Medpace Hldgs reports Q3 2025 revenue of $659.9 million, up 23.7%, with solid backlog growth and positive 2026 guidance.

OPERATOR - (00:00:55)

Good day ladies and gentlemen and welcome to the Medpace third quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 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 Holdings' Director of Investor Relations. You may begin.

Lauren Morris - Director of Investor Relations - (00:01:31)

Good morning and thank you for joining Medpace's third quarter 2025 earnings conference call. Also on the call today are our CEO August Trundle, 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 10K 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 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@investor.medpace.com with that, I would now like to turn the call over to August Trundle.

August Trundle - Chief Executive Officer - (00:03:03)

Good day everyone. Cancellations were well-behaved in Q3, permitting Record net bookings and a net book to bill of 1.20 RFP quality remained solid with decisions progressing at a usual tempo. Initial award notifications were strong and our total dollar value of awarded work not yet recognized in the backlog was up approximately 30% in Q3 on a year over year basis, we are making good progress toward refilling our pipeline of opportunities. We will provide 2026 guidance when we report full year 2025 results in February. However, I will provide a brief preliminary view in an attempt to avoid significant divergence between our view and analysts models. We anticipate 2026 revenue to grow in a low double digit range. Offer updated 2025 full year guidance. We expect EBITDA to grow at a high single digit pace or greater. We believe pass through costs will remain high compared to historical levels and represent between 41 and 42% of revenue. Jesse will now provide comments on the Q. Jesse, thank you August. Good morning everyone. Revenue in the third quarter of 2025 was 659.9 million which represents a year over year increase of 23.7%. Net new business awards entering backlog in the third quarter increased 47.9% from the prior year to 789.6 million, resulting in a 1.20 net book to bill ending backlog as of September 30, 2025 was approximately 3 billion, an increase of 2.5% from the prior year. We project that approximately 1.84 billion of backlog will convert to revenue in the next 12 months and our backlog conversion in the third quarter was 23% of beginning backlog. With that, I'll turn the call over to Kevin to review our financial performance in more detail as well as our guidance expectations for the balance of 2025. Kevin.

Jesse Geiger - President - (00:05:37)

Thank you Jesse and good morning to everyone listening in. As Jesse mentioned, revenue was 659.9 million in the third quarter of 2025. This represented a year over year increase of 23.7%. Revenue for the nine months ended September 30, 2025 was 1.82 billion and increased 15.9%. As expected, revenue for the quarter was favorably impacted by higher reimbursable cost activity, particularly investigator sites driven by a therapeutic mix shift to faster burning studies in areas which have a higher concentration of reimbursable cost. EBITDA of 148.4 million increased 24.9% compared to 118.8 million in the third quarter of 2024. Year to date EBITDA was 397.5 million and increased 14.7% from the comparable prior year period. EBITDA margin for the third quarter was 22.5% compared to 22.3% in the prior year period. Year to date EBITDA margin was 21.8% compared to 22% in the prior year period. EBITDA margins benefited from productivity and lower employee related costs offset by higher reimbursable costs. In the third quarter of 2025, net income of 1 11.1 million increased 15.3% compared to net income of 96.4 million in the prior year period. Net income growth below EBITDA growth was primarily driven by a higher effective tax rate and lower interest income compared to the prior year period. Net income per diluted share for the quarter was $3.86 compared to $3.01 in the prior year period. Regarding customer concentration, our top 5 and top 10 customers represent roughly 23% and 33% respectively of our year to date revenue. In the third quarter we generated 246.2 million in cash flow from operating activities and our net day sales outstanding was negative 64 4.3 days. During the quarter, we repurchased approximately 14,649 shares for 4.5 million year to date, we repurchased 2.96 million shares or 912.9 million. As of September 30, 2025, we had 821.7 million remaining under our Share Repurchase Authorization Program. Moving now to our updated guidance for 2025 full year 2025 total revenue is now expected in the range of 2.48 billion to 2.53 billion, representing growth of 17.6% to 20% over 2024 total revenue of 2.11 billion. Our 2025 EBITDA is now expected in the range of 545 million to 555 million, representing growth of 13.5% to 15.6% compared to EBITDA of 480.2 million in 2024. We forecast 2025 net income in the range of 431 million to 439 million. This guidance assumes a full year 2025 effective tax rate of 18.25% to 18.75%, interest income of 12.2 million and 29.5 million diluted weighted average shares outstanding. There are no additional share repurchases in our guidance. Earnings per diluted share is now expected to be in the range of $14.60 to $14.86. Guidance is based on foreign exchange rates as of September 30, 2025. With that, I will turn the call back over to the operator so we can take your questions.

