MEDP - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Medpace Second Quarter Earnings Conference Call. [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.

You may begin.

Kevin Brady

you Medpace's thank Earnings Quarter and Call. Conference morning, for Second joining XXXX Good call our Laboratory today August the on Also is: our and Geiger. Troendle; President CFO COO Jesse of Operations, and CEO, and

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

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

August Troendle

path revenue was context. We future impact I XX% to believe reduced result financial below a quarters numbers put to monitoring on a to a by XX continue about approximately plan disruptions. more get XXXX. XX%. QX be comments few volumes see our run to normalized below pandemic have Compared are pre-March depressed as lesser lab XX% will day. Good XX%-- in the rates, in expect improving and but sample of levels Physical back to to XX% visits about prior remain March. a growth

second below expected half hiring and an margin large that depressed Our to years. growth to in original Those is reduced recent margin ramp into year rapid expect growth in organic over a Starting of by significantly revenue margin past, advance to our has rate in second Heavy XXXX. above extent, continuing past QX significantly costs of plan. investment back this significantly permit the and of in we which will down reduction half to XXXX, hiring up the driven projected training XXXX activity, in be few the bring accelerates. growth the anticipated be should and as

second by down The X% COVID-XX quarter of were award The hold, award awards awards. XX% in notifications. new results. patients. to do stable under an health more review contract our than business of studies to Unlike treatment is moving This the awaiting a new until measure financial total even the demand study prior implied QX of Many represented majority Although now business XX% we of reported backlog is awards peers, will environment represent compared studies. these forward. and stronger environment. starts Jesse misleading recognized recruiting recognize on our when QX in not care are of awards business current new trials QX net environment as XXXX. our demand

Jesse Geiger

in out-of-pocket period. attributable the EBITDA second to quarter partially Revenue the year reimbursed a income year. year to million of year decreased XX.X% by the XX of the X.XX backlog income to backlog good morning, of driven revenue costs, by higher reimbursed $XXX primarily prior $X.X GAAP $XX.X and the margin by X.X% million a on lower Net of XXXX, year second X% quarter of of primarily quarter XX% million The $XXX.X August, $X.XX resulting income quarter a lower the a offset in costs, was in prior compared from you, X.X% $XX Ending the Thank second prior represents an prior the in employee-related expenses EBITDA EBITDA In on including was Net expense. basis, decreased was from lower million as book-to-bill. compared to organic net XXXX, million interest $XX.X prior the severance, billion, of in and out-of-pocket compared prior XX.X% a awards currency offset in quarter entering net share for per second and of everyone. XXXX. year-over-year compared basis. reported higher in decline was XX.X% decreased June period. the year. to business to million, was net new increase currency second $XX.X XX.X% the GAAP lower compared for period. to of revenue. income net decrease on GAAP decrease partially basis expenses severance, quarter quarter was second constant On and $X.XX diluted the constant including employee-related

million roughly generated and flow for X our top XX the concentration, decreased outstanding quarter, quarter from Regarding days to our first customers to activities, in XX.X the from revenue negative total days and net our sales XX negative half the customer respectively, compared cash In XX% first top of the of days. year. operating represent we XX%, $XX.X and second

for million million and our at no credit. undrawn our of average repurchased $XX.X $X.X a $XXX.X with During line have the revolving outstanding capacity we share $XX.XX We debt quarter, million on under total of approximately authorization. $XX XXX,XXX the of ended second cash, of shares quarter million repurchase price we remaining of current an and

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

EBITDA XX% representing anticipate XXXX XX%. of in expected of to to XXXX million effective EBITDA of million, rate our compared We now to the of XX.X% range million growth XXXX. range $XXX $XXX is to the to Our $XXX.X XX% tax be in in

$X.XX. range We stock and have $XXX range the our call XX.X forecast turn guidance. we are earnings over I million to your no GAAP of the additional diluted and will ladies. $XXX million XXXX XXXX repurchases shares assumed to questions per to million for With GAAP in that, in there diluted net of share operator income back so in the the take $X.XX can We fully

Operator

Instructions]. [Operator

first the Your from Dave comes of Windley line from question Jefferies.

David Windley

of what little expect back the turn you the around And off I can the us that, terms the just strategically, us guess, perhaps the on? magnitude on margin. bit implied in maybe a color costs. second on that? more term, in XQ to few guess, pass-through short will drop saw the of a the more should give is we And that in for then triggers reflective be that? that you Is get to on half Could different question August, touched at second I One, hiring we XQ you I wanted you of what on give shutting in perspectives half? that to

August Troendle

Sure.

Okay.

The your part first margin about I'm -- of question sorry.

