On Thursday, Medpace Hldgs (NASDAQ:MEDP) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/bhe793yf/
Summary
Medpace Hldgs reported Q1 2026 revenue of $706.6 million, marking a 26.5% year-over-year increase. However, the net book-to-bill ratio was 0.88 due to increased project cancellations.
Backlog at the end of March 2026 was approximately $2.9 billion, with an expectation that $1.94 billion will convert to revenue over the next 12 months.
EBITDA for the quarter was $149.4 million, a 25.9% increase from the prior year, with a margin of 21.1%. Net income rose to $123.9 million.
Management acknowledged the challenge posed by high cancellations, particularly in oncology and cardiovascular sectors, and expressed a commitment to expanding the pipeline and improving win rates.
Guidance for 2026 remains unchanged despite the challenges, with expectations for higher future bookings and a focus on enhancing operational efficiencies.
No immediate plans for additional share repurchases were noted, although authorization remains in place.
The company highlighted initiatives to improve win rates but did not disclose specific strategies due to competitive reasons.
Full Transcript
OPERATOR
Good day ladies and gentlemen and welcome to the Medpace first quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. After the speaker’s remarks, there will be a question and answer session. If you’d like to ask a question, please press star 11 on your phone. If your question has been answered and you’d like to remove yourself from the queue, simply press star 11 again. As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference call, Lauren Morris, Medpace’s Director of Investor Relationship. You may begin.
Lauren Morris (Director of Investor Relations)
Good morning and thank you for joining Medpace’s first quarter 2026 earnings conference call. Also on the call today is our CEO August Trundle, our President Jesse Geiger and our CFO Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. These statements involve inherent assumptions with known and unknown risks and uncertainties as well as other important factors that could cause actual results to differ materially from our current expectations. These factors are discussed in our Form 10K and other filings with the SEC to update forward looking statements even if estimates change accordingly, you should not rely on any of today’s forward looking statements as representing our views as of any date after today. During this call we will also be referring to certain non-GAAP financial measures. These non-GAAP measures, are not superior to or replacement for the comparable GAAP measures,, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures, is available in our Earnings Press Release and Earnings Call presentation slides provided in connection with today’s call. The slides are available in the Investor Relations section of our [email protected] with that, I would now like to turn the call over to August Trundle.
August Trundle (Chief Executive Officer)
Good day everyone. Before reviewing Q1 results, I would like to acknowledge that this will be our last earnings call with Jesse Geiger, our President. I would like to thank Jesse for his 18 and a half years of service. Thank you Jesse. Quarter one of 2026 saw cancellations rise again with backlog cancels reaching their highest point in over a year. Net bookings were below the level seen in Q4 but well above those in Q1 2025 with a net book to bill ratio of 0.88. RFPs were down in the quarter sequentially and year over year. Initial award notifications and win rate were strong. We continue to view the quality of opportunity flow as good. While there is nothing we can do to alter our cancellation rate, we are focused on expanding our pipeline of opportunities and have implemented a number of initiatives to improve our win rate. Jesse will now comment on Q1.
Jesse Geiger (President)
Good morning everyone. Revenue for the first quarter of 2026 was 706.6 million, which represents a year over year increase of 26.5%. Net new business awards entering backlog in the first quarter increased 23.7% from the prior year to 618.4 million, resulting in the 0.88 net book to bill ending backlog as of March 31, 2026 was approximately 2.9 billion, an increase of 2.9% from the prior year. We project that approximately 1.94 billion of backlog will convert to revenue in the next 12 months and backlog conversion in the first quarter was 23.3% of beginning backlog. Now, before I turn the call over to Kevin, I want to add that it has been a true honor to serve the company all of these years. I wish all of my medpace colleagues well and I’m so proud of what we’ve accomplished together. And with that I’ll turn the call over to Kevin.
Kevin Brady (Chief Financial Officer)
thank you Jesse and good morning to everyone listening in. As Jesse mentioned, revenue was 706.6 million the first quarter of 2026. This represented a year over year increase of 26.5% on a reported basis and 25.8% on a constant currency basis. EBITDA of 149.4 million increased 25.9% compared to 118.6 million in the first quarter of 2020. On a constant currency basis, first quarter EBITDA increased 28.6% compared to the prior year. EBITDA margin for the first quarter was 21.1% compared to 21.2% in the prior year period. As the impact of higher reimbursable costs were offset primarily by lower employee related costs in the first quarter of 2026, net income of $123.9 million increased 8.1% compared to net income of $114.6 million in the prior year period. Net income growth below EBITDA growth was primarily driven by a higher effective tax rate in the quarter. Net income per diluted share for the quarter was $4.28 compared to $3.67 in the prior year period. Regarding Customer concentration. Our top 5 and top 10 customers represent roughly 28% and 37% respectively of our last 12 months revenue. In the first quarter we generated $151.8 million in cash flow from operating activities and our net day sales outstanding was negative 58.8 days. As of March 31, 2026, we had 652.7 million in cash. Our 2026 guidance ranges for revenue, EBITDA, net income and EPS are unchanged from our prior quarter based on an effective tax rate of 19 to 20% and interest income of 27.5 million. There are no additional share repurchases in our guidance. With that, I will turn the call back over to the operator so we can take your questions.
OPERATOR
Thank you. As a reminder to ask a question, Please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Max Smuck with William Blair. You may proceed.
