Medpace Holdings Inc

NASDAQ:MEDP

Q2-2025 Earnings Call

[Operator]

Good day, ladies and gentlemen, and welcome to the Medpace Second 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, Lauren Morris, Medpace's Director of Investor Relations. You may begin.

[Lauren Morris, executive]

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 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, executive]

Good day. RFP flow in Q2 continued to be strong, and we saw an increase in rate of decisions. Total pending RFP dollars were down in 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 1.03 in the second quarter of 2025. We continue to see a strong potential for book-to-bill returning to above 1.15 in Q3. Although funding challenges remain acute for many of our clients, the large 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 start-up shifting mix away from oncology and towards 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.

[Jesse Geiger, executive]

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 1.03 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. Kevin?

[Kevin Brady, executive]

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 to 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 and 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 or $518.5 million. Year-to-date, we repurchased 2.9 million shares or $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 towards faster burning therapeutic areas with a higher concentration of reimbursable costs.

We now expect reimbursable costs 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 [indiscernible] 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.

[Operator]

[Operator Instructions]

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

[Ann Hynes, analyst]

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 some price step up in 3Q and 4Q. And I'm just trying to figure out what that means for 2026 revenue growth. I know you want to -- probably want to give guidance for 2 but do you expect an acceleration in bookings for the second half to support growth in 2026?

[August Troendle, executive]

Yes. As I said in my prepared comments, we do believe that there's a reasonable chance of getting book-to-bills back over 1.15, 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.

[Ann Hynes, analyst]

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?

[August Troendle, executive]

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 consider normal. They're actually toward the lower end 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 felt we were going to do in terms of both bookings and overall performance in terms of the revenue.

[Operator]

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

[David Windley, analyst]

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 passed through versus direct revenue?

[Kevin Brady, executive]

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 that 200 to 300 basis point increase in expectations on the pass-throughs.

[David Windley, analyst]

Okay. So last night, we -- on this topic, we looked it kind of a pattern in 2023, where you also had an increase in revenue and a good chunk of that coming from pass-through. It sounds like maybe not quite that extreme but similar. And to get the EBITDA increase that you just mentioned on effectively the direct revenue portion, which sounds like the minority, you're having to get pretty high incremental margin as you just alluded management has been talking for the last, I don't know, a year at least, that staff productivity has been increasing that you were at levels that were above historical records and probably not much upside room there.

So I'd ask you to elaborate a little bit on how you're able to squeeze additional productivity out. And then to support the revenue growth and your bookings expectations, I would guess that you're expecting to kind of take the shackles off hiring a little bit and accelerate the hiring? And how should we expect that to impact margin over the next couple of quarters?

[Kevin Brady, executive]

Yes, Dave, you're right. I mean I didn't expect per productivity to continue from what we saw in 2024. Certainly, we've reduced our hiring expectations a little bit coming into the year, but we're also seeing improved attrition rates, again, furthering in the past couple of quarters. And so all of that is contributing to -- I still expect some headwinds on a net basis. In 2025 relative to where we are in 2024. But you're right, certainly improved versus where we were coming into the year.

[David Windley, analyst]

And then last question for me quickly is the August, your comments around funding are interesting to me. Certainly, our tracker is not the gas pool certainly, but we have seen some predictiveness out of it and funding year-to-date is pretty bad, really. June was much better, but were down over 40% year-to-date. So how do you get comfortable -- I mean I know you have a lot of visibility into the awards that you have in hand that aren't even in backlog yet. But how do you get comfort that the weak funding through the first 6 months of this year is not essentially foreshadowing another downturn in demand activity for you as it did in '23 ahead of '24?

[August Troendle, executive]

Well, I guess I don't get myself comfortable with that. I mean I thought we probably hit a bottom in Q4, but then cancellation Look, a big part of all of our difficulty in the last year has been cancellations, not new projects and baseline level of business. But certainly, the last 9 months, it's -- so it's really been just really heavy cancellations. And if they get adequate funding. I don't know what subset that is of the total pool of funding you're talking about, but we get comfortable with that and we can make our numbers.

