Good day, ladies and gentlemen, and welcome to the Medpace Second Quarter 2025 Earnings Conference Call. This call is being recorded. I would now like to introduce your host for today's conference, Lauren Morris, Medpace's Director of Investor Relations. You may begin.

Good morning, and thank you for joining Medpace's Second Quarter 2025 Earnings Conference Call. Also on the call today is our CEO, August Troendle; our President, Jesse Geiger; and our CFO, Kevin Brady. Before we begin, I would like to remind you that our remarks and responses to your questions during this teleconference may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and these statements involve inherent assumptions with known and unknown risks and uncertainties as well as other important factors that could cause actual results to differ materially from our current expectations. These factors are discussed in our Form 10-K and other filings with the SEC. Please note that we assume no obligation to update forward-looking statements even if estimates change. Accordingly, you should not rely on any of today's forward-looking statements as representing our views as of any date after today. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the Investor Relations section of our website at investor.medpace.com. With that, I would now like to turn the call over to August Troendle.

Good day. RFP flow in Q2 continued to be strong, and we saw an increase in the rate of decisions. Total pending RFP dollars were down on the quarter and our award notifications were strong. Cancellations were down across the pipeline and awards recognized in the backlog were the highest in the past 5 quarters with a book-to-bill of 1.03x in the second quarter of 2025. We continue to see a strong potential for book-to-bills returning to above 1.15x in Q3. Although funding challenges remain acute for many of our clients, the majority of those clients with ongoing studies were able to obtain sufficient funding to keep the trials running. The funding environment has been stable to improve. Due to several factors, including better funding than anticipated, fewer cancellations, accelerated client decisions, rapid project startup, shifting mix away from oncology and toward faster burning therapeutic areas and significantly higher investigator costs, we now anticipate accelerating revenue in the second half of the year. As a result, our revenue guidance has been raised by $280 million at the midpoint. Jesse will now add some additional detail.

Thank you. Good morning, everyone. Revenue for the second quarter of 2025 was $603.3 million, which represents a year-over-year increase of 14.2%. Net new business awards entering backlog in the second quarter increased 12.6% from the prior year to $620.5 million, resulting in a 1.03x net book-to-bill. Ending backlog as of June 30, 2025, was approximately $2.9 billion, a decrease of 1.8% from the prior year. We project that approximately $1.75 billion of backlog will convert to revenue in the next 12 months, and backlog conversion in the second quarter was 21.2% of beginning backlog. Now 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.

Thank you, Jesse. As Jesse mentioned, revenue was $603.3 million in the second quarter of 2025. This represented a year-over-year increase of 14.2% on a reported basis and 13.8% on a constant currency basis. Revenue for the 6 months ended June 30, 2025, was $1.16 billion and increased 11.8%. Revenue for the quarter was favorably impacted by higher reimbursable activity, particularly at investigator sites, driven by studies progressing ahead of projected schedules and the therapeutic mix shift to faster burning studies in areas like metabolic, which have a higher concentration of reimbursable costs. EBITDA of $130.5 million increased by 16.2% compared to $112.3 million in the second quarter of 2024. On a constant currency basis, second quarter EBITDA increased 18.5%. Year-to-date EBITDA was $249.1 million and increased 9.3% from the comparable prior year period. EBITDA margin for the second quarter was 21.6% compared to 21.3% in the prior year period. Year-to-date EBITDA margin was 21.4% compared to 21.9% in the prior year period. EBITDA margin in the quarter benefited from direct service activities and productivity, offset by higher reimbursable costs and foreign exchange losses behind the weaker U.S. dollar. In the second quarter of 2025, net income of $90.3 million increased 2.2% compared to net income of $88.4 million in the prior year period. Net income growth behind EBITDA growth was primarily driven by a higher effective tax rate in the quarter and lower interest income. Net income per diluted share for the quarter was $3.10 compared to $2.75 in the prior year period. Regarding customer concentration, our top 5 and top 10 customers represent roughly 21% and 31%, respectively, of our year-to-date revenue. In the second quarter, we generated $148.5 million in cash flow from operating activities, and our net days sales outstanding was negative 65 days. During the second quarter, we repurchased approximately 1.75 million shares for $518.5 million. Year-to-date, we repurchased 2.9 million shares for $908.4 million. As of June 30, 2025, we had $826.3 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 $2.42 billion to $2.52 billion, representing growth of 14.7% to 19.5% over 2024 total revenue of $2.11 billion. Our 2025 EBITDA is now expected in the range of $515 million to $545 million, representing growth of 7.3% to 13.5% compared to EBITDA of $480.2 million in 2024. The increase in our guidance reflects the impact of lower second quarter backlog cancellations, improved funding on several challenged programs, which we anticipate will continue through the remainder of the year and a shift in business toward faster burning therapeutic areas with a higher concentration of reimbursable costs. We now expect reimbursable cost as a percentage of revenue to increase by 200 to 300 basis points over the balance of the year. We forecast 2025 net income in the range of $405 million to $428 million. This increased guidance assumes a full year 2025 effective tax rate of 18.5% to 19%, interest income of $11.6 million and 29.4 million diluted weighted average shares outstanding for 2025. There are no additional share repurchases in our guidance. Earnings per diluted share is now expected to be in the range of $13.76 to $14.53. Guidance is based on foreign exchange rates as of June 30, 2025. With that, I will turn the call back over to the operator so we can take your questions.

