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Medpace Holdings, Inc. (MEDP)·Q1 2025 Earnings Summary

Executive Summary

  • MEDP delivered a broad-based beat: Q1 2025 revenue $558.6M (+9.3% YoY) and diluted EPS $3.67; revenue and EPS exceeded Wall Street consensus by ~6.1% and ~20.2%, respectively; beat drivers included higher reimbursable pass‑through activity and strong program progression, with net income aided by a lower effective tax rate and higher interest income . EPS/Revenue consensus: 3.053 / $526.34M (9 estimates)*.
  • Bookings were soft: net new awards $500.0M (book‑to‑bill 0.90x), backlog declined 2.1% to $2.846B; management highlighted elevated pre‑backlog cancellations and slowing decision cycles despite strong RFP flow .
  • Guidance was tightened up: FY25 revenue raised to $2.140–$2.240B (from $2.110–$2.210B) and EPS to $12.26–$13.04 (from $11.93–$12.69); EBITDA unchanged at $462–$492M; tax rate lowered to 15.5–16.5% (from 18–19%), interest income lowered to $15.8M, diluted shares to 30.8M .
  • Capital returns and liquidity: Board approved an additional $1.0B buyback authorization on April 17; the revolving credit facility was upsized to $600M and extended to April 30, 2027, adding flexibility amid a variable bookings environment .

What Went Well and What Went Wrong

What Went Well

  • Revenue and EPS beat amid stronger reimbursable activity and program progression; EBITDA $118.6M (+2.6% YoY), net income $114.6M (+11.7% YoY); “programs continued to progress very nicely” and pass‑throughs were higher than expected .
  • Raised FY25 revenue and EPS guidance ranges despite bookings softness; management reiterated path to >1.15x book‑to‑bill in H2 contingent on moderating cancellations and improved climate .
  • Operating cash flow $125.8M; cash $441.4M; aggressive buybacks in Q1 ($389.8M for ~1.19M shares) and added $1.0B authorization, underscoring capital return capacity .

Quotes:

  • CEO: “We continue to see a path to improve backlog growth reflected in book‑to‑bill ratios above 1.15 in Q3 and Q4. However, this will depend upon moderating cancellations and an improved business climate.”
  • CFO: “A big part of the revenue increase that we saw this quarter was influenced by the reimbursable activity.”

What Went Wrong

  • Bookings softness: net new awards $500.0M (‑18.8% YoY); book‑to‑bill 0.90x; backlog down 2.1% YoY to $2.846B, reflecting elevated pre‑backlog cancellations and slower decision cycles .
  • Margin compression: EBITDA margin 21.2% versus 22.6% prior year; management cited employee‑related costs and FX (weaker USD) as headwinds .
  • Pricing competition and RFP quality concerns: broader CRO participation, “fishing for lower prices,” and variability in RFP quality given funding uncertainties among small biopharma clients (MEDP’s revenue mix remains ~80% small biopharma) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$533.3 $536.6 $558.6
Diluted EPS (GAAP) ($)$3.01 $3.67 $3.67
Net Income Margin (%)18.1% 21.8% 20.5%
EBITDA ($USD Millions)$118.8 $133.5 $118.6
EBITDA Margin (%)22.3% 24.9% 21.2%
KPIQ3 2024Q4 2024Q1 2025
Backlog ($USD Millions)$2,927.4 $2,902.2 $2,846.0
Net New Awards ($USD Millions)$533.7 $529.7 $500.0
Book‑to‑Bill (x)1.00x 0.99x 0.90x
Backlog Conversion Rate (%)18.2% 18.3% 19.2%
Backlog to Convert in Next 12 Months—~$1.63B ~$1.61B
Q1 2025 vs EstimatesActualConsensusSurprise
Revenue ($USD Millions)$558.6 $526.34*+$32.26 (+6.1%)*
Diluted EPS (GAAP) ($)$3.67 $3.053*+$0.62 (+20.2%)*
# of Estimates—9 (EPS), 9 (Rev)*—

Values marked with * retrieved from S&P Global (Capital IQ) consensus.

Drivers:

  • CFO noted reimbursable pass‑through activity “elevated in the quarter” drove revenue upside, with program progression also better than anticipated; margin headwinds from employee costs and FX .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 10, 2025)Current Guidance (Apr 21, 2025)Change
Revenue ($USD Billions)FY 2025$2.110–$2.210 $2.140–$2.240 Raised
GAAP EPS ($)FY 2025$11.93–$12.69 $12.26–$13.04 Raised
EBITDA ($USD Millions)FY 2025$462–$492 $462–$492 Maintained
GAAP Net Income ($USD Millions)FY 2025$378–$402 $378–$402 Maintained
Effective Tax Rate (%)FY 202518.0–19.0 15.5–16.5 Lowered
Interest Income ($USD Millions)FY 2025$30.5 $15.8 Lowered
Diluted Shares (Millions)FY 202531.7 30.8 Lowered
Share Repurchase Authorization ($USD)Program+$600M (Feb 6) +$1.0B (Apr 17) Increased

Notes:

