Good morning and welcome to the Medpace Fourth Quarter and Full Year 2017 Earnings conference call. Before we begin, I will read Medpace’s Safe Harbor regarding forward-looking statements. During today’s call, management’s 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 other important factors that could cause the company’s future results to differ materially from management’s current expectations, including those discussed in the Risk Factors section of our Form 10-K for the year ended December 31, 2016 filed with the SEC. Management disclaims any obligations to update forward-looking statements in the future even if estimates change. Accordingly, you should not rely on any of today’s forward-looking statements as representing management’s views as of any date after today. During this call, management will be referring to certain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to the earnings press release and earnings call presentation slides provided in connection with today’s call. The slides are available on the company’s Investor Relations section of its website at investor.medpace.com. With that, I will now turn the call over to Dr. August Troendle, Medpace President and Chief Executive Officer for opening remarks. Dr. Troendle, please begin.

Thank you, Operator. Good day everyone and welcome to Medpace’s fourth quarter and full-year 2017 earnings call. With me on the call is Jesse Geiger, our Chief Financial Officer and Chief Operating Officer of Labs. Medpace ended 2017 with a strong finish to a challenging year. Net new business awards entering backlog were up sequentially in the fourth quarter at $114.7 million, resulting in a net book to bill ratio of 1.15. Our Q4 service revenue was up 4.3% compared to the same quarter of 2016, and service revenue for all of 2017 was also up 4.3% compared to full year 2016. Slide 4 of our earnings presentation shows improving new business awards through 2017 in sequential dollar terms and on a net book to bill ratio basis, with a reasonably stable backlog conversion rate. We anticipate accelerating revenue growth in 2018 as a result of our improved bookings. Jesse will review our guidance for 2018 in a few minutes, but I would like to make a few comments in advance. At the midpoint of our 2018 guidance range, we anticipate ASC 605 service revenue growth of 8.7% for full year 2018. If achieved, I believe this will represent another year of above industry growth rate on an organic basis and represent organic share gain by Medpace in the clinical CRO space. I believe we outgrew the industry on an organic basis in each of the past two years and I anticipate higher than industry organic growth over the next few years. We also anticipate strong adjusted net income growth in 2018 driven primarily by taxes; however, I know many observers will focus on our flat to down adjusted EBITDA in 2017 and 2018 and question the factors leading to a decrease in our adjusted EBITDA margin, which we anticipate…

Thank you, August, and good morning to everyone listening in. Moving now to our key financial highlights and trends on Slides 5 and 6, net service revenue was $99.4 million in the fourth quarter, which represents growth of 4.3% from $95.4 million in the fourth quarter of 2016. Full-year 2017 net service revenue increased 4.3% to $386.5 million from 2016. Adjusted EBITDA was $27 million compared to $27.5 million in the fourth quarter of 2016. Our calculation of adjusted EBITDA in the fourth quarter of 2017 includes adjustments for our corporate campus lease payments and transaction related costs associated with the closing of our secondary offering. Full-year adjusted EBITDA was $108 million compared to $113.4 million in 2016. Adjusted EBITDA margin for the quarter declined 160 basis points to 27.2% versus 28.8% in the prior year period. This decline was primarily attributable to higher employee related costs. Adjusted EBITDA margin for the full year was 28%. In the fourth quarter of 2017, we had GAAP net income of $11.3 million compared to GAAP net loss of $21,000 in the prior year period. For the full year 2017, GAAP net income was $39.1 million compared to GAAP net income of $13.4 million in 2016. Adjusted net income of $14.8 million in the fourth quarter increased 3.2% compared to $14.3 million in the fourth quarter of 2016. Full-year 2017 adjusted net income of $60.5 million increased 8.5% compared to $55.7 million in 2016. Adjusted net income growth was primarily driven by revenue growth partially offset by higher employee related costs. Our GAAP net income per diluted share for the quarter was $0.30 compared to a GAAP net loss of $0.00 in the prior year period. For the full year 2017, GAAP net income per diluted share was $0.98 compared to GAAP net…

[Operator instructions] The first question is from Dave Windley of Jefferies. Your line is open.