But could things pull back again and really impact 2026. Sure. That's quite possible. I have no idea. I do know that we have good pipeline of things awarded but not yet reaching backlog that should support good bookings through the remainder of this year, again, as long as cancellations don't rear their head excessively. And that should at least get us started into 2026, but is it possible there's a pullback in the future? And we run into another very weak booking quarters, I don't know.

[Operator]

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

[Jailendra Singh, analyst]

Congrats onto strong quarter. Actually, I 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 pressure. Keeping that in mind, can you provide some color around how intra-quarter trends were in 2Q, the majority of trends suddenly accelerate towards the end of Q2, so essentially like latter part of June and those trends have continued. Just give us some flavor how demand environment evolved in Q2 in particular?

[August Troendle, executive]

I mean Q2 was -- again, it was really a continuation of Q1 in terms of business environment was -- continued to be pretty strong in terms of RFPs. As I said in Q1, they were strong. It was really cancellations that backed off quite a bit. And that was sort of throughout the quarter. As you said, cancellations were actually low on the low side this quarter as opposed to being very high in the past, and certainly in the prior quarter. So it was across the quarter. I mean I didn't see any real trends of acceleration or deceleration in the quarter?

[Jailendra Singh, analyst]

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 lower scope or reduce scope than previously planned?

[August Troendle, executive]

Yes, sure. A number of projects were down scope. And we see that -- you see that in any environment. I don't know if that was particularly prevalent, but you do see some down scoping and largely delays. I mean slower start-up, hold off on certain regions, kind of keep the study running, but don't execute as fast as you could otherwise. So those are the kind of the things that clients do to try to keep things alive while they don't have adequate funding. Obviously, the your -- your profit is going to be impacted by that, yes. I mean the most profitable project for us is a project that runs the fastest. And if it's delayed, if it's down scope, if it's -- has some gating, et cetera, that impairs our ability to execute and to make a profit on it.

[Operator]

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

[Max Smock, analyst]

Just wanted to follow up on some of the questions that have already been asked around book-to-bill in the back half of the year. And in particular, your commentary about getting back to $1.15 billion if you do that in the back half of the year, I think that implies bookings are up more than 40% year-over-year. So just trying to get a sense for when you're talking about getting back to 1.15, do you need to see further improvement in funding or the demand environment to get there? And if you don't think about -- or if you think about there not being an improvement from today, what do bookings look like if the environment essentially remains unchanged from 2Q? Should we expect some more net awards in the back half of the year roughly in line with the $620 million that you posted in the second quarter?

[August Troendle, executive]

Yes. I'll answer that. Bookings in the could give me maybe the first part of that question again with the bookings?

[Max Smock, analyst]

Yes. Okay. So if I'm just thinking about your guide and your commentary about $1.15 million book-to-bill in the back half of the year. I mean, that implies net is 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 1.15, do you need to see further macro improvement? And if you don't, what this book-to-bill look like in the back half of the year?

[August Troendle, executive]

Sure. I think that it's macro improvement. It depends whether you -- whether all of our cancellations have been related to funding. And I think they're a good part of them were yes. So we do have to see cancellations remain lower. I don't need to see new -- strong business environment with new opportunities. But we need to see things progress along and not be held up by funding or other factors. So -- but the current quarter -- Q2 was relatively low on cancellations. If that continues, I think we're going to be there. If it's in the mid upper range of cancellations, we're getting right on the edge. I mean I think prior to last quarter, prior quarter, Q1, in which we had a lot of cancellations, particularly in the pre-backlog bucket, things that we expected to be converting in this next quarter, in the next couple of quarters.

A lot of things dropped out and made it a lot closer on being able to get back to that 1.15. But I think it's still not anywhere near a slam dunk, but I think that if things continue the way they have in this past quarter, I think we'll be there. And how much more weakness and increased cancellations can occur. I don't know but that answers your question.

[Max Smock, analyst]

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 and maybe how much of your results are more a reflection of you are taking share more so than a broader rebound in demand environment from small biotech?

[August Troendle, executive]

Yes. No, I was hoping not to have to talk about the 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, 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 RF dollars increased quite a bit. That came down in this past quarter because there was 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. I think 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. Prior quarter, it was fine. So we'll see.