Our first question is going to come from Ann Hynes with Mizuho.

Great. Could you just let us know what your booking expectations are for the second half? And the reason being is that your burn rate stepped up in 2Q and obviously, your guidance implies a step-up in 3Q and 4Q. And I'm just trying to figure out what that means for 2026 revenue growth. I know you don't probably want to give guidance for 2026. But do you expect an acceleration in bookings for the second half to support growth in 2026?

Yes. As I said in my prepared comments, we do believe that there's a reasonable chance of getting book-to-bills back over 1.15x, which implies a considerable increase in bookings as our revenue is also growing. So yes, we do expect bookings to increase. Now again, that's always dependent upon cancellations, which were very well behaved in this quarter. But last quarter, they were terribly high. So if things continue in the trend we saw in this quarter, then yes, we expect bookings to remain strong through the remainder of the year.

And can you provide any more information on cancellations? Like what was the rate this quarter versus what had been trending the past couple of quarters?

Yes. We don't disclose the actual rate, but it was down across the entire portfolio. So both sort of the non-backlog awards before they get the backlog was very low. And our backlog cancellations that have been at or above the upper range of what we'd consider normal. They're actually toward the lower end of expectations or usual history in this past quarter in Q2. So they were actually very well behaved. And that, of course, made us exceed what we thought we were going to do in terms of both bookings and overall performance in terms of revenue and EBITDA.

Our next question is going to come from the line of David Windley with Jefferies.

I've got a few. I'll try to go through quickly. On the burn rate, I'm not quick enough on the calculator. I heard, Kevin, you say that you do expect pass-throughs to be 200 to 300 basis points higher over the balance of the year. And that, I think, contributes in part to the higher burn rate. I was hoping you could maybe walk me to water a little bit on how much of the increased guide is pass-through versus direct revenue?

Yes, Dave. I mean, obviously, a large portion of the increase is going to be on the accelerated reimbursable cost activity, right? But we did increase also the EBITDA guide as well. And so we're also seeing some pull-through on just greater productivity on the existing staff and quite frankly, some programs that are progressing ahead of what we had projected in our schedules. So it's a combination of both. But the revenue, in particular, is certainly heavily influenced by the 200 to 300 basis point increase in expectations on the pass-throughs.

Okay. So last night, we examined a pattern in 2023 where there was also an increase in revenue, with a significant portion coming from pass-throughs. It seems like it may not be as extreme, but it's similar. To achieve the EBITDA increase that you mentioned regarding the direct revenue portion, which appears to be the smaller part, you're looking at needing a fairly high incremental margin, as you pointed out. Management has been noting for at least a year that staff productivity has been rising and that we are above historical levels, likely with limited room for further improvement. So I would like you to explain how you are managing to enhance productivity further. Additionally, to support revenue growth and meet your bookings expectations, I assume you plan to ease up on hiring and accelerate the process? How can we expect that to affect margins over the coming quarters?

Yes, Dave, you're correct. I didn't anticipate the productivity levels we experienced in 2024 to persist. We've slightly adjusted our hiring expectations for this year, but we've also noticed better attrition rates in the last few quarters. All of this contributes to my expectation of some challenges in 2025 compared to 2024. However, it's definitely an improvement from where we started the year.

