Medpace’s Q4 Cancellations Spike, Dragging on Bookings and EBITDA

Date of Call: Feb 10, 2026

Financials Results

• Revenue: $708.5M in Q4, up 32% YOY; $2.53B for full year 2025, up 20% YOY
• EPS: $4.67 per diluted share in Q4, up 27.2% YOY; $15.28 for full year 2025, up 19.7% YOY
• Operating Margin: EBITDA margin 22.6% in Q4, down from 24.9% prior year; full year EBITDA margin 22%, down from 22.8% prior year

Guidance:

• Full year 2026 total revenue expected in range of $2.755B to $2.855B, representing growth of 8.9% to 12.8% over 2025.
• 2026 EBITDA expected in range of $605M to $635M, representing growth of 8.5% to 13.9% compared to 2025.
• Net income forecast in range of $487M to $511M.
• EPS expected in range of $16.68 to $17.50.
• Assumes effective tax rate of 18.5% to 19.5% and no additional share repurchases.

Business Commentary:

Elevated Cancellations and Impact on Bookings:

• Medpace experienced elevated backlog cancellations in Q4, marking the highest level in over a year, leading to a lower-than-anticipated net book-to-bill ratio of 1.04.
• The cancellations were primarily concentrated in the metabolic area, affecting overall bookings.
• The cancellations were widespread and not linked to a specific client or project, impacting the company's financial outlook.

Revenue and EBITDA Growth:

• Medpace reported Q4 2025 revenue of $708.5 million, representing a year-over-year increase of 32%. Full-year 2025 revenue was $2.53 billion, up 20% from 2024.
• The company's EBITDA for Q4 2025 was $160.2 million, a 20% increase compared to the previous year, and full-year EBITDA was $557.7 million, up 16.1%.
• Growth was driven by strong performance in oncology and metabolic areas, despite the impact of cancellations.

Guidance for 2026:

• Medpace projected total 2026 revenue to be in the range of $2.755 billion to $2.855 billion, representing growth of 8.9% to 12.8% over 2025.
• The company forecast 2026 EBITDA to be between $605 million and $635 million, indicating a growth of 8.5% to 13.9%.
• The guidance reflects expectations of continued strong demand in oncology and metabolic areas, with some normalization in pass-through costs.

Therapeutic Area Concentration and Risk:

• Oncology and metabolic areas were highlighted as strong performers, but there was a noted concentration risk in metabolic, particularly in diabetes and obesity.
• The company expects metabolic's contribution to revenue to decrease slightly, leading to a more balanced therapeutic mix.
• This shift is anticipated to help normalize pass-through costs, which have been high due to the metabolic programs.

Headcount and Hiring Expectations:

• Medpace anticipates hiring in 2026 to be in the mid- to high single-digit growth area, above 2025 levels.
• The increased hiring is linked to the company's growth strategy and is supported by improved employee retention.
• This hiring strategy is expected to enhance productivity and support revenue growth in 2026.

Sentiment Analysis:

Overall Tone: Neutral

• Management expressed some caution due to elevated cancellations in Q4, stating 'I see no reason to expect the higher level of cancellations to continue, but did not anticipate the spike in Q4.' However, they noted 'good opportunities continue to present themselves, and I rate the overall business environment is adequate and headed in the right direction.' Guidance for 2026 shows growth but with moderate margin expansion.

Q&A:

• Question from Christine Rains (William Blair): What is embedded in your guidance for revenue growth, excluding pass-throughs? Last quarter you alluded to high single-digit to low double-digit direct fee revenue growth in 2026. Are expectations now higher given the strong EBITDA guide? What is the expected cadence?
  Response: Reimbursable costs expected to be 41-42% of revenue in 2026, slightly higher than 2025. Quarterly revenue growth may be flatter than past years, with reimbursables starting higher as a percentage and ending lower.

• Question from Christine Rains (William Blair): Noticing acceleration in headcount growth in the quarter. What do you expect headcount growth to be in 2026? Should we expect mid-single-digit cadence to continue or an acceleration in hiring?
  Response: Expect accelerated growth; hiring in 2026 anticipated to be above 2025 levels, in the mid- to high single-digit growth area.