Hi, good morning. Thanks for taking my questions. The first one, I wanted to come back to the margin questions and the headwinds that you identified, and come at it a slightly different way. August, you talked about 2017 insomuch as there wasn’t, I guess, bonus accrual, that 2017 outperformed on that basis. If I think about that and a year-over-year comparison to 2016, perhaps you could talk about the pressures that you’re seeing that have brought EBITDA margin down in ’17, and if not for the bonus accrual would have been down more.

In ’17, why it was down relative to ’16 by such a large amount?

Right, exactly. So I’m looking at, like, 30.6% in ’16 and then 28, but as you said, it would have been 26 and change if you had accrued full bonus.

Sure. Some of the factors are the same - partially there was FX change between ’16 and ’17. I think the amount of tailwind from FX is maybe under-appreciated. It was rather substantial - Jesse, do you have the number on--?

Yes, so EBITDA headwind for 2017 full year, a little over a million dollars.

Okay, so that’s not that very large, but--. I guess it’s--then I guess as we’ve stated before, reduced revenue relative to budget with relatively fixed employee base led to a substantial headwind. I guess that was probably the largest of all. If we’d had--you know, we basically had the staff we’d have had if we’d had our original budgeted revenue for the year, and of course that came down and we decided not to make any action on any employees to rein in that cost. I guess the question is how we unwind perhaps a larger capacity going forward, and we stated before that we wanted to maintain at least a larger portion of that employee overhang for accelerating growth, which we’ve not anticipated to date but we do anticipate picking up, and we’ve--I guess still a little bid discouraged with the rate at which our revenue has come back, and so one of the initiatives for 2018 is really to expand substantially our efforts in generating business. In a different and changing biotech environment, we’ve taken some different approaches to expanding our business development activities and growing our revenue more rapidly.

Okay, so two follow-ups to that, if I could. One, the point about labor capacity versus revenue, it sounds like, Jesse, based on your cadence comments for 2018 that that’s still a little bit true in the first half of 2018, that your revenue will ramp, you’re maintaining an employment base that you’ll leverage over the course of the year - confirm that for me? Then second question, in relation, August, to your comment about still wanting to see better revenue traction and investing in new business in that regard, is your win rate changing, is it that you need to see more RFPs, or are you seeing enough RFPs and your win rate is dropping? Thanks.

Our win rate has been pretty stable to up in the past year, so that has not really been a problem. It’s really a matter of finding and selecting appropriate opportunities, so we’ve decided to expand our catchment of incoming opportunities and the infrastructure around managing that.

Dave, back to your comment on salary costs, we do plan to be hiring as we go through 2018, so cost will build as we build heads; but I do want to point out, and this maybe gets back a little bit to your question about ’17 relative to ’16, is we do enter 2018 with a substantially higher employee cost base at the outset, so we had salary cost that was increasing more than revenue as a percentage in ’17 relative to ’16, even though we had slightly down headcount during 2017. That’s a function of those pressures that August spoke of from a market standpoint as well as some mix that we experienced during 2017 and continuing into 2018.

Okay, thank you.

Thank you. The next question is from John Kreger of William Blair. Your line is open.

Good morning, this is Jon Kaufman on for John Kreger. August, a second ago you mentioned finding and selecting more opportunities. Is this a matter of clients becoming less willing to work with Medpace in the full service model and shift towards perhaps an FSP model, and as a result maybe you guys are seeing just fewer RFPs? Can you just describe that a little more in detail?

Sure. We haven’t really seen any movement toward FSP. That may be a factor in larger companies - I don’t know, but our client base is smaller companies and they’re exclusively or nearly exclusively full service, and generally do not use FSP to any material extent. Maybe on the margin, some of the larger customers might use some FSP, so that’s not really it. It’s a matter of finding an increasing number of opportunities and being able to manage that and select the right ones.

