In its third quarter of 2023, Medpace Holdings (NASDAQ:MEDP) Inc. reported revenue of $492.5 million, marking a 28.3% increase year-over-year. The company also witnessed a surge in net new business awards entering backlog by 29.9% to $611.5 million. The ending backlog as of September 30, 2023, rose by 20.3% from the previous year to approximately $2.7 billion.
Key takeaways from the call:
- Medpace expects approximately $1.46 billion of the backlog to convert to revenue in the next 12 months.
- The company's updated guidance for 2023 includes expected total revenue in the range of $1.87 billion to $1.89 billion, and EBITDA in the range of $353 million to $361 million.
- Initial guidance for 2024 projects revenue between $2.15 billion and $2.2 billion, and EBITDA between $390 million and $415 million.
- Factors such as inflationary changes, competition, and the type of study are contributing to increased investigator fees. The company expects these costs to remain elevated for some time.
- Medpace reported strong funding in Q2 and expects it to remain robust in Q4 and in 2024.
- The company does not anticipate significant margin expansion in 2024 due to the impact of reimbursable activities and wage and benefit inflation.
- The company plans to continue investing in organic growth, with some capital expenditures for expanding its headquarters.
According to InvestingPro data, Medpace's market cap is currently at 7800M USD, with a P/E ratio of 28.66. The company's revenue growth for the second quarter of 2023 was 30.05%, a significant increase that is reflected in its financial report.
During the earnings call, Medpace executives also discussed the overall funding environment and various factors contributing to increased investigator fees. They noted that while wage inflation has moderated and turnover is lower, investigator fees are expected to remain high due to inflationary changes, competition, and the type of study. However, cancellation levels have returned to normal.
InvestingPro Tips indicate that Medpace has a perfect Piotroski Score of 9, which is a testament to the company's strong financial health. The company has also been aggressively buying back shares, a move that typically signals management's confidence in the company's future.
The company also provided an update on their hiring plans and mentioned that they are well-positioned for current and upcoming work. They expect headcount to grow in line with revenue in 2024. However, they do not foresee a significant margin expansion in 2024 due to the impact of reimbursable activities and wage and benefit inflation.
Addressing a question on capital allocation and interest income, the company revealed plans to continue investing in organic growth, with some capital expenditures for expanding their headquarters. They also mentioned the possibility of share repurchases and stated that a reasonable assumption for interest income is a blended rate of around 4.5%.
In response to a question about the trading and movement of companies within the Top 10 category, the executives stated that there were no significant changes or patterns to note, as companies move in and out of this category on a quarterly basis.
The call concluded with closing remarks from the company and a statement about the next earnings call scheduled for the fourth quarter of 2023. For those interested in further insights, InvestingPro offers more than 15 additional tips about Medpace on their platform.
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