• Question from Justin Bowers (Deutsche Bank): Can you unpack the business environment and commentary on RFP activity and win rates? Also, characterize the funding environment in the quarter.
  Response: Business environment was reasonably good. RFPs were a bit higher quarter-over-quarter and year-over-year but nothing significant. Elevated cancellations, particularly in metabolic area, impacted net bookings.

• Question from Justin Bowers (Deutsche Bank): Could you characterize the cancellations? Were they normal? Any therapeutic or customer concentration?
  Response: Cancellations were widespread, not concentrated in one area or client. Skewed towards metabolic, but overall bookings remain strong, especially in oncology.

• Question from Ann Hynes (Mizuho Securities): Can you remind us of the historical cancellation range and what drove the elevated cancellations this quarter? Also, what are you assuming for cancellation trends in the rest of the year?
  Response: Cancellations were the highest in over a year, widespread, not due to a single client or area. No guidance provided on cancellation trends for the remainder of the year.

• Question from Ann Hynes (Mizuho Securities): What drove the strong burn rate? What are you assuming in guidance for the rest of the year for burn rate?
  Response: Management does not guide to burn rate.

• Question from David Windley (Jefferies): How do you think about therapeutic area concentration risk, given metabolic's rapid growth and potential for cancellations due to crowding?
  Response: Metabolic is heavily concentrated in obesity and diabetes. While it will decrease as a percentage of revenue in 2026, it is not seen as a major over-concentration risk at this time.

• Question from David Windley (Jefferies): To what extent are pass-throughs outstripping expectations due to site-level inflation, leading to higher burn rate?
  Response: Almost none. Pass-throughs are driven by the design of metabolic projects with high investigator fees, not by site-level inflation or rebudgeting.

• Question from Charles Rhyee (TD Cowen): Does expecting pass-throughs to be higher at the start of the year than end suggest lower metabolic mix exiting 2026? Also, were cancellations more from trial failures or funding issues?
  Response: Yes, metabolic mix is expected to slow down slightly. Cancellations were more from sponsor decisions to end studies early due to compound performance, not primarily funding issues.

• Question from Sean Dodge (BMO Capital Markets): On guidance, what are the margin puts and takes? At the midpoint, about 10 bps expansion despite higher pass-throughs and hiring. What offsets?
  Response: Margin improvement driven by continued good retention enabling higher productivity and slower hiring than revenue growth, not by major cost savings initiatives or restructuring.

• Question from Sean Dodge (BMO Capital Markets): How big of a technological step change is AI for the space, and how are you positioned?
  Response: Too early to know full impact; no net productivity advantage expected in 2026 as investments will equal benefits. Long-term, AI may benefit clients and could reduce net revenue, but Medpace is investing and using AI applications.

• Question from Jailendra Singh (Truist Securities): Outside of cancellation spike, did you see any slowdown in decision-making or projects moving from pre-backlog to backlog?
  Response: No significant slowdown; business progression is relatively normal. Some delays due to drug availability or trial design changes, but not a trend.

• Question from Jailendra Singh (Truist Securities): How is the competitive landscape with top CROs getting more aggressive? Impact on win rate?
  Response: No perceived change. Competitors are involved in the space as before; dynamics seem similar to five years ago.

• Question from Daniel Leonard (UBS): Was there anything unusual in large pharma revenue growth? Sustainable?
  Response: Nothing unusual to call out; large pharma is not a focus and growth is not a key driver.

• Question from Daniel Leonard (UBS): Can you elaborate on AI rollouts this year? What are you trying to accomplish?
  Response: AI initiatives focus on improving efficiency and data analytics for feasibility/site selection. Specific details not disclosed.

• Question from Luke Sergott (Barclays): What flexibility do you have to ramp resources as projects start to burn? How does mix affect capacity needs?
  Response: Hiring ahead continues but at lower levels due to improved retention, leading to higher productivity and less training time. Business model allows flexibility but with less onboarding.

• Question from Luke Sergott (Barclays): Why are performance obligations over 3 years trending down? Due to faster burning business or changes in trial duration?
  Response: Change in mix of trials, particularly more shorter-duration metabolic trials, not a long-term trend in trial duration for given indications.

• Question from Daniel Christopher Clark (Leerink Partners): How did pricing look in new awards in Q4? Outlook for 2026?
  Response: Pricing has not changed materially and is not expected to impact margin.