And then my last question quickly is about August. Your comments regarding funding are interesting. Our tracker is not definitive, but we have observed some predictiveness, and funding year-to-date has been quite poor. While June was better, we are down over 40% for the year so far. How do you feel assured that the weak funding during the first half of the year is not signaling another decline in demand activity for you, similar to what we experienced in 2023 ahead of 2024?

I find it hard to feel comfortable with the situation. I initially thought we would reach a bottom in the fourth quarter, but then we faced cancellations. A significant part of our challenges over the past year has been due to cancellations rather than new projects and our baseline business, especially in the last nine months. There have been substantial cancellations. If they secure sufficient funding, I'm not sure what portion that would be of the overall funding pool, but if we're confident in it, we can meet our targets. However, there is a possibility of further pullbacks that could affect 2026. I can't say for certain what will happen. I know we have a solid pipeline of projects awarded that haven't yet contributed to our backlog, which should lead to strong bookings for the rest of this year, provided we don’t experience excessive cancellations. This should help us start the year 2026 on a positive note. Nonetheless, there's a chance we could see another decline and face weak booking quarters again; I simply don't know.

Our next question comes from the line of Jailendra Singh with Truist Securities.

Congrats on a strong quarter. I actually want to follow up on the last part of David's question. I mean it seems like macro environment and business pipeline when we caught up in early June was still choppy and pressured. Keeping that in mind, can you provide some color around how intra-quarter trends were in 2Q? The majority of trends suddenly accelerated towards the end of Q2, essentially like the latter part of June and those trends have continued. Just give us some flavor how demand environment evolved in Q2 in particular?

Yes. Q2 was a continuation of Q1 in terms of the business environment, which remained strong regarding RFPs. I mentioned in Q1 that they were strong, and this quarter saw a notable decrease in cancellations throughout. Cancellations were actually on the lower side this quarter compared to being very high in previous periods. I didn't observe any significant trends of acceleration or deceleration during the quarter.

Okay. And my quick follow-up on these trials which were delayed or kind of put on hold coming back, new trials, business wins. Are you seeing in any way the scope being different? Are you seeing like reduced scope of work? Or is it like a similar scope of work as you guys agreed on? And related to that, is there any meaningful variations around EBITDA margin if the project comes at a lower scope or reduced scope than previously planned?

Yes, we did downscope several projects. This is something you observe in various environments. While it might not be widespread, there are instances of downscoping and significant delays. We see slower starts, postponements in certain regions, and efforts to keep studies ongoing without moving as quickly as we could. Clients often take these measures to maintain operations despite insufficient funding. Naturally, this will affect profits. The most profitable projects are the ones that progress quickly, and any delays or reductions in scope hinder our ability to execute and generate profits.

Our next question is going to come from the line of Max Smock with William Blair.

I wanted to follow up on some previous questions regarding the book-to-bill ratio for the second half of the year, especially your comments about returning to 1.15x. Achieving that would suggest bookings are up over 40% year-on-year. I'm looking for clarification on whether reaching 1.15x requires further improvements in funding or the demand environment. If you anticipate no changes from the current situation, what would bookings look like if conditions remain the same as in the second quarter? Can we expect net awards in the second half of the year to be similar to the $620 million reported in the second quarter?

Yes, I will answer that. Can you repeat the first part of that question regarding the bookings?

Yes. So if I'm just thinking about your guide and your commentary about 1.15x book-to-bill in the back half of the year, I mean, that implies net bookings up over 40%. So just trying to get a sense for how much visibility you have into that? And then what's embedded in the outlook to get back to 1.15x? Do you need to see further macro improvement? And if you don't, what does book-to-bill look like in the back half of the year?

Sure. I think there is improvement in the macro environment. It depends on whether all of our cancellations are related to funding, and I believe a significant portion of them were. We need to see cancellations remain low. While I don't require a strong new business environment to create opportunities, it's essential for progress to continue without being hindered by funding or other issues. In the current quarter, Q2, the cancellation rates were relatively low. If that trend continues, I believe we will be in a good position. However, if cancellations fall into the mid-to-upper range, we will be on the brink of concern. Prior to last quarter, specifically Q1, we experienced a high number of cancellations, particularly in the pre-backlog segment, where many expected conversions fell through in the upcoming quarters. This has made our ability to reach the 1.15x target much tighter. I wouldn't say it’s guaranteed, but if conditions remain similar to the last quarter, we should be able to get there. The extent of potential weaknesses or further cancellations is uncertain, but that addresses your question.