[Operator]

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

[Michael Cherny, analyst]

So maybe if I could just dive a little bit more on the trajectory in back half in particular, on the step-up in pass-through business, I think, Kevin, please correct me if I'm off here, but you said 23 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?

[Kevin Brady, executive]

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? I'm 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.

[Michael Cherny, analyst]

Understood. I won't poke further at the implied 26 numbers at this point in time. But maybe just a follow-up, August to your last comment regarding the win rate, the win rate dynamics. I certainly understand how it can bounce around on a quarter-by-quarter basis. With the win rate, was there anything from a disease state perspective from a or any of the pieces perspective that characterized why you think the win rate shook out where it did? Or was this also just a random dispersion across your book?

[August Troendle, executive]

Yes. It wasn't -- I mean, look, it is always concentrated because it -- I mean, the factor is very large programs. we're less likely to win, okay? So I mean we're talking about -- and there were some very large programs in that. And so size of project and our experience in this area and our experience with the client, obviously, if it's a new client, and it's very large, and they've got existing providers.

Our win rate is going to be lower. And it's -- that's what bounces around quarter-to-quarter. We won the projects we expected to win. And unfortunately, in that quarter, in this past quarter, there were some very large -- and we're talking about dollars. I talk about win rate, it's dollar-based. And so a very large program is a good part. I mean, it actually is a single program can be a substantial part of the total wins or losses in the quarter. So it just happened to bounce down in this past quarter. We did lose there was 2 very large projects in that.

But no, I can't -- it was not like we're weak in a particular therapeutic area or some trend or a subset is just happens to be what projects were close to and which one is very large.

[Michael Cherny, analyst]

And one last real quick one, if I may, as the market's 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?

[Kevin Brady, executive]

No, it's more of the same, Michael. We'll continue to be opportunistic in buying at levels that we seem to be very accretive. And 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.

[Operator]

Our next question is going to come from the line of Eric Coldwell with Baird.

[Eric Coldwell, analyst]

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?

[August Troendle, executive]

Sure. Yes. And Eric, I think your question kind of I don't know, in my head confuses some of the moving parts here. So we're talking about competitive wins and we're talking about wins, et cetera, those are awards notifications. And they're not in backlog yet. We're not making any revenue often, and it's often multiple quarters before they come in.

So a new award this quarter is not going to influence our revenue or anything like that. Booking would probably because that's when we're starting to get revenue but it could be late in the quarter and might not be much of a factor. It's mostly in future quarters, that's going to impact. So if I look at just sort of new notifications this quarter, no, nothing particularly stands out. There's nothing particularly large. It was a pretty usual quarter. In fact, the really large stuff we lost. And so our competitive win rate was actually on the lower side, but completely understandable. If you took out a couple of -- those 2 outliers, our win rate was great. I mean it was fine. So that's not an issue and what went into bookings this quarter. Nothing particularly unusual or notable the big -- and there was nothing sort of a rescue or something really short-term project that we won during the quarter, something that added to it. It was just kind of usual stuff that progressed that a lot of it we did not anticipate it might progress, so sort of good upside news on things progressing. And we thought might not.

Things went faster than expected. And we maybe didn't do as great a job at projecting what some of the pass-through how quickly things were going to move forward on some of the investigator fees, et cetera. So that part of it, I think on a direct fee basis, we were probably pretty good at projecting it, but there are still projects that went forward that more than we expected and faster than we expected. So there was some upside. But there was nothing kind of unusual in terms of short-term quick interim or rescue work or anything like that.

[Eric Coldwell, analyst]

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 2 plus 200 to 300 basis points specifically is in reference to or what the absolute percentage you're targeting is?

[Kevin Brady, executive]

Yes, Eric. Yes, 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% in the back half of this year.

[Eric Coldwell, analyst]

Okay. And then last one for me for now. So you have obviously -- it's kind of shocked the street with this update. You have enormous backlog conversion already. Now it's going up to 41.5%, 42.5% in the second half. Your backlog is down 2% year-over-year, but you're seeing revenue growth as much as 27% in the back half at the high end of the range. I mean there's just a lot of questions about sustainability. And I know it's so hard to project with the mix shift in reimbursables, which are seemingly clearly driving the majority of the revenue increase and those may or may not continue next year.

