Medpace Holdings, Inc. (MEDP) Q4 2025 Earnings Call Transcript
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Overview
The earnings call presented a mixed picture: strong revenue growth expectations were offset by high cancellation rates and unclear management responses on key issues like AI impact and M&A environment. While product development and market strategy showed some positive signs, concerns over pass-through costs and the lack of specific guidance on cancellation trends and burn rate create uncertainties. The absence of a new partnership announcement or major shareholder return plan further tempers positive sentiment, resulting in a neutral outlook for the stock price over the next two weeks.
Key Financial Performance
Revenue (Q4 2025) $708.5 million, a year-over-year increase of 32%. The increase was due to strong business performance and growth in new business awards.
Revenue (Full Year 2025) $2.53 billion, a 20% increase from 2024. This growth was driven by consistent business expansion and higher backlog conversion rates.
Net New Business Awards (Q4 2025) $736.6 million, a 39.1% increase from the prior year. This reflects strong demand and successful client acquisition.
Net New Business Awards (Full Year 2025) $2.65 billion, an 18.7% increase from 2024. The growth was attributed to robust client engagement and project wins.
Ending Backlog (as of December 31, 2025) Approximately $3 billion, a 4.3% increase from the prior year. This was due to sustained business growth and higher project inflows.
EBITDA (Q4 2025) $160.2 million, a 20% increase compared to $133.5 million in Q4 2024. Growth was driven by higher revenue, though margins were slightly impacted by therapeutic mix.
EBITDA (Full Year 2025) $557.7 million, a 16.1% increase from 2024. Growth was supported by revenue expansion, though margins were affected by higher reimbursable costs.
EBITDA Margin (Q4 2025) 22.6%, compared to 24.9% in Q4 2024. The decline was due to higher reimbursable cost activity driven by therapeutic mix.
EBITDA Margin (Full Year 2025) 22%, compared to 22.8% in 2024. The slight decline was attributed to higher reimbursable costs.
Net Income (Q4 2025) $135.1 million, a 15.5% increase compared to $117 million in Q4 2024. Growth was driven by higher revenue but offset by lower interest income and a slightly higher tax rate.
Net Income (Full Year 2025) $451.1 million, an 11.6% increase from $404.4 million in 2024. Growth was supported by revenue expansion but impacted by lower interest income and a higher tax rate.
Net Income Per Diluted Share (Q4 2025) $4.67, compared to $3.67 in Q4 2024. The increase reflects higher net income.
Net Income Per Diluted Share (Full Year 2025) $15.28, compared to $12.63 in 2024. The growth was driven by higher net income.
Cash Flow from Operating Activities (Q4 2025) $192.7 million. This reflects strong operational performance and efficient cash management.
Cash (as of December 31, 2025) $497 million. This indicates a strong liquidity position.
Share Repurchases (Full Year 2025) 2.96 million shares or $912.9 million. This reflects the company's commitment to returning value to shareholders.
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Operating Highlights
Revenue Growth: Fourth quarter revenue in 2025 was $708.5 million, a 32% year-over-year increase. Full year 2025 revenue was $2.53 billion, a 20% increase from 2024.
Net New Business Awards: Net new business awards in Q4 increased 39.1% year-over-year to $736.6 million. Full year 2025 net new business awards were $2.65 billion, an 18.7% increase.
Backlog Conversion: Backlog conversion rate in Q4 was 23.6%, with $1.9 billion of backlog expected to convert to revenue in the next 12 months.
EBITDA and Margins: Q4 EBITDA was $160.2 million, a 20% increase from Q4 2024. Full year EBITDA was $557.7 million, a 16.1% increase. EBITDA margin for Q4 was 22.6%, and full year margin was 22%.
Net Income: Q4 net income was $135.1 million, a 15.5% increase year-over-year. Full year net income was $451.1 million, an 11.6% increase.
Cash Flow and Share Repurchase: Generated $192.7 million in cash flow from operating activities in Q4. Repurchased 2.96 million shares for $912.9 million in 2025, with $821.7 million remaining under the authorization program.
2026 Financial Guidance: Revenue projected to grow 8.9% to 12.8%, reaching $2.755 billion to $2.855 billion. EBITDA expected to grow 8.5% to 13.9%, reaching $605 million to $635 million. Net income forecasted at $487 million to $511 million, with earnings per share between $16.68 and $17.50.
