Good day, ladies and gentlemen, and welcome to Medpace Q2 2024 earnings conference call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference call, Lauren Morris, Medpace Director of Investor Relations. You may begin. Good morning, and thank you for joining Medpace's Q2 2024 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. 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 of our website at investor.medpace.com. With that, I would now like to turn the call over to August Troendle. Good day, everyone. Net new business awards entering backlog were down in Q2 compared to the same quarter of 2023. This was primarily the result of significantly elevated project cancellations, including backlog cancellations that were more than 2x the quarterly average of the calendar year 2023. Gross bookings were strong, and had the cancellation rate been equal to the average quarterly rate in 2023, our net book-to-bill would have been 1.24. Cancellations were disproportionately high in the month of June, with April and May cancellations in line with our expectations for a strong quarter. Reasons for cancellations included reprioritization, impaired sponsor liquidity, and acquisition of one sponsor by a large pharma with subsequent decision to move the work to an existing preferred provider. As several of the cancellations involved awarded work not yet recognized in backlog, we also anticipate a depressed book-to-bill ratio in Q3. The business environment remains robust, and we continue to be optimistic about our future growth, but it may take a few quarters to replenish the flow of opportunities converting into backlog at a more normalized rate. I should stress that despite the challenged backlog growth, we continue to anticipate industry-leading organic revenue growth and profitability. In fact, we are raising our 2024 EPS guidance, as will be discussed by Kevin. With that, I will turn the call over to Jesse. Thank you, August. Good morning, everyone. Revenue for the Q2 of 2024 was $528.1 million, which represents a year-over-year increase of 14.6%. Net new business awards entering backlog in the Q2, which were influenced by higher cancellations, decreased 4.1% from the prior year to $551 million. This resulted in a 1.04 net book-to-bill. Ending backlog as of June 30, 2024, was approximately $2.9 billion, an increase of 13.7% from the prior year. We projected approximately $1.585 billion of backlog will convert to revenue in the next 12 months, and backlog conversion in the Q2 was 18.2% of beginning backlog. Now, with that, I will turn the call over to Kevin to review our financial performance in more detail, as well as our guidance expectations for the balance of 2024. Kevin. Thank you, Jesse, and good morning to everyone listening in. As Jesse mentioned, revenue was $528.1 million in the Q2 of 2024. This represented a year-over-year increase of 14.6%. Revenue for the six-month ended June 30, 2024, was $1.04 billion, an increased 16.1%. EBITDA of $112.3 million increased 34.2% compared to $83.6 million in the Q2 of 2023. Year-to-date EBITDA was $227.9 million and increased 29.1% from the comparable prior year period. EBITDA margin for the Q2 was 21.3% compared to 18.1% in the prior year period. Year-to-date EBITDA margin was 21.9% compared to 19.7% in the prior year. EBITDA margin benefited from direct service activities, continued productivity, and foreign exchange. In the Q2 of 2024, net income of $88.4 million increased 44.7% compared to net income of $61.1 million in the prior year period. Net income growth ahead of EBITDA growth was primarily driven by higher EBITDA and interest income, partially offset by a higher effective tax rate in the quarter. Net income per diluted share for the quarter was $2.75 compared to $1.93 in the prior year period. Regarding customer concentration, our top five and top ten customers represent roughly 22% and 29%, respectively, of our year-to-date revenue. In the Q2, we generated $116.4 million in cash flow from operating activities, and our net days sales outstanding was negative 58.1 days. We did not repurchase any shares during the Q2. As of June 30, 2024, we had $510.9 million in cash and $308.8 million remaining under our share repurchase authorization program. Moving now to our updated guidance for 2024. Full year 2024 total revenue is now expected in the range of $2.125-$2.175 billion, representing growth of 12.7%-15.3% over 2023 total revenue of $1.89 billion. Our 2024 EBITDA is now expected in the range of $430-$460 million, representing growth of 18.6%-26.9% compared to EBITDA of $362.5 million in 2023. We forecast 2024 net income in the range of $361-$383 million. This guidance assumes a full year 2024 effective tax rate of 15%-16%, interest income of $24 million, and 32.1 million diluted weighted average shares outstanding. There are