Medpace Holdings, Inc. (MEDP) Q2 2026 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the MedPace Second Quarter 2026 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 phone. 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, David Ruh, MedPace's Director of Investor Relations. You may begin.

Good morning, and thank you for joining MedPace's second quarter 2026 earnings conference call. Also on the call today is our CEO, August Trundle, 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 Security 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 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 Trundle.

Good day, everyone. The business environment was strong in Q2 2026. Cancellations were well-behaved and supported a record quarter for net bookings. RFPs were up sequentially and year-over-year, generating high-quality opportunities. Initial award notifications remained solid, although they declined sequentially from a very strong Q1. Overall, the environment remains constructive into July, and we are making good progress in positioning the business for 2027. Kevin will now review our financial results from Q2.

Thank you, and good morning to everyone listening in. Revenue was $707.3 million in the second quarter of 2026. This represented a year-over-year increase of 17.2%. Revenue for the six months ended June 30, 2026 was $1.41 billion and increased 21.7%. EBITDA of $153.4 million increased 17.6% compared to $130.5 million in the second quarter of 2025. Year-to-date EBITDA was $302.8 million and increased 21.5% from the comparable prior year period. EBITDA margin for the second quarter was 21.7% compared to 21.6% in the prior year period. Year-to-date EBITDA margin of 21.4% was flat compared to the prior year period as the impact of higher reimbursable costs was offset primarily by lower employee-related costs. In the second quarter of 2026, net income of $121.4 million increased 34.5% compared to net income of $90.3 million in the second quarter of 2025. Net income growth above EBITDA growth was primarily driven by a lower effective tax rate and higher interest income compared to the prior year period. Year-to-date net income was $245.2 million compared to $204.9 million in the comparable prior year period, which represents a 19.7% increase. Net income per diluted share for the quarter was $4.25 compared to $3.10 in the prior year period. Year-to-date net income for diluted share was $8.53, compared to net income for diluted share of $6.79 in the comparable prior year period. Net New Business Awards entering backlog in the second quarter increased 28.2% from the prior year to $795.7 million, resulting in a 1.13 net book to build. Ending backlog as of June 30, 2026 was approximately $3 billion, an increase of 4.9% from the prior year. We project that approximately $1.96 billion of backlog will convert to revenue in the next 12 months. Backlog conversion in the second quarter was 24.1% of beginning backlog. Regarding customer concentration, our top five and top ten customers represent roughly 31% and 40% respectively of our last 12 months revenue. In the second quarter, we generated $162 million in cash flow from operating activities, and our net day sales outstanding was negative 59.6 days. During the second quarter, we repurchased approximately 706,000 shares for $294.7 million. As of June 30, 2026, we had $527 million remaining under our Share Repurchase Authorization Program. Cash ended the quarter at $502.7 million. Moving now to our updated guidance for 2026. Full-year 2026 total revenue is now expected in the range of $2.805 billion to $2.885 billion, representing gross of 10.9% to 14% over 2025 total revenue of $2.53 billion. Our 2026 EBITDA is now expected in the range of $618 million to $642 million, representing gross of 10.8 percent to 15.1 percent compared to EBITDA of 557.7 million in 2025. We forecast 2026 net income in the range of 494 million to 514 million. This guidance assumes a full-year 2026 effective tax rate of 19 percent to 19.5 percent. interest income of $21.1 million, and 28 additional share repurchases assumed in our guidance. Earnings per diluted share is now expected to be in the range of $17.25 to $17.95. Guidance is based on foreign exchange rates as of June 30, 2026.

With that, I will turn the call back over to the operator so we can take your questions. thank you as a reminder to ask a question please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again please stand by while we compile the q a roster and our first question comes from charles rey of td cowan your line is open oh yeah thanks for taking the questions um I wanted to ask, you know, obviously a lot of the growth that we've seen over the last year has been really driven by metabolic mix, and at the same time it looks like our concentration

of top customers, particularly the top five, has increased. Can you give us a sense on, you know, are the two related in such that, you know, maybe a lot of the metabolic work you're doing is coming from a couple large clients, and can Can you give us a sense on sort of what visibility you have of that going forward? And I guess the question is, does the mix within your bookings and backlog look similar to what your current revenue mix? Just trying to get a sense, you know, how long you could expect this kind of mix persists and particularly on the metabolic side, or, you know, does that kind of roll off at some And maybe any sense on timing, would that be?

