Medpace Holdings, Inc. (MEDP) Q2 2026 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Medpace Second Quarter 26 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question, please press 1-1 on your phone. If your question has been answered and you would like to remove yourself from the queue, simply press 1-1 again. As a reminder, this call is being 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.

Good morning, and thank you for joining Medpace's second quarter 26 earnings conference call. Also on the call today is our CEO, August Troendle 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 2 thousand. 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 our 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.

Good day, everyone. The business environment was strong in Q2 26. Cancellations were well behaved, and supported a record quarter for net bookings. RFPs were up sequentially and year over year, generating high quality opportunities. Initial award notifications remained solid although they declined sequentially from a very strong Q1. Overall, the environment remains constructive into July and we are making good progress in positioning the business for 2027. Kevin will now review our financial results from Q2.

Thank you, and good morning to everyone listening in. Revenue was $707.3 million in the second quarter 26. This represented a year over year increase of 17.2%. Revenue for the 6 months ended June 30, 2026 was $1.41 billion, and increased 21.7%. EBITDA of $153.4 million increased 17.6% compared to $130.5 million in the second quarter 25. Year to date EBITDA was $302.8 million and increased 21.5% from the comparable prior year period. EBITDA margin for the second quarter was 21.7%, compared to 21.6% in the prior year period. Year to date EBITDA margin of 21.4% was flat compared to the prior year period as the impact of higher reimbursable costs was offset primarily by lower employee related costs. In the second quarter of 26, net income of $121.4 million increased 34.5%. Compared to net income of $90.3 million in the second quarter of 25. Net income growth above EBITDA growth was primarily driven by a lower effective tax rate and higher interest income compared to the prior year period. Year to date net income was $245.2 million compared to $204.9 million in the comparable prior year period. Which represents a 19.7% increase. Net income per diluted share for the quarter was $4.25 compared to $3.10 in the prior year period. Year to date net income per diluted share was $8.53 compared to net income per diluted share of $6.79 in the comparable prior year period. Net new business awards entering backlog in the second quarter increased 28.2% from the prior year to $795.7 million resulting in a 1.13x net book to bill. Ending backlog as of June 30, 2026 is approximately $3 billion an increase of 4.9% from the prior year. We project that approximately $1.96 billion of backlog will convert to revenue in the next 12 months. Backlog conversion in the second quarter was 24.1% of beginning backlog. Regarding customer concentration, our top 5 and top 10 customers represent roughly 31%, 40%, respectively, of our last 12 months revenue. In the second quarter, we generated $162 million in cash flow from operating activities. And our net days sales outstanding was negative 59.6 days. During the second quarter, we repurchased approximately 706 thousand shares for $294.7 million As of June 30, 2026, we had $527 million remaining under our share repurchase authorization program. Cash ended the quarter at $502.7 million Moving now to our updated guidance for 2026. Full year 2026 total revenue is now expected in the range of $2.805 billion to $2.885 billion representing growth of 10.9% to 14% over 2025 total revenue of $2.53 billion Our 2026 EBITDA is now expected in the range of $618 million to $642 million representing growth of 10.8% to 15.1% compared to EBITDA of $557.7 million in 2025. We forecast 2026 net income in the range of $494 million to $514 million This guidance assumes a full year 2026 effective tax rate of 19% to 19.5% interest income of 21.1 million and 2028 no additional share repurchases assumed in our guidance. Earnings per diluted share is now expected to be in the range of $17.25 to $17.95. Guidance is based on foreign exchange rates as of June 30, 2026. With that, I will turn the call back over to the operator so we can take your questions.

Thank you. And our first question comes from Charles Rhyee of TD Cowen. Your line is open.

Yes. Thanks for taking the questions. Wanted to ask, obviously, a lot of the growth that we have seen over the last year has been really driven by metabolic work. And at the same time, it looks like our concentration of top customers, particularly the top 5, has increased Can you give us a sense on are the 2 related in such that maybe a lot of the metabolic work you are doing is coming from a couple large clients, and can you give us a sense on sort of what visibility you have of that going forward? And I guess the question is, does the mix within your bookings and backlog look similar to what your current revenue mix? Just trying to get a sense how long you could expect this kind of mix to persist, particularly on the metabolic side, or, you know, does that kind of roll off at some point and maybe any sense on timing of when that would be?