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Risk or Challenges
Backlog Cancellations: Cancellations were elevated in Q4, with backlog cancellations in absolute and percentage terms being the highest in over a year. This led to a lower-than-anticipated net book-to-bill ratio of 1.04, which could impact future revenue growth if the trend continues.
EBITDA Margins: EBITDA margins declined in Q4 2025 to 22.6% from 24.9% in the prior year period, and full-year margins also decreased to 22% from 22.8%. This was attributed to higher reimbursable cost activity driven by therapeutic mix, which could pressure profitability.
Customer Concentration: The top 5 and top 10 customers accounted for 25% and 35% of full-year 2025 revenue, respectively. This high customer concentration poses a risk if any of these customers reduce or terminate their business with the company.
Net Income Growth: Net income growth lagged behind EBITDA growth due to lower interest income and a slightly higher effective tax rate, which could limit overall profitability improvements.
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Guidance & Outlook
Revenue Growth: Full year 2026 total revenue is expected in the range of $2.755 billion to $2.855 billion, representing growth of 8.9% to 12.8% over 2025 total revenue of $2.53 billion.
EBITDA Growth: 2026 EBITDA is expected in the range of $605 million to $635 million, representing growth of 8.5% to 13.9% compared to EBITDA of $557.7 million in 2025.
Net Income: 2026 net income is forecasted in the range of $487 million to $511 million.
Earnings Per Share: Earnings per diluted share is expected to be in the range of $16.68 to $17.50 for 2026.
Backlog Conversion: Approximately $1.9 billion of backlog is projected to convert to revenue in the next 12 months.
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Shareholder Return Plan
Share Repurchase Program: For the full year 2025, Medpace repurchased 2.96 million shares amounting to $912.9 million. At the end of the year, $821.7 million remained under the share repurchase authorization program. The 2026 guidance does not include any additional share repurchases.
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Key Q&A
Q:What is embedded in your guidance for revenue growth, excluding pass-throughs?
A:Kevin Brady stated that they do not provide guidance on direct service revenue. However, he mentioned that reimbursable costs are expected to be consistent with what was shared in October, around 41%-42% of revenue in 2026, slightly higher than the current year. He also noted that reimbursable costs would start the year higher as a percentage of revenue and flatten out towards the end of the year.
Q:What do you expect headcount growth to be in 2026?
A:Jesse Geiger mentioned that they expect accelerated growth in headcount, with hiring in 2026 anticipated to be above 2025 levels, in the mid- to high single-digit growth range.
Q:Can you unpack the business environment and commentary on RFP activity or win rates?
A:August Troendle described the business environment as reasonably good, with RFPs slightly up quarter-over-quarter and year-over-year. However, he noted a higher cancellation rate, particularly in the metabolic area, which impacted net bookings. Gross bookings were substantially better than last year.
Q:Can you provide more details on cancellations, including historical ranges and drivers?
A:August Troendle explained that cancellations were widespread and not driven by a single large client or project. The level of cancellations was the highest out of backlog compared to the past year, with Q1 being slightly worse due to high cancellations among projects not yet recognized in backlog. He noted no discernible pattern and attributed some cancellations to compound performance issues.
Q:What are you assuming for cancellation trends and burn rate for the remainder of the year?
A:Kevin Brady stated that they do not guide to burn rate. August Troendle added that cancellations were widespread and not concentrated in specific areas, and they do not provide specific guidance on cancellation trends.
Q:How do you view therapeutic area concentration, particularly in oncology and metabolic areas?
A:August Troendle acknowledged that metabolic trials are concentrated in areas like diabetes and obesity but stated that they do not see over-concentration as a significant risk. He expects metabolic to decrease as a percentage of revenue next year and normalize. He also noted that metabolic trials have high pass-throughs, which are expected to moderate.
Q:What is the impact of pass-throughs on revenue growth and burn rate?
A:Kevin Brady and August Troendle explained that pass-throughs, driven largely by metabolic programs, have contributed to revenue growth but are expected to normalize. This normalization will provide a headwind to overall revenue growth but will result in more direct revenue. They clarified that pass-throughs were known to be high from the start and not due to site-level inflation.
Q:What are the margin drivers and productivity gains expected for 2026?
A:Kevin Brady mentioned that margin expansion is expected to be driven by slower hiring due to improved retention, leading to better productivity. He noted no major cost-saving initiatives but highlighted improved utilization and productivity across the board, including laboratory operations.
Q:What are your thoughts on AI and its impact on the business?