• Question from Daniel Christopher Clark (Leerink Partners): When talking to customers/RFPs, what are they focused on from an AI angle?
  Response: Conversations balance benefits of AI with risk management and data stewardship to ensure quality and confidentiality.

• Question from Jay Lewis (Baird): Can you give any color on new signings in pre-backlog? Quantify pre-backlog and its growth?
  Response: No details provided; Q4 was light on pre-backlog signings.

• Question from Jay Lewis (Baird): Impact of accelerating M&A environment with large pharma buying clients on revenue or future projections?
  Response: Broad client base reduces risk; work generally not lost in the short term, but clients may be incorporated into large pharma over time.

Contradiction Point 1

2026 Pass-Through Cost Trend

Guidance on the trajectory of pass-through costs for 2026 conflicts.

How have pass-throughs exceeded 2025 expectations, and is this due to site-level inflation driving rebudgeting that impacts backlog and revenue? - David Windley (Jefferies)

2025Q4: Pass-through growth has been driven by metabolic programs, not by site-level inflation or rebudgeting. The high pass-through projects were designed that way from the start. - August Troendle(CEO)

How should pass-through costs in 2026 be viewed in relation to the growth in metabolic work, and are metabolic trials declining compared to the current rate or expected to stabilize? - Charles Rhyee (TD Cowen)

2025Q3: Pass-through costs are expected to peak in Q4 2025 and then come down over 2026, partly due to the metabolic mix but also influenced by the timing of projects. - August Troendle(CEO)

Contradiction Point 2

Underlying Business Environment and Funding Confidence

Descriptions of the business environment and client funding challenges appear inconsistent.

Could you quantify RFP activity and win rates from the prepared remarks and clarify the factors behind the strong funding quarter? - Justin Bowers (Deutsche Bank)

2025Q4: The business environment was reasonably good... Elevated cancellations were the primary factor impacting net bookings. - August Troendle(CEO)

Why is the funding environment impact different this time? How will the business evolve in terms of backlog growth, burn rate, and hiring? - David Windley (Jefferies LLC)

2025Q3: The current situation is driven by cancellations, not a weak funding environment. Underlying business environment remains okay. - August Troendle(CEO)

Contradiction Point 3

Cancellation Trends and Business Environment

Contradiction on cancellation frequency and business stability.

How can we determine if cancellations were normal and what the net bookings would be? Could you characterize the cancellations by therapeutic area, customer, and vintage? - Justin Bowers (Deutsche Bank)

2025Q4: Cancellations were elevated and widespread, not tied to a single large project... Without these elevated cancellations, net bookings would have been substantially higher. - August Troendle(CEO)

What aspects of AI are clients prioritizing in interactions or RFPs? - Daniel Christopher Clark (Leerink Partners)

2025Q2: The business environment was reasonably good... We have not seen an increase in cancellations or any significant trends. - August Troendle(CEO)

Contradiction Point 4

AI Impact and Investment

Contradiction on AI's immediate benefits versus long-term potential.

How will AI impact Medpace over the next few years? Is it a net positive or negative? How is the company positioned and investing? - Sean Dodge (BMO Capital Markets)

2025Q4: It is too early to know the full impact. In 2026, AI benefits will likely be offset by investment costs, resulting in no net productivity advantage. - August Troendle(CEO)

What is Blackwell's ramp trajectory this year and its impact on gross margins? - Timothy Arcuri (UBS)

2025Q2: We are beginning to see significant benefits from AI... Cost savings are materializing and contributing to improved margins. - Kevin Brady(CFO)

Contradiction Point 5

Headcount Growth Outlook and Cadence

Contradiction on the expected pace of headcount growth for 2026, shifting from "mid-single-digit" to "mid- to high single-digit."

What is your outlook for headcount growth in 2026, and will the mid-single-digit growth cadence continue or require acceleration? - Christine Rains (William Blair)

2025Q4: Headcount growth is expected to accelerate in 2026, with hiring anticipated to be in the mid- to high single-digit percentage range, above 2025 levels. - Jesse Geiger(President)

What is your outlook on turnover and this year's hiring timeline? - Eric Coldwell (Baird)

2025Q1: The company is on track for mid-single-digit headcount growth this year, but hiring plans depend on how the business environment unfolds. - Jesse Geiger(President)