August Trundle (Chief Executive Officer)
Hi, good morning everyone. Thanks for taking our call. Maybe just following up on the cancellations point, August, I know you mentioned the highest that you’d seen about in a year. Just wondering if you could dive into the dynamics behind those cancellations. I know last quarter you called out not really macro related, more project specific, wondering if that was the case here in the first quarter. And then any detail you can provide around how cancellations have trended so far, far in the second quarter and just any other drivers in terms of therapeutic modality indication, any sort of themes behind outsized cancellations that you saw here in the first quarter. Thank you. Yeah, sure. Hi, Max. Yeah, so cancellations were again, just the kind of random stuff you’d expect. You know, product performance, reprioritizations, et cetera. It wasn’t particularly informed by acute, you know, financial shortages or anything like that. So it was just kind of a usual thing but you know, higher than, you know, historically we’ve kind of average and, you know, put pressure on our book to bill. Cancellations in the quarter were, you know, I think the largest, you know, therapeutic areas kind of were oncology and cardiovascular, which it’s kind of kind of usual anyway, so really nothing to call out there and second quarter, you know, it’s really, I think too early to get any kind of read on cancellation rate and whether it’s going to, you know, be high again in Q2. I just have, I think it’s too early to make any kind of assessment of that.
Max Smuck (Equity Analyst)
Maybe following up on sticking on the cancellations Theme, I think last quarter you also mentioned cancellations were both in terms of your backlog, but also in that initial awards bucket. I know a couple of quarters ago you called out, I think the initial awards bucket. You had about 4 billion worth of signed work in there. Just wondering if you can provide any update around cancellations out of that bucket in particular and where that bucket, the size of that bucket today relative to maybe that 4 billion that we’re at a couple quarters ago. Just trying to get a sense for your visibility and level of confidence into that initial awards bucket converting into backlog moving forward here.
August Trundle (Chief Executive Officer)
Yeah, look, we’re not going to, you know, get into kind of our pipeline size, et cetera. You know, we’ve never quantified that really. Cancellations in that bucket though were not particularly elevated in the quarter in Q1. So it was more backlog related cancellations that were problematic for us. So I don’t think that impairs our future, you know, things rolling into backlog. But I think the last couple quarters of high cancellations overall and across everything, including, you know, that bucket before, you know, our pipeline of opportunities in prior quarters does influence it. But that was not a particular factor. You know, this quarter, obviously the higher cancellations take away from, you know, the total revenue opportunities in the, in the year, but, you know, future conversion, hopefully, you know, with a reduction in cancellations, if we hopefully see that, you know, can proceed at a kind of more normalized rate. Thanks again for taking our questions.
OPERATOR
Thank you. Our next question comes from David Windley with Jefferies. He may proceed.
David Windley (Equity Analyst)
Hi, thanks for taking my question. Good morning. I wanted to clarify on the cancellations comment to Max’s question. August, you said oncology and cardiovascular. I believe you all would treat cardiovascular independent of metabolic. And I just wanted to make sure I heard that right and that we’re interpreting that correctly. So metabolic cancellations were actually not part of your call out, is that correct?
August Trundle (Chief Executive Officer)
That’s correct. And we break out our therapeutic areas in our earnings release in our in the deck presentation. You know, the deck that comes with it and you know, cardiovascular. Yes. Is separate from metabolic. I mean, obviously there are programs that are sometimes very, you know, one product, if it’s cardiovascular focused versus metabolic, sometimes there’s a little bit of overlap, but we do break.
David Windley (Equity Analyst)
Yeah. So I think a concern, market concern is metabolic has been a significant revenue growth driver as evidenced by the pie chart that you include in the deck as you reference. And I think the call out on the fairly sizable cancellation that shaded down net bookings Last quarter was metabolic. And so maybe you could speak to. I think I asked you this last quarter, but is there a. Do you have a GLP1 concentration that is becoming more volatile perhaps because of changes in price in the market dominance by a couple of players that would cause biotechs to think twice about whether pursuing GLP1s. That’s I think a thesis that is out there and I wondered if you could provide some color as to whether you have that exposure or not.
August Trundle (Chief Executive Officer)
Yeah, I mean certainly we have, I think we Talked about that 50% of our, you know, I think we talked about 50% of our obesity work was GLP1, you know, directly related, et cetera and you know, gave a few metrics on that last quarter. But yeah, I mean there’s a fair amount of work there, but I don’t really see that as more volatile. You know, I think in terms of new opportunities there may be some truth to what you say in terms of, you know, the market becoming a bit saturated and competitive and pricing, you know, sensitive. But you know, it has not resulted in higher cancellations. You know, and even in our, even in pre backlog, you know, we’ve not. And you know, you have to realize metabolic actually if you look at, you know, historically, you know, quarter to quarter look at cancellations as percent of opening backlog, just like we do for our total, you know, backlog percentage cancellation. You know, of all the therapeutic areas we break out, metabolic has the lowest historically cancellation rate. So metabolic is actually very last quarter because metabolic’s large and it happened to be a little bit of an uptick in oncology had a little bit of a downtick in percentage. Metabolic happened to be higher, you know, but generally oncology is a riskier field and has more cancellations. So you know, and I just do not see the, I don’t see the disruption that you kind of described. Maybe others are seeing, you know, GLP1. There’s a lot of, lot of work. There’s a lot of stuff. It’s actually a pretty safe therapeutic area for us and you know, things are going fine.
David Windley (Equity Analyst)
Okay, that’s helpful. Last one for me on kind of the revenue guidance and cadence. Given the immediacy of your bookings recognition to revenue, I mean your project, when you recognize a booking, the project’s kind of already going and you’re highlighting higher cancellations. A sub one book to Bill, you’re maintaining the revenue guidance. Perhaps you or Kevin could speak to the kind of the durability or the ability to hold the revenue where it Is despite backlog not really growing.
August Trundle (Chief Executive Officer)
Yeah, we got Kevin talking for a minute. But just on the surface of it, under ASC 606 revenue is a tough one. We’ve not been really great at predicting just when, you know, pass through, you know, investigator costs are going to hit and they’re, you know, a larger portion of things, you know, lately. And so you know that’s, that’s look that that’s always at risk. But our current modeling is, you know, we’re going to be within our guidance range on revenue despite these cancellations. But certainly, you know, we have to worry about future cancellations. Yeah, understood.
