Medpace Holdings, Inc.MEDPNASDAQ
LOADING
|||
Operator: Good day, ladies and gentlemen, and welcome to the Medpace Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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.
Lauren Morris: Good morning, and thank you for joining Medpace's Third Quarter 2025 Earnings Conference Call. Also on the call today are our CEO, August Troendle; our President, Jesse Geiger; and our CFO, Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve inherent assumptions with known and unknown risks and uncertainties as well as other important factors that could cause actual results to differ materially from our current expectations. These factors are discussed in our Form 10-K and other filings with the SEC. Please note that we assume no obligation to update forward-looking statements even if estimates change. Accordingly, you should not rely on any of today's forward-looking statements as representing our views as of any date after today. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the Investor Relations section of our website at investor.medpace.com. With that, I would now like to turn the call over to August Troendle.
August Troendle: Good day, everyone. Cancellations were well behaved in Q3, permitting record net bookings and a net book-to-bill of 1.20. RFP quality remains solid with decisions progressing on 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 analyst models. We anticipate 2026 revenue to grow in a low double-digit range off our 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?
Jesse Geiger: 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?
Kevin Brady: 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 9 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 costs. 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 $111.1 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 days sales outstanding was negative 64.3 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.
Operator: [Operator Instructions] Our first question comes from the line of Charles Rhyee with TD Cowen.
Charles Rhyee: 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 pass-throughs in relation to maybe the increase in metabolic work? 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 pass-throughs 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?
August Troendle: Yes. I think over the course of '26, it will level off some and might even come down a little bit. But -- and it isn't just the shift to metabolic studies. That is the largest driver, which we've talked about, of course. But timing of projects and having a lot of late-stage projects in what we're burning as 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 pass-through costs are late in the trial. A trial starts and -- 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. It's start-up, if it's a very short trial and start-up is a big part of it. So the pass-through parts of a trial are backloaded. So if you have a back-loaded portfolio stuff you're burning, you're going to have more pass-throughs as a -- pass-through expenses at that time. So 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.
Operator: And our next question comes from the line of Ann Hynes with Mizuho.
Ann Hynes: Thanks for the 2026 guidance. Typically, your EBITDA grows above your -- initial thoughts, okay -- yes. 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.
August Troendle: Yes. I think the driver there is the pass-throughs. I mean, look, there's a number of challenges to EBITDA, and that includes exchange rates and a number of factors. But the biggest factor, I think, is the pass-through that challenges that a little bit. But pricing, look, we've talked and everyone's talked about pricing environment as things have slowed in the industry over the last couple of years, there has been a bigger focus on pricing. Pure pricing is more an area for large pharma to get really aggressive at and has the cloud to do it. It is an area of -- it's always a competitive environment. It's always 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.
Operator: Our next question is going to come from the line of Michael Cherny with Leerink Partners.
Michael Cherny: 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're positioning with relative to your preliminary views on FY '26, how do you think about the conversion rate of those -- of the pre-backlog, your win rate and how that should factor in relative to what you've seen over the last couple of years?
August Troendle: Yes. I mean, the conversion of how much of it's going to anticipated pull into revenue versus backlog, I really don't have that breakout. I provided the number to -- there has been some concern that our burn rate has gone up quite a bit. Our backlog hasn't grown much this year. It's a single -- low single digit, a couple of 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 given us written award of that. And it just hasn't gotten to first patient in yet. So we may be working on it, et cetera. And it just hasn't gotten to first patient enrolled. And that's in our -- this bucket pre-backlog. And that is up 30%. And this pre-backlog bucket of awarded -- 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 what a number of people have described as some sort of air gap in our revenue growth and things will stall, we run at a backlog kind of. So we really are improving our opportunities for backlog conversion in '26 and revenue generation.
Operator: Our next question will come from the line of David Windley with Jefferies.
David Windley: 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 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 timeframe as you saw some of that pre-backlog cancel out and not move forward, et cetera. So kind of the same timing dynamic sets up for what was a pretty weak funding environment in the first half of '25. So your last answer may have been pointing at me specifically, I'll take that. Why is this time difference -- why is this time different?
August Troendle: I don't know. The difference -- a big difference is this has been driven by cancellations, not weak business. There are many challenged clients, and that does affect the business environment. And there's been a really a highly unusual series of cancellations that we went through. But the business environment underlying it has always been pretty okay. And 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 pre-backlog awarded study bucket, despite all of those, we still grew that bucket by 30% over the last year. It would have grown much faster, and we'd have a much bigger backlog at this point if we hadn't had those cancellations. But the difference is this has been driven by cancellations, not really weak funding environment causing lack of opportunities.