Kevin Brady - Chief Financial Officer - (00:10:24)

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star one one again. One moment while we compile our Q and A roster Our first question comes from the line of Charles Rahee with TD Cowan. Your line is open. Please go ahead.

OPERATOR - (00:10:46)

Oh yeah, thanks for taking the questions. Hey, obviously congrats on the quarter here. When we think about sort of the kind of ranges that you've given for next year, how should we think about the pastors in relation to maybe the increase in metabolic? Now obviously we saw another increase here as a percent of total revenue to 30% in the third quarter from 25% in the first half. But you're still calling out for pastures to remain stable in 26 at that sort of 41 to 42% range. When we think out of your current bookings, are you seeing less metabolic trials compared to your current burn or should we expect to see some kind of leveling off in terms of the higher metabolic mix? Thanks. Yeah, I think over the course of 26 it'll level off some and might even come down a little bit. But you know, and it isn't just, you know, the shift to metabolic studies, you know, that is the largest driver which we've talked about, of course, but you know, timing of projects and having a lot of late stage projects in the, you know, in what we're burning, you know, as you know, we're going to start ramping up new studies. New studies are. Even if they have the same mix of pass through costs, there's greater direct costs incurred earlier in a trial. I mean, you know, pass through costs are late in a trial. You know, a trial starts and you know, some trials you can get halfway through the trial in terms of direct fees. And we've earned half of our half of the revenue from our activities and we haven't paid sites anything hardly. You know, it's startup if it's a very short trial and you know, startup's a big part of it. So, you know, you know, the pass through parts of a trial are backloaded. So if you have a backloaded portfolio, stuff you're burning, you're going to have more, you know, pass throughs as a pass through expenses, you know, at that time. So, you know, there's a number of things driving it. But yes, we do expect pass through to maybe peak in Q4 or so and come down over 26.

Charles Rahee - Equity Analyst - (00:13:07)

Great, thank you, thank you. And one moment for our next question. And our next question comes from the line of Ann Hines with Mizuho. Your line is open. Please go ahead.

Ann Hines - Equity Analyst - (00:13:20)

Great, thank you. Thanks for the 2026 guidance. Typically your EBITDA grows above your revenue.

UNKNOWN - (00:13:31)

Initial thoughts. Okay.

Ann Hines - Equity Analyst - (00:13:34)

But typically your EBITDA grows above revenue. And it's growing lower. Is that just because of the pass through dynamic or is there something else. Going on and within that, if you. Can just talk about the pricing environment. That would be great. Thank you.

August Trundle - Chief Executive Officer - (00:13:50)

Yeah, I think the driver there is the pass throughs. I mean look, there's a number of challenges to EBITDA and that includes, you know, exchange rates and you know, a number of factors. But the biggest factor I think is the pass through, you know, that challenges that a little bit. But pricing. Look, you know we've, we've talked and you know, everyone's talked about, you know, pricing environment. As things have slowed in the industry over the last couple years, there has been a bigger focus on pricing. You know, pure pricing is more of an area for large pharma to get really aggressive at and has the clout to do is an area of, you know, it's always a competitive environment. It is, you know, it's always, you know, top of mind but. And there has been a greater focus and some clients just can't get the cash to make it work. And so you're looking for ways to help them get there. But I do not think pricing is going to drive a meaningful change in margins at all.