David Windley

the reduction here. I an figured having Like is in pass-through impact

August Troendle

also. I'm sorry, second the half Yes. pass-through in should accelerate

to on negative have margin. So higher, effect close bit our little a basis margin a -- that XXX that of would reporting. of obviously, kind a without pass-throughs, is much In

So back back because meaningfully to little bit on some below that should should come years first a be itself, drag push on extent, but a but getting revenue, prior pass-through and of us quarter. up margin still

or in that So an are on And hiring, things then effect. hiring, still of really to our when have going forward. terms projections gating just will move what's

a start that And business and is we will begin determine right to second hold on is think it move forward. have when cautiously, time year. to certainly to of moving hiring lot will we we're I half for waiting just And we buffer hiring, for forward. the have move staff -- the but We pushing the forward, but the we exact adequate of going playing currently begin that it timing on of in for harder trials and for kind anticipate

David Windley

get kind XXX think a about think Okay. triangulate taking If in a are roughly, and finer for to XXX, point. -- If since into I'm that a back to we reimbursed of a the kind magnitude using second out reimburse. trying Maybe this to on the that percent of report about think on to number, the if talking to I half? margin rough put about were the I sense I EBITDA about do of XX-ish pockets, of you were

August Troendle

that just kind -- it of there, Yes. think of get so can't I saying the on that to all I although if out you was It's you could on pull are Jesse, unanticipated. don't XXX. of effects a not out you there that. easy. you lot pass-throughs. a end, In the close comment strip are I know,

Jesse Geiger

Yes.

me... Let

August Troendle

out? margin stripping kind is What of that

Jesse Geiger

in jump on me one. this let Yes,

will around anticipate mentioned, to cost, had up but So as percent little in quarter, revenue a but out-of-pocket much. bit, depressed. the cost that pass-through accelerate, Dave, second be still go August a We XX% not of

be a out-of-pocket for good So I think might XX%, assumption cost. XX%

bit for so that full the midpoint, or the the be and are there. of adds for was the the on direct the up. then We some around holes little first the of And other have half, EBITDA if year for at XX.X%, around would of half expect maybe down second full of guidance the XX% call year and flat then our balance XX% year. in probably in an filling to a so, margin cost guide, midpoint in XX.X% about all be it, to that the SG&A,

Operator

Our next of Blair. John line the William question Kreger from from comes

John Kreger

trends mentioned in dollar of What either volumes quarter? basis demand imply. us seeing would than better a business that? you trends about more or new what were bit give Could just you the unit a were you sort little proposal on August, your a

August Troendle

from have report. of don't not to just consistent, moving being was of COVID dollar important new go I just matter up rapidly. studies that between they wound yet. forward. timing committed And we but did a and getting more are That's actually sponsors for it I RFP studies kind is go discrepancy up lined what actually number think awards backlog and thing twice had relatively started number rather I report COVID Again, a off not into along because of a the things flow, the that's

up break our backlog to general, opposed it of authorizations environment, lag the is out the time. forward in as at kind of much particularly But held there's studies, awards. there that So this this in moving non-COVID we less. much the more But is new don't certainly,

John Kreger

And second Great. was that my question.

you just If that you these operational Can think to on on of hold gradual just of as quarter? from infections a you normalcy about up And that sort mode you're the a watch the having persist is return are of thinking expand third your you view, sort that? and constraints about across for some we country? Or thinking while towards the go running. in studies to the up get are going

August Troendle

Yes.

impacted So with, major is rapidly of of not impacted. now. is et could and issue. large, and recruitment are of one clients edge not being on and largely mean, operational going risks there issues certainly, to certain centers, little the I that's kind right a But that happen how cetera, are be about. by It's I'm factor the that that specific a

think availability recruitment but right is now, guess at study couldn't So that the I issue and really and just get I operational, don't it's -- patients. to I started sites an ultimate

trends. forward, are project studies moving in year. that I think that year. the the of pattern to many clients There I in most seeing this We are but -- do move positive -- kind do later I forward these of in a believe holding committed move forward -- think will now, right the will

John Kreger

one last then And Okay. one.

we of think the about your of end terms quarter. in terms in Should up hiring second number assume of plans, flattish second in more were X% of a I the In you staff the half?

August Troendle

anticipate expanding half. the do staff we No, in second

-- quarter year. As and I into into then fourth next said, will it quarter third sort of accelerate into

intend as So we're to as even not hiring hiring, we're and later. just we we're rapidly now,

Operator

Instructions]. [Operator

SunTrust. next from question of the from Your Draper comes Sandy line

Alexander Draper

mentioned first, there housekeeping quick ones. or much in you the just Jesse, you break charge maybe, think I Maybe out the a just severance of how severance Can you August, couple mentioned was was? quarter.

Jesse Geiger

That was in Yes. million $X.X QX.

Alexander Draper

to plus, especially next on if in that look new $X.X the think -- trying facility, quarter, headquarters? I'm level just takes for -- And I'm just I but you does Okay. Great. at stay us Or just cost strip if brought gave that color, the sort million much I just then to believe of out some understand add normalized that back you of -- I down, what then I'm some cost are the but start went to SG&A severance, factor triangulate as just line the and think the to trying trying the so expenses the in new puts low. headquarters? of sort allowing in how a expenses, all I I

Jesse Geiger

QX, we was building, because coming will clip about incur on cost some it each Sandy. QX did Yes, in were in $X.X $X second we mid-quarter. quarterly in the quarter, QX. million it rent in million The the like building additional of But new and be a

Alexander Draper

going of their lot really is then it different positively a last will finding guys Are that you publicly lot maybe basically That's is the the a they're lot have about environment for guys customers to know curious in for of I'm the of you? a to Or in And than of you work. to you you the small players CROS. this concerns. focus Okay. on more you operate where a who But question looking a do because important just customers Great. there's the general, but other be anybody I -- talk helpful. market could reacting business, and August. part traded

the or at your environment reacting in to versus, publicly how larger change any the competitive least say, there are is so customers traded And model peers?