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

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

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

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

I'm sorry, can you just clarify then, August? What is the change that allows other – my understanding of duration was the way backlog converts is length of trials and where recognition happens, but you're saying that with interim analysis, even in, let's say, an oncology trial, that triggers a revenue – We might only have one year of backlog for that program.

The program might be five years planned to go, but we only have one year of backlog in there because there is another stage looking at before they do the expansion or you know before before there's some increase in the program and we won't put any of the backlog beyond that point until we get to it and there's a favorable decision.

I see okay that's really helpful appreciate the comments thank you.

Thank you and our next question comes from Michael Cherney of hearing partners, your line is open.

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

Yeah, no, I don't think the market has changed. It's gotten stronger over the last few quarters. We had a pretty strong, and I would say pretty strong because I didn't want to say just unqualified, strong business environment in the prior quarter because there was cancellations. You know, still we continue to see clients that are, you know, we're looking for funding or having, you know, problems, et cetera. And, you know, high-level cancellations. This quarter, this very last quarter, you know, Q2, cancellations came down quite a bit. The business environment continued to be strong. New opportunities look good. And I don't really see, you know, competitive dynamics or anything. Like I said, the profiles, you know, moved more back towards oncology programs being the largest, in fact, the majority of opportunities as opposed to, you know, sort of, you know, metabolic, you know, drivers of, you know, a year or so ago. But, you know, otherwise, I think things are pretty stable.

And just quickly on the cancellation side, I know you don't guide the cancellations, but I know they can be volatile for quarter to quarter, but do you feel going forward like cancellations should be at least in a better place versus what seemingly could have been an outlier in one quarter, in one queue?

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

Thank you. And our next question comes from Anne Hines of Mizuho. Your line is open.

Great. Thank you. I know your business, you do a little bit of phase one, but phase two and three. And there's been some increased investor concern that maybe phase two is hitting a wall, maybe something's moving to China. I don't know if that's the case for you, just giving you a biotech mix. But maybe if you can just discuss gross bookings, trends, and phase one versus phase – I mean, I'm sorry, phase two versus phase three, that would be great. Thank you.

Yeah, I think if we look at kind of the numbers, maybe phase one has increased, you know, some relative to phase two. You know, phase three has been pretty stable. But, you know, and of course that phase one is driven largely by, you know, oncology programs. And, you know, so I, you know, I don't know that that's not just the kind of move towards, you know, very, you know, heavy oncology. I haven't tried to analyze that too greatly in terms of, you know, you know, where that's going. But I don't really see a, you know, a shift of things to China greatly for, you know, at least the programs we're, you know, chasing. So, you know, I don't know that I see that dynamic, but I don't want to see.

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

Yeah, I mean, you know, that kind of is set up. Gross bookings are going to be determined by, you know, pre-backlog cancellations, you know, from the past. We did have, you know, high cancellations, but we've had an improving business environment. As I said, you know, that's what I've been saying the last three quarters or so. You know, the business environment is pretty good. It looks actually, you know, I would say very good, except that we keep having cancellations, and that is part of the business environment, you know, and it's – and, you know, there has been still a number of clients that were, you know, challenged financially. So, yeah, I don't know.

All right.

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

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

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

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

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

Got it. Thanks a lot.

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

It's Christine Rainson for Jared. So while I realize the majority of the work that you booked today will not burn until at least 2027, given the volatility of recent, hoping you can get some color on what you're expecting for bookings growth cadence in the back half of the year, and really if you expect 2Q net bookings to be a high watermark or if we could see sequential acceleration as we move throughout the year.

I'm sorry. You're a little bit faint there. It sounds like you're asking about how the bookings are going to go in the second half towards 27 years.