no additional share repurchases in our guidance. Earnings per diluted share is now expected to be in the range of $11.24-$11.93. Guidance is based on foreign exchange rates as of June 30, 2024. With that, I will turn the call back over to the operator so we can take your questions. Thank you. Ladies and gentlemen, to ask a question, please press star 11 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Coldwell with Baird. Your line is open. Thank you. Good morning. I wanted to obviously dive into the cancellations. I was hopeful you could provide maybe some more details around perhaps the number of cancels or maybe relative sizing. Were there any that were particularly large here? And I'm curious if there's any way you could help us frame your expectations for the 3Q cancellations experience or what you're expecting at this juncture for a reasonable net book-to-bill range, given that some of these cancels are for awards that had not previously been placed into backlog. Thank you. Yeah, sure, Eric. This is August. Surprisingly, usually you have a big cancellation quarter. It's a couple of drivers, and I don't think this was far off. It was several that were large, but it wasn't just one or two very large cancellations. So it was pretty distributed in that way, although some of the bigger ones do drive a lot of it. And again, they were kind of across the board in terms of what the rationale for the cancellation was, and primarily that's kind of a reprioritization, compounds not meeting expectations, don't want to focus on other projects. And yeah, the cancellations were kind of on programs, and there were cancellations that involved just sort of things that were awarded but hadn't gotten to backlog. We were getting very close and things that were in backlog, but we didn't have all of the backlog recognized yet under our policy. So it does cause kind of a gap there that will impact our Q3 bookings, but it depends upon the continuation of cancellations. They were kind of focused in Q2. I don't see a reason why they should continue elevated, but I also don't have a good rationale for why we have cancellations that are twice kind of a run rate in the Q2. So I think cancellations are always kind of that unknown and can happen at any point. We have reasonable visibility on awards coming along, and awards looked good and that we're getting to the point of backlog recognition. It was the cancellations that caught us by surprise, and they always can in another quarter. But yes, we already see a challenge to Q3 based on the cancellations that we had in Q2 that will impair your recognition of backlog from projects that were canceled now. I realize it's very difficult to forecast the remaining cancellation experience this quarter as well as your gross bookings experience this quarter, but just to help level set, are you at least at this point initially thinking a book-to-bill that is similar to Q2's experience, something maybe a little better, but not quite in that typical 1.2-plus zip code, or are we talking a book-to-bill that could, at this juncture, could reasonably look like something lower than Q2's experience? Well, look, in early June, I thought we were going to have a book-to-bill of at least 1.2. So it's late in the quarter that you're really trying to round things out and know where they are. So that's really difficult to say. I would hope it's above the current quarter. I think a 1.2 is probably not in the cards, but so I think you're kind of setting in that kind of range is where I would expect somewhere like we booked this current quarter of 1.04 to hopefully getting closer to the 1.2. Okay. Thank you very much. I'll let others jump in. Thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Max Smock with William Blair. Your line is open. Hi, good morning. Thanks for taking our questions. Maybe one here for me on win rate, right? You mentioned you had some cancellations that were associated with an acquisition where a sponsor ended up moving some, I think you said, work to a larger player. And you mentioned gross bookings seemed solid in the quarter, but any sort of update you can give us around how much of the booking shortfall, if any, was tied to maybe a step down in win rate? And did you see any sort of improvement in win rate after the bit of a step back that you took in the Q1 here? No. The win rate was good, not outstanding, but it came back, snapped back from it was down a bit in Q1. The business environment, again, looks very good. I really think we're in a position to rebuild kind of that pipeline nicely. We kind of have a little bit of gap here, but I don't see a long-term issue, and we are win rate is good. Our opportunities are good. I think it's hard. Look, CEOs are always optimistic. I really am. I'm not the kind of guy who tends to put a lot of fluff into it, but