Yes, it does. I'm sorry for the long-winded question on my end. Maybe just one on competition and win rate and what you saw there in the second quarter and maybe how much of your results are more a reflection of you all taking share more so than a broader rebounding demand environment from small biotech?

Yes. No, I was hoping not to have to talk about win rate. It was not great in the quarter, actually. It was more an issue of more decisions. As I said, in the prior quarter, Q1, things were not being decided. Things were being held up, a lot of funding issues and the go-ahead was not being given on new awards. They weren't making decisions. And so our pending RFP dollars increased quite a bit. That came down in this past quarter because there were a lot of decisions. Our win rate on those decisions was not particularly high, but there was a lot of decisions. So actually, awards were good. We actually had a very good new award quarter, but on a lower end win rate, competitive win rate. But that's something that bounces around quarter-to-quarter, and I never make anything out of a single quarter down. The prior quarter, it was fine. So we'll see.

Our next question is going to come from the line of Michael Cherny with Leerink.

So maybe if I could just dive a little bit more on the trajectory in back half and into '26, in particular, on the step-up in pass-through business. I think, Kevin, please correct me if I'm off here, but you said 200 to 300 basis points of increased pass-through business baked into the numbers in the back half of the year. Is this something, especially given the results this quarter that should be a new normal going forward? Or is this just a matter of luck of the draw timing on the types of contracts that are currently hitting your backlog?

Yes. I mean, certainly, in the near term, it's going to be the new normal. And again, it's heavily influenced by just the mix that we're currently seeing in areas where there is a higher concentration of reimbursable costs. So yes, in the near term, I would say it's going to be elevated. How long does this last? Not going to provide commentary on '26 at this point. But certainly, the balance of the year, we do expect it to be and continue to be elevated.

Understood. I won't delve deeper into the implied 2026 numbers at this moment. However, as a follow-up to your earlier comment regarding the win rate and its dynamics, I recognize that it can fluctuate from quarter to quarter. With regard to the win rate, was there anything related to the disease state or other factors that you believe influenced the outcome, or is it simply a random variation within your overall portfolio?

Yes, it was somewhat concentrated. Larger programs tend to have a lower likelihood of winning. We were dealing with some significant programs. The size of the project and our previous experience with the client play a key role. If it's a new client with existing providers, our chances of winning decrease. This is what causes fluctuations from quarter to quarter. We secured the projects we anticipated, but in the previous quarter, we faced some major losses. The wins or losses we experience are heavily influenced by the dollar value of these large programs. Essentially, a single large project can significantly impact our total results for the quarter. Unfortunately, we lost two substantial projects. However, I can’t say this indicates weakness in any specific area or trend—it just reflects which projects were nearing completion and their sizes.

And one last really quick one, if I may. As the market is opening, your stock is up a lot. I know the guidance does not assume any more buyback. But conceptually, given the outstanding authorization you still have, how are you thinking about near-term balance sheet utilization and the potential for incremental buybacks?

No, it's more of the same, Michael, that we'll continue to be opportunistic in buying at levels that we see to be very accretive. And if our plans don't execute, then we're okay building cash. We're very happy with what we were able to execute in the fourth quarter, first quarter and second quarter of this year.

Our next question is from Eric Coldwell with Baird.

I have a few, hopefully not too repetitive. I was hoping we could start with talking about following on that last line of questioning, just talking more broadly about the bookings dynamics this period. There was some speculation going around last night based on the big increase in revenue that maybe you had picked up some large studies. It does not sound like that happened this quarter, anything particularly crazy large. But I was hoping you could just maybe more specifically tell us what your largest win individually was in the quarter, if there were any rescue awards or losses that you could talk to, maybe just broadly talk about competitive dynamics. You did mention your win rate wasn't the best, but talk a bit about competitive dynamics. Just hoping to get a little more flavor on the bookings mix and breadth of those bookings to start?