Ann Hines - Equity Analyst - (00:15:11)

Great, thank you.

OPERATOR - (00:15:13)

Thank you. One moment for our next question. Our next question is going to come from the line of Michael Turney with Learank Partners. Your line is open. Please go ahead.

Michael Turney - Equity Analyst - (00:15:24)

Good morning and thanks for taking the question. Maybe if I can go back to. Your comment August on some of the pre backlog filling. Encouraging to see especially given your customer base as you think about what you. Are positioning with relative to your preliminary views on FY26, how you think about the conversion rate of those of the.

August Trundle - Chief Executive Officer - (00:15:45)

Pre backlog, your win rate and how that should factor in relative to what you've seen over the last couple years. Thanks. Yeah, I mean the conversion of how much of it's going to anticipated, you know, pull into revenue versus backlog. You know, I really don't have that breakout. I, you know, I provided the number to address some concerns that, you know, our burn rate has gone up quite a bit. You know, our backlog hasn't grown much this year. You know, it's low single digit, you know, a couple percent up over the past year. But I wanted to let people know that the overall pipeline of awarded studies, I mean I'm not just talking about pipeline of opportunities of awarded studies. We got a fixed scope of work, we've negotiated the price on it. They've you know, you know, give us, given us written award of that. And it just hasn't gotten to, to first patient in yet. So we may be working on it, et cetera. And it just hasn't gotten to, you know, first patient enrolled and that's in our, you know, this bucket pre backlog and that is up 30%. And, you know, this pre buck, this pre backlog bucket of awarded, you know, firm award work is larger than our backlog itself and is up 30% over the year. So I think that puts us in a good position for refilling our backlog over the next year and not having, you know, what a number of people have described as, you know, some sort of air gap in, you know, our revenue growth and, you know, things will stall, we run out of backlog kind of, you know, so we really are, you know, improving our opportunities for backlog conversion in 26 and revenue generation.

OPERATOR - (00:17:50)

Thank you. And one moment for our next question. Our next question will come from the line of David Windley with Jeffries. Your line is open. Please go ahead.

David Windley - Equity Analyst - (00:18:01)

Hi. Thanks. Good morning. So that's good timing. I'll come in right behind that. So, so August in 23, 24, a lot of your peers saw their activity levels, which would be more akin to your kind of initial award timing, moderate decline, you know, begin to feel the impact of lower funding. And then for you, that materialized for medpace, I should say that materialized in the weaker book to bills more in the mid 24 time frame as you saw some of that pre backlog cancel out, not move forward, et cetera. So kind of the time the same timing dynamic sets up for what was a pretty weak funding environment in 1H25. So your last answer may have been pointing at me specifically. I'll take that. Why is this. Time different?

August Trundle - Chief Executive Officer - (00:18:58)

I don't know the difference. A big difference is this has been driven by cancellations, not weak business. You know, there are many challenged clients and that does affect the business environment. And there's been really a highly unusual series of cancellations that we went through. But the business environment underlying it has always been pretty okay. You know, maybe you're saying, well, I'm not real strong compared to what it had been a few years ago, but it's pretty good. And despite all these huge cancellations out of this, you know, pre backlog awarded study bucket, despite all of those, we still grew that bucket by 30% over the last year. It would have grown, you know, much faster and we'd have a much bigger backlog at this point if we hadn't had those cancellations. But you know, the difference is this has been driven by cancellations, not a really weak funding environment causing lack of opportunities.

David Windley - Equity Analyst - (00:20:06)

Got it. And so then from kind of a metric cycling standpoint, you and I after the last quarter talked about your burn rate kind of naturally increasing in at least some large part because you hadn't been adding a lot of early new to start studies into the call it the early part of the backlog. And so now you're getting into a period where it feels like that is probably going to happen, get healthier, more added to the backlog. And so I appreciate also the 26 commentary. If I were to kind of interpret, you would expect backlog to grow faster, burn rate to come down and then your need to, and this is my next question, is your need to hire to support that growth is probably going to accelerate. Is that the right way to think about how the business is going to evolve?