David Windley (Equity Analyst)
Thank you. Yeah, Dave, exactly right. Despite the headwind from cancellations that we saw in the first quarter, we feel very good about the range that we have out there, which is why we reconfirmed guidance. Certainly your future cancellations could potentially impact that because cancellations can have a more near term impact on that. But right now we feel good about the guidance ranges that we have out there. Got it. Thank you.
OPERATOR
Thank you. Our next question comes from Ann Hines with Mizuho. You may proceed.
Ann Hines (Equity Analyst)
Great, thank you and good luck. Jesse, it was nice working with you. On the gross booking side. Can you give us what the gross bookings grew and if it was in line with your internal expectations?
August Trundle (Chief Executive Officer)
If what gross bookings? We don’t, we don’t break out gross bookings from, you know, we just report on net bookings. But directionally wasn’t. Yeah, I mean directionally wasn’t in line. So, you know, was it, you know, overwhelmingly cancellations that drove us down from what would have been a great book to build? No, you know, new gross awards were also, you know, on the low end. And that’s why, you know, so it was a combination of the two, both cancellations and weak gross bookings obviously impacted by prior pre backlog cancellations in the past.
Ann Hines (Equity Analyst)
Okay, and then I get the question a lot. There’s a lot of Biopharma M and A buying biotech. Do you have any like how should we view your exposure to that going forward? And if a big pharma purchase one of your biotech companies, what happens in that scenario to current trials?
August Trundle (Chief Executive Officer)
Well, that’s frustrating and it happens all the time. It’s not. And it’s happened in the recent past and it continues to happen. You know, clients of ours get acquired, generally speaking, we are cut out on future work. You know, it’s a loss for us. Usually the ongoing work we continue with. Although there’s even cases where they sometimes decide they’re going to, you know, fold that into their current, you know, provider or internal resources. So acquisitions are not good for us. No, but it happens all the time and we have a very broad portfolio of clients and, you know, it’s something we work around.
Ann Hines (Equity Analyst)
Thank you.
OPERATOR
Thank you. Our next question comes from Charles Rie with TDCown. You may proceed.
Charles Rie (Equity Analyst)
Yeah, thanks for taking the question. Maybe if I could first follow up on Ann’s question. If, you know, would you attribute any of sort of the heightened level of cancellations as a result of past M and A.
August Trundle (Chief Executive Officer)
No, I don’t, you know, I don’t think any of the cancellations we had in the quarter were related to any M and A activity. No. Maybe I’m wrong on some little smaller part, but that was not a driver of anything. No.
Charles Rie (Equity Analyst)
And then, you know, maybe just two more things around that, you know, you talked about sort of what normally drives cancellations now, the reprioritizations or, you know, drug fails. Could you give us a sense for the mix in the cancellations, perhaps between drugs that were canceled sort of in flight or because of futility or kind of canceled, you know, ahead of start because of sort of a change in direction by the sponsors?
August Trundle (Chief Executive Officer)
Yeah, no, we don’t even track that because to even categorize it is difficult because they’re overlapping buckets. So, no, I just don’t have any real. There’s just nothing struck us as specifically funding related, which we are sensitive to and try to, you know, get a feel for the overall funding levels in the market. But, you know, funding is always a one of the, you know, one of the factors. If everyone had unlimited resources, you know, a lot of stuff would move forward that they’re canceling because of product performance. But they’re just so overlapping. We don’t even try to break that out.
Charles Rie (Equity Analyst)
Got it. And one last quick one for me. In the bookings that you did in the net bookings, the level of pass through revenues expected in the future work, is that at the same current rate that you’re seeing today or is it lower? So in other words, maybe there’s a mixed difference. And therefore, obviously we have a higher level of pass through revenues reported this quarter. But maybe as pass through is expected in the new work a lot less, which could skew the metric.
Kevin Brady (Chief Financial Officer)
Kevin? Yeah, Charles, I would say that in terms of the current bookings, I would say there’s still somewhat of an influence in the higher pass throughs. But as I had mentioned last quarter, I do expect your pass throughs as a percentage of revenue to end the year lower than what we started this year at. And so we were pretty high this quarter at 44% or so. I do expect that to come down as some of these metabolic studies wind down a little bit, but it all depends on kind of future work and future bookings as well.
Charles Rie (Equity Analyst)
Got it. Okay. I appreciate the comments. Thank you.
OPERATOR
Thank you. Our next question comes from Eric Caldwell with Baird. You may proceed.
Eric Caldwell (Equity Analyst)
Thanks very much. I’ll hit this cancel topic a different way. Bear with me.
August Trundle (Chief Executive Officer)
If you’re. So you have. Historically, you have an average cancellation rate, and I know there’s lots of volatility around that, but you have an average. And I’m just curious if cancels were average this quarter, understanding that gross awards were lower than you would like. But if the cancels were average, what kind of zip code book to Bill would we have been looking at? Would it have been a 1 0, a 1 1? Where would you have been if. If the cancels were just normal and all else constant? Yeah. You know, and what normal is just kind of pick the middle of the range or something. But I really haven’t done that math. But. But, Eric, you know, I think directionally, yeah, it would have been still a weak book to Bill somewhere around one, I would assume, you know, so it wasn’t just, you know, massive cancellations that knocked us down from a, you know, a great 1.15 to 0.88. It was a mixture of the two.
Eric Caldwell (Equity Analyst)
And then if I could play off that a bit, sometimes, you know, these rates are impacted by, you know, one larger, two larger, three larger cancels.