things really do look a lot stronger than this unfortunate bookings reflect. That's helpful. Maybe just putting some more power on that to kind of frame out what you're seeing on the business environment side. Can you give us an update on how RFP flows and initial awards and book-to-bill trended and then any sort of initial look, I guess, at how these metrics are trending so far here in the Q3? Yeah. RFPs were strong. I think they were up about 16% both sequentially and year-over-year. So it was really strong. And again, RFP numbers, I don't like discussing numerically because numerically isn't a good way to discuss RFPs because you can have lousy RFPs and a lot of rehashed RFPs and a lot of searching for funding RFPs to support them trying to line up things when it looks unlikely that the project is going to go forward. But we have a very good pipeline of RFPs. So I think if you look at kind of if you qualified them or graded them, I think it's not only a numeric increase in RFPs, but the quality of RFPs. Again, our initial awards were strong in the quarter, and everything else, all the other metrics look good except cancellations. I mean, that's basically it. I mean, this is difficult, always difficult. Cancellations are always there as a possible downside, but everything else looks good, and I think that things will normalize and we will get back on to backlog growth rate soon. And look, we're going to put up great growth numbers on GAAP basis in the meantime. Yeah, absolutely. Maybe just sneaking one final one here for me. You talked about Q3 bookings obviously going to be depressed, maybe a step up off that 1.04, but is there any other detail you can give us on the timeline for book-to-bill to move back above 1.2 and what that means for 2025? I'm assuming the step up in revenue you called for is obviously off the table next year, but can you frame out the range of outcomes for how we should be thinking about revenue next year given your commentary about it taking some time to rebuild backlog? I think it's too early to talk about next year, and I think we will have kind of a view on that next quarter. Of course, we get to look at where things shake out and what it looks like. Like I said, we see the next quarter, you kind of see what is lined up for possible getting across the line. Cancellations are always a wild card, but you can kind of line up what is likely to get across the line. I think we'll have good, at least reasonable insight as things normalizing in Q4. We still haven't a problem in Q4. I hope to be able to tell you that at the end of Q3, but I think it's a little bit too early to talk about the impact on 2025, except to say that I anticipate, I continue to anticipate better than industry growth, and we're going to continue to perform well. I do not think this is a prolonged pullback in anything. I mean, if it was awards and opportunities were drying up, that's a much more concerning situation. We've got a group of projects that were moved, but I don't think that is predictive of the long term. I mean, cancellations are random things, and we got an upswing. I just don't think that's a pattern that's going to continue. Got it. Thanks again for taking our questions. Thank you. Please stand by for our next question. Our next question comes from the line of Tucker Remmers with Jefferies. Your line is open. Is that me? It might be David Windley with Jefferies. If you can hear me, can you hear me? We can hear you, Dave. We can hear you. Okay. Great. Thanks. So wrong code number. Sorry. A few questions. Thanks for taking my questions this morning. So the impact to bookings and backlog, you've guided revenue. I guess I'm wondering how we should think about revenue conversion in light of the fact that it sounds like some of these cancellations were either revenue-generating or about to be revenue-generating. How does that impact your near-term revenue? Kevin, you want to take it? Yeah. Dave, this is Kevin. Just in terms of 2024, we do feel pretty good about it. Certainly, there's a little bit of headwinds associated with some of those cancels. We'll see how those programs kind of tail off and finish up, but we still feel good about revenue. Now, we did take the midpoint of the guidance and the guidance range down a little bit. That was more indicative of the past direct service activity and the decline that we saw in the Q1. It did bounce back a bit in the Q2, but at the same time, it wasn't something that we could overcome the decline that we saw in the Q1. But no, we feel good about revenue, kind of the balance of the year, in particular on the direct service side. Again, there was a bit of headwind associated with these cancels, but still feel good about where we are. Okay. On the pipeline, I guess a couple of things that we've heard a little bit and not been sure