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Medpace Holdings, Inc. (MEDP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $536.6M (+7.7% YoY), diluted EPS $3.67, EBITDA $133.5M, and EBITDA margin expanded to 24.9%; net income margin rose to 21.8% as reimbursables fell and productivity stayed high .
  • Book-to-bill was 0.99x on net new awards of $529.7M, reflecting prior pipeline cancellations; management targets >1.15x in 2H’25 if cancellations normalize and the environment improves .
  • FY25 guidance: revenue $2.11–$2.21B (0.0–4.8% growth), EBITDA $462–$492M, net income $378–$402M, EPS $11.93–$12.69, tax rate 18–19%, with no buybacks assumed; FX at 12/31/24 rates .
  • Liquidity/cash generation strong: Q4 operating cash flow $190.7M; cash $669.4M; board raised buyback authorization by $600M on Feb 6, 2025, after repurchasing ~$174.2M in Q4 .
  • Stock narrative catalysts: near-term bookings weakness and low FY25 growth outlook vs robust margins/productivity; advanced billings up and negative DSO highlight cash flow strength; funding-linked cancellations remain the key swing factor .

What Went Well and What Went Wrong

  • What Went Well

    • Margin expansion: EBITDA margin 24.9% (+570 bps YoY); net income margin 21.8% (+610 bps YoY) aided by lower reimbursables, strong direct service productivity, FX tailwind (~$4M EBITDA) .
    • Cash generation and balance sheet: Q4 operating cash flow $190.7M; cash $669.4M; negative DSO (-71 days); buyback authorization increased by $600M .
    • Management execution/retention: “productivity of our existing staff… programs… progressing very nicely,” with retention at very high levels and mid-to-upper mid-single-digit hiring planned in 2025 .

  • What Went Wrong

    • Bookings softness: Q4 net awards $529.7M and book-to-bill 0.99x, with lingering effects from 2024 pipeline cancellations; RFPs down slightly QoQ and qualitative quality softened .
    • 2025 growth outlook subdued: revenue guided flat to +4.8% and EBITDA down ~3.8% at the low end; management acknowledged uncertainty and cancellations as key risk .
    • Competitive/funding pressure: heightened competition and pricing defense amid many clients facing funding challenges; cancellations largely funding-related in 2024 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$528.1 $533.3 $536.6
Revenue YoY Growth %14.6% 8.3% 7.7%
Diluted EPS ($)$2.75 $3.01 $3.67
Net Income ($USD Millions)$88.4 $96.4 $117.0
EBITDA ($USD Millions)$112.3 $118.8 $133.5
EBITDA Margin %21.3% 22.3% 24.9%
Net Income Margin %16.7% 18.1% 21.8%
KPIQ2 2024Q3 2024Q4 2024
Net New Awards ($USD Millions)$551.0 $533.7 $529.7
Book-to-Bill (x)1.04x 1.00x 0.99x
Backlog ($USD Millions)$2,924.9 $2,927.4 $2,902.2
Backlog Conversion (% of beginning backlog)18.2% 18.2% 18.3%
Operating Cash Flow ($USD Millions)$116.4 $149.1 $190.7
Cash & Equivalents ($USD Millions)$510.9 $656.9 $669.4
Advanced Billings ($USD Millions)$638.4 $670.9 $710.6
Net DSO (days)-58.1 -62 -71

Segment breakdown: Not applicable; company reports consolidated CRO services metrics and does not provide segment revenue by business line in these disclosures .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025No prior FY25 guidance provided $2.110–$2.210 Initial issuance
EBITDA ($USD Millions)FY 2025No prior FY25 guidance provided $462–$492 Initial issuance
Net Income ($USD Millions)FY 2025No prior FY25 guidance provided $378–$402 Initial issuance
Diluted EPS ($)FY 2025No prior FY25 guidance provided $11.93–$12.69 Initial issuance
Tax Rate (%)FY 2025N/A18–19 Initial issuance
Interest Income ($USD Millions)FY 2025N/A$30.5 Initial issuance
Diluted Shares (Millions)FY 2025N/A31.7 Initial issuance
FX AssumptionFY 2025N/ARates as of Dec 31, 2024 Initial issuance
Share Repurchases AssumedFY 2025N/ANone assumed in guidance Initial issuance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Cancellations & fundingCancellations >2x normal in Q2, depressing bookings; largely reprioritization/liquidity and one M&A; normal cancellation rate historically <4.5% .Elevated cancellations persisted Q1–Q3; impact across backlog and pre-backlog; largely companies funded during COVID “sugar high” now running out of money; no client dissatisfaction-driven cancels .Q4 cancellations near normal; bookings delayed; funding remains primary cancellation driver; environment softened qualitatively .Improving cancellations into Q4; bookings recovery expected 2H’25.
Bookings/book-to-bill outlookQ3 expected depressed due to Q2 cancels; book-to-bill hoped above Q2’s 1.04, but not near 1.2 .Q4 book-to-bill framed “above 1.0 but under 1.1”; target >1.15 in 2H’25 .Q4 delivered 0.99; outlook for weak 1H’25, improving to >1.15 in 2H’25 .U-shaped recovery envisaged.
RFPs/front-end demandRFPs up ~16% YoY; initial awards strong .RFPs down modestly sequentially and YoY; quality good .RFPs down slightly QoQ; qualitative aspects less robust .Mixed; still flowing but quality/momentum softer.
Pricing/competitionSome aggressive large-CRO pricing earlier; normalized recently .Competitive environment normalized; no unusual pricing .Heightened competition; defending volume and margin; funding-challenged clients .Slightly more competitive into Q4.
Pass-throughs/reimbursablesPass-through volatility; guidance lowered partly due to lower reimbursables; modeling near ~38% of revenue .Reimbursables down 350 bps YoY; burn rate dynamics discussed .Reimbursables down 400 bps YoY; 2025 mix expected similar to Q4 .Lower reimbursables aiding margins; expected to stabilize near Q4 mix.
Productivity/headcountHiring muted; retention strong; still mid-single-digit headcount growth expected .Low turnover at record lows; margins near optimal; limited further productivity upside .Retention/productivity strong; restart hiring mid-to-upper mid-single digits in 2025; some margin headwinds from hiring .Productivity strong; controlled hiring resumes.
Advanced billings/DSONegative DSO; strong cash conversion .Advanced billings up; negative DSO (-62 days) .Advanced billings +27% YoY; negative DSO (-71 days); timing/milestones and strong collections .Improving cash metrics.
Performance obligations vs backlog—Performance obligations up but longer-tail; backlog better near-term revenue indicator .Similar view; 10-K to show comparable delta; backlog stressed as better reflection .Consistent methodology.
Offshoring/operations——Early-stage offshoring of back-office/admin to India; long-term margin tailwind, not 2025 driver .Building long-term efficiency.
Strategy/focus—Full-service biotech focus; no shift to big pharma/functional outsourcing .Consistent go-to-market; defend price/value; not pursuing large pharma partial-service .Strategy unchanged.
FX—FX benefit noted in margins .~$4M Q4 EBITDA FX benefit; FY25 guidance at 12/31 rates .Neutralized in guidance.