Yeah. No, I apologize. I was just hoping to get some color on really if 2Q is expected to be the high watermark for bookings here, if we really could see an acceleration as we move throughout the year in terms of net bookings?

No, no. As in response to the last few questions, I said that we expect a ramp in bookings. I expect a ramp in gross bookings. I would expect that to translate into a ramp in net bookings, but cancellations are always a wild guard. But that was my commentary on the second half.

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

Yeah, so RFPs were up meaningfully, certainly on a sequential basis. RFPs were up substantially, and the quality has been good and improved. We see a lot of clients that have had recent funding. I think the big thing is funding has been a lot broader rather than just a few companies getting quite a bit more money. It's quite a bit broader. We're seeing more opportunities with recent funding and moving forward with the program. So I think the business environment is in good shape, and I think the RFPs' numbers have increased. I don't like paying a lot of attention to the numbers. They are up substantially year-over-year. They were up also, you know, sequentially by a reasonable amount. But I again, quality is more important and I think the quality has been there and it is good. What was your other question?

Oh, it was just on initial awards in terms of they seemed strong but um declined sequentially in your commentary um so just curious one if this bucket was up on a year-over-year basis and then just any commentary on the magnitude sequentially yeah yeah sorry i don't have any other comments on it really they were uh we had a very strong q1 we had a q2 that they were down they were on the lower side of kind of the but but not you know unusually low.

I don't know what to say about that. These are things that do bounce around. We look at it over a longer period of time because single large programs often drive the actual number there, whether you win or miss that one or two very large programs. So it's not like a metric that can be looked on on an individual quarter. But, you know, overall, you know, the overall new awards were in a good range because the business environment was very strong. And even though maybe there were some very large ones that we lost and made the actual percent fantastic, overall awards were good.

Perfect. Very helpful. Thank you.

Thank you. And our next question comes from David Windley of Jefferies. Your line is open.

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

Well, I think given the environment with the high cancellations that we were in, we did, I think we double looking at programs for decision points and what, you know, and I think they may have not been as, you know, broadly implemented. You know, what, you know, there's a lot of gray area there in terms of what is a decision point, you know, what is, is this look, you know, for power? Is that something that could influence their continuation of the program. There's a lot of different factors that could, and we were in a very high cancellation environment. We didn't want large reductions in backlog hitting us, and so I think that was it. I think that just overall, the awards that were slower, you know, did, you know, cause a change in the average profile for the program. And then metabolic, I'm not denying that it has had some effect. I just don't think it is the, you know, overwhelming driver, you know, that if metabolic becomes less that, because metabolic, you know, conversion isn't naturally a lot faster in our systems. I think that it can be if There's a decision point. That's a very large program. I mean, you know, I'm not saying there couldn't be situations where metabolic might be a driver, but almost any other program also could be. So I just don't think that that is, oh, yeah, metabolic's much faster burning, and therefore that is the driver of our conversion rate. I don't think it has been.

Did the – it sounds like you kind of went through a, you know, logically a backlog recheck as a result of what the environment was signaling to you.

Yeah, and I don't want to say that we removed anything from backlog because we didn't. We didn't, you know, take anything out of backlog. We just started looking at should we put this into backlog when we have this decision point in a year from now that in the past you might have said, Well, that's just an adjustment, and it isn't really an interim look for decision about continuing the trial.

Do you have, on this point, do you have any meaningful amount of revenue where, say, a decision point or some factor would cause value to kind of be added to backlog and go right into revenue in the same quarter? Oh, definitely. You know, like a decision point, you know, happens and that drops into revenue?

Yes. I mean, that is kind of the profile of an interim analysis to decide whether to stop the trial. And if it continues, it might be that next quarter's revenue could be significant, you know, could be influenced. Obviously, any one program is not going to be a big driver of a quarter, but it could be in the next quarter right away.

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

Yeah, I think we're in a good place. That's been substantially helped by the low turnover that we've had, which has continued. through q2 uh you know very low turnover on historical terms and um we do expect uh high single digit um you know growth in employees uh you know this year and uh i suspect we'll you know continue that uh next year um uh so i i think we're in a good space that uh employee growth has been predominantly U.S. and then also Asia-Pac, and a chunk of that in India, which does kind of represent a positioning for cost. But the biggest growth has been U.S. and as I think I'd mentioned previously, a lot of things have kind of moved back towards U.S. in terms of growth. But there has been some repositioning, too.