But what can you give us today that can help us understand the jumping off point from these conversion rates and these growth rates as we look at 2026. I mean everybody -- I know you're not guiding now, but we all have to build models and do assessments for next year. And you've caught us so off guard, I think I'll admit, at least I'm scrambling to understand what kind of a growth rate we might be looking at in the next year. It doesn't feel sustainable to be honest, but then again, I didn't see this quarter coming.

[August Troendle, executive]

Eric, you broke up a little bit in the middle of that. So -- but I think I heard enough of it to -- so if I don't cover it and jump back I think that -- yes, we have had a significant shift towards faster burning stuff. And a part of it, our conversion rate is high overall because they're lower denominator. And of course, does that mean that we're going to burn off our backlog, and then we're going to have a real gap I don't think that's necessarily true. I think that we do have an adequate business environment to replenish things.

I do think that our indirects are ramping because of a shift towards metabolic work. I don't know how long that's going to last. So if it continues and okay, I think our growth rate next year is probably fine. If that pulls back and I think that it can challenge growth rate, but that's because of a drop in reimbursables. And I think on a direct fee basis, we're going to do fine.

So I think our profitability is going to there's no reason to see it dropping off. And I think that we could have growth rates similar to this year, ex the pass-through stuff. -- right? But I don't know. We don't have the model next year. It's really dependent upon stuff that's coming in now and over the next couple of quarters. So 26% is not really addressable, but I -- we don't have a reason to believe that we're going to have a challenge next year and have our growth go to 0 or something unless pass-throughs dropped drastically and all of our growth is directly, but I don't really see that as a -- on a 605 basis, we'd be fine.

[Eric Coldwell, analyst]

Completely understood. I appreciate the commentary.

[Operator]

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

[Luke Sergott, analyst]

I just kind of want to figure out -- we've talked a lot about the moving parts, everybody's focused on the burn rates, et cetera. But you have this elevated burn rates, everything stepped up materially. You had a big step up in bookings. You didn't need to hire additional SG&A for the type of revenue growth that we would typically think you had step up materially also in the quarter. So -- and it doesn't sound like you picked up some ongoing work from someone else or share gains. So I'm just trying to figure out like what's going -- like what actually drove this -- the step-up in everything and trying to foot all these different metrics?

[August Troendle, executive]

I think it could drop in cancellations. I mean, look, we've been running -- we've been running at growth rates of 20% plus for a long time. Things dropped back, we did have a weakening environment, but still our fundamental growth rate, I think, is pretty good a lot of unusual cancellations. Now a lot of that, that's part of the same package. I mean the same environment that causes the cancellations reduced opportunities to some extent.

But I don't know how you close the loop on those things. I think the environment is reasonable if cancellations are reasonably behaved. Our conversion rate is up because we have dropped both -- two major factors. The denominator has not grown as expected. And we have a shift towards faster burning stuff I mean it's -- we're in an era of a lot of metabolic type of programs or particularly in the obesity space, important part of the market. So that's -- made things have a faster burn turnaround.

But otherwise, I think the big step up from our expectation was less cancellations than we anticipated.

[Luke Sergott, analyst]

Okay. And then I guess just to follow on that. Your backlog that you guys report are 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 every you're saying like faster burn rates and some more near-term stuff. So as you think about, as this starts to roll off, like what's the average time line 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 seeing for 26 and the range just gets pretty really wide.

[August Troendle, executive]

Yes. I mean I can't give you an average for overall categories or something like that. But look, long studies are can be 6 to 10 years in duration. And oncology studies are classically kind of that they run a very long time, and it's a slow burn. Metabolic studies, some of these can run in 2, 3 years and have a larger proportion of indirects as a part of it. And indirect usually, the model is the direct fees burn a lot faster upfront toward the beginning. That's when a lot of work is being done in organizing and setting up and getting the trial ongoing and recruited. But a lot of the investigator fees are later on when patients are enrolled and having lots of visits.