A:August Troendle stated that AI's impact will take years to materialize and does not expect significant productivity advantages in 2026. He noted that AI investments will likely offset initial benefits. Jesse Geiger added that AI initiatives are focused on improving efficiency and data analytics for feasibility and site selection.
Q:Did you see any slowdown in decision-making or business moving from pre-backlog to backlog?
A:August Troendle stated that there was no significant slowdown in decision-making or movement from pre-backlog to backlog. He noted that things are progressing relatively normally.
Q:What is the competitive landscape like with top CROs becoming more aggressive?
A:August Troendle mentioned that while top CROs are more interested in the space, there has been no significant change in the competitive dynamic or impact on win rates.
Q:Was there anything unusual in large pharma revenue growth, and is it sustainable?
A:Kevin Brady stated that there was nothing unusual to call out in large pharma revenue growth, and it is not a focus area for the company.
Q:What AI applications are being rolled out in 2026?
A:Jesse Geiger mentioned that AI initiatives include improving efficiency and data analytics for feasibility and site selection. However, specific details were not disclosed.
Q:Did you see any impact from the accelerating M&A environment with large pharma acquiring clients?
A:August Troendle noted that while some clients have been acquired by large pharma, it generally does not pose a short-term risk as ongoing work is not lost. However, the company may lose the client long-term as they are integrated into large pharma.
Q:How did pricing look in new awards in Q4, and what is the outlook for 2026?
A:August Troendle stated that pricing has not changed materially over time and is not expected to impact margins significantly.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to several questions, including specific guidance on direct service revenue, burn rate, and pre-backlog quantification. They also did not disclose details on AI applications being rolled out in 2026, citing confidentiality. Additionally, they did not provide specific insights into the impact of the accelerating M&A environment or changes in trial durations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Associate Director
Backlog cancellation
CFO obligation
Cancellations Backlog
Conference Instructions
Conference today
Director Investors
Full Conference
Geiger CFO
Instructions reminder
Investors Relations
Medpace Director
Medpace Full
President Geiger
Relations remark
SEC Associate
award increase
backlog increase
bill award
bill rate
cancellation percent
cancellation spike
conference Medpace
conversion rate
day Cancellations
direction comment
environment direction
increase backlog
level cancellation
news backlog
opportunity environment
percent term
rate book
rate reason
ratio news
reason level
spike opportunity
term book
MEDP Transcript
Medpace Holdings, Inc. (MEDP) Q4 2025 Earnings Call Transcript
Unknown2-10
The earnings call presented a mixed picture: strong revenue growth expectations were offset by high cancellation rates and unclear management responses on key issues like AI impact and M&A environment. While product development and market strategy showed some positive signs, concerns over pass-through costs and the lack of specific guidance on cancellation trends and burn rate create uncertainties. The absence of a new partnership announcement or major shareholder return plan further tempers positive sentiment, resulting in a neutral outlook for the stock price over the next two weeks.
Medpace Holdings, Inc. (MEDP) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary indicates strong revenue guidance with a raised outlook, optimistic backlog conversion, and a strategic shift to faster growing therapeutic areas. Despite slower EBITDA growth, the overall sentiment is positive due to improved funding confidence, a strong pre-backlog position, and expected acceleration in hiring. While some uncertainties remain, particularly around cancellations and competition, the positive aspects outweigh them, suggesting a likely stock price increase over the next two weeks.
Medpace Holdings, Inc. (MEDP) Q2 2025 Earnings Call Transcript
Unknown7-22
The earnings call summary indicates mixed signals: improved backlog growth and low cancellations are positive, but the weak win rate and dependency on low cancellations for future success are concerning. The Q&A reveals management's reluctance to provide specific long-term guidance, adding uncertainty. Despite improved productivity and revenue growth, reliance on pass-through revenue and potential headwinds in 2025 suggest caution. These factors, combined with management's vague responses, lead to a neutral sentiment, anticipating minimal stock price movement.
Medpace Holdings, Inc. (NASDAQ:MEDP) Q1 2025 Earnings Call Transcript
Unknown4-23
The earnings call reveals concerns about increased price competition, mixed project quality, and reliance on a few customers. EBITDA margins are decreasing, and there is uncertainty in backlog growth and bookings due to cancellations. Despite share repurchases, the Q&A highlights risks like funding issues and lack of clear guidance. These factors, combined with a decrease in net new business awards, suggest a negative sentiment likely affecting stock price.
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