August Trundle (Chief Executive Officer)
What. What would be the quantum, you know, if your largest cancel hadn’t happened? Would you have been normal if it was. It. Was it three? Just trying to. Yeah, you’re talking about several, you know. Yeah, two, three. You know, I mean, to drive you over it, but, you know, because. So there was no very large one or something like that that drove it. And it, you know, but, you know, there are always. Some of them are, you know, meaningful in size. But. But no, there was no one or two that were outsized that drove it.
Eric Caldwell (Equity Analyst)
Okay, and then last one.
August Trundle (Chief Executive Officer)
And wait a minute. Let me make, you know, one. One more comment. You know, I say it was, you know, weak bookings and, you know, cancels, you know, kind of, you know, both were, you know, factors here. Cancels had been much better. Ra. We would have had a better book to Bill and, you know, but it would have been weak anyway. You know, even if. Even if cancels were relatively low, would have been a, you know, poor book to Bill. That low book to Bill, you know, I say was something of a, you know, just what’s progressed and what’s in pre backlog and what’s canceled there and never, you know, is never moving forward. But also, you know, some things were just, you know, timing of, you know, things that move forward and you know, some of that you hope will eventually make it to backlog in future quarters.
Eric Caldwell (Equity Analyst)
Yeah, no, that’s understood. One last thing. The backlog that you show to the street, you have a next 12 month revenue visibility figure and a total backlog figure. You subtract the next 12 month visibility figure from the total. Over time we’ve seen a deterioration in the backlog coverage that is beyond one year. So years two and years three and you’ve had six consecutive quarters of that number coming down. And just, you know, walk us through why there isn’t. I think, you know, you and I spoke a quarter or two ago about, you know, this view of this effectively being like a drug patent cliff for a big pharma or something. That there’s something looming a year plus away that’s going to completely upend the revenue growth profile. In the past I sensed that you weren’t concerned about that, but the street is. And I’m just hoping you can talk us through the mindset of why seeing this plus one year backlog decline, maybe it is now a concern for you, but I’d love it if you could talk through that thesis, that thought process of why we shouldn’t be so focused on this or maybe we should and what it would take to get that number going back in the right direction if you are concerned. But I think this is sort of the elephant in the room that a lot of people are looking at and it would be helpful if you could could really dig into that for us.
August Trundle (Chief Executive Officer)
Yeah, sure. No, and I guess there is area for concern. You know, I mean I, you know, several quarters back thought it wasn’t a concern because our pre backlog was growing so fast and, and I thought cancellations were coming down and going to be in a good place that really frankly hasn’t happened. Cancellations have continued to go on at a much higher rate both in backlog and pre backlog and it does now result in us facing revenue. Just look at the Q1 versus remainder of year. We don’t have revenue growth. You know, we will on a year over year basis but not on a quarter sequential quarter basis. And you know, 27 is, you know, I don’t Know, yet. I mean, that’s, that’s too, you know, too far out at this point to really get a handle on. But yeah, no, our growth profile, you know, both now and six months from now in terms of, you know, sequential growth is, is, you know, real question. We need, we need an improve, we need either cancellations to abate or gross awards, you know, new notifications and, you know, a bigger pipeline going forward. And that’s why I talked about us trying to expand our pipeline and you know, really kind of accommodate, you know, what could be a much higher cancellation rate than we’re sort of used to in, you know, in historical, you know, periods. But, but no, I mean, I can’t, I can’t dodge it and say, oh, yeah, yeah, no, there’s no, there’s no issue there. Certainly, you know, what we consider a reasonable growth rate is not projected, you know, on a, on a sequential basis going forward.
Eric Caldwell (Equity Analyst)
I appreciate the candor. Thanks very much.
OPERATOR
Thank you. Our next question comes from Jillendra Singh with True Securities. You may proceed.
Jillendra Singh (Equity Analyst)
Good morning and thanks for taking my questions. I want to follow up on your comments earlier about RFP trends. I think you said that they were down year over year. Can you elaborate on that? Any particular areas you’re seeing weakness? Maybe biotech funding remaining stable over the past eight, nine months. Surprising to see RFP weakness. Just, can you put some, give some more color on that?
August Trundle (Chief Executive Officer)
Yeah, you know, I, it’s hard to, you know, categorize what we know where, you know, what sector, what therapeutic areas or, you know, what, what’s weak, you know, etc. I really don’t have those kind of metrics and I don’t, I don’t even frankly pay a lot of attention to it. It is a, it is a focus of the industry overall and Everybody talks about RFPs. And so I feel compelled to do it. As I’ve said many times in the past, I don’t really pay a lot of attention to the numerical, you know, certainly, you know, a long term trend of decreasing RFPS is, you know, obviously not viable. But, you know, the bouncing around of RFPS is overwhelmed by the quality of the RFPs, you know, and, and there’s always the question of is more RFPS means that they’re just, you know, inviting more CROs to the same RFPs, or are there really, you know, more RFPS out there? And you know, just measuring it is very difficult. And you know, I tend to just ignore the numerical value, you know, on a, on a sequential basis or, you know, single, you know, time points and focus on the quality of the opportunities we have. And I believe we have very high quality opportunities and I haven’t seen a deterioration of that. I don’t feel like we have talked about that sometimes in the past of, you know, real funding problems and a lot of just scenario planning and fundraising and all the rest of it, that they’re just looking for bids so that they can go out and then try to get it funded. You know, that has happened in the past and I do not see that in the present to a large extent. I mean, obviously that’s something that happens all the time, but you know, the trend is actually pretty good. So I don’t put a lot of stock in just, you know, the numerical value of RFP that we see in a given quarter.
Jillendra Singh (Equity Analyst)
Just a quick clarification. But you don’t see that the biotech CRO market has got more competitive in last say six months or so. I mean, we’ve heard about some of the large peers investing in biotech venture funds to help secure some early stage biotech work. Just curious if that is having any impact. How do you think about that? Just industry comparative landscape in particular for the last six or so months.