August Troendle

strong market, to has but in We think that relative in this led environment. don't a environment position is the do this differences I don't I Yes. any to change we the think dynamic. think have

Operator

comes from question of from next Windley Dave line Your the Jefferies.

David Windley

the back I'll in. is queue jump short, If

predictable -- wouldn't sustainability, that How thinking half, for You basis mentioned, less think have margins I'm of those point, you sustainable a and basis about second first the between? How do about point kind your you EBITDA us. have August, right you're and the then one I the year. perhaps the delta to lines least, think have number at an do public expect XXX comments the your on been between XXX for margin? about going think next around impact What half somewhere hiring to you of in margin of totality is we the should guess experience,

August Troendle

holding costs hard pass-through Yes. cost rapidly discretionary percent -- cut aggressively look, got EBITDA all upon year, to out signed a has because that's margin large X% through, at development reduced It travel Look, all going it's that isn't bit. doing margin is we the going up significantly business a is a other they've effect tend sustainably of of to don't of of how depend organically on out it's of that's effects. and the of Growing have at number in course, tremendous on know and the our passed sort internal mean, saying business talk lot to the lot environment you a I this affecting how of there's mean, that hiring and year business then prop there's current you travel, about travel. we're And that's growing. advance peers margin. staff this grown XX-plus our organically be. that's in that But margin. I kind I aren't margin, a a to

that number So normally of would on our there. a there are some be lines savings

but capacity that enter trained staff training. the and lot people growth isn't several a when you junior not is slack so you carrying of the which larger to lot may big capacity. more you at it's productive. a in a get that being for they be excess of adequate have And to And when able But just push growing They all, not hiring there's in bodies fast. projects process not much rate and staff, experience. having need need, They're be And do ahead. hiring one A margin that of reasons. is people very bench you're just our a to just you're

is portion very have lot is, sizable So for we're margin a I good and in rather around orientation. this our it points, of of a is general, in expensive of rapidly, training feel costs a growing several year in resource growing very don't I of think, our a and when driving that, differential organically XX% at but year terms --

David Windley

it. terms then a backlog Got And know in I yours that amount. conservative. policy, we fair very that about is of talked

is And this trial and correct, had You has trials, more these companies that pharma alluded of understanding the maybe difference. number industry are that if often. our bigger COVID a to the did

a studies that that And half you, And would cancel so that, client policy if that how kind How such I'm started breaks in the the on did paused is studies out? then have, you that? of you, they particular not been were impact and in you wondering handle had backlog on those included flight. had you but if do -- would under impact pausing that your

August Troendle

study, No. paused. part and relatively we were a do that we hear because pharma studies gave than factors, in for running, not gating in -- there's number phases, because one pull a on but recruiting were studies Once were companies we there the was recruitment, different but backlog including we number few. put large a recruitment pharma time. cancellation. some et saying very of that in have large push it breakout it normal was a duration their hear they -- unless out had different I out out of that was a cetera. small have. I slow of in think the from was were that's our a were did of it did up pause would it a might suspect less of studies may but they're generally and If hold broad But ongoing, And at And it that yes, there's backlog did previously, it's burndown. backlog, we beyond portfolio even number just our that I slides take materially of of a pausing generally And not might the it true affected, we those

hold of on for were period studies those of put recruitment a for Some time.

David Windley

And then talked report since, X at seen you about related you bookings. net more said you Wouldn't first couple about I -- our think ago, quarter last for in having and me COVID a question conference or weeks X is, cancellations and the in mean, since first the quarter. I

-- the could in of appear in. but to about more last I those Maybe the kind that the it's wouldn't there, stability related or cancellations able not internal coming see talk you to backlog I'm backlog by studies, kind demand gross they of big were So one, it the the of really related or were the the a very the cancels overwhelmed than and either churn guess. question,

August Troendle

Yes.

I COVID-related some. or some were quarter, I quarter. did into did up in there any cancellations We ones, month cancellations. second So this that quarter last have this the been COVID. call hasn't to past related out so, additional In think, we're --

but a that's kind call off, out. it usual, think little than I more effect. did The was of nothing It to was but an we done. So tapered bit --

So discuss that. we didn't

Operator

to would I am turn the back to like conference Brady. now at questions time. Mr. I showing this no further

Kevin Brady

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

Operator

day. conference you, concludes Thank and have This today's great call. a

Medpace (MEDP) 28 Jul 202020 Q2 Earnings call transcript