August Trundle - Chief Executive Officer - (00:21:00)

Yeah, I think that's a reasonable scenario.

David Windley - Equity Analyst - (00:21:05)

And on the hiring where we haven't talked about your beginnings of your offshoring activity that I think you started in 2024, how is that progressing and where is your hiring happening? And that'll be my last question.

August Trundle - Chief Executive Officer - (00:21:18)

Thanks. Sure. So hiring in the year to date and in the last quarter, the largest region of growth was North America and all that really United States. Second largest would be Asia Pacific. Kind of two outlying areas that we've not really grown staff at all are Europe and China and you know, throughout Asia Pacific. It's throughout Asia Pacific. Although our largest hiring area in Asia PAC is a single country was India. Over the last few years, you know, starting as you say, a couple years back, we started hiring in India and you know, that has, you know, added a substantial number of staff over time, substantially not compared to our overall numbers. But you know, that's been a focus area in Asia Pacific, Asia Pacific. So I think that it's pretty balanced. And most of the hiring recently has been US and that's kind of a transition in the market. There's been more US Focused work lately and a lot of the metabolic stuff is more US focused. So that's been a very strong area of growth.

David Windley - Equity Analyst - (00:22:46)

Appreciate the answer. Thank you.

OPERATOR - (00:22:49)

Thank you. One moment for our next question. Our next question comes from the line of Max Smok with William Blair. Your line is open. Please go ahead.

Max Smok - Equity Analyst - (00:23:00)

Hey, good morning. Thanks for taking our questions. August number one on the just expectations for book to Bill here moving forward. You talked about initial awards being up 30% year over year. But based on kind of the midpoint of the guide here, I think you need to do 55% growth in bookings in 4Q to put up a 1.2 book to bill in the quarter. Can you help us bridge that gap or maybe just elaborate on your booking expectations for 4Q and what you've embedded in your guide for bookings in 2026? Thank you. Yeah, we're not, we're not giving a guide to 26 and I don't know where the bookings are going to come out. So I'm not going to get into, you know, trying to set them. We did say that second half of 25, you know, we, we did think that we could get to a 1.15. We thought a reasonable, you know, chance of getting there. And that's what kind of where we're looking at, you know, towards Q4 is so of the target. And I think that looks reasonable, but I'm not going to get into next year yet. Maybe just following up on that point, I mean, 1.15 still kind of implies 45% plus bookings. Growth in 4Q is that disconnect from the 30% growth in initial awards to that 45% give or take on net new business awards in 4Q, is that disconnect? Is that typically there in a quarter? What's your visibility into that bookings and 4Q given the initial awards up 30%? Well, look, as I said, that bucket's a little bit bigger and it's 30% growth, not 30% increase in awards. I'm talking about the total bucket is up 30%. Awards.

August Trundle - Chief Executive Officer - (00:24:43)

New awards were up sequentially a bit. But you know, that's, you know, that, you know, it's the total bucket and you know, how much of that has to, you know, is needed to, you know, drive, you know, a given booking number, you know, I don't know. Yeah, okay, that makes sense. Thank you for clarifying on that. Maybe just as a quick follow up here, you know, gave some color on decisions progressing at a usual tempo. Just wondering how those decision making timelines have changed more recently and what you're hearing from customers around this confidence in the funding environment moving forward. Yeah, no, I think things are moving along. You know, Q1, you know, we had a sort of things were held up, you know, we weren't getting, you know, our sort of pending RFPs, you know, total dollar pending decisions, you know, had kind of spiked and there was a lot of slowdown in things and that's then improved quite a bit. And it's been now, I wouldn't say there's still challenged funding challenges for clients and so some are delayed, et cetera. But I think overall things are going on at a pretty reasonable pace. It certainly it's somewhat normalized. I don't, you know, there isn't a big, large jump in sort of that pending work and people not making decisions and holding things up. So I think they're moving along. Things are moving along pretty well. And that's, you know, that's what we hear in terms of feedback. You know, people are getting, are getting funding. I think, you know, things are moving along. There's, you know, a parallel group that are stalled and having trouble. But, you know, we have the flexibility to jump where we need to be.