Okay, great, and then just one follow-up. In terms of the biotech funding environment, from our perspective the macro level of data appears to be pretty robust. Are you guys seeing any issues with your clients obtaining funding or being able to pay you right now?

Yes, from a funding standpoint, the environment has returned to more of a steady state, certainly not much improved from what it was this time last year. From a payment standpoint, we had little to no bad debt expense - actually, we had a bad debt credit in the fourth quarter. There’s always a couple in the portfolio that we’re keeping an eye on, but the credit quality of the existing portfolio has also much improved over the year.

Okay, great. Thank you.

Thank you. The next question is from Eric Coldwell of Baird. Your line is open.

Hey, thanks. Jesse, is the mismatch in revenue and expense and euro and pound your two biggest exposures on the currency side, and maybe you could quantify those for us?

Yes, it is the biggest driver, Eric. About 10% of our revenue roughly is in ex-U.S. currencies, and most of that is in the euro. On a cost standpoint, about 30% of our cost is ex-U.S., and on the cost side about 14% of total cost is euro and 5% is pound, and 10% is other currencies, none of which represent more than 1%.

Okay, thanks. I think we were off a little on one of those, but that would help explain it. Shifting gears, the combination of FX and bonus, 255 of the 300 BP of margin headwind, to some people that might imply that investments in labor are the remaining 45 BPs. My gut is those are actually greater headwinds and being offset perhaps through the years you see some improvements in other areas like workforce productivity or revenue leverage, so I’m just hoping you could quantify for us what you think the actual basis point impact of the investments in the labor is, in terms of the total impact on EBITDA this year. Thanks very much.

I don’t think we have that with us here to provide, but you’re right - there is some of that going on. There is a little bit of unwinding of--you know, better utilization of staff, and that eats up a little bit of the additional negative. But I don’t have a magnitude on that.

But you’re right, Eric - those three are more than the total, and there are some positives that offset it.

Okay, thank you.

Thank you. As a reminder, if you do have a question, please press star then one on your touchtone telephone. The next question is from Donald Hooker of Keybanc. Your line is open.

Great, good morning. You had mentioned earlier in the call that oncology was increasing as a portion of your business mix. Has that impacted the length of the average clinical trial and projects that you’re working on, and then when I think about how you recognize backlog, I know you guys are really conservative there, and remind me but I think you cap anything at three years, so I’m wondering how much business you’ve won that extends beyond what you recognized in backlog, given the big pick-up in oncology.

You’re right, Don - we do cap it at three years. The amount that we’ve held back beyond that three-year time is not a big portion of the total as a percentage of active backlog. You’re right - growth in oncology does have an effect of elongating the timelines in trials, which has increased a little bit but on average is still within in general the three-year duration.

Okay. That’s helpful. Just checking on that given the mix changes. Then when I think about your outlook for EBITDA for 2018, for those of us who kind of focus on different parts of that, if I think about gross margin, how do I think about that changing in 2018, and are there ways that you guys can proactively use some of your technology investments to manage labor and staffing and things like that around gross margin as you look into next year?

Sure, so as we think about this bridging margin from year to year, we do expect SG&A percentage to be in the 16% to 17% range and the balance would be in direct cost and gross margin. There are a number of areas really throughout the business that we’re continuing to evolve our system and our platforms for efficiency, but nothing individually that I would point out that would be a large driver of margin efficiency in 2018.

Okay, and then last question from me, when I think about your EPS guidance, you do have good cash flow and you’ve been buying back stock. Do you assume share repurchases in your 2018 EPS guidance?

We do not. We’re assuming 36.3 million fully diluted shares, and our guidance does not include any assumed share buybacks. Really, if and when we would act upon the authorization depends on a number of factors, including market conditions.

Thank you very much.

Thanks Don.

Thank you. There are no further questions in queue. I’d like to turn the call back over for closing remarks.

All right, well thank you everyone for joining us on our earnings call and your interest in Medpace. We look forward to speaking to you again on our first quarter call. Thanks.

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day, everyone.