exactly how much credit to put on them are that oncology as a therapeutic area is perhaps among the most volatile right now, perhaps more jockeying around of programs and intentions in that space that has been highly invested and kind of crowded. And then we also hear that there's quite a bit of price competitiveness, and I think we talked about some one-off kind of deep discount deals by some of the bigger CROs that you had seen in the Q1. I'm wondering if you're seeing more of that. Sounds like win rate bounced back up, and so that's encouraging relative to that. But on those two fronts, is there any theme in oncology specifically, and is there a theme of large players being more price competitive? In terms of our cancellations, they were not overly concentrated in oncology relative to our overall oncology. I mean, I don't think. I don't have the exact numbers whether percentage-wise, but oncology is obviously a big part of our work, and it was a big part of the cancellations, but I'm not really sure if that's a factor. Pricing overall, look, it's a competitive market. We have seen some cases of very aggressive looking for things given the environment we're coming out of. I actually think things are a lot better now, but a few quarters back, things were a lot tighter, I think, for a lot of groups, and there was some maybe aggressive pricing, but it's really not, I think, a driver of things now. Okay. Last question for me. Your headcount growth in the Q1 was, I think, lower than expected in this quarter. It's basically flat. I mean, you've talked about some productivity initiatives, but I'm guessing that those don't preclude any hiring at all or net hiring at all. So how should we think about kind of the margin increase that you're showing in the guidance today? I'm sure positively influenced by the lack of hiring and the sustainability of that when this growth resumes and you have to resume the hiring front. Help us with your hiring thoughts. Yeah. Dave, it's Jesse. Yeah. I mean, we're still expecting hiring. The retention has continued to be good. Productivity has been good, good efficiency, but we do anticipate some kind of mid, perhaps mid to low, mid single-digit net headcount growth for the year. So still hiring despite the cancellations and despite continued productivity and efficiency. Okay. And so that hiring you anticipate for the balance of the year, and that's baked into the so your margin can absorb that and still go up as you're guiding. It is baked into the guidance. Okay. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Dan Leonard with UBS. Your line is open. Thank you. I have a follow-up to that last question. Is the muted hiring in the quarter, was that reflective of any countermeasures you took in response to the weaker bookings, or was that consistent with your plan? Again, primarily consistent with plan. The cancellations came very late in the quarter, very late in the quarter and at the elevated level, and we were continuing to hire kind of according to plan through the quarter. And then separately, that acquisition of a customer by large pharma, was that a trial that was already in flight? Because I know that moving that type of work would be unusual. Could you clarify that and also clarify whether that was the biggest factor in the elevated cancellations or just one of many? That was just one of many. The project was very early, but near running, near significant revenue. It was late in the pipeline, should have been in backlog, so it was already running in the field. So had patients being recruited, but it wasn't fully. It wasn't very broadly operationalized yet. And then, final question. I'd love to be able to better quantify the impact of the double of cancellation rate compared to typical. Can you remind me what is the normal cancellation rate so I could do my own math on doubling that? Yeah. Well, we've talked about that our cancellation rates normally run below 4.5%. Thank you very much. Thanks, Dan. Please stand by for our next question. Our next question comes from the line of Ann Hynes with Mizuho Securities. Your line is open. Hi. Good morning. I know you made a comment that cancellations got worse in June. I'm keying up some update on what's happening in July since it's later in the month. And my second question is just around the RFP activity. I believe you said RFP activity is up 16% year-over-year. Is that just actual RFPs, or does that represent in a revenue term? So if it doesn't, can you tell us from a revenue perspective that the total RFP activity up year-over-year, that'd be great. Thanks. So yeah, I don't have numbers on the actual dollar value of the RFP, but that's what we're talking about in percentage terms. It's percent of dollars. So 16% up means dollar value of the RFPs corresponded to in the quarter were up 16%. We're not