Okay. Thank you.

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

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

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

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

Yes, and in cancellations. And even Q4 was, you know, I think things have improved quite a bit. It's cancellations that were driving sort of the backlog bookings decrease, and also we're very high in our pre-backlog, reducing our potential for future conversions. But that has – in Q2, it was in a very good place.

Got it. Okay. And then last one for me. You had previously guided to direct service costs at 41%, 42% of revenue, which I think implies a sequential decrease. Just curious if that continues to be the case, if you are expecting some declining direct service costs.

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

Thanks for taking the questions.

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

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

Yeah, I mean, you're really, it's, you know, a lot of the impact that we see from Q1 to Q2 or Q4 to Q1 as related to, you know, the annual merit cycles, you know, depending on what happens with the company's equity programs that can influence it, you know, both of which have already occurred this year. And so you'll kind of start to see more of an influence on headcount increases as we continue in the back half of the year, but at a slower pace than revenue. So you'll see a little bit of what you're saying and that margin expansion in the back half of this year. Great. Thank you.

Thank you. And our next question comes from Eric Coldwell. Baird, your line is open.

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

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

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

Yeah, that's fair, Eric. I did anticipate it coming down a little bit more in the first and second quarter.

As I had mentioned in the second quarter, I thought it would be for the year on the higher end and you push it to 42 percent it might be just north of even that that watermark and then the the current generation of bookings the 800 million here in q2 uh any sense on what the profile of that looks like with pass-through mix um if you just took that bucket individually i'm thinking that perhaps with mix shifting back towards oncology the pass-through mix of that bucket, maybe the newer generation buckets of awards, could be lower. So we would see a reduction in pass-through mix in 27 if that were the case, but maybe that's not the right thought process.

Yeah, I mean, it certainly can be. I mean, I would say that the mix of programs going into backlog, is it significantly different on a percentage basis? Maybe it's a little bit lower, but I think what's more indicative of what happens in 2027 is just the programs that end up burning revenue and where they are in their life cycle. As we've said before, that studies that are later in their life cycle have a tendency to even burn a bit more reimbursable pastures.

And so it's just a combination of all the portfolio and how things are going to progress across that portfolio it's just it's not just what you're putting in the background gotcha and then last one for me I was hoping sorry if I missed this but did you provide a an update on pre backlog you know was it up down flat quarter over quarter you know I think last quarter you said it was around the size of backlog but maybe you could you know provide some more color on where that stands exiting Q2?

Yeah, I don't want to get into, you know, doing that. It is larger than backlog, yes. It is growing. It has grown faster than backlog over the last year. You know, but I don't want to get into, like, you know, percent and, you know, how much larger or what kind of stuff.

Thank you. Thank you. As a reminder, if you have a question, please press star 11. And our next question comes from Justin Bowers of Deutsche Bank. Your line is open.

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

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

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

Yeah, the timing of when biotechs spend their money, look, I'm not the person to talk to about that. I don't know. I don't have a good feeling. A lot of our clients are raising money while they're getting bids from us, you know, so it's an immediate kind of, but I just, you know, I don't know overall. So I don't really have a good insight into that.

Okay. And any change in the trajectory of decision-making timelines or competitive landscape?

Yeah. Sorry. No. I mean, we're seeing more clients that come with recent funding and able to move forward in programs. We have seen better funding for things. So, yeah, the trajectory has been better and the opportunities, you know, moving along nicely. It isn't like a lot of things are hung up now or, you know, things. So I think trajectory has improved with the funding environment.

Okay, thank you. I'll jump back in queue.

Thank you. I'm showing no further questions at this time.

I'd like to turn it back to David Rue for closing remarks. thank you for joining us on today's call and for your interest in medbase we look forward to speaking with you again on our third quarter 2026 earnings call this concludes today's conference call thank you for participating and you may now disconnect