Sure. It is August. The top 5 growth has been driven quite a bit by that metabolic work. So the answer to that is yes. There are some large programs among that top 5 that are a good part of that growth in the group. And as to, you know, timing of that, more recently, you know, this year, the last couple quarters, I think that oncology has come back quite a bit in terms of our both our award notifications. So the earliest part of kind of the pipeline for awards and the backlog recognition. So, you know, our bookings in particularly in this last quarter, we are very strong in oncology. Oncology represented over half of our overall bookings and our award notifications. So that is and metabolic cardiometabolic has kinda dropped off quite a bit. In terms of new award notifications. So I think we are seeing kind of a shift back towards more historical averages. I do not know if we will get back to where we were, you know, 2 years ago in terms of percent, but I think oncology will retake its position, you know, move up, you know, a few percent in our in our mix etcetera. I would expect over the next year or so that to kind of, you know, head back toward that, you know, kind of prior mix So, yes, the metabolic is kind of, you know, some of the very large programs are kind of, you know, reducing and sort of the new opportunities. Are not as great as a year ago.

Great. And maybe just to follow-up then. Maybe, Kevin, just from a modeling perspective then, should we think back to maybe 2 years ago what the backlog conversion rate and I would assume backlog conversion rate would just fall naturally because of the mix because the oncology trials are longer in duration.

Yeah. I mean, Charles, as you know, we do not guide to the burn rates. And so we have got to kind of see how you know, those programs where we have been awarded the work from a notification standpoint, how those progress into awards the rest of this year, and we will have more color on what 2027 will look like, possibly next quarter, but certainly in the February call. Yeah.

Yeah. But I would challenge the very premise that the metabolic programs are driving the conversion rate up. I do not think that is necessarily the dynamic It might have had an influence, but it is not the primary driver of you know, the increased conversion rate. Remember, we do block backlog greater than 3 years. And in fact, to average duration of backlog across programs is much lower based upon interim analyses or steps, you know, that we limit backlog recognition until we get certainty around that, and that is very prevalent among many of the nonmetabolic programs that in oncology. So I you know, the fact that you think that metabolic has a faster burn rate that can be true. But it is not overwhelmingly apparent. I think that is the biggest driver of the you know, con-- you know, that is going to cause a normalization of our conversion. I am sorry.

Can you just clarify then, August? Like, what is the change that allows other like, my understanding of duration was the way backlog converts is length of trials and where recognition happens, but you are saying that with interim analysis, even in, let's say, an oncology trial, that is right.

We might have a revenue rep. We might only have 1 year of backlog for that program. The program might be 5 years planned to go, but we only have 1 year of backlog in there because there is another stage looking at before they do the expansion or, you know, before there is some increase in the program. And we will not put any of the backlog beyond that point until we get to it and there is a favorable decision.

I see. Okay. that is really helpful. Appreciate the, the comments. Thank you.

Thank you. And our next question comes from Michael Cherny of Leerink Partners. Your line is open.

Good morning and thank you for taking the question. Very nice job on the bookings. As you think about the mix that you saw, anything to call out relative to stability of the bookings in terms of pricing, in terms of competition? And what are you seeing in terms of any potential changes, adjustments, fierceness of competition relative to the overall market health with your core biotech customers?

Yeah. No. I do not think the market has changed other than it is gotten stronger, you know, over the last few quarters. We had a pretty strong and I would say pretty strong because I did not wanna say an unqualifiedly strong business environment in the prior quarter. But because of cancellations. You know? Still, we continue to see clients that are you know, were looking for funding or having problems, etcetera. And, you know, high level of client cancellations. This quarter, this very last quarter, you know, Q2, cancellations came down quite a bit. The business environment continued to be strong. New opportunities look good. And I do not really see a, you know, competitive dynamics or anything. Like I said, the profile has, you know, moved more back towards oncology programs being the largest in fact, the majority of opportunities as opposed to, you know, sort of, you know, metabolic drivers of, a year ago. But, you know, otherwise, I think things are pretty stable.

And just quickly on the cancellation side, I know you do not guide to cancellations, but I know they can be volatile from quarter to quarter. But do you feel going forward, like, cancellations should be at least in a better place versus what is seemingly could have been an outlier in 1 quarter? In 1Q?