disclosing the actual dollar value, but those are dollar value. We don't talk about numbers unless I specifically call that out. We don't really think that's relevant. And then you asked about cancellations. In July? In July. To date? Yeah. Nothing unusual, not like in June. So no, no unusual activity in July. Then maybe we can just talk about EBITDA. Obviously, your EBITDA guide, despite the book-to-bill, was very strong. Can you just talk about the drivers of that? That'd be great as well. Thanks. Yeah. I mean, it's continued good progression in our direct service activity. As we've kind of mentioned previously, just continued improved productivity that we're seeing on existing staff and somewhat slower hiring in the Q2. Again, as Jesse had mentioned, we do think that we'll end the year kind of mid-single digits, mid to low single digits for the year. And so that might pick up in the balance of the year. And we had a little bit of FX benefit in the quarter as well from the strengthening of the US dollar. Thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Charles Rhyee with TD Cowen. Your line is open. Yeah. Thanks for taking the questions. I wanted to ask, in terms of maybe the guidance, right, with the cancellations and sort of the step down the backlog, maybe first, how much of the backlog reduction is a function of pass-through revenue versus maybe direct service revenue? Yeah. The cancellation. We don't break out. Yeah. I guess for both. Percentage of direct versus indirect cancellation, we don't. I can tell you the percentage of the quarter cancellations that were passed through was around 50%-55%. Okay. And is that kind of, are we kind of back into then for backlog as well in terms of reduction there? Is that a good proxy? In terms of the what, Charles? When we look at the backlog reduction? Because I guess the question I'm trying to ask is, if we think about the burn rate and reaching the revenue guide for this year, obviously, because it seems like if it's more pass-through, is that a function of why the EBITDA guide actually has gone up? And instead, when we think about getting to the $2 billion+ in the revenue guide, should we expect a material uptick then in the burn rate because we're really just taking out on service revenue, which would have been more stable anyways? Yeah. No, I think what you will see is probably somewhat of an increase in the burn rate, the balance of the year in light of the cancellations. And as I had mentioned earlier in the call, the reduction in the revenue guidance is primarily related to pass-throughs, both in terms of the reduced pass-throughs that we saw in the Q1, but then also the cancellations, to which Jesse pointed out, a little bit heavier on the pass-through on those cancellations than direct. Okay. And I guess just overall, obviously, we had a very strong funding quarter in the Q1 for biotech. Still an overall decent Q2. And when you look at the first half, very strong relative to the prior year. Is that funding yet to translate through? You kind of mentioned that without the cancellations, you're looking at a book-to-bill of 1.24. Would you say that from a gross bookings perspective, we are seeing this funding flow through, or is that still, do you think, yet to come in terms of activity? I think the business environment is strong and is going to remain strong. I don't know about what's flowing through where, but the business environment is strong. I think we will replenish our pipeline of projects that are converting into backlog. And of course, anything that gets to backlog tends to burn direct faster than indirect. And so cancellations tend to have a higher percentage of indirect to direct when they cancel. But I think the environment's going to keep up and we'll replenish our pipeline. But I don't know about what funding is tied to what opportunities, etc. Okay. Great. If I could just sneak one more. Just in the cancellation, you mentioned one was due to an acquisition, client getting acquired by a large pharma client that moved that business. Can you kind of help size relative to overall cancellations, how much of the cancellation was related to that? No, but it wasn't most of the cancellation or anything like that. It was a sizable cancellation, but not one of the larger ones, but not overwhelmingly driving it. Okay. That's great. Thanks a lot. Thank you. Thanks, Charles. Please stand by for our next question. Our next question comes from the line of Jack Wallace with Guggenheim Securities. Your line is open. Hey. Thanks for taking my questions. Wanted to just ask kind of a broader question about the cancellation related to the M&A event. Just looking back in your company's history as the biotech industry has gone through cycles of higher M&A, have you typically lost most of those clients when they've been acquired by