Medpace Holdings, Inc. Common Stock 2026 Q3 Earnings Call

You may begin. Good morning, and thank you for joining Medpace's third quarter 2026 earnings conference call.

Also on the call today is our CEO, August Troendle, 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 10-K and other filings with the SEC. Please note that we assume no obligation 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 a 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 the 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 website at investor.medpace.com. With that, I would now like to turn the call over to August Troendle.

Thanks, David. Good morning, everyone. The business environment remained strong in quarter three 2026. We saw high-quality RFP activity, strong initial award notifications, and a good win rate. Net new business awards reached an all-time high in the quarter, and our last 12-month growth in awards was 23.9%. We will provide guidance for 2027 at the time of our Q4 reporting in February. However, we see no large disconnect between analyst consensus estimates and our current modeling of 2027. Kevin will now review our financial results for Q3 and our updated 2026 guidance.

Thank you and good morning to everyone listening in. Revenue was $716 million in the third quarter of 2026. This represented a year-over-year increase of 8.5%. Revenue for the nine months ended September 30, 2026, was $2.13 billion and increased 16.9%. EBITDA of $172.1 million increased 16% compared to $148.4 million in the third quarter of 2025. Year-to-date EBITDA was $474.9 million and increased 19.5% from the comparable prior year period. EBITDA margin for the third quarter was 24% compared to 22.5% in the prior year period. EBITDA margins benefited from lower reimbursable costs. Year-to-date EBITDA margin was 22.3% compared to 21.8%. In the third quarter of 2026, net income of $137.5 million increased 23.7% compared to net income of $111.1 million in the third quarter of 2025.

Net income growth above EBITDA growth was primarily driven by higher interest income and a lower effective tax rate compared to the prior year period. Year-to-date net income was $382.7 million compared to $316 million in the comparable prior year period, which represents a 21.1% increase. Net income per diluted share for the quarter was $4.84 compared to $3.86 in the prior year period. Year-to-date net income per diluted share was $13.37 compared to net income per diluted share of $10.64 in the comparable prior year period. Net new business awards entering backlog in the third quarter increased 10.6% from the prior year to $873.4 million. Net new business awards entering backlog over the last 12 months increased to $3.02 billion, representing a year-over-year increase of 23.9%. Ending backlog as of September 30, 2026, was approximately $3.2 billion, an increase of 5.6% from the prior year.

We project that approximately $1.99 billion of backlog will convert to revenue in the next 12 months. Backlog conversion in the third quarter was 23.8% of beginning backlog. Regarding customer concentration, our top five and top 10 customers represent roughly 31% and 39%, respectively, of our last 12 months revenue. In the third quarter, we generated $216.6 million in cash flow from operating activities, and our net days sales outstanding was negative 66 days. Cash ended the quarter at $705.3 million. Effective October 20, 2026, the board terminated the company's current share repurchase authorization and approved a new share repurchase authorization of up to $1 billion. Moving now to our updated guidance for 2026. Full year 2026 total revenue is now expected in the range of $2.835 billion-$2.855 billion, representing growth of 12%-12.8% over 2025 total revenue of $2.53 billion.

Our 2026 EBITDA is now expected in the range of $638 million-$652 million, representing growth of 14.4%-16.9% compared to EBITDA of $557.7 million in 2025. We forecast 2026 net income in the range of $514 million-$524 million. This guidance assumes a full year 2026 effective tax rate of 19%-19.5%, interest income of $22.9 million, and 28.6 million diluted weighted average shares outstanding for 2026. There are no additional share repurchases assumed in our guidance. Earnings per diluted share is now expected to be in the range of $17.97-$18.32. Guidance is based on foreign exchange rates as of September 30, 2026. With that, I will turn the call back over to the operator so we can take your questions.

Thank you. August, you might be on mute.