I guess the cancellations are completely beyond my ability to even yeah. I we it is not like we have any of these past, you know, past year. Have a situation where we had a very high risk programs, and we thought, oh, you know, there could be client cancellations. And, you know, sure enough, they were. We just have no idea. I mean, you know, there is not been that kind of insight into future cancellations. And I do not anticipate that there will be going forward. Any cancellations just come up You know, like I said, we are very careful about gating our backlog by having any sort of interim look or, you know, analysis or, you know, thing that might, you know, decision that might influence the remainder of the program. We will not put in backlog beyond that point. You know, we will wait for that to happen. And so, you know, we the cancellations that we have are completely unanticipated and, you know, out of the blue sky. So I cannot I cannot say that. But what I can say is that the business environment is good. Our pipeline of stuff, including in the kind of pre-backlog that have been awarded programs is very strong. And I would anticipate that our gross bookings, which, you know, we do have reasonable insight into, are going to, you know, scale and then you know, second half is going to ramp up. And I think that independent of where cancellations are, that should be a, you know, a scaling in our a ramping up in our net bookings. But unless, you know, but I say that if cancellations are in any kind of, you know, reasonable range, but, you know, there is always a possible cancellation spike to a you know, unusual level. Thank you.

And our next question comes from Ann Hynes of Mizuho. Your line is open.

Great. Thank you. Can we I know your business. You do a little bit of Phase 1, but Phase 2 and 3. And there is been some increased investor concern that may be Phase 2 is hitting a wall, maybe something's moving to China. I do not know if that is the case for you. I am just given your biotech mix. But maybe if you can just discuss gross bookings trends in Phase 1 versus phase mean, I am sorry, Phase 2 versus Phase 3 would be great. Thank you.

Yeah. I think if we look at kind of the numbers maybe Phase 1 has increased you know, some relative to phase 2. You know, phase 3 is pretty been pretty stable. But, of course, that Phase 1 is driven largely by, you know, oncology programs. And, you know, so I do not know that is not just the kind of move towards you know, the a very heavy oncology mix. Have not tried to analyze that too greatly in terms of, you know, you know, where that is going, but I do not really see a, you know, a shift of things to China greatly for, you know, at least the programs we are, you know, chasing. So I, you know, I do not know that I see that dynamic. But I do not know. Great.

And I know the past couple of quarters I believe, you said gross bookings was good, but maybe a little bit below your expectations. Was this quarter, was gross bookings actually in line or better than what you expected heading into the quarter?

Yeah. I mean, you know, that kind of is set up. Gross bookings are going to be determined by, you know, pre-booked backlog cancellations, you know, from the past. We did have, yeah, you know, high cancellations. But we have had an improving business environment. As I said, you know, that is what I have been saying the last few quarters-- the last 3 quarters or so, you know, that the business environment is pretty good. It looks actually, you know, I would say, very good except that we keep having cancellations. And that is part of the business environment. You know? And it is and, you know, there has been, you know, still a number of clients that were, you know, challenged financially. So yeah, I do not know. Yeah. Let me go and check. Yeah. Thank you.

Thank you. And our next question comes from Jailendra Singh of Truist Securities. Your line is open.

Thank you, and thanks for taking my questions and congrats on a good quarter. Just want to go back to the cancellation comment, August I was wondering if you can put Q2 trends in some perspective. Is it fair to say that cancellations have improved back to levels seen in Q3 of last year? Or even better or worse? Just to confirm that. And also to confirm, did cancellations improve in both backlog and pre backlog? Yeah.

Yeah. I guess so. Cancellations were actually in a pretty good range this quarter. In fact, if you look at the book net bookings a bigger driver of the net bookings increase from last quarter was due to reduced cancellations rather than, you know, kinda gross bookings. Okay? So you could look at it that way. I think second half, we are going to see more just gross bookings ramping up. Quite a bit. So this quarter was helped along quite a bit by substantial drop from what had been a kind of elevated cancellation rate So it is come down nicely, you know, not to an unusually low level, but, you know, a very good level. Let's say. And even in this quarter, cancellations in AIS was very well behaved also. So that also helps. Towards the ramping in gross bookings going forward in the second half. So across the board, yes, cancellations were down. They were in a nice range. And were more than half of the driver of, I would say, of, you know, the net bookings growth from the prior quarter from Q1. Okay. Is that an answer? Yeah. Yeah. It helps. Thank you.