a larger pharma? Have you been able to maintain a decent amount of the business post-acquisition? Thank you. Yeah. Losing a project that is in backlog and running in the field is highly unusual. So that was the reason I mentioned it. It's like it almost never happens. But losing the future work from that client is very frequent. So if they get acquired by a large pharma, usually they bring it into their systems and we're cut out for future work, but it's very rare that they pull a study that is actually started and decide to move it. So that was very unusual. Got it. Yeah. Thank you. That's helpful. And then just thinking about the competitive environment, have you seen any just change in posture and activity from some of your larger CROs coming down market a bit? And just kind of another kind of question there around pricing. Which types of competitive actors have been most aggressive on price or have been most formative in terms of how they're attacking the new business? Thank you. Yeah. No, that would be largely kind of anecdotal. I think the competitive environment remains much the same. I don't see a big change there. Certainly, as most of our competition is larger players and by and large. So I don't really see a change in that overall dynamic. I think there was a time a few quarters back when things I think were much worse in terms of a funding environment, and there was maybe a little bit more talk about competitive pricing and some of our larger competitors making some very aggressive moves possibly. But I think the environment is relatively normalized in a competitive environment. Got it. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Justin Bowers with Deutsche Bank. Your line is open. Hi. Good morning, everyone. Can you remind us of your backlog policy? The gist of the question is trying to understand your visibility on the 3Q bookings as you enter into 2Q. In your prepared remarks, you made some comments based on what's coming in out of backlog and how that would impact 3Q. Yeah. Justin, this is Kevin. Go ahead. Go ahead, Kevin. Sorry. Just in terms of our backlog policy, there's a couple of criteria that have to be in place or gating items that have to be in place before it's put in the backlog. There can't be any regulatory hurdles that are still pending. The program has got to be ready to get started in actively recruiting patients. There can't be any funding issues. So there's got to be clear line of sight to funding and where that funding is going to come from before we'll put that into backlog. And so the programs that we do put in the backlog, they are starting to actively generate revenue relatively shortly after we put those programs in the backlog. And so a cancellation out of backlog does have a nearer-term impact on revenue depending on how those programs wind down and finish out. As August mentioned as well, there were some cancellations that happened for programs that were awarded that were not yet in backlog. How those funneled opportunities eventually convert into backlog and new awards remains to be seen. We do have to continue to fill up that pipeline and fill that gap. As August had mentioned, Q3 is potentially going to be a little bit light if we kind of fill up that pipeline. Okay. So you were on top of that. The other criterion for backlog recognition is we only put the first three years of a project into backlog, and then the balance beyond three years kind of bleeds in over time as quarters progress. And so some of those active backlog cancellations also had a portion that was straddling backlog and also some pre-backlog that would then impact future quarters like Q3 and beyond. Okay. So cancellations is kind of like. Sometimes. To give you a little bit more, also to address your question directly, kind of our visibility on it. Sometimes things are awarded and don't get to backlog for quite a long time. It may be because they're out looking for funding and it looks like they're lining things up and they're going to start things. Or it could be we're doing some early startup kind of but on hold for the rest of the project because they don't have funding. So you're kind of ready to run forward as soon as they close on funding. It might be it looks like it's coming in the next quarter. It looks like they've raised the money. They're going to go give us the green light. We're going to move forward. So you do have quite a bit of stuff that's in that hold pattern that could be pulled or could go forward into the quarter. Okay. That's helpful. Understood. So of the cancellations, there were some that were in backlog and some that were not in backlog in the current period, but you were anticipating. Some were both. Going into backlog into 3Q. Okay. All right. And then just. That's right. Okay. And then in terms of hiring, you've had some productivity