August Trundle (Chief Executive Officer)
I don’t know how to, I mean, I just don’t know what the impact of that. I mean, how would I know? I don’t even know what, you know, funds or what, where they might be doing. You know, they talk about being more active and certainly we have, it’s a very competitive market. I haven’t seen a large change there. You know, certainly, you know what our biggest factor over the last 18 months has been cancellations. But you know, we’re, you know, we, we think, you know, we do have to work on our win rate and you know, is that due to, you know, increasing competitiveness? You know, I don’t know. It’s just. How do you, how do I, how do you measure that? I just don’t have a way. But you know, certainly we would like to win more. Fair point.
Jillendra Singh (Equity Analyst)
And the last one, last quarter you mentioned that in 2026 you don’t expect a net productivity benefit from AI as investments would largely offset the gains. I mean, given the continued advancements and growing interest in AI over the last few months, has there been any impact or any change in your thinking? How should we think about the potential impact, positive or negative of AI on your business internally?
August Trundle (Chief Executive Officer)
Yeah, I mean, I just reiterate what I said before. You know, I think that I would either have to be so transformative as to just be ending our industry in the short term or just total hype for us to have savings in the next year or two. You know, if AI is really something of value, which I believe it is, it’s going to take a lot of investment to achieve that saving and there are lots of opportunity because it’s such a attractive area for improving overall process and efficiency. It’s going to take a lot of investment and the only reason we wouldn’t do that investment is if we thought there was, oh, there’s just some low hanging fruit, we’ll grab that. But you know, really it’s just a lot of hype, you know, then you’d see some efficiency. But no, I think the next two years at least we’re going to be investing more dollars in trying to achieve future benefit than we will gain in terms of efficiency. And I stand by that. I still think it’s, you know, it’s a few years out before we see any actual net benefit. Not that we won’t see efficiencies even currently, you know, we are, but I think net benefit on it all, I think you’re talking for us, I think it’s a few years out.
Jillendra Singh (Equity Analyst)
Great, thanks a lot.
OPERATOR
Thank you. Our next question comes from Luke Saragot with Berkeleys. You may proceed.
Jake
Hey, this is Jake on for Luke. Thanks for the question. So I know large pharma isn’t a big focus for you, but as they spend ahead of patent clips and scoop up more of these biotechs and assuming their demand is less volatile, when would it make sense to take on more of this work? Or will it always make sense to prioritize biotech? Yeah, look, we’ve made a strategic decision not to play in large pharma. To be there you need to have very flexible model of delivery involving staffing and quite a bit of functionality outsourcing. And that’s pretty uniform across large pharma that, you know, they, they, it’s not to say they don’t do some full service outsourcing, but it’s in a very different environment and they expect their partners, if you’re going to be one, to have all of those services. We’ve chosen not to do that. We’ve chosen not to do that. Not because it’s, it’s not an attractive area. It’s because we think it does detract from some of our focus on full service internal expertise and you know, driving our own efficient process of clinical development that I think is a value to many virtual and smaller companies as opposed to a very large pharma that have a lot of systems and are more focused on how to incorporate their CROs into their system. So, you know, it is a different model in many ways. It’s not unachievable, but it’s something we’ve decided is not, you know, for us.
OPERATOR
Great. Thank you. Thank you. Our next question comes from Sean Dodge with BMO Capital Markets. You may proceed.
Sean Dodge (Equity Analyst)
Yeah, thanks. Good morning, August. You mentioned in your prepared remarks some initiatives you’re putting into place to improve your win rate. Maybe if you could just tell us a little bit more about what you’re doing there and how quick kind of the pull through on those could be in impacting gross wins.
August Trundle (Chief Executive Officer)
Yeah, I’m not going to get into individual things we’re doing. I think that’s just a little bit too much to push out to our competitors. But I just wanted to really express that we are focused on this and we do see opportunities. So I wanted to just, you know, point out we do believe there’s opportunities to expand our both the pipeline and the win rate on our opportunities to really combat the higher cancellation should they continue on to get back to a growth rate that we, you know, we want. So it was more to really, you know, focus on that in terms of timing. I’m hoping this, you know, over the next few quarters we’re going to see, you know, real improvement. I think we already have. Even in Q1, we had a good win rate. And so, you know, I’m hoping it’s sustainable and, you know, the things we’ve done and put in place and the enhancements we’re making improve our win rate meaningfully over the immediate term. Okay.
Sean Dodge (Equity Analyst)
And then maybe taking that and just going back to the comments on the revenue outlook, you can continue to hire in the quarter despite the cancellations and the softer gross wins. Just any more context you can share there that seems to be signaling confidence that you will continue to grow revenue. But I guess maybe just some help squaring kind of the declining net wins with the increasing headcount.
August Trundle (Chief Executive Officer)
Oh, I think you have it right there. That’s the confidence. We’re still hiring. I don’t know how you get any more confident than that.
Sean Dodge (Equity Analyst)
All right, thanks again.
OPERATOR
Thank you. Our next question comes from Michael Cherney with Leering Partners. You may proceed.
Michael Cherney (Equity Analyst)
Morning. Thank you for taking the question. Maybe to flip the AI question a different way. August, as you engage with clients, do you see any commercial usage of AI being done by your clients? Right now we see day by day, it seems like Anthropic OpenAI continue to release modules designed to address clinical trial work, drug discovery. Is any of that factoring into the dynamics of what you think could be in place play relative to the bookings performance and the challenges you noted relative to some of the slowdown in the quarter?
August Trundle (Chief Executive Officer)
No, I don’t think there’s real applications that our clients are using now. They’re impacting our interaction with them. Everybody’s using AI in places, many times embedded in other systems, et cetera. But I don’t think it’s anything that’s affecting our provision of services or interaction with clients at the current time. No.