Sure. Your question seems to introduce some confusion regarding the various components at play. When we refer to competitive wins, these are essentially awards or notifications that have not yet entered our backlog, meaning we are not generating any revenue from them, and it typically takes several quarters before they do contribute financially. Therefore, a new award this quarter won’t affect our revenue immediately. A booking would likely have an impact as that signifies the start of revenue generation, although it could occur late in the quarter, which may not have a significant effect. Most of the impact will be seen in future quarters. Looking at the new notifications for this quarter, nothing particularly stands out; there were no significantly large awards—just a fairly typical quarter. In fact, we faced some losses with large deals, resulting in a lower competitive win rate. However, if you disregard a couple of outlier cases, our win rate was actually quite acceptable. In terms of bookings for this quarter, nothing particularly remarkable occurred. There weren’t any urgent or short-term projects that we secured during the quarter that contributed to this. Instead, it was mostly standard progress on existing projects, and some advanced more quickly than we anticipated. We observed positive developments in areas where we initially expected slower progress, such as with investigator fees. While we projected direct fee flows relatively well, certain projects moved forward more rapidly than we had expected, resulting in some positive surprises. However, we didn’t experience anything out of the ordinary regarding short-term or rescue work.

Okay. On the reimbursable indirect revenue commentary, and I hate to be this myopic, especially since it's been talked about so much, but I want to make sure I'm 100% clear. When you talk about 200 to 300 basis point increase in mix for the rest of the year, can you clarify, does that specifically mean you're looking at something 41%, 42-plus percent in the second half? Or does that mean something more like 38%, 39% for the full year compared to 2024 total levels? I'm just I'm not 100% clear what that plus 200 to 300 basis points specifically is in reference to or what the absolute percentage you're targeting is?

Yes, Eric, thanks for asking the question. To clarify, that's relative to what we saw in the second quarter. So yes, we could see this in the low 40% the back half of this year.

Okay, and then my last question for now. Your recent update has clearly taken the market by surprise. You have a significant backlog conversion, now projected to be between 41.5% and 42.5% in the latter half of the year. While your backlog is down 2% year-over-year, you're still anticipating revenue growth as high as 27% in the second half at the top end of the range. This raises many questions about sustainability. I understand it's challenging to predict with the shift in reimbursables, which seem to be driving most of the revenue increase, and those may or may not persist next year. What can you share today that will help us comprehend the starting point for these conversion rates and growth rates as we look ahead to 2026? I realize you're not giving guidance right now, but we all need to build models and make assessments for next year. You've certainly caught us off guard, and I'll admit I'm trying to grasp what growth rate we might expect for the upcoming year. It doesn't seem sustainable, to be honest, but then again, I didn't anticipate this quarter. So...

Eric, there were parts of your comments that were hard to hear. I believe I got the gist, but please let me know if I miss anything. We are experiencing a notable shift toward quicker processes. Our overall conversion rate is strong due to a lower baseline. However, I don't think this necessarily means we'll exhaust our backlog leading to a significant gap. I believe we have a stable business environment to maintain our replenishment. I also see our indirects increasing because of a focus on metabolic work, although I can't predict how long this will last. If this trend continues, our growth rate for next year should be fine. But if it recedes, that could impact our growth, especially due to a decline in reimbursables. I expect our direct fee income to remain solid, so there's no reason to anticipate a drop in profitability. We might achieve growth rates next year similar to this year, excluding pass-through factors. However, we cannot predict next year definitively, as it depends on incoming factors over the next few quarters. While 2026 is not really a focus now, we don't have any indication that we will face significant challenges next year resulting in stagnated growth, unless there is a drastic drop in pass-throughs affecting our overall growth directly, which I don’t foresee based on current data.

Our next question is going to come from the line of Luke Sergott with Barclays.

I want to understand the situation better. We've talked about the various factors at play, and while there's a focus on the burn rates, you have experienced an increase in those rates significantly. There was a notable rise in bookings, and you managed to achieve that revenue growth without the need for additional SG&A hires. Additionally, DSO also increased substantially during the quarter. It seems you haven’t gained ongoing work from other companies or increased market share. I'm trying to figure out what exactly led to these increases and how all these metrics align.