And then my follow-up, I know last quarter, you did call out implementing initiatives to improve win rates. You provide any update on that? Have you started to see the impact of those initiatives? And if any color, you can provide around the what are these initiatives related to? Is it commercial execution? Positioning, quality? Just give us more color, like, if that is having impact on your wins here.

Yeah. I brought that up to say that we had recognized our win rate last year. You know, largely was less than it had been in prior years. We were making some changes. We did make changes. In fact, around and in the late last year, and maybe in a little bit in the first quarter. But, you know, they were really done you know, last year. And so they have been implemented and are in place. And I think were a possible you know, influence our very strong win rate in Q1. And so I think that has come back I do not want to go into the details. I just wanted to be acknowledge, recognize, that we had not won the same percent of programs that we had historically in 2025, and we are, you know, making some changes, but I do not want to go into just how those competitive changes were rolling out. Got it.

Thanks a lot.

Thank you. And our next question comes from Jared Haas of William Blair. Your line is open.

Great. Thank you. it is Christine Rains on for Jared. So while I do realize that the majority of the work that you booked today will not burn till at least 2027, Given the volatility of recent, hoping you can give some color on, what you are expecting for bookings growth cadence in the back half of the year. And really, if you expect 2Q net bookings to be a higher watermark or if we could see sequential acceleration as we move throughout the year?

I am sorry. I have a You are a little bit faint there. It sounds like you are asking about how the bookings are gonna go in the second half towards 2027. Or Yeah. No. I apologize. I was just hoping to get some color on really if Q2 is expected to be the high watermark for bookings here if we really could see an acceleration, as we move throughout the year in terms of net bookings. No. No. As in response to the last few questions, I would said that we expect a ramp in bookings. I expect a ramp in gross bookings. I would expect that to translate into a ramp in net bookings, but, you know, cancellations are always a wild card. But, you know, that was my commentary on second half. Perfect. Thank you.

And then you can give a little bit more color on RFPs in terms of magnitude of sequential and year over year growth. And on bookings quality as well? And then a similar on magnitude of initial awards declined sequentially. And out of this bucket was up year over year.

Yeah. So booking so RFPs. Were up meaningfully. You know, certainly on a sequential basis. You know, RFPs were up substantially. You know? And the quality has been good and improved. We see a lot of clients that have had recent funding Yeah. I think the I think the big thing is funding has been a lot broader. Rather than just, you know, a few you know, companies getting, you know, quite a bit more money. it is quite a bit of broader. We are seeing more opportunities with you know, recent funding and moving forward with the program. So I think the business environment is in good shape, and I think the RFP numbers have increased. I do not to pay a lot of attention to the numbers. They are up substantially year over year. They were up also, you know, sequentially by a, you know, reasonable amount. But I again, quality is more important, and I think the quality has been there and it is good. And what was your other question? You had another question on that? Oh, it was just on initial awards. In terms of I they seem strong, but declined sequentially in your So just curious, 1, if this bucket was up on a year over year basis? And then just any comments on the magnitude sequentially. Yeah. Yeah. Sorry. I do not have any other comments on it. Really, they were we had a very strong Q1 We had a Q2 that they were down. They were on lower side of kind of a but not, you know, unusually low. So, you know, I do not know what to say about that. You know, it these are things that do bounce around. We look at it over a longer period of time because single large programs often drive the actual number there where you win or miss that, you know, 1 or 2 very large programs. So it is not like a metric that can be looked on and on an individual quarter. But, you know, overall, you know, the overall new awards were in a good range. Because the business environment was very strong. And even though maybe there was some very large ones that we lost and made the, you know, actual percent not fantastic, overall awards were good. Perfect. Very helpful. Thank you.

Thank you. And our next question comes from David Windley of Jefferies.

