Medpace Books a Record Quarter, Then Declines to Book 2027
Record awards and a 24% EBITDA margin meet a familiar cancellation caveat and a deliberate guidance delay.
MEDP · Earnings Call · 2026-10-22
The quarter that should have been a victory lap
Medpace reported a genuinely strong third quarter. Revenue rose 8.5% to $716 million, EBITDA climbed 16% to $172.1 million, and the EBITDA margin expanded to 24% from 22.5%. Net income of $137.5 million was up nearly 24%, and diluted EPS reached $4.84. Net new business awards entering backlog rose 10.6% to $873 million, while trailing-twelve-month awards hit $3.02 billion, up 23.9% and an all-time high. Ending backlog was roughly $3.2 billion, with about $1.99 billion expected to convert over the next twelve months. The stock has already voted: MEDP is up 41.7% over the last 90 trading days and sits near its highs. So why does the call feel like a hedge? Because management gave 2026 guidance but pointedly refused to guide 2027. August Troendle said the business environment was strong and that “Net new business awards reached an all time high in the quarter” — August James Troendle, Chief Executive Officer · 2026-10-22, yet the formal 2027 number will wait until February. The reason is the same word that has haunted this name for two years: cancellations. “Our cancellations, backlog cancellations this quarter were not something to call out, but also not a help. They were toward the higher end, but within the kind of range we would expect.” — August James Troendle, Chief Executive Officer · 2026-10-22 Record awards plus a higher-end cancellation quarter plus no 2027 guide is the tension of this report.What the keywords say: from backlog burn to awards and gating
The company's own keyword trajectory shows a clear narrative pivot. The top MEDP keywords this quarter are business awards, gating factors, direct fee, terms of RFPs, and low turnover. That is the vocabulary of offense: winning work, converting it, protecting margin. Compare that with prior quarters, where the dominant language was defensive — high cancellations, backlog burn, faster burn, conversion rate, and win rate. The old themes are not gone. 'Lot of cancellations' still appears in the current top thirty, just at lower momentum, and 'terms of cancellations' sits at the bottom. That is the correct read: cancellations have moved from the headline to the footnote. But footnotes matter. In April, Troendle was blunt: “There is area for concern... sequential growth is not projected at what we would consider a reasonable rate without improvement in one of those factors.” — August James Troendle, CEO · 2026-04-23 By July, he was saying Q2 cancellations had come down nicely. Now they are back toward the higher end of the expected range. That is a round trip, not a straight line.Margins, direct fee, and the pass-through optical illusion
The margin story is better than the headline revenue growth suggests. Q3 revenue growth of 8.5% looks pedestrian against 16.9% year-to-date growth, but pass-through revenue dipped. CFO Kevin Brady guided the pass-through mix to roughly 40% to 40.5% for Q4, below the prior 41% to 42% expectation. Because reimbursable costs carry little margin, a lower pass-through mix mechanically flatters EBITDA margin and obscures the underlying direct fee performance. Brady was careful: “I expect it to be somewhere around where we finished the third quarter. So kind of 40 to 40.5% based on our.” — Kevin Brady, Chief Financial Officer · 2026-10-22 Underneath, the business is running well. Operating margin was 21.4% in the latest reported quarter, and net margin was 17.2%. Low turnover continues to support productivity; headcount grew high single digits sequentially while revenue grew faster. But low turnover is a tailwind that fades if the labor market tightens. Management flagged no unusual wage pressure today, but the margin benefit is partly a retention story, not a permanent cost structure.The 2027 fog and the Cincinnati bill
The real issue is 2027. Medpace will absorb roughly $20 million of operating costs next year from its Cincinnati expansion, and Brady flagged it explicitly: “we do have a new expansion, significant expansion coming online here in Cincinnati, which will add about $20 million Of operating costs in 2027.” — Kevin Brady, Chief Financial Officer · 2026-10-22 That is a known headwind against a consensus that already expects slower growth. Troendle said consensus looks reasonable relative to current modeling, but he would not put a formal stake in the ground.The cancellation explanation has also shifted. In prior calls, funding was the primary villain. On this call, Troendle argued the mix has changed: “Our cancellations now are primarily those of product failure A little bit more clearly product failure... no real signs funding is now a main driver of many of the cancellations.” — August James Troendle, Chief Executive Officer · 2026-10-22 If true, that is a better quality of cancellation — idiosyncratic product risk rather than a macro funding squeeze. But it is also less forecastable. Troendle admitted everything about cancellations surprises him, which is precisely why he is not guiding 2027 yet.We cannot provide a very firm guide. We feel we can provide a much more firm guide in February than we would be able to now. And we did not see a real need to come out with some commentary on what we expected relative to consensus, it looked somewhat in line.