  • Management emphasized no additional buybacks reflected in FY25 guidance in both periods .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Bookings & cancellationsQ4: cancellations within normal range; warned weak bookings H1’25, aiming >1.15 in H2 Q1: pre‑backlog cancellations “worse”; book‑to‑bill 0.90x; path to >1.15 H2 depends on moderating cancellations Mixed to cautious
RFP quality & pricingQ4: RFP volume fine; qualitative quality weaker; environment tightened pricing Q1: more CROs invited; price competition; RFP quality variable amid funding uncertainty Persistent pressure
Pass‑through costsQ4: indirect costs down; margin tailwind Q1: reimbursables elevated (timing); expect levels similar to 2H’24 for FY25 Volatile, normalizing
Backlog burn/advanced billingsQ4: advanced billings up; alignment with milestones and collections Q1: backlog conversion 19.2%; revenue acceleration drove burn higher Solid execution
Hiring/productivityQ4: high retention/productivity; plan mid‑single‑digit headcount growth in ’25 Q1: turnover “pretty good”; mid‑single‑digit headcount growth target, dependent on environment Prudent scaling
FX impactQ4: ~+$4M EBITDA FX benefit; FY25 assumes 12/31 rates Q1: margin headwind from weaker USD Reversing tailwind
Small biopharma exposureQ4: funding issues primary cancellation driver Q1: 80% revenue from small biopharma; funding challenges, some negative EV concerns but not a major driver Funding risk remains

Management Commentary

  • Strategy and bookings outlook: “We continue to see a path to improve backlog growth… above 1.15 in Q3 and Q4… depend upon moderating cancellations and an improved business climate.” — August Troendle
  • Revenue drivers: “Programs were progressing well… increase in the reimbursable cost activity… a bit higher than… expected.” — Kevin Brady
  • Margin headwinds: “EBITDA margin… impacted by employee‑related costs and foreign exchange behind the weakening of the U.S. dollar.” — Kevin Brady
  • Competitive dynamics: “Anytime there's a slowdown… more price competition… larger number of CROs participating… [concern is] likelihood of funding.” — August Troendle
  • Capital returns: “We did increase the Board authorization on share repurchases… will continue to take an opportunistic approach.” — Kevin Brady

Additional corporate actions:

  • Credit facility amendment: line increased to $600M and revolving note extended to April 30, 2027 (Term SOFR and Daily Rate options) .
  • Buyback authorization: Board approved +$1.0B increment on April 17 .

Q&A Highlights

  • RFPs and pricing: More CROs invited to bids; sponsors “fishing” for lower prices; RFP quality mixed due to unfunded projects seeking proposals; pricing pressure from both mid‑size and larger competitors .
  • Cancellations: Management does not disclose rates; cancellations broad and largely funding‑related; pre‑backlog cancellations significantly worse in Q1; in‑flight cancellations more tied to drug performance but funding overlaps .
  • Backlog burn and pass‑throughs: Revenue acceleration and higher reimbursables drove increased burn; FY25 reimbursables expected similar to 2H’24 mix .
  • Hiring and productivity: Turnover remains good; planning mid‑single‑digit headcount growth in ’25, contingent on environment .
  • Advanced billings: Elevated via milestone schedules and strong collections despite lower bookings; fewer clients not paying .

Estimates Context

  • Q1 2025 beat: EPS $3.67 vs $3.053* (+$0.62); Revenue $558.6M vs $526.34M* (+$32.26M), with 9 estimates for each metric*. Beat driven by elevated reimbursables and better program progression; net income aided by lower effective tax rate and higher interest income . Values marked with * retrieved from S&P Global.
  • Implications: Consensus likely adjusts higher for FY25 revenue/EPS given raised guidance and execution; margin expectations should reflect employee‑cost and FX headwinds, and normalized reimbursable mix .

Key Takeaways for Investors

  • Strong headline beat with quality drivers (program progression and reimbursables); but bookings softness and elevated pre‑backlog cancellations temper the medium‑term growth outlook; watch H1 book‑to‑bill and H2 trajectory toward >1.15x .
  • Guidance raised for FY25 revenue and EPS; EBITDA unchanged; tax rate lowered, diluted shares lowered—both supportive to EPS; maintain focus on cancellations and FX impacts .
  • Capital deployment remains aggressive: $389.8M Q1 buybacks and +$1.0B authorization; increased $600M credit line adds flexibility for opportunistic buybacks and working capital needs .
  • Margin outlook: Expect near‑term pressure from employee costs and FX; reimbursable mix volatility will influence reported EBITDA margins quarter‑to‑quarter .
  • End‑market sensitivity: ~80% small biopharma exposure implies continued funding‑related volatility in bookings and cancellations; pricing competition rising across peer set .
  • Trade setup: Post‑beat, stock reaction hinges on H2 bookings evidence (book‑to‑bill trending >1.15x), stability in reimbursables, and confirmation of lower tax rate and share count driving EPS leverage .
  • Risk checks: Monitor pre‑backlog cancellation trends, FX moves, pass‑through cost normalization, and any changes in FDA cadence impacting sponsor behavior (management sees limited evidence so far) .