measures, right? It sounds like this year. What's the new? Is there sort of a rule of thumb or back-of-the-envelope way for us to think about hiring on the go-forward based on some level of revenue growth now that you've instituted some of these productivity programs? And just for example, for every 10% of revenue growth, there's going to be a 4% growth in FTEs. That's sort of the gist of the question. Yeah. Justin, it can be volatile. I mean, it can depend from time to time where we are with people versus near-term revenue. We're looking at the funnel. We're looking at the pipeline. We're estimating staffing needs on an ongoing basis, trying to determine, excuse me, how much of a buffer do we have? Are we sitting on some excess capacity, or have we gotten to too high of a utilization level where we need to aggressively hire and catch up from time to time? And so over time, it really depends on kind of how those two sit, how revenue projection sits versus staffing needs. We have been fortunate, as we've mentioned lately, in terms of good retention and low turnover, which has been kind of reducing the needs for more gross hiring. But kind of how that progresses, how the rate of hiring progresses versus the revenue rate as we move through into 2025 will largely be dictated by how the pipeline shapes up and how the award and then revenue growth looks as we move into the year. Okay. Appreciate it. I'll take the rest offline. Thank you. As a reminder, ladies and gentlemen, that's Star 11 to ask the question. Please stand by for our next question. We have a follow-up question from the line of Eric Coldwell with Baird. Your line is open. Thanks very much. Last quarter, you did mention still a 1.2 book-to-bill, but you did mention higher cancels in Q1. And obviously, some of these cancels did impact 2Q to a limited amount. I'm curious if you could tell us the impact of year-to-date heightened cancellations, if that makes sense, on 2Q's revenue. I don't care. Eric sorted that out. Right. And while they were somewhat elevated in Q1, Eric, it wasn't significant enough that it had a major impact on Q2. And as August mentioned, Q2 cancellations were primarily in June. The elevation that we saw was in June. Probably not more than, say, $1 million, $2 million at the most, correct? Is that a fair? I don't know, Eric. I mean, like August said, we didn't quantify it, but not a significant amount. Yeah. What I'm trying to get to here is let's call this in the zip code of $100 million-$110 million of incremental abnormal cancels in 2Q. You would have had 655 of net awards at a 1.24 book-to-bill. You did 551. So zip code of 105. You said the pass-through or indirect cancels were somewhat disproportionate, 50%-55% of the total. So I'm thinking $50 million, give or take $50 million of direct fee cancellations that were deemed as abnormal this quarter. Your backlog is three years. That's 12 quarters. I take $50 million. I divide it by 12. I'm coming up with something like $4 million, a little over $4 million a quarter of revenue impact on the direct fee side and maybe closer to $5 million on the indirect fee side if the duration of all of these cancels were equally split across the next three years, which obviously is not going to be the case, and you would have a tail beyond the three years you put in backlog . But directionally speaking, if I do that, I'm coming up with about $9 million a quarter of revenue headwind. You get to something like $17 million-$18 million for the year. You cut guidance by $25 million. I'm just trying to understand if that's directionally the theme on why you're cutting revenue by a little over 1%. Is the thought process behind that the correct thought process, or do these cancellations truly skew more to the next 12 months, or are they, in fact, more balanced? I'm just trying to get a dynamic on how we start. You're not going to guide 25, but we need to start thinking about it. So trying to get a sense on where we go with our models here. Thank you, Eric. There's a lot of moving pieces, August. Yeah. Sorry. Go ahead, August. Yeah. I was just going to say, with your math, sounds fine. I don't really think that's how we're doing our projections is based on, "Well, it looks like we lost this out of it, and therefore it's going to come down by this amount." I mean, it's kind of a buildup of everything going forward again. And so we just don't quantify the amount that was lost, but your calculations are probably true. There would have been an upside. I mean, I think the bigger thing we've seen is the drop-off in some of the pass-through expenses that have maybe had a bigger impact on revenue. Now, we would have had an upside. We probably would have beat revenue if we hadn't had cancellations. And cancellations, sometimes, remember, aren't always immediate revenue ceases at