We saw a decline in cancellations. We've been experiencing growth rates of over 20% for quite some time. While things have slowed down due to a weakening environment, our core growth rate remains solid despite some unusual cancellations. These cancellations are part of the same environment that has also limited opportunities to some degree. However, I'm not sure how to fully address that connection. The market is performing reasonably as long as cancellations remain manageable. Our conversion rate has improved because we've seen a drop in two significant factors. The expected growth in our denominator did not materialize, and there has been a shift towards more rapidly consuming products. Specifically, many metabolic programs, especially in the obesity sector, are playing a crucial role in the market, leading to quicker turnaround times. Overall, the significant improvement from what we expected was fewer cancellations than we had predicted.

Okay. And then I guess just a follow on that, your backlog that you guys report, so like anything over 12 months that's included there took a pretty big step down in the quarter. It's been declining the last few quarters and that makes sense with everything you're saying like faster burn rates and so more near-term stuff. So as you think about as this starts to roll off, like what's the average timeline of these faster burning trials as we think about into '26 and '27? I mean that's like to Eric saying, like we're all trying to model here of what we're thinking for '26 and the range just gets pretty really wide?

I cannot provide an average for overall categories. Long studies typically last between 6 to 10 years, especially in oncology, and they tend to progress slowly. Metabolic studies, on the other hand, can take 2 to 3 years and often involve a higher percentage of indirect costs. Usually, direct fees accumulate quickly at the beginning while we focus on organizing, setting up, and recruiting for the trial. Investigator fees generally come in later when patients are enrolled and attending numerous visits. Typically, direct fees are heavy in the first half of the study, while investigator costs dominate the second half. In metabolic studies, things can happen much more quickly and all at once.

Okay. Just to follow up on the previous point, considering the margins and the need for hiring to support these trials, you mentioned the efficiency of your current team, and since you don't use FSP, along with your strong culture and low attrition rates, how should we view your hiring requirements in the latter part of the year if you aim to maintain these burn rates and continue on this elevated growth path?

Yes. Back half of the year, we do expect accelerated hiring. We expect to hire more in the second half than we hired in the first half. We still think we'll be kind of in the mid-single-digit to kind of upper mid-single-digit growth rate for the year. But then as we move into the third quarter and fourth quarter, depending on a lot of factors, including the business environment and new opportunities and activity, we have opportunities to accelerate that beyond that. But right now, we're very comfortable with current headcount levels and projections to handle the current and future projects, but it is dynamic and we can adapt as we go.

Our next question is going to come from the line of Charles Rhyee with TD Cowen.

I just wanted to follow up on some of the earlier questions. August, it seems you're indicating that what we've been experiencing over the past year, combined with the challenging funding environment, has significantly impacted cancellations. This occurs when individuals are unable to secure funding for their projects. However, the flow of new RFPs has remained consistent. Has that stability been present over the last few years?

I wouldn't say there haven't been changes. The main issue for us has been the significant increase in cancellations, which has held us back quite a bit. While the overall environment has weakened since the highs experienced during COVID, it has not fully recovered and remains weaker due to reduced funding. This results in less appealing opportunities. Requests for proposals don’t always reflect the current situation; last year certainly had limited opportunities, and some clients were focused on securing projects at lower prices. However, the most pressing issue recently has been the high level of cancellations. I initially believed we had moved past that in the fourth quarter and that conditions were improving. Although we observed some improvements in fundamental opportunities starting in Q4, cancellations have been the major uncertainty affecting our forecasts, more so than new opportunities and awards. Both factors play a role, but it has truly been the cancellations that have disrupted our plans. The last quarter, Q2, showed considerable improvement, but we also saw significant improvement in Q4 before witnessing another spike in Q1.

In this quarter, cancellations were significantly lower compared to Q1. When analyzing the reasons for cancellations, are they mainly related to funding, or do changing priorities from sponsors play a role as well?

You can never sort that out entirely. I think they're very highly related. Reprioritization is sometimes another word for cutting back. And so I don't know. But I do think the funding environment has been a critical part of the vast majority of cancellations.

Okay. And then you talked about earlier faster burning therapeutic areas like metabolic. But when we look at revenue contribution by category, that's sequentially the same in metabolic. It was sort of this other category we saw a big step-up in the quarter. Can you give us some examples of therapy area in that other bucket that you saw this big pickup. And just curious like what kind of visibility you have or like how much of your upcoming pipeline of RFP activity is in this other bucket? And what kind of visibility you have into that?