Hi, good morning. Thanks for taking my question. August, I wanted to try to understand hearing you on the contingency backlog considerations that you had told me recently, and mentioned again this morning. And how influential they are. So I guess I will spin the question to: The backlog burn has, you know, ramped over a couple years. kind of making new highs. Sounds like you do not you would not attribute that to the metabolic mix to what do you attribute, I guess, is my basic question. What are the what are the various factors that contribute to that burn rate being as high as it is?

Well, I think given the environment with high cancellations that we were in, we did I think we were double-looking at programs for decision points and what you know? And I think the policy has not been as, you know, broadly implemented. You know, you know, because there is a lot of gray area there in terms of what is a decision point. You know, what is this look, you know, for power? Is that something that could influence their continuation of the program? Is this-- you know, there is a lot of different factors that could and we were in a very high cancellation environment. We wanted to be we did not want large reductions in backlog hitting us. And so I think that was it. I think that just overall, you know, the awards that were slower, you know, did you know, cause a change in the average profile for the program. And then what metabolic, I am not denying that it has had some effect. I just do not think it is, an overwhelming driver, you know, that will be, you know, if metabolic becomes less that because the metabolic, you know, conversion is not naturally a lot faster. In our systems. I think that it can be if there is a decision point that is a very large program. I mean, you know, the I am not I am not saying there could not be situations where metabolic might be a driver, but almost any other program also could be. So I just do not think that is oh, yeah. Metabolic's much faster burning, and therefore, that is the driver of our conversion rate. I do not think it has been. It sounds like you kind of went through a you know, it is not logically, a backlog recheck as a result of what the environment was signaling to you Yeah. And I do not wanna I do not wanna say that we removed any from backlog because we did not. We did not, you know, take anything out of backlog. We just started looking at should we put this into backlog when we have this decision point in a year from now? That in the past, you might have said, well, it is it is, that is just a you know, an adjustment, and they are not really you know, it is not really an interim look for decision about continuing the trial.

Do you have on this point, do you have any meaningful amount of revenue where, say, a decision point or some factor would cause value to kinda be added to backlog and go right into revenue in the same quarter?

Okay. Okay. You know, like really-- like a decision point, you know, happens and Yes. And that drops into revenue? Yes. Yeah. Sure. That I mean, that is the that is the that is kind of the profile of an interim analysis to decide whether to stop the trial. And if it continues, it might be that next quarter's revenue could be significant, you know, could be influenced to the-- you know, obviously, any 1 program is not gonna be a big driver of a quarter, but, you know, it could be in the next quarter. You know, right away. Yeah.

Last question for me. On the labor side, your head count growth did tick up a little bit. I wondered how you would assess where you stand on, resources relative to the demand that you are seeing, you know, matriculate toward bookings. And within that, has the composition of your labor changed, you know, geographically? You, you know, in past years talked about beginning to do some offshoring or between full time equivalents and contractors as you maybe try to manage costs? Thanks.

Yeah. I think we are in a good place. that is been substantially helped by the low turnover that we have had, which has continued through Q2, you know, very low turnover on historical terms. And we do expect high single digit you know, growth in employees, you know, this year. And I suspect we will, you know, continue that next year. So I think we are in a good space to employee growth has been predominantly U.S. and then Asia-Pac, and I have had a chunk of that in India, which does kind of represent, you know, a positioning for, you know, cost. But the biggest growth has been U.S. and as I think I would mentioned previously, lot of things have kind of moved back towards U.S. in terms of growth. But there has been some repositioning too. Okay. Thank you.

Thank you. And our next question comes from Ryan Halsted of RBC Capital Markets. Your line is open.

Good morning. Thanks for taking the questions. Just going back to the net new awards growth, My question is are you able to quantify, I guess, or just size? You know, how much of the new awards growth came from converting your pre-backlog awards from last year into awards this year, and how much of it was from, you know, this improvement in the business environment? So kind of organic new awards this year.

Yeah. So in Q2, most of the backlog recognition would have been from award notifications the prior year, so Q1 would not have influenced Q2 greatly backlog awards. Got it. Okay.

And then in terms of the improving business environment, where are you seeing that? Is that sort of in the pre-award backlog? Yes.

And in cancellations. You know? So I and even Q4 was, you know, like, I think things have improved quite a bit. it is cancellations that were driving sort of the backlog bookings decrease, and also were substantial or very high in our pre backlog, reducing our potential for, you know, future conversions. But that has in Q2 was in a very good place. Got it.