Max Smok - Equity Analyst - (00:26:33)

Got it. Thanks again for taking our questions.

OPERATOR - (00:26:37)

Thank you. One more moment for our next question. Our next question will come from the line of Jaylen dressing with Truist Securities. Your line is open. Please go ahead.

Jaylen dressing - (00:26:47)

Thank you and thanks for taking my questions. First, quick clarification on your preliminary 2026 growth expectations or numbers. Just to clarify that underlying assumption there is the environment looks similar to what you are seeing in Q3 in terms of bookings flow and pipeline. Right. That that's the underlying assumption. I'm going to make sure that yeah, we kind of always push forward the environment. But you know, a lot of 26 is already kind of, you know, cancellations are the biggest sort of wild card, you know. But yes, you're right, the business environment, there still are things that, you know to be newly awarded now that will affect next year. But you know, kind of most of the pipeline is there and the big, you know, question mark is cancellation rate. And what we're assuming is actually it could be a little bit higher than where it has been this quarter and last quarter, you know, in Q3 and in Q2. But it doesn't jump up again to like levels of Q1 and you know, Q4 and things like that. Okay. And then my quick follow up on the margin trends. So thanks for the color on the growth number for next year. But outside of pass through, as you. Think about the margins in the core direct service revenue business, can you talk about the leverage on gross margin? You had a nice kind of improvement this quarter just trying to understand the trends there. And I mean, do you think that you are pretty much at the peak on this margin on the again, outside of pass through impact? Yeah.

Kevin Brady - Chief Financial Officer - (00:28:33)

Dalandra, as August mentioned, we provided some color on both revenue and EBITDA for 2026 and the margin for the most part is expected to remain in a very good spot. And so we're continuing to see improved productivity from our existing employee based. Some of that is just driven by improved attrition rates. They remain very low. Great utilization levels and studies are progressing at very good pace. As we said in the third quarter we are seeing improved funding and with the fewer cancellations, things are progressing in a very good way. So we do expect margins to remain remain in a good spot in 2026. And it's really driven by just continued productivity of the business. Great.

Jaylen dressing - (00:29:25)

Thanks a lot.

OPERATOR - (00:29:28)

Thank you. And one moment for our next question. Our next question is going to come from the line of Dan Leonard with ubs. Your line is open. Please go ahead.

Dan Leonard - Equity Analyst - (00:29:39)

Thank you very much. I'm curious how you would describe the breadth of outperformance in Q3. Would you attribute the upside to a narrow set of one to two customers or it broader than that? No damage in terms of what? Revenue? Yeah, exactly. Just looking at the revenue in Q3 compared to Q2, it looks like the growth came in top five. It came in metabolic. I'm just looking for color on breadth versus what otherwise might suggest that there was just a big trial that landed in the quarter. Kevin, you want to. Yeah, Dan.

Kevin Brady - Chief Financial Officer - (00:30:17)

I'd say it's pretty broad based. I mean certainly some of that was just influenced by the pass throughs. I mean pass throughs continued to increase. I think for the quarter we were right around 42% so that certainly had an influence. But then also just the carryover of the improvements that we saw coming out of our conversation in Q2 where we saw improved funding in those studies progressing forward, the fewer cancellations in the second quarter and that translating further into the third quarter. So it's pretty broad based. I wouldn't say it's isolated to a handful of studies.

Dan Leonard - Equity Analyst - (00:30:55)

Okay, appreciate that. And then just a quick follow up. Do you need to accelerate headcount growth further to service your sales forecast for next year or is that low single digit growth rate and headcount growth the right number? Yeah, we expect headcount acceleration as we head into next year. Got it. Thank you very much.