Management Commentary

  • CEO on bookings backdrop: “Our book-to-bill ratio was 0.99… influenced by prior pipeline cancellations… RFPs were down slightly… backlog increased 3%… challenging backdrop to growth in 2025… hopeful… book-to-bill above 1.15 in the second half of the year. Revenue growth for 2025 is expected to be in the low single digits.” .
  • CFO on margins and drivers: “EBITDA margin… favorably impacted by reimbursable costs… benefited from direct service activities and productivity on slower headcount growth… additional benefit from foreign exchange… ~$4 million EBITDA impact for the fourth quarter” .
  • President on Q4 operations: “Revenue… $536.6 million… net new business awards… $529.7 million… backlog… approximately $2.9 billion… ~ $1.63 billion of backlog will convert to revenue in the next 12 months” .
  • CEO on cancellations cause: “Overwhelmingly… linked in good part to funding… primary kind of driver” .
  • Strategy reaffirmed: “We’re not jumping… to do large pharma… not doing partial service… I think longer term, we’re on the winning strategy and we don’t plan on changing it” .
  • Liquidity/capital return: “Repurchased ~527,000 shares for $174.2 million… $134.6 million remaining… Board… approved an increase of $600 million to the Company’s stock repurchase program” .

Q&A Highlights

  • Margin mechanics: Elevated cancellations can create slight margin tailwinds at closeout, but core driver was productivity and retention; reimbursables expected at Q4-like mix in 2025 .
  • Revenue phasing: Expect sequential revenue growth through 2025 depending on awards progression; no big step-up in Q1 .
  • Advanced billings: Up 27% YoY despite bookings decline due to milestone/payment schedule timing and strong collections discipline .
  • Hiring/productivity: Plan to resume mid-to-upper mid-single-digit headcount growth in 2025; anticipate margin headwinds from hiring; offshoring in India is early-stage and longer-term .
  • Bookings outlook and risk: Weak bookings in 1H’25, improving in 2H; delays from Q4 expected to hit bookings in H1’25; cancellations remain top-of-mind risk .
  • Performance obligations vs revenue signal: Longer-tail obligations less correlated to near-term revenue; backlog better indicator .
  • FX and assumptions: ~$4M EBITDA tailwind in Q4; guidance assumes FX at 12/31/24 rates .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates for EPS and revenue for Q4 2024 and prior quarters; data was unavailable due to an S&P Global API daily limit error. As a result, comparisons versus Wall Street consensus are not included in this recap. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q4 showcased strong profitability and cash conversion: EBITDA margin 24.9%, net income margin 21.8%, OCF $190.7M, negative DSO (-71 days) .
  • Sequential revenue trajectory modestly positive across Q2–Q4; bookings remain the swing factor with book-to-bill at 0.99x in Q4 amid prior pipeline cancellations .
  • FY25 outlook is conservative (flat to +4.8% revenue); expect weak bookings in 1H’25, improving to >1.15x 2H’25 if cancellations normalize—watch RFP quality, conversion to awards, and funding conditions .
  • Margin dynamics supportive near term: lower reimbursables and high productivity, but hiring restart in 2025 introduces some margin headwinds; pass-through mix expected similar to Q4 levels .
  • Cash and buybacks: enhanced authorization (+$600M) provides capital return flexibility; Q4 buybacks already material (~$174M) .
  • Risk monitor: funding-linked cancellations and competitive pricing pressure; management asserts no loss of projects due to dissatisfaction; backlog remains best near-term revenue indicator versus performance obligations .
  • Trading lens: near-term sentiment may hinge on bookings prints and funding trends; medium-term thesis supported by margin strength, disciplined execution, and potential bookings recovery in 2H’25 .