So there's usually acceleration. The direct fees or the first half of the study heavy and the second half, it's investigator costs. In metabolic study, like I said, it can be very fast, and it all happens at once.

[Luke Sergott, analyst]

Okay. And then just real quick from the last one. As I think about like from the margin and the hiring needs, to meet these trials? Like we talked about the efficiency on your existing base, and you guys don't do FSP. So and you have a really strong culture where the attrition rates are really low. So how should we think about your hiring needs in the back half if you're going to be able to sustain the type of burn rates and elevated growth?

[Unknown Executive]

Yes. Back half of the year, we do expect to accelerate hiring. We expect to hire more in the second half, so we're higher than 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 for this dynamic, and we as we do.

[Operator]

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

[Charles Rhyee, analyst]

I just wanted to follow up on some of the questions from earlier. It sounds like what you're saying is that what we've really been seeing over the last year or so plus with the weak funding environment, that's really tied really that's where cancellations will come in, people that can't get funded, projects cancel but that projects themselves new RP that flow has never changed. Has that always been constant over the last couple of years?

[August Troendle, executive]

I wouldn't say that's not changed. I'm saying that the I think the big outlier, the biggest component of us for us has been very elevated cancellations. They've held things back quite a bit. I'm not saying that overall environment certainly over the last few years, it hasn't weakened from kind of the COVID and it came back, and it's been weaker. There's weaker funding overall. So you have less attractive opportunities. RFPs don't necessarily reflect what's going on.

And so last year, there was certainly weak overall opportunities. And sometimes people looking for a price that they could get it done at, et cetera, and less opportunity. But the biggest thing of late has been cancellations that just -- like I said, I thought we were past it all in Q4, and I thought this was the bottom and things are improving. And the biggest gap hasn't been the improved fundamental opportunities that we started seeing in Q4, okay?

So the business environment started -- before that, yes, we had real weakness in everything. But the business environment seem to be okay on new opportunities the last several quarters, but cancellations. We're just -- last quarter, we're horrendous. And that's what has been probably the biggest uncertainty in our modeling is cancellations rather than new opportunities and new awards. They're both components of it, but it's really been the cancellations that have thrown us off.

And this past quarter, showed a great improvement in that. But we saw a great improvement in Q4. I don't know. We'll see. Q1 was -- had spiked again.

[Charles Rhyee, analyst]

And then in terms of the this quarter cancellations were obviously much lower relative to Q1. Anything that when you look at reasons for cancellation the cancellations are those all tied to funding? Or is that -- how much of that maybe is changing priorities from sponsors?

[August Troendle, executive]

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 King solutions.

[Charles Rhyee, analyst]

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 do you have into that?

[August Troendle, executive]

Yes. No, I mean it's -- and it's a bunch of different things. And I don't -- there's nothing that sort of is the vast majority of it or something. But look, the big trend has been metabolic over the last year. If you look at our metabolic revenue and awards, and they've been a higher percent of the overall, and they will continue because of the awards, they're going to continue for the next couple of quarters anyway and to be a growing part of our overall revenue base. And they tend to be -- overall, some of them are long term, but overall tend to be faster burning and higher indirect fees.

[Charles Rhyee, analyst]

That's great. And maybe last one for me. You talked about faster decision-making. Anything that you can elaborate on what that might be? Is that just maybe with drug pricing kind of being kicked out with MSN maybe towards the end of the year? And just people deciding, hey, you know what, we can't wait forever. And so we just got to make decisions now or anything that could maybe point to why this decision making maybe has picked up again?

[August Troendle, executive]

No, I think that's funding again. I mean I think we saw things somewhat seizing up our pending dollars, that is RFPs we've received. We made a bid on and are just sitting there waiting for a response and no decision and no go forward on things even that we have been awarded and they say they're yes, we're going to use us, they agree to the , but then they want to hold off on things until I think largely that sometimes there's other reasons. There's drug supply. There's other waiting on some other information on the drug, et cetera, another study may be completing whatever.