OPERATOR - (00:31:22)

Thank you. And one moment for our next question. Our next question will come from the line of Luke Surgat with Barclays. Your line is open. Please go ahead.

Luke Surgat - Equity Analyst - (00:31:34)

Great. Thanks for the questions. I'm also one of those that thought that there would be an air pocket. I just want to talk about the competitive win rate that you guys are seeing. We're Hearing from some of the larger CROs that typically haven't played in your part of the market that they're going to start competing or entering or bidding on some of this business. So are you guys starting to see the likes of them show up or just any color around that?

August Trundle - Chief Executive Officer - (00:32:06)

Yeah, they've always been there. I don't know about the additional effort or attention there. Certainly there's a lot of talk about it, but we see the same players and it is the large providers that we're often competing against. You know, our, you know, win rate has been okay. You know, I mentioned last quarter it was actually down a little bit. Awards were actually good because the total decisions were, you know, elevated. Our win rate did come back up this quarter and, you know, some fewer number of decisions, but again, you know, good awards. We don't see a trend towards, you know, greater competition causing our win rate to deteriorate. There has been some movement over the last year or so to bring more providers to an opportunity. So instead of, you know, what you often see was three, you know, maybe four CROs now is often it's six or even more. And so that obviously reduces the win rate a little bit for everybody. But you know, I think you're correct for those situations and I think our competitive position is very strong. Great.

Luke Surgat - Equity Analyst - (00:33:37)

And then I guess a follow up here, not to beat a dead horse, but on the, on the burn rate and kind of how you're thinking about. That through next year, where do you think that, like not even through the end of next year, but where do.

Kevin Brady - Chief Financial Officer - (00:33:48)

You think that this kind of settles out as we think about kind of the out years, could it be more elevated versus what you had and let's say before it started ramping up in like the high teens? Yeah, I mean, I don't think we can answer that question in terms of long term. It's a lot dependent on our mix of programs where they are in their life cycle. It depends on your future bookings. If you go back to a couple years, you're coming out of COVID when our bookings were very strong, our burn rate came down quite a bit. So it is influenced by how things are progressing from award notifications into programs in the backlog, it's hard to say. Our range has been quite wide. All right, great. Thanks.

OPERATOR - (00:34:40)

Thank you. And one moment for our next question. Our next question comes from the line of Justin Bowers with DB Your line is open. Please go ahead.

Justin Bowers - Equity Analyst - (00:34:52)

All right, thank you and good morning everyone. So I just want to follow up on Luke's comment and your remarks on the win rate, August, you said fewer decisions but good awards and the win rate was up. So are we to infer that your average award size was larger or substantial this quarter? So that's part one. And then part two is just, can you give us a sense of how your conversion or retention or win rates have been trending, call it over the last couple years of programs that, you know, progress from phase two to phase three? Yeah, I don't think there's been any change in that. You know.

August Trundle - Chief Executive Officer - (00:35:46)

It'S kind of all over the map. But you know, usually we can progress from phase two to three, but you know, there's a lot of times that, you know, products within our clientele are sold or, you know, move to someone else and sometimes we also just don't win. The, the phase three were considered not strong enough in a particular market or something. So I don't, I don't know that that's changed at all. Okay, and then in terms of the award size in the quarter. Yeah, I'm sorry, I don't actually have that. Anybody, anybody online have that?

Kevin Brady - Chief Financial Officer - (00:36:29)

I mean, it's pretty, pretty normal, I would say. Justin, there's been, there were no significant decisions. And remember, your decisions where we're notified of an award, those don't go into backlog. Right. Those fit into that kind of pre backlog bucket. But I wouldn't say there was anything out of the ordinary in the quarter from a decision standpoint.

