Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the third quarter of 2024 was $533.3 million, representing a year-over-year increase of 8.3%.
- EBITDA for the third quarter increased by 31.7% compared to the same period in 2023, reaching $118.8 million.
- Net income for the third quarter rose by 36.7% year-over-year, driven by interest income and partially offset by a higher effective tax rate.
- Ending backlog as of September 30, 2024, was approximately $2.9 billion, an increase of 8.8% from the prior year.
- The company expects to convert approximately $1.62 billion of backlog into revenue over the next 12 months, indicating strong future revenue potential.
Negative Points
- Backlog cancellations in Q3 were above the usual range, marking three consecutive quarters of elevated cancellations.
- Net new business awards decreased by 12.7% from the prior year, resulting in a net book-to-bill ratio of 1.0 for the quarter.
- The elevated cancellations are expected to depress reported net backlog awards in Q4 and Q1 of 2025.
- RFPs were down modestly on a year-over-year and sequential basis, indicating a potential slowdown in new business opportunities.
- Gross bookings were lower in the quarter due to prior cancellations, impacting the overall business momentum.
Q & A Highlights
Q: Can you provide more details on the elevated cancellations and whether any trends have emerged in terms of therapeutic areas or other factors?
A: August Troendle, CEO: The cancellations are largely random and not tied to specific therapeutic areas. The common factor is that many companies were funded during the COVID high and have since run out of money. The cancellations are not due to dissatisfaction with our services but rather financial difficulties faced by these companies.
Q: How is the competitive environment affecting pricing, and are you seeing any changes in competitor behavior?
A: August Troendle, CEO: The competitive environment is stable, and we haven't seen any significant trends toward aggressive pricing. The business environment is normalized, and we expect robust growth in the future.
Q: Can you clarify the impact of cancellations on your book-to-bill ratio and how it would have looked without elevated cancellations?
A: August Troendle, CEO: Even without elevated cancellations, our bookings would have been below the usual 1.2 range due to cumulative prior cancellations. The cancellations have affected both backlog and pipeline work, impacting future backlog awards.
Q: Are you seeing any changes in your win rate or competitive dynamics that might affect your bookings?
A: August Troendle, CEO: Our win rate has been strong, and recent quarters have been within the normal range. The cancellations are not due to our win rate or competitive dynamics but rather financial issues faced by companies funded during the COVID period.
Q: How do you view the potential for further productivity improvements and margin expansion given current staffing levels?
A: Jesse Geiger, President: We are operating efficiently with low turnover and good utilization of staff. While there is some room for productivity improvements, we are currently in a good spot, and significant further margin expansion is unlikely without increased hiring.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