Okay. And then last 1 for me. Just you had previously guided to direct service costs at, you know, I do not know, 41%, 42% of revenue. Which I think implies a sequential decrease, just curious if that continues to be the case, if you are expecting some, declining direct service costs.

Yeah. And that commentary is related to the reimbursable component of direct cost. Right? And that is what I do expect some further decline in the back half of the year. And I would say a range of 41% to 42% of revenue. Q3, Q4 is kind of what we are modeling right now.

Great. Thanks for taking the questions.

Thank you. And our next question comes from Luke Sergott of Barclays. Your line is open.

Hey, this is Jake on for Luke. Thanks for the question. For the last couple of years, you saw a sequential step down in SG&A from 1Q to 2Q. And then this quarter it ticked up slightly. So I know you called out benefiting from lower employer related costs through the last couple of quarters, but what are the puts and takes there going forward around the margin step up through the year? Thank you.

Yes. I mean, you are really it is I mean, you know, a lot of the impact that we see from Q1 to Q2 or Q2 to Q1 is related to, you know, the annual merit cycles, you know, depending on what happens with the company's equity programs that can influence it. You know, both of which have already occurred this year. And so you will kinda start to see more of an influence on headcount increases as we continue in the back half of the year, but at a slower pace than revenue. So you will see a little bit of what you are saying in that margin expansion in the back half of this year. Thank you.

And our next question comes from Eric Coldwell of Baird. Your line is open.

Thank you. Good morning. I just wanted to circle back first to David's questions. And on the backlog burn rate. I think I get the gist of what you are saying. Just to be very clear, your long term average backlog burn rate up until the beginning of 25 was about 18%. Now you are at 24%. You are saying metabolic was not the main driver. It sounds like you are saying the main driver was that you tightened the screws, I guess, if you will, tightened the screws on your policies around what you put into backlog. So, you know, effectively, changed SOPs on what went in there. And, you were more restrictive on gating factors. I just wanna clarify that was in fact the main driver of this increase, you know, being 30, 35% above normal on backlog burn. And if that was the case, is your expectation that backlog burn stays at 24% moving forward Or now that the environment is improving, are you perhaps going to go back to a more traditional process in terms of where you, you know, gate or do not gate, awards when they, you know, do or do not become bookings.

Yeah. I so yeah. Thanks, Eric. Let me clarify. So I do not think that metabolic is an overwhelming driver of the difference. And I am not saying that metabolic programs might have been contributed, but it is I think it is our bigger part was the policy implementation. Really, enhanced. It was the same policy that was written. We did not change the SOP. it is just a matter of if we were more maybe attuned to looking for those type of issues. And I do not think it is it is not a natural part of metabolic programs. I am not saying there were not there was not maybe a metabolic program that also had a, you know, meaningful contribution to that because of the same issue was there. You know, of gating rather than faster burn. I am saying that metabolic programs are not faster burning driving our high conversion rate. And even to a large extent. They may, you know, they may do some extent, but, but I really think there is 3 components. Maybe metabolic is a little bit faster burning on average, We had a implementation of our policy, you know, given the cancellations that were going on. And I think the overall dynamics of awards and size of backlog and AIS and all the, you know, rest of it, you know, targeting dynamics in terms of the average age of program. Okay? So I think there was a number of drivers of this And I do not think that if metabolic goes to zero or doubles in our backlog that is going to have a big influence on our conversion rate. Okay? So that is the whether metabolic comes down or not, I do not think that is the driver of reducing conversion rate, overwhelmingly. I do not think that is gonna be a big, you know, big change between 18 and 24. That all that said, I would expect that our conversion rate does tend to drop down some over time as we have new awards and, you know, more programs and all the rest of it, hopefully get into a lower cancellation environment. Okay.

And then on the pass throughs, the last question, you Kevin said 41% to 42% of mix in the second half. I think that is perhaps higher. Maybe Q1 and Q2 were a little higher than you were thinking. Is that a fair statement that they have run at a slightly faster clip this year than you were anticipating? Is that fair?

Yeah. that is fair, Eric. You know, I did anticipate it coming down a little bit more in the first and second quarter, you know? But and as I had mentioned in the second quarter, I thought it would be for the year. On the higher end, if you push it to 42%, it might be just north of even that watermark.

