Medpace Holdings, Inc. (NASDAQ:MEDP) Q1 2023 Earnings Call Transcript
Medpace Holdings, Inc. (NASDAQ:MEDP) Q1 2023 Earnings Call Transcript April 25, 2023
Medpace Holdings, Inc. beats earnings expectations. Reported EPS is $2.27, expectations were $1.8.
Operator: Good day, ladies and gentlemen, and welcome to the Medpace First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today’s conference call, Lauren Morris, Medpace’s Director of Investor Relations. You may begin.
Lauren Morris: Good morning. And thank you for joining Medpace’s first quarter 2023 earnings conference call. Also on the call today is our CEO, August Troendle; our President, Jesse Geiger; 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.
August Troendle: Thank you Lauren. Business environment improved in Q1 with RFP flow up on a sequential and year-over-year basis. The total dollar value of pending RFPs also improved significantly. Although word notifications were down on the quarter, they showed sequential improvement January to February to March, and have improved even further to a relatively strong level in the first three weeks of April. Total pipeline cancellations were down over 50% on a sequential basis in Q1. The trends at this point look favorable. And we are cautiously optimistic about our backlog build toward 2024. We’re raising 2023 guidance in line with our strong financial performance in Q1 and greater visibility we now have into the full year results. Jessie and Kevin will now review Q1 financial results in detail and our updated 2023 guidance.
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Jesse Geiger: Thank you, August. And good morning, everyone. Our revenue in the first quarter of 2023 was $434.1 million, which represents a year-over-year increase of 31.2%. Net new business awards entering backlog in the first quarter increased 31.4% from the prior year to $555.8 million, resulting in 1.28% net book-to-bill. Ending backlog as of March 31 was approximately $2.5 billion, which was an increase of 17.8% from the prior year. We project that approximately $1.33 billion of backlog will convert to revenue in the next 12 months. And backlog conversion in the first quarter was 18.6% of beginning backlog. In 2023, we continued to make progress in hiring in the first quarter, adding 4.3% from the end of 2022 and over 15.8% from the prior year.
Employee retention and continued hiring for future business will remain top priorities in 2023. And with that, I will turn the call over to Kevin to review our financial performance in more detail and discuss our 2023 guidance. Kevin?
Kevin Brady: Thank you Jesse and good morning to everyone listening in. As Jesse mentioned, revenue was $434.1 million in the first quarter of 2023. This represented a year-over-year increase of 31.2% on a reported basis and 31.8% on a constant currency basis. The strong revenue results for the quarter reflected less funding challenges than anticipated for our clients. EBITDA of $92.8 million increased 31.9% compared to $70.4 million in the first quarter of 2022. On a constant currency basis, EBITDA for the first quarter increased 28.6% compared to the prior year. EBITDA margin for the first quarter was 21.4% compared to 21.3% in the prior year periods. EBITDA margin for the quarter was positively impacted by the strong revenue.
We anticipate margin headwinds the balance of the year as a result of wage inflation, headcount gross, entire reimbursable costs as a proportion of total revenue. In the first quarter of 2023, net income of $72.9 million increased 18.9% compared to net income of $61.3 million in the prior year period. Net income growth lagging EBITDA was primarily driven by a higher effective tax rate of 15.3% compared to 6.1% in the prior year period. Net income per diluted share for the quarter was $2.27 compared to $1.69 in the prior year period. Regarding customer concentration, our top five and top 10 customers represent roughly 22% and 29% respectively, of our first quarter revenue. In the first quarter, we generated $80.1 million in cash flow from operating activities.
Our net day sales outstanding was negative 43.2 days. During the quarter we repurchased approximately 650,000 shares for a total of $120.1 million. As of March 31 2023, we had $332.7 million of authorization remaining on our share repurchase program. Our net debt position at the end of the quarter was $68.1 million, which was composed of debt of $115 million and cash of $46.99. Our net leverage ratio is approximately 0.2 times last 12 months EBITDA. Moving now to our updated guidance for 2023. Full year 2023 total revenue is now expected in the range of $1.745 billion to $1.805 billion, representing growth of 19.5% to 23.6% over 2022, total revenue of $1.46 billion. Our 2023 EBITDA is expected in the range of $335 million to $355 million representing growth of 8.7% or 15.2% compared to EBITDA of $308.1 million in 2022.
Guidance is based on foreign exchange rates as of March 31st. This guidance assumes a full year 2023 effective tax rate of 17.5% to 18.5% and 32 million diluted weighted average shares outstanding for 2023. There are no additional share repurchases in our guidance. We forecast 2023 net income in the range of $250 million to $269. Earnings per diluted share is expected to be in the range of $7.81 to $8.40. With that, I will turn the call back over to the operator so we can take your questions.
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