MEDP Q3 Deep Dive: Broad-Based Growth and Strong Pipeline Fuel Upbeat Outlook

Clinical research company Medpace Holdings (NASDAQ:MEDP) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 23.7% year on year to $659.9 million. The company’s full-year revenue guidance of $2.51 billion at the midpoint came in 1.6% above analysts’ estimates. Its GAAP profit of $3.86 per share was 10% above analysts’ consensus estimates.

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StockStory’s Take

Medpace’s third quarter results were well received by the market, driven by broad-based revenue growth and robust net new business awards. Management credited strong demand across therapeutic areas—particularly metabolic and obesity studies—and a significant increase in net bookings for lifting performance. CEO August Troendle pointed to a 30% year-over-year rise in awarded but not-yet-recognized work, which helped offset concerns about recent cancellations. CFO Kevin Brady added that improved productivity and lower employee-related costs also contributed to margin stability.

Looking forward, Medpace’s updated full-year guidance reflects continued confidence in its backlog and pipeline. Management anticipates low double-digit revenue growth next year, supported by a high level of awarded work still awaiting project kickoff. Troendle emphasized that pass-through costs, especially in metabolic studies, will remain elevated but are expected to stabilize. He noted, “We really are improving our opportunities for backlog conversion in ’26 and revenue generation.” Brady highlighted that productivity gains and low attrition rates should help maintain healthy margins despite ongoing industry pricing pressures.

Key Insights from Management’s Remarks

Management attributed the quarter’s strong results to accelerating demand in metabolic studies, reduced cancellations, and a growing backlog of awarded but unbilled work.

• Metabolic studies drive demand: Revenue growth was fueled by faster-burning clinical trials in metabolic and obesity segments. Troendle clarified that metabolic trials, especially those involving GLP-1 drugs, now account for a higher share of work, which drove increased reimbursable cost activity and pass-throughs.
• Bookings and backlog strength: Net new business awards surged nearly 48% year-over-year, resulting in a 1.20 net book-to-bill ratio. Troendle highlighted a substantial 30% increase in the total value of awarded work not yet recognized in backlog, suggesting a robust pipeline for future conversion.
• Reduced cancellations aid stability: Management noted that cancellations, while still present, were notably lower this quarter compared to earlier in the year. Troendle described the cancellation pattern as “highly unusual” but emphasized that the underlying business environment remained solid.
• Productivity and hiring trends: Brady cited improved employee productivity and lower attrition as key contributors to margin stability. Recent hiring has been concentrated in North America and India, reflecting strong U.S.-focused demand and ongoing offshoring initiatives.
• Competitive landscape unchanged: Troendle addressed analyst questions about increased competition from larger contract research organizations (CROs), stating that while more providers are bidding on projects, Medpace’s win rate remains stable and its competitive position is strong.

Drivers of Future Performance

Medpace expects future growth to be shaped by strong backlog conversion, high pass-through costs, and stable productivity, even as cancellations and industry pricing pressures pose risks.

• Elevated pass-through costs: Management expects pass-through expenses (costs reimbursed by clients, such as site payments) to remain high, especially in metabolic trials, but anticipates these will peak and then moderate in 2026. Troendle explained that the timing of projects and a high share of late-stage trials are contributing factors.
• Backlog and pipeline visibility: A growing bucket of awarded but not-yet-activated work positions Medpace for continued revenue growth. Troendle believes that the 30% growth in this “pre-backlog” will help refill the official backlog and support low double-digit revenue growth next year, barring a material increase in cancellations.
• Margin resilience and hiring: Brady expects margins to remain healthy, driven by continued productivity and low attrition. However, he cautioned that fluctuations in pass-through mix, funding environment, and the need to accelerate hiring in North America and Asia could influence near-term profitability.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of backlog conversion from the substantial pre-backlog pool, (2) whether pass-through costs begin to moderate as management expects, and (3) trends in customer cancellations, given their outsize impact on revenue visibility. We will also track hiring and productivity metrics, particularly as demand in metabolic and obesity studies evolves.

Medpace currently trades at $598.63, up from $547.71 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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