Justin Bowers - Equity Analyst - (00:36:51)

Okay, and then in terms of the pre backlog, how does that, how does the therapeutic mix of that compare to the revenue that you're showing right now? So just sort of frame things a little bit. Like oncology is 30%, was 30% in 3Q and like metabolic was 27%. When you look at the pre backlog, is it over indexed or under indexed. Relative to those two therapeutic areas?

August Trundle - Chief Executive Officer - (00:37:23)

It's over indexed in, in metabolic, as you might expect. Okay. All right, thanks so much. Not massively, but, you know, there's a, it's a higher proportion and you know, that again, you know, fits in with what, you know, we're currently, you know, seeing and burning.

OPERATOR - (00:37:46)

Thank you. And one moment for our next question. Our next question will come from the line of Eric Caldwell with Baird. Your line is open. Please go ahead.

Eric Caldwell - Equity Analyst - (00:37:56)

Thanks very much. Good morning. I have maybe three first. On the. Preliminary views of 2026, talking about the revenue outlook. If we run various inputs on what the fourth quarter service revenue might look like and then also, what does low double digit growth mean and 41 to 42% pass throughs. You can run various scenarios. They all lead to service revenue implied growth or preliminary view growth of being somewhere in the upper mid single digits to low double digits growth. Is that your interpretation as well or am I missing something? I believe your math, Eric. Did you say, say that again, upper mid. You know, I don't know if you're going to do 400 million of. Oh, sorry, go ahead. Say it again. Yeah, look, I mean it's going to be annoying on the call here, but I don't know if you're going to do 400 million of service revenue in Q4, 410, I don't know what that number is. So there's various bases from which we have to grow. But if I model low double digit revenue growth and I take it all the way up to 12.5%, which is my view of the low end of low double or the high end of low double digit, and then I say pass throughs at the low end of mix 41%. You know, even using various inputs like that, I'm coming up with service revenue growth somewhere in the mid to upper single digits on the low end of the range up to low double digits on the high end of the range. And the only reason I'm focusing on this.

August Trundle - Chief Executive Officer - (00:39:38)

Yeah, that's fair. Yeah, that's fair.

Eric Caldwell - Equity Analyst - (00:39:42)

Yeah, so I thought, and maybe I'm, you know, still taking too many crazy pills here, but I thought last quarter we came off thinking it was going to be more like 15% service revenue growth. And I, you know, maybe I misinterpreted comments last quarter but admittedly I was a bit higher on my service revenue outlook for next year.

August Trundle - Chief Executive Officer - (00:40:03)

Yeah, I don't think we made any comments about next year's growth at all, let alone service revenue.

Eric Caldwell - Equity Analyst - (00:40:11)

I might have misinterpreted something on the Pre backlog, the 3 to 6 or. I'm sorry, you said pre backlog. You kind of again confirmed that it's above backlog. So it's above 3 billion. I think there's a range out there of where it might be, you know, obviously more than three, but less than X. I was hoping you could get us, give us a little more specificity because I still think there's a lot of confusion on the street about these, you know, quarterly net new awards. They're really not things that are happening in the quarter. It's the amalgamation of everything you've built up in the past that's moving into revenue generation phase. So having a sense on that bucket, is it 4 billion, 5 billion, 6 billion? Having a sense on that bucket could help, you know, maybe help people think about, you know, what magnitude of that pre backlog actually needs to convert to revenue generation phase, whereby it then goes into your reported backlog.

August Trundle - Chief Executive Officer - (00:41:15)

I mean, look, it's part of an overall, you know, pipeline and you know, they are firm awards at that point, but you know, it is part of an overall pipeline and we do tend to see we have seen some very large cancellations there. So we don't, we don't treat it like backlog because until the study's actually running and gets patients in, there is a higher risk. But look, I don't want to get into putting numbers on that and then tracking just the size of it, the size of what other buckets, et cetera. I think we provide adequate information on the overall parameters that we look at and measure and pay attention to to give trends. But yeah, the bucket is somewhere under 4 billion.