And then the current generation of bookings, the $800 million here in Q2, Any sense on what the profile of that looks like with pass through mix? You just took that bucket individually, I am thinking that perhaps with mix shifting back towards oncology, the pass through mix of that bucket, maybe the newer generation buckets of awards could be lower. So we would see a reduction in pass through mix in 2027 if that were the case. But maybe that is not the right thought process.

Yeah. I mean, it certainly can be. I mean, I would say that, you know, the mix of programs going in the backlog, and, you know, is it significantly different on a percentage basis Maybe it is a little bit lower, but I think what is more indicative of what happens in 2027 is just the programs that end up earning revenue and where they are in their life cycle. As we have said before, that studies that are later in their life cycle has a tendency to even burn, you know, a bit more reimbursable pass throughs. And so it is just a combination of all the portfolio and how things are going to progress across that portfolio. it is just it is not just what you are putting in the backlog. Gotcha.

And then last 1 for me. I was hoping if I missed this, but did you provide an update on pre-backlog? You know, was it up, down, flat quarter over quarter? I think last quarter, you said it was around the size of the backlog, but maybe you could provide some more color on where that stands exiting Q2?

Yeah. I do not wanna get into, you know, doing that. It is larger than backlog. Yes. It is growing. It has grown faster than backlog over the last year. I you know, but I do not wanna get into, like, you know, percent and, you know, you know, how much larger or what, you know, that kind of stuff. Okay. Thank you.

Thank you. As a reminder, if you have a question, please press 1-1. And our next question comes from Justin Bowers of Deutsche Bank. Your line is open.

Hi. Good morning. I have a few questions, but just wanted to continue with Eric's line of questioning and just clarify a couple things on the burn rate. So, August, it sounds like your statement on the burn rate excuse me, coming down in the future, would be driven more by fewer cancellations And I guess that would mean, you know, greater bookings showing up in the quarter versus a change in how you are running the business or study mix. Is that the takeaway that you want us to have?

Or I think the average age of projects and the booking characteristics what was more recently put in the backlog does have an influence on the conversion rate, and I think that will change over time. I think that and that would put pressure downward on the conversion rate. Again, I do not do not want to try to project the conversion rate. I do not know that it is gonna come down. I do not know how fast it would come down if it did. But I just think that a lot of the increase over time has been related to the average age of projects and, you know, kind of the dynamics of what is coming in and off of backlog. And that would I would expect the more would at least revert towards our historical norm. I mean, you know, that is, you know, 24% is kind of, you know, high relative to historical values. And so I would think that it is going to come down. But I am not making a statement on, you know, we have projected a decrease you know, through any kind of, you know, formal analysis. Okay. Understood.

And then just on the environment, this is a question that is been asked amongst some of your peers as well. You probably have line of sight into this better than anyone just given the customers that you serve. But with the increase in funding that we are seeing now, and the wider dispersion out there. when, you know, how should we be thinking about the timeline of when that actually shows up either as awards and or in your-- in your backlog. Is there a time frame that you can help us think about? And then also, just in general, how is how is the cadence of decision making? Right now? Versus maybe 12 months ago? Yeah.

The timing of when biotech their money, Look, I am not the person to talk to, but I do not know. I do not have a good feeling. A lot of our clients are raising money while they are getting bids from us. You know? So it is an immediate kind of but I just I, you know, I do not know overall. So I do not really have a, like, you know, good insight into that. Okay. And any change in the trajectory of decision making timelines or competitive landscape? Yeah. Sorry. No. I mean, we are we are seeing more clients that come with recent funding and able to move forward in programs. We have seen better funding for things. So yeah, the trajectory has been better and the opportunities you know, moving along nicely. I mean, there is been-- it is not like a lot of things are hung up now or, you know, things. So I think the trajectory has improved with the funding environment. Okay.

Thank you. I will jump back in queue.

Thank you. I am showing no further questions at this time. I would like to turn it back to Lauren Morris for closing remarks.

Thank you for joining us on today's call and for your interest in Medpace. We look forward to speaking with you again on our third quarter 26 earnings call.

This concludes today's conference call. Thank you for participating, and you may now disconnect.