take look be the put certainly allocation far the will will be on consider the couple in a be continue turn to share our towards of we two. continuing on We're next versus real we of bit build will quarters that out advantage

Donald Hooker

super. Okay,

rapidly well. of next margins one last think guess, in you’re past, - me. do growing evidenced and we Another major I the base sort kind of we're as of as for employee How margin so kind kind think, for about EBITDA? rate your to of make in from the normalized sort of XX.X%. should net of expect past talked want long-term target I XX% about I you’ve we to basis? EBITDA just that sure that how a year

August Troendle

I margin guidance Yeah, I I guess, the into make, two but, year. in clarity we next cost give going will think, EBITDA I’ll and today February, comments, comment more guidance mean, on on the

do but organic hire impact to we plan we’re of the earlier, We related in of some there mentality. year aggressively. mentioned to expect anticipate that to top August aggressively start we the to continuing light and softening model As hiring, training election, our be year could our growth certainly next continuing hire - do line that hire,

then with entering about at as $X additional the year. million that but we’ll the EBITDA are as heads So comment but year reminder, to in those quarter head be do year. million for the refined we’ll add online make wanted at guidance, influences we second a and other a in I cost margin out two to more the pretty continue into just pace the point quarter, come back that starting the is, February headquarters the EBITDA a corporate $X new aggressive here coming we building will I’d have, And

Operator

Thank you.

Wolfe Research. is from Stephen question next Baxter from Our

open. now is line Your

Stephen Baxter

sure Hi, the assumes? the charge. the XXX% reconciliation, wanted don’t from thanks. clear to I’m in comp discussion stock your XXX% excluded I on just million not on Can wanted you the for confirm that a anything make make not to see was that quarter? but just $X earnings I charge adjusted

August Troendle

See, that’s correct.

have any comp stock or the or We adjustments any stock add-backs comp? made offer for tender not

Stephen Baxter

great. Okay,

to it existing you’ve the the like to but charge your within digest been assumed range. So in guidance, able to me wasn’t sounds prior

could think have be guess, you guidance I that would EBITDA gone that absent So first, that would and by it to charge? reasonable then definition, higher confirm

August Troendle

was what it the think potential we’re settlement -- our far guidance. date. hiring guidance But level - impact about not of so of no, participation $X.X assume we or been we’re mean, on did as had as -- was I we potentially what in higher would range that had million the the tender Yeah, the the there could either lot additional and be stock of price having charge. considerations have comp as not stock would be on the And,

Stephen Baxter

And Thanks. leverage the over in different then When tell ton. share share back was active purchase last a your to I you purchase XXXX, Okay. already come to were on in just wanted you question way. a

So current XXXX, now two the drove you’ve see but excess capital additional get you of where cash you I CapEx. about for and market been to need some against flow you more process, before contrast, and active previous to what hopefully, that talking year-to-date cash more last hoping significantly position active. you in net were in outlook, guess, your getting quarters. in a your I And in I could spending, about insight was time some your the guess

that very some very to signaled understand a that we’re level currently? whether seeing trying So low from material there is CapEx step-up going you’re and in Thanks. a to -- be of

August Troendle

in is XXs. the stock The price

Jesse Geiger

repurchases. specific not going we’re share to into price get So points on

programmatic about more trading we our more activity, cash. it’s to just had have been and because better we buying continue opportunistic shares, than of be If that the view to you look at be rather prior

for have the in in we we’ll opportunities look as so the past. future And

up up in of -- the quarter of It’s a lead quarter. material. We lead could half it be stock a but range won’t going year the could on little of something bit, And that that a that anticipate cash. to - the be not it’s sit the in early material million. some much that that building, stepping out the higher in year, our as next little or fourth to $X.X we be Now CapEx the will bit third around impact

Stephen Baxter

is this small concentration, it, I enough. And what on the bit. little one that the ask at up a that backlog tracking midsized bit more customer in that as of to you that’s Thanks. large have on Okay. think remainder stabilize client about a least, a and is over wanted base. midsized as do you could basis years? biopharma XX% pharma guess, large to allocate the fair as next your Obviously, And That’s bit the pharma last one think revenue a dollar kind towards currently to then we I look ice down the and into year, you you a little melting is biopharma of Or reasonable but of small to opportunity? going couple resources you and see cube look

Jesse Geiger

melting think a I cube. more of ice

focus a where that's lot are opportunities of and winning and continued the is business. small Our biopharma, on we're where

Operator

question [Operator from instructions] our And next from Jefferies. David Windley is

now is line open. Your

David Windley

on the $X heard around for cost I back $X wanted new corporate I on the clarifications. heard cost Jesse, make that coming to Just think building million in your past, couple from the for for you I've XXXX. said you I right operating sure building, of million. said a the

Jesse Geiger

building per million It's will be April. in available million of The cost quarter. annual an $X $X

million So $X XXXX, quarter, $X XXXX. it million in starts the for second for

David Windley

okay. Right,

before? planned than open So is a you quarter later it had that to

Jesse Geiger

its bit, track. little It but has slipped reasonably a on

David Windley

mechanisms of have? wary that Are concentrations standpoint, about therapeutic ripple drugs? need from think particular the action where it’s negative to you have then, results a in I’m the about portfolio everybody, fine. grown you think the a has of how within oncology curious from that concentration, you class you, would second, project -- Okay do platform grown there oncology diversification for you And mix of how effect be project for August,

August Troendle

so. think Yeah, I don't

We in diversified the on spending pretty very have some you of of We’re and PDX that about inhibitors. kind just talk level of don't concentration. oncology, high

that really of lot pharma-driven and we're not involved. large a is think I

do part agents in our an involve Now that we it's oncology overwhelming synergy, is combination studies number have agents, and but just of a pretty broad. not it of with other business, and in those

is diverse pretty oncology of a a it's but large So new there. part it,

Operator

Our next question Hooker is KeyBanc. from Donald from

open. now is line Your

Donald Hooker

One to follow quick one up. last

you adding growing about of you're have obviously capacity. terms I know guys fast spending, In capital talked and,

spending the your do terms On been spending capital we in side, has lab some lumpiness there. there going and capital How facilities? forward about think space of

Jesse Geiger

some -- so this of capital each locations. Yeah, includes lab year in spending we growth our capital

couple spending, the impact smaller us a that up be of runway on the overall to but some -- the the tends it on sets but that big so it’s it’s us that some little going bit So into next doesn't part going gives spending spending. of be to lab years, business, of the not, lumpier an have continued of a capital

Operator

At the time, like closing over you. showing no Brady turn Thank I further to remarks. Kevin would this call to questions. I’m for back

Kevin Brady

today us your speaking again forward for Medpace. on our look XXXX joining for We this continued on interest in call, call. earnings quarter you fourth you to and with Thank

Operator

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

You may disconnect. now

Medpace (MEDP) 29 Oct 192019 Q3 Earnings call transcript