Behind The Numbers – Medpace Holdings (MEDP)
Medpace (MEDP) is a leading clinical contract research organization that assists pharmaceutical, biotech, medtech companies in the clinical development process. “Our mission is to accelerate the global development of safe and effective medical therapeutics.”
Shares would finish higher today by over 11% after reporting Q1 earnings after the bell yesterday:
-EPS of $2.27 vs $1.81 estimate – Beat
-Revenue of $434.1M vs $401.8M estimate – Beat
-Revenue increased 31.2%
-Backlog increased 17.8%
-Achieved a Book-to-Bill Ratio of 1.28x
-Sees FY23 EPS of $7.81 – $8.40 ($8.10 midpoint) vs $7.76 estimate – Beat
-Sees FY23 Revenue of $1.745B – $1.805B ($1.77B midpoint) vs $1.71B estimate – Beat
Prior to the earnings call this morning, Guggenheim’s Sandy Draper noted that the company’s 1.28x book to bill was well above their expectation of 1.2x. “Clearly, even in a challenging environment, the company is winning business as this represents their highest ever bookings number.”
Turning to the conference call, management reiterated that their ending backlog as of March 31st was approximately $2.5B. They project that approximately $1.33B of backlog will convert to revenue in the next 12 months, and backlog conversion in the first quarter was 18.6% of beginning backlog.
CFO Kevin Brady would comment on how the first quarter really just accelerated with less funding challenges than anticipated with clients and lower cancellations as August had pointed out in his prepared remarks. “We’ve kind of had a perfect setup for us in the first quarter with reimbursable activities and direct service activities that really drove that first quarter revenue, but we expect that to come back to ranges that we saw in the third quarter and fourth quarter of 2022.”
CEO August Troendle noted that a Q4 phenomenon was that they had a lot of clients that were having difficulty raising funding while some that declared bankruptcy and stop their programs. “And we haven’t seen as much as we kind of anticipated seeing more of that and have not seen as much in Q1.”
During the Q&A session, Jefferies analyst David Windley noted that both their customer concentration and their therapeutic concentration kind of jumped in tandem.
August Troendle would respond saying, “The trends that we’ve seen over this downturn is a greater amount of our bookings and awards have been more in the midsized clients. Many of our very small clients have had challenges. We have had very strong metabolic awards, oncology, which tends to be toward our biotech clients and antivirals, anti-infectives, which infectious disease type studies have — which have always tend to have a lot of funding difficulties have been smaller in number. That’s the kind of profile I’d provide.
“I think what you’re seeing is a cumulative rise in our metabolic, which has been very strong throughout the past year. There is no one client pushing that, there’s no large study. It’s a very diversified pool. So we have no real strong concentration there.”