Michael Cherney (Equity Analyst)
And I know you said, Kevin, no buyback in the guidance now, but given the way the stocks reacted to the earnings, any thoughts on just capacity and capability, not just from the authorization, but cash flow availability given clearly what’s amount of cash on the balance sheet?
Kevin Brady (Chief Financial Officer)
Yeah, I mean, certainly we’ve got authorization in place. I think we’ve got a little bit over $800 million in authorization and we’ll continue to execute as we always have and look for opportunities to do that. So no, we will continue to execute under our planning strategy that we always have.
Michael Cherney (Equity Analyst)
Thank you.
OPERATOR
Thank you. And as a reminder to ask a question, please press star 11 on your telephone. Our next question comes from Ryan Halstead with rbc. You may proceed.
Ryan Halstead (Equity Analyst)
Good morning. Thanks for taking the questions. Maybe just going back to SGA looked like there was a pretty nice improvement sequentially. Can you talk a little bit about
Kevin Brady (Chief Financial Officer)
what drove the improvement? And then just how should we think about SGA going forward, especially in light of the comments earlier that you’re continuing to hire. What are sort of the efficiencies and how should we think about that going forward? I mean, SGA was up slightly sequentially. Right. Okay. So do you expect though that you know, again with sort of the cancellations going forward and you know, maybe in the past you’ve talked about having some pretty strong retention of your, of your professionals. You know, do you envision more operating efficiencies going forward? Yeah, I mean, certainly because of the improved retention rates that we’ve seen, we continue to these efficiencies probably at a slower pace than we have. If you look at guidance and the midpoint of guidance margins to remain in a very good spot. But no, we continue to see some divergence because of that is reflected in our guidance.
August Trundle (Chief Executive Officer)
Got it. Okay. And then maybe just trying to take another angle at the cancellations. Not sure if you’ve commented on this in the Past. But do you see within cancellations any trials that are suspended and maybe are outside of your bookings time horizon but have the potential to restart in the future? Sure. You know, both things in backlog and things in, you know, they haven’t reached backlog. You know, that’s always a one of the biggest risks. Like there’s always, you know, total cancellation risk. But one of the biggest risks is, you know, timing of it, you know, making it the backlog, you know, when it starts proceeding. You know, sometimes they award something, heck, even before they’ve raised money to do the trial, you know, before, you know, well, before they’re ready to move forward on it or awarded it as part of a series of studies that are based on each other, you know, and so it’s sequential, you know, and you know, so there’s always a question whether things get pushed out or sometimes they can accelerate and come in quicker than we expected. But generally if something happens, you know, they get pushed out or canceled.
Ryan Halstead (Equity Analyst)
Got it. Okay. So sorry, just to follow up on that. So do you feel, you know, there’s, I guess, confidence in your outlook in that perhaps some of those cancellations could resume within the year?
August Trundle (Chief Executive Officer)
Yeah, so I if to cancel, it’s probably dead. I mean, look, look, things don’t generally come back from the cancel bucket, but I’m just saying that there are things that didn’t make it into backlog in a given quarter that might come in in future quarters. We might have expected them to come in one quarter and they get delayed and get pushed into other quarters. And some of the stuff that’s in backlog that gets put on hold. Yeah, it could cancel. I mean, we don’t necessarily, we don’t cancel it because of that. We just hold it in backlog, it remains in backlog, you don’t cancel it. It’s just on hold for a period of time and then hopefully it gets started or, or maybe it does cancel in the future. Got it. Okay, that’s helpful.
Ryan Halstead (Equity Analyst)
Thanks for taking my questions.
OPERATOR
Thank you. Our next question comes from Eric Caldwell Baird. You may proceed.
Eric Caldwell (Equity Analyst)
Thanks for the follow ups. And I am definitely expecting a snarky response on this because it’s probably a bad question. But I’m curious what level of netbook to Bill you are using internally to help guide the revenue outlook that you do have. I know calling quarters is incredibly unreasonable, you know, particularly at this point in April. You don’t know what the cancels will be at this point. I get that. But you do have a forecast internally and I’m just trying to level set what you’re thinking and where you would be directionally steering those of us on the outside so we don’t get ahead of our skates here over the next
August Trundle (Chief Executive Officer)
quarter, next three quarters. Yeah. So first off, just, you know, book the bill. I mean, you know, it’s just a horrible measure. I mean, look, I get it. It’s useful to, you know, see that the buckets filling at a rate that’s, you know, commensurate with what’s pouring out into revenue, you know, that, that, you know, you’re either growth or non growth in future, you know, revenue opportunity. But you know, under, particularly under 606 and you know, you don’t model things based on a book to bill. You know, it’s, it’s. Do we miss book to bill because revenue ran up so fast that it made our book to bill lower even though we exceeded on bookings, our expectation. You know, I mean, you, you miss on things that are good, you know, I mean, you know, we, we, you know, you missed that book to bill target because our revenue was so high, you know. Oh, is that a bad thing? You know, it’s a, it’s a, you know, it’s a flawed measure of, you know, performance. You know, it’s a great measure to see if the bucket’s filling, you know, versus emptying. But they’re different buckets, unfortunately, under 606 and you don’t even know whether the good bucket’s, you know, actually filling while, you know, another bucket’s, you know, draining. So I don’t want to talk about book to bill and I’m not going to give, you know, a guide, you know, guide, you know, future book to bill for us. But we certainly do hope to you have improving, you know, bookings over time. And I would assume that the book, the bill, you know, Certainly, you know, 0.88 where, you know, things are contracting is, you know, not, you know, anything we would expect, you know, going forward. But you know, the cancellations can drive you to lower levels occasionally.