David Windley: 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 Troendle: Yes. I think that's a reasonable scenario.
David Windley: 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 would be my last question.
August Troendle: Sure. So hiring in 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 Pac. The kind of two outlying areas that we've not really grown staff at all are Europe and China. And throughout Asia Pac -- it's throughout Asia Pac, although our largest hiring area in Asia Pac as a single country, it was India. Over the last few years, starting, as you say, a couple of years back, we started hiring in India, and that has added a substantial number of staff over time, not compared to our overall numbers, but that's been a focus area in Asia Pac. So I think that it's pretty balanced and most of the hiring recently has been U.S., and that's kind of a transition in the market. There's been more U.S.-focused work lately and a lot of that metabolic stuff is more U.S. focused. So that's been a very strong area of growth.
Operator: Our next question comes from the line of Max Smock with William Blair.
Max Smock: August, maybe 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? And maybe just elaborate on your booking expectations for 4Q and what you've embedded in your guide for bookings in 2026?
August Troendle: Yes. We're not giving a guide to '26, I don't know where the bookings are going to come out. So I'm not going to get into trying to set them. We did say that -- second half of '25, we did think that we could get to 1.15. We thought a reasonable chance of getting there, and that's kind of where we're looking at towards Q4 is sort of the target. And I think that looks reasonable, but I'm not going to get into next year yet.
Max Smock: 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? Like what's your visibility into that bookings in 4Q, given the initial awards up 30%?
August Troendle: Well, look, as I said, that bucket is 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 -- new awards were up sequentially a bit, but that -- it's the total bucket. And how much of that has to -- is needed to drive a given booking number, I don't know.
Max Smock: Yes. Okay. That makes sense. Maybe just as a quick follow-up here. You gave some color on decisions progressing at a usual tempo. Just wondering how those decision-making time lines have changed more recently and what you're hearing from customers around their confidence in the funding environment moving forward?
August Troendle: Yes. No, I think things are moving along -- Q1, we had a sort of -- things were held up. We weren't getting our sort of pending RFPs, total dollar pending decisions 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 a pretty reasonable pace. And certainly, it's somewhat normalized. I don't -- there isn't a big -- a 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 what we hear in terms of feedback. People are getting funding. I think things are moving along and there's a parallel group that are stalled and having trouble, but we have the flexibility to jump where we need to be.
Operator: Our next question will come from the line of Jailendra Singh with Truist Securities.
Jailendra Singh: First, a 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's the underlying assumption. I want to make sure that.
August Troendle: Yes. We kind of always push forward the environment. But a lot of '26 is already kind of -- cancellations are the biggest sort of wild card. But yes, you're right, the business environment, there still are things that -- to be newly awarded now that will affect next year. But kind of most of the pipeline is there and the big 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 in Q3 and in Q2. But it doesn't jump up again to like levels of Q1 and Q4 and things like that.
Jailendra Singh: Okay. And then a 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 on the core direct service revenue business, can you talk about the leverage on gross margin and SG&A? 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 those margin on the -- again, outside of pass-through impact?
Kevin Brady: Yes, Jailendra, 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 base. Some of that is just driven by improved attrition rates. They remain very low. Great utilization levels and studies are progressing at a 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 in a good spot in 2026, and it's really driven by just continued productivity of the business.
Operator: Our next question is going to come from the line of Dan Leonard with UBS.
Daniel Leonard: I'm curious how you would describe the breadth of outperformance in Q3. Would you attribute the upside to a narrow set of 1 to 2 customers? Or was it broader than that?
August Troendle: In terms of what, revenue?
Daniel Leonard: Yes, exactly. Just looking at the revenue in Q3 compared to Q2, it looks like the growth came in top 5, 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?
August Troendle: Kevin, do you want to...
Kevin Brady: Yes, Dan, 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 continue 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.
Daniel Leonard: 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 in headcount growth the right number?
Jesse Geiger: Yes. We expect headcount acceleration as we head into next year.
Operator: Our next question will come from the line of Luke Sergott with Barclays.
Luke Sergott: Great. 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 that part of -- 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 Troendle: Yes. 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. Our win rate has been okay. I mentioned last quarter, it was actually down a little bit. Awards were actually good because the total decisions were elevated. Our win rate did come back up this quarter and some fewer number of decisions, but again, good awards. Look, we don't see a trend towards 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 what you often see was 3, maybe 4 CROs now is -- often it's 6 or even more. And so that obviously reduces the win rate a little bit for everybody. But I think you correct for those situations. And I think our competitive position is very strong.