Yes. There are various factors at play, and nothing stands out as the majority. However, the significant trend has been in metabolic over the past year. Our metabolic revenue and awards have represented a larger percentage of the total, and this will continue because of the awards. For the next couple of quarters, they are expected to be a growing segment of our overall revenue. While some of these tend to be long-term, they generally have a quicker turnover and higher indirect fees.

That's great. For my last question, can you provide more details about the faster decision-making you've mentioned? Is this related to drug pricing and the possibility of changes at the end of the year, leading people to feel the need to make decisions sooner? Or is there something else that might explain why decision-making has picked up?

No, I think that's related to funding again. We've noticed that our pending RFP dollars, which are for proposals we've bid on, are just sitting there awaiting a response with no decisions or progress, even for projects we've already been awarded. They confirm they're going to use us and agree to the budget, but then they hold off. There are various reasons for this delay, such as drug supply issues or waiting for additional information on the drug, and other studies that may need to be completed. But funding remains a significant factor. We've observed a quicker execution on the sponsor side to move forward, providing us with the authorizations and resources needed, which is also tied to funding.

Our next question is going to come from the line of Justin Bowers with Deutsche Bank.

So Jesse, just a quick cleanup question. Regarding employee growth, it sounded like there is accelerated hiring in the second half and mid-to-upper single digit growth. Is that for the second half, or for the full year?

Yes, accelerated hiring in the second half. So hiring more in the second half than we hired in the first half, mid-to-high single digit for the full year growth rate.

Okay. So second half employee growth should be mid-to-high single digit year-over-year.

Correct.

I think we're talking about the full year would be high single-digit growth over the prior year.

What does the guidance expect for top line growth on a 605 basis this year?

Yes. Justin, we don't provide a 605 basis look. I think if you just model it kind of using the guidance that we have out there and assume kind of the 200 to 300 basis point increase in reimbursable costs over the balance of the year, you kind of back into what that could be.

Okay. It seems that the burn rate is quite sustainable and is likely to increase in the latter half of the year. What does the pre-backlog or your current authorizations, which are not yet in backlog, look like? Is that similar to the revenue composition so far this year, or are there any significant differences in the therapeutic mix?

Yes. We're seeing a move towards more metabolic and that will continue. It looks like, based upon anticipated awards, yes.

Okay. Regarding the cancellations, there are two key points that stand out. One is the improved execution and the changes made during the quarter. The other is the cancellations mentioned. When did you notice a significant change? Did it start around May, or was it happening as we exited March?

I don't have the monthly breakdown, and we typically analyze these on a quarterly basis. While we are aware of the notification dates, I've not been able to determine exactly when cancellations occurred during the quarter. Overall, we experienced lower cancellations throughout the quarter. However, I lack precise data regarding the timing of these cancellations. They notify us, but we don't fully understand the situation until we finalize what needs to be done to resolve it, which does take some time. I do believe that the cancellations in the second quarter were significantly lower than in the first quarter.

Okay. And then maybe just one last one for me online. With what was change order activity like during the quarter? And how did that change from 1Q or even what you saw towards the tail end of last year?

I don't have the numbers on just what the magnitude of change orders were, but there's nothing been particularly unusual there.

Yes, Justin, I wouldn't say there's anything unusual on change orders. They happen all the time, but nothing that would stick out.

Okay. Nothing. Okay. I just have one follow-up.

Change orders can be complex. Sometimes they award a project as part of a broader study, but it might only cover an initial region. We typically plan for the next six months, and funding isn't available until then. That raises questions about what constitutes a change order. The challenges arise when we receive authorization and then determine if it qualifies to be added to our backlog.

Our next question comes from the line of Kyle Crews with UBS.

You've historically disclosed around a high single-digit revenue exposure to cell and gene therapy. Can you talk about the impact of Sarepta recently having their clinical trials put on hold and kind of the pausing of the platform technology designation there and the impact to your company?

Has no impact to us.

Can you maybe speak more broadly to the cell and gene therapy market and what you've seen there and if you're still that exposed to it?

We don't have significant exposure to the overall area, but we do have some exposure. However, I don't believe Sarepta will have an impact on our programs.

And I'm showing no further questions at this time. And I would like to hand the conference back over to Lauren Morris for any 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 2025 Earnings Call.

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