There's lots of reasons. But funding is a big part of it. And we've -- I think we've seen a more rapid execution on sponsor side to move forward and give us authorization and get a stuff that we need to move forward has been funding related.

[Operator]

[Operator Instructions]

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

[Justin Bowers, analyst]

So Jesse, just a quick cleanup question. On the employee growth, it's you were breaking up a little bit, but it sounded like accelerated hiring in the second half in mid- to upper single digits. Is that for the second half? Or is that for the full year?

[Jesse Geiger, executive]

Accelerated higher in the second half. So highly more second half than the past the high single digits for the full year,

[Justin Bowers, analyst]

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

[Jesse Geiger, executive]

Correct.

[August Troendle, executive]

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

[Justin Bowers, analyst]

Okay. So then you're looking at a.

[Unknown Executive]

[indiscernible] has increased around double-digit cutting.

[Jesse Geiger, executive]

Yes. For the 6 months year-to-date, we grew we grew revenue 1.5% or so. We expect that to accelerate. We hired I'm sorry, 2.5% for the first half. The headcount growth is up 2.5% for the 6 months. We expect the growth rate in the second half at or slightly above that for the second half.

So you're expecting a 5% to 6% for the full year.

[Justin Bowers, analyst]

Okay. All right. And then in terms of what's the growth this year, the top line that -- what is the guidance assumed for growth on a 605 basis for the top line.

[Kevin Brady, executive]

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 a 200 to 300 basis point increase in reimbursable costs over the balance of the year and kind of back into what that could be.

[Justin Bowers, analyst]

Okay. And then in terms of -- it sounds like the burn rate is fairly sustainable, likely to increase in the back half of the year. What does the pre the pre-backlog or your current authorizations, but not yet in backlog, the mix look like. Is that similar to what the revenue composition has been like this year? Or are there any notable differences to call out in terms of therapeutic mix?

[Unknown Executive]

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

[Justin Bowers, analyst]

Okay. And then -- and then on the cancellations, there's really 2 things that jump out. One was just the improved execution. -- and the changes there during the quarter. And then clearly, like the cancellations have cited as well. When did you -- like when did that start to really inflect or turn -- was that something that was that sort of May where things really started to change? Or did that -- was that exiting March or?

[August Troendle, executive]

Yes. I don't have the monthly breakout. And we kind of reconcile these things quarterly. So there isn't like I mean we obviously do know the date of notification of something, et cetera. But I just not tried to sort out when exactly cancels. And if they were low in March before this quarter began or didn't start until May after the quarter was well into it or what, but pretty much across the quarter. We had lower cancellations. But I can't -- I just don't have good data just when -- you call it again. There's -- and what do you mean by when it's kind of -- they give us a notification, but we don't really know what's happening and then they finally reconcile what exactly we're going to do to close this thing down these are kind of things that have a period to them.

But look, I think Q2 was much lower than Q1.

[Justin Bowers, analyst]

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.

[Unknown Executive]

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

[Kevin Brady, executive]

Yes, Justin, I wouldn't say there's anything unusual in change or they happen all the time. But nothing that would stick out.

[Justin Bowers, analyst]

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

[Unknown Executive]

Again, change or sometimes they award something -- it's going to be a global study of this, but they want to award it first as just the first region or something. And then we're going to -- planning in 6 months and you don't have the budget for it until then. And so it's -- what's even a change order. It's difficult. It's when we get authorization and then when it meets our criteria are going into backlog.

[Justin Bowers, analyst]

Okay. I'll jump -- we'll catch up after the call.

[Operator]

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

[Unknown Analyst]

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 going to hold and kind of the pausing of the platform technology designation there and the impact to your company. Can you maybe speak more broadly to the Celgene therapy market and what you've seen there and if you're still that exposed to it?

[August Troendle, executive]

Look, we don't have a great deal of exposure to the overall area, but we certainly do have exposure, but I don't think there's -- not to correct the not -- it's not I don't think it's going to have an impact on our programs.

[Operator]

And I'm showing no further questions at this time. And I would like to hand the conference back over to Loren Morris for any closing remarks.

[Lauren Morris, executive]

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.

[Operator]

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