Eric Caldwell (Equity Analyst)
Yeah, I completely agree with you on the book to Bill. I wish you could see my correspondence with investors on this topic. I’m 100% on board, but bookings dollars are important and I was really hoping more for direction on that. You just did 618 in the quarter. Are you, you know, internally, are you modeling 650, 700. I’m just trying to get a sense on what you’re thinking the dollars will
August Trundle (Chief Executive Officer)
be, forget the ratio. What you need to do to be within this revenue guidance range for the year. So we do anticipate that it will increase, but you know, I don’t want to quantify anything there. It’s just not, you know, we’re not going to guide, you know, what, you know, bookings and given quarters and it’s just too variable. You know, I do anticipate the increase but you know, that’s, there’s no guarantees on anything.
Eric Caldwell (Equity Analyst)
Yeah, fair enough. And then on the pre backlog in the past you’ve given some, some ballparks on that and I think at one or two
August Trundle (Chief Executive Officer)
back, you know, quantification. You mean in terms of cancellations in there or do you mean in terms of magnitude? But it hasn’t moved into the three year window yet. All right, so in response to, you know, kind of the moving parts and how we could have, you know, growth and I said that it was comparable size to backlog itself and actually somewhat larger at the time I think was, you know, I’d said, but you know, we’ve never tried to, you know, quantify that. And again, it’s because it’s so variable, but it’s, it’s a size that is generally comparable to backlog.
Eric Caldwell (Equity Analyst)
Yeah. So. Okay, fair enough. Thank you very much.
OPERATOR
Thank you. Our next question comes from Justin Bowers with Deutsche Bank. You may proceed.
Justin Bowers (Equity Analyst)
Hi, good morning everyone.
August Trundle (Chief Executive Officer)
August. I’m just trying to understand some of the moving parts here on the gross versus net. And I think folks are a little confused on what we’re seeing in the broader macro environment and biotech funding and that’s large your customer base. And then you know, in turn, like, in terms of like the bookings that we see now, it seems like, you know, realistically if you take a step back, you guys have grown net bookings, you know, 25% year over year. You could say you might be a little bit of a victim of your own success because of the outsized growth that you’ve had over the last year plus versus the rest of industry. So is this. And you’re calling out cancellations as well, but what about the overall gross environment? Was rfp? Was this an RFP sort of dynamic that you saw, a win rate dynamic? It seems like your win rates were okay or actually stepping up. So was it just the opportunities weren’t there in the quarter or something else? Can you help us understand that? Yeah, sure. I think maybe there’s a little confusion over where things happen. So in the current quarter, as I said, our wins, our awards were good and our win rate was Good. Okay. So if we had a backlog policy that shows anything that we get awarded in a quarter as going into backlog, as some CROs have done in the past, we would. Had a good book to Bill. I don’t know what it would have been, but, you know, it would have been a, you know, I think people would be happy with it. The. But we don’t because those awards are often just, you know, based upon, you know, future plans and, you know, there’s a lot of to be done. And like I said, they might not even have money and they might, you know, in our client base, it’s not like a large pharma that, you know, hands over to one of their partners, you know, a protocol on a, on a study for, you know, a compound that they’re, you know, ready to run with. You know, sometimes there’s a lot of moving parts in with our clients and they award us something and it’s going to be quite a while before it starts and there’s quite a bit of risk that it never gets there, you know, that never gets to start. So we don’t recognize that into a backlog, which are things that are ongoing. Okay. So that’s stuff that we start up and that’s our backlog. It’s the future, you know, you know, opportunity for projects that have started. But we have a lot of projects that are not started and may never start in this kind of pre backlog. And so the quarter was good in terms of clients telling us that, you know, they, they’ve now got money or they’ve got plans or, you know, they’re going to have money and, and they want to use us. But what is actually starting in the quarter is based on stuff that was awarded to us prior quarters. I don’t know, it could have been some of them, you know, two years ago. I mean, some of it, you know, last quarter, the quarter before or whatever. And so there is a little bit of a disconnect between current environment and our bookings. And so what current environment is a better reflector on our bookings? I don’t know, two, three quarters out or so. You know, I mean, it’s a, there’s a lag. So does that close the, does that answer the question? Yeah, yeah, that’s helpful. And then maybe to just bridge that a little bit. It does sound like, you know, sort of awards or wins were good, but that’s not starting anytime soon. So then is it. If we sort of zoom back to what Eric asked, the pre backlog, then is that, you know, is that growing or has that been. So pre backlog did grow. We’re just not going to give metrics on the size of the growth. I just one time, you know, said, because there was this huge cliff, you know, people thought was happening, which I like, I say I can’t, you know, at this point it’s, it’s a greater risk than it was back then because cancellations have been so large. But, you know, I said, I think that, you know, pre backlog had grown by 30% or something. But, you know, we’re not going to give percentage growth in pre backlog. But yes, we did. Like I said, we had a good quarter in terms of new authorizations, not in the backlog. But, you know, just they’re telling us they plan to use this in the future. If you add up all those, all those, the pool group in the quarter. Okay, that’s helpful. And then just last one for me. In terms of those authorizations, is there a way or how do you get, how do you sort of risk assess or risk adjust, you know, quality of those awards and is there any change in the trend that you’re seeing, like between now and over the last few months or a few quarters? So, yeah. So you’re asking how we assess, like for modeling backlog conversion and, you know, conversion into backlog and future revenue. How do we assess that risk? Is that what you’re asking about? That, that, that and like, let’s say how well capitalized or funded these programs are. Well, that, that’s part of the assessment of, you know, likelihood of moving forward. So, so we do make an assessment of when we think, you know, something will progress based on, you know, a number of factors. But I don’t have a, I don’t have a track. You know, we don’t, we don’t track like how many are in this bucket versus how many in that bucket and, you know, which ones are, you know, high risk versus low risk. I don’t have any of those kind of metrics, but we do on a project, by project basis, estimate, you know, risk adjust, probability adjust, you know, opportunities and things in pre backlog, you know, schedule when we think they’re going to make it to backlog and when we realize revenue from them. So we do have, you know, the planning tools for, you know, making a model around, you know, our bookings and our revenue. You know, so that is true. But I don’t have a, you know, whether there’s been an increase in the number of projects that are in this category. Of very high risk and don’t even think about it kind of stuff. I don’t have any of that. Okay. Thank you for the questions.