Eric Caldwell - Equity Analyst - (00:42:03)

Right, okay, that's super helpful actually. And then last one, thank you for allowing my time here. You made a comment earlier about this total bucket of awarded work that isn't in backlog being up 30% year over year. And then in that same vein of commentary, you said something about haven't gotten to first patient in. So then I got thinking. Are you basically telling us that you don't put an award here until you actually have the first patient in the study? Because I used to think that the parameter was that you needed to be within 30 days of revenue generation. But maybe the real parameter is you actually are live in the study generating revenue before you, you put something into street facing backlog.

August Trundle - Chief Executive Officer - (00:42:56)

That's correct. It could be that there's revenue prior to, you know, and even sometimes, you know, chunk of revenue prior to reaching backlog.

Eric Caldwell - Equity Analyst - (00:43:11)

So this is how the revenue started growing before the headcount did. I'm trying to get a sense like things started, the work sped up maybe a bit faster than you were thinking six months ago when you had some cancels and market uncertainty, the work sped up sometime between April and July. The tone and the messaging clearly shifted. It just feels like maybe this work really picked up pace and you were sitting right there, not quite in backlog, but suddenly this stuff is in backlog and now we get the big revenue spike. I'm just trying to get a sense on what really are these dynamics between reported backlog, the pre backlog and then the notion that your revenue actually accelerated pretty quickly before your headcount growth did.

August Trundle - Chief Executive Officer - (00:44:06)

Yeah, and there's a couple components. That one is. Yes, you're right. We put it in very late. Generally, you know, a patient doesn't, you know, patients got to be, you know, you know, you know, kind of we think a patient's going to go in very short, you know, near term. Right. You know, so it's a, so it's right about when, you know, you get first patients in. But there's other reasons why, you know, there might be some concern on that. You know, there's studies where we have a manufacturing problem and actually that was an issue recently, you know, and in terms of, you know, it's right up to, you know, a lot of work being done and we haven't got space in it. But, you know, there's a uncertainty around, you know, drug availability or, you know, there may be some other, you know, regular. They need some decision at, you know, some regulatory authority to move forward with this. So, you know, those kind of things we don't put in backlog, you know, so there's a number of gates. But, but yeah, things can be very close to large scale revenue generation when they go into backlog.

Eric Caldwell - Equity Analyst - (00:45:15)

Very helpful. Thanks again, guys. I appreciate it.

OPERATOR - (00:45:19)

Thank you. And one moment for our next question. And we have a follow up question from the line of David Winley with Jefferies. Your line is open. Please go ahead.

David Windley - Equity Analyst - (00:45:29)

Hi. Thanks for taking my follow up. Eric asked one of the two I was going to follow up on. The other one is on your metabolic indexing. So a lot of the inbound questions I get on this particular topic assume GLP1. I wondered if, August, you'd be willing to provide some color on the breadth or lack of your participation in metabolic. My sense is that it is broader than just GLP1 and maybe mostly non GLP1, but I wondered if you'd be willing to come comment on that just so we'd have a better perspective of what you're, you know, what, what the drivers are of that fast growing part of your revenue and backlog things.

August Trundle - Chief Executive Officer - (00:46:12)

Yeah, so GLP1 is probably two thirds of our obesity. So it is a big, big chunk. You know, what you call me in the GLP class, you know, is a, is a, is a large portion of the overall obesity, but it's not all of it. You know, there's still, you know, a. Fair amount of other.

David Windley - Equity Analyst - (00:46:31)

And is that spread across multiple clients, I would presume. Oh, yes. Great. Thank you.

OPERATOR - (00:46:40)

Thank you. And I'm showing no further questions. And I would like to hand the conference back over to Lauren Morris for closing remarks.

Lauren Morris - Director of Investor Relations - (00:46:48)

Thank you for joining us on today's call and for your interest in Medpace Holdings. We look forward to speaking with you again on our fourth quarter 2025 earnings call.

OPERATOR - (00:46:57)

This concludes today's conference call. Thank you for participating. And you may now disconnect. Everyone, have a great day.