Luke Sergott: Great. And then I guess a follow-up here, not to be a dead horse, but 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 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 in, let's say, before it started ramping up in like the high teens?
Kevin Brady: Yes. 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 future bookings. If you go back to a couple of years 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. So it's hard to say. Our range has been quite wide.
Operator: Our next question comes from the line of Justin Bowers with DB.
Justin Bowers: All right. 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 more than 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 of years of programs that progress from Phase II to Phase III?
August Troendle: Yes. I don't think there's been any change in that. We -- it's kind of all over the map. But usually, we can progress from Phase II to III, but there's -- there is a -- I think there's a lot of times that products in our clientele are sold or moved to someone else. And sometimes we also just don't win the Phase III. We're considered not strong enough in a particular market or something. So I don't know that that's changed at all.
Justin Bowers: Okay. And then in terms of the award size in the quarter?
August Troendle: Yes, I'm sorry. I don't actually have that. Anybody on the line have that?
Kevin Brady: I mean, it's pretty normal, I would say, Justin. There's been -- there were no significant decisions. And remember, decisions where we're notified of an award. Those don't go in the backlog, right? Just 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: 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 2 therapeutic areas?
August Troendle: It's over-indexed in metabolic, as you might expect. Not massively, but there's a -- it's a higher proportion. And that, again, fits in with what we're currently seeing and burning.
Operator: Our next question will come from the line of Eric Coldwell with Baird.
Eric Coldwell: I have maybe 3. 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?
August Troendle: I believe your math. All right, Kevin, do you want to comment on that?
Kevin Brady: Eric, could you say that again, upper mid -- upper mid double digit...
August Troendle: Upper single...
Eric Coldwell: Yes, no, no, I don't know if you're going to do $400 million of -- sorry, go ahead.
August Troendle: No, no, go ahead. Say it again.
Eric Coldwell: Yes. 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 or $410 million. 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%, 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 that -- yes.
August Troendle: TThat's fair, that sounds reasonable.
Kevin Brady: Yes, that's fair.
Eric Coldwell: Yes. So I thought -- and maybe I'm 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 -- maybe I misinterpreted comments last quarter, but admittedly, I was a bit higher on my service revenue outlook for next year.
August Troendle: Yes. I don't think we made any comments about next year's growth at all, let alone service revenue.
Eric Coldwell: Yes, yes, 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, obviously, more than $3 billion, but less than X, so I was hoping you could give us a little more specificity because I still think there's a lot of confusion on the Street about these quarterly net new awards. There are 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 -- maybe help people think about what magnitude of that pre-backlog actually needs to convert to revenue generation phase, whereby it then goes into your reported backlog?
August Troendle: I mean, look, it's part of an overall pipeline. And they are firm awards at that point, but 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 treat it like backlog because until the study is 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 and 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 give trends. But yes, the bucket is somewhere under $4 billion, right?
Eric Coldwell: 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 the 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 put something into backlog -- street-facing backlog.
August Troendle: That's correct. It could be that there's revenue prior to -- and even sometimes a chunk of revenue prior to reaching backlog...
Eric Coldwell: So this is how the revenue started growing before the headcount did. I'm just -- I'm trying to get a sense like things started -- the work sped up maybe a bit faster than you were thinking 6 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, the 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 and that...
August Troendle: So yes, and there's a couple of components to that. One is, yes, you're right, we put it in very late. Generally, a patient doesn't -- but patients got to be kind of -- we think a patient is going to go in, in a very short near term, right? So it's right about when you get the first patients in. But there's other reasons why there might be some concern on that. There's studies where we have a manufacturing problem. And actually, that was an issue recently. And in terms of -- it's right up to a lot of work being done, and we haven't got the patient, but there's uncertainty around drug availability. There may be some other regular -- they need some decision at some regulatory authority to move forward with this. So those kind of things we don't put in backlog. So there's a number of gates. But yes, things can be very close to large-scale revenue generation when they go into backlog.
Operator: And we have a follow-up question from the line of David Windley with Jefferies.
David Windley: 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 GLP-1. 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 GLP-1 and maybe mostly non-GLP-1, but I wondered if you'd be willing to comment on that just so we'd have a better perspective of what your -- what the drivers are of that fast-growing part of your revenue and backlog.
August Troendle: Yes. So GLP-1 is probably 2/3 of our obesity, so it is a big chunk -- we can call the GLP class kind of is a large portion of the overall obesity, but it's not all of it. There's still a fair amount of other.
David Windley: And is that spread across multiple clients, I would presume?
August Troendle: Oh, yes.
Operator: 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: 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 fourth quarter 2025 earnings call.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.