OPERATOR
Thank you. Our next question comes from David Windley with Jefferies. You may proceed.
August Trundle (Chief Executive Officer)
Thanks for taking the follow up, but the, the risk of belaboring. I was going to come back for one more August. We’ve talked in some detail around the cadence, your bookings policy and the cadence of award. And I just, I still struggle to, I think, evangelize some of those things. So I want, I’m going to say some things and I’m hoping you’ll confirm them. So number one, you’ve talked about on this call, an award to a booking could be as short as 1-2-4 or as long as a couple years. You said to me in the past the average is. The inside range is maybe three to five quarters. So call it about a four quarter average from award to booking recognition. Do you agree with that? Yeah, I don’t have in front of me the metrics, but that’s kind of in the ballpark. Yeah. Yep. Okay. And then for clarity, when you recognize a booking, I think we’ve talked in the past and you’ve kind of alluded to this on public calls in the past, that a booking for you is basically happening coincident with first patient in. Is that also consistent with your. Do you agree with that? Yes, that’s true. Okay, so the audience understands then at that point you have already, not you, you, but the company medpace has already done a fairly significant amount of setup work on the trial that is rev. Recable. Correct. At the time you’re recognizing the booking, that’s frequently the case. Yes. Yes. Okay. So in the case of. Yeah, sorry, is that somebody wants to chime in or is that me? I’m hearing an echo. Sorry. So in the case of a cancellation, where the client decides not to move forward, I mean, I guess I would interpret that that doesn’t really happen because they already have. Is that right?
David Windley (Equity Analyst)
No, it’s not infrequent that somebody pulls the plug before we get the first patient in. It’s very, you know, the costs are very small compared to, you know, launching the trial. Right. So things, things do cancel at any, any stage right up to, you know, once patients are in, then it’s usually, you know, it has to be something, I mean, big, you know, toxicity, you know, something, you know, failure of the compound, you know, but, you know, once you’ve invested that, it’s, it’s generally, you don’t pull patients off of the drug just you know, before, before patients end. It’s much higher risk. But you’re right, we generally have though a very limited, you know, some loi, you know, some startup task order that is, you know, covering the costs that might be going before the study fully launches. And you know, sometimes we have a contract, you know, but very often we have something covering us and you know, limits there amount of liability to you know, some X number of dollars and you know, and they could pull the plug. Yeah, sure. Okay. But in that case where, where the client is, is deciding to pull the plug before first patient in more times than not. That’s a pre backlog cancellation, not a backlog cancellation.
August Trundle (Chief Executive Officer)
Yeah, virtually always. Yeah. No, I’m sorry if you’re talking about just backlog. Yes, that’s you know, they’ve expended quite a bit of resources and when it gets to the point where the quarter in which it goes into backlog, they’ve expended a lot of resources and that’s highly unlikely to cancel. But I’m just saying that you know, three quarters before first patient in, you know, the amount of work we might have done, you know, work in terms of, you know, some regulatory work and other, you know, other things, but it, the investment’s relatively small and they could, they could cancel that. Right. And I understand, I’m belaboring the point. But so the, in the case like this quarter where cancellations of backlog were relatively high and you answered to Eric, it’s not just one, it’s, it’s several. Those are trials that have patients in the study that the client has chosen to cancel and those can happen because of futility of the drug or things like that. But more often I guess I’m asking in this quarter, in this particular case what does drive the higher cancellation? Because those study, you know, asking in the context of those studies having advanced as far as they have in order for them to have already gotten into backlog.
David Windley (Equity Analyst)
Yeah, generally product failure, I mean look at oncology happens all the time. You know, they got, it’s not working right. And you know, and it’s got multiple phases possibly of it, you know, and it’s, and they’re rolling, you know, one into the next, et cetera or just, you know, it just gets canceled because you know, there’s unexpected toxicity. But it’s also some things go really well and you finish early, you recruit faster and there’s a cancellation because the budget was for a two year study because you. Or two years of Recovery recruitment, and you recruit it in one year, actually, your client gets money back, you know, or, you know, the contract amount is reduced, you know, so there’s lots of, you know, ways in which, you know, the total budget might wind up being less than what you bid it at and put in backlog. Got it.
August Trundle (Chief Executive Officer)
My last question for you on a completely different subject, and congrats to Jesse on the retirement. But August, what is. I mean, I know this has been a lot of your life for a very long period of time, but what is your commitment to the company? How do you view your own longevity in your current role?
David Windley (Equity Analyst)
How do I view my longevity? Look, I don’t know. Look, I’m committed to the company, obviously very passionately interested in medpace and its success. So I’m going to be here for quite a while and I will retake duties as president as I had in the past. And I don’t think there should be any kind of disruption or problem. We do have a very strong and deep management team. And, you know, we will eventually, you know, have someone move to that spot, but it’s not in the. In the near term. But we do have plenty of management strength to continue to move Midpace forward. Got it.
OPERATOR
Thank you for enduring my many additional questions. Thanks very much. Thanks. Yeah, I think our hour’s up. I don’t know where we are in the queue. None left in queue. I would like to turn the call back over to Lauren Morris for any closing remarks.
Lauren Morris (Director of Investor Relations)
Thank you for joining us on today’s call and for your interest in medpace. We look forward to speaking with you again on our second quarter 2026 earnings call.
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