that moment. It just means they cease over the next quarter, possibly, or whatever. So it may not even impact the current quarter, and it may be farther out. Sometimes it's 2 quarters out that the drop-off in all of the revenue from that project is for a backlog cancellation. I asked something that isn't in backlog yet that can affect, but generally, the next quarter or the next few several quarters, whatever, going forward. But yeah, I mean, you're right. It's a big headwind to revenue overall. Yeah. And thank you for all of that. And I think ultimately what I was trying to get to is if there hasn't been much impact to date, and I was actually my follow-up question was, how do the cancels impact the next couple of this quarter or the next quarter or two from transitory events as you wind those down? Do you get wind-down payments, etc.? I was just trying to get a sense of if there was anything more built into the $25 million revenue reduction because, again, very simple and arguably very incorrect math would get us to something like $17-$18 million impact for this year. And that would be before including potential wind-down payments or some of these cancels that may have a few months left in their life in 3Q. So I'm just trying to get a sense on, quite frankly, if you built in some extra cushion with the $25 million or if I'm just thinking about it wrong. No, Eric. I mean, as August mentioned, I think you're thinking about it right logically that there is some headwind there now. In terms of quantifying it, that's a bit of a challenge. But as I had mentioned, the lowering of the revenue range is really twofold. Number one, it's the lower faster activities that we saw in the first half of the year, in particular the Q1. As I had mentioned on the Q1 call, with those reimbursables coming in lower, I expected it to potentially be on the lower side of the range and just kind of with the rebounding in the Q2, but maybe not as much as I had anticipated. That's part of it. And then the other piece of it's going to be the headwinds on these cancellations. It's going to be a combination of the two if that's helpful. Okay. Yep. It is. Thank you. Okay. Thank you. Please stand by for our next question. We have a follow-up question from the line of Dave Wendley with Jefferies. Your line is open. Thanks. Following up on Eric's line of questioning on the pass-throughs. So Kevin, the last part of your answer that you just gave, my recollection is that, as you described, Q1 was low on pass-throughs, but your expectation was that it would still jump back up and run at about a 38%, similar to last year, 38% of total revenue level. I could be wrong in not remembering something about the lower end, but I remember 38% of total revenue similar to last year. It sounds like what you're saying today is that is trending lower than that. And so some of this is a reset of expectations around pass-throughs. So I guess confirm that, put magnitude on it if you could. 38 drops to what? And then where's the point of stabilization? Several years ago, it was 33, 34. It got up to 38 and change last year. Where's that going? Yeah. I mean, Dave, nothing's changed in terms of our ability to predict where it's going to go. Certainly, as I mentioned in the Q1, I do expect it to increase, and it did in the Q2. I think we finished at like 38.4% of revenue in the Q2. And so it did rebound from the Q1. And modeling would suggest that it's going to be at or slightly above these levels for the balance of the year. We'll have to see how it finishes out, but that's kind of what the modeling would suggest at this point in time. And we'll try to provide more color in the Q3 call on 2025 here. Just as a general statement, you don't have a view as to whether it feels like there's a little post-COVID inflation rate at the sites and things like that, and is that normalizing? And maybe we're headed back over the long term to something like 34 instead of 38? In the long term, Dave, I don't know. I mean, I don't know that it's going to go back to those historical levels. It probably will trend back to those levels. But again, I'll provide more color on 2025 and the Q3. Okay. Last question for me. Balance sheet's now at $500 million. Can you talk to us about your intent for use of the balance sheet, please? Thanks. Yeah. I mean, Dave, more kind of the same. We'll continue to invest in the organic growth of the business. That's going to be our first priority. We do have some elevated capital expenditures that will happen here as we expand the campus, as I had mentioned previously. But beyond that, really, it's just continue to look for opportunistic share purchases. And to the extent that we're able to trigger at levels that we see value, we'll go ahead and get those executed. And if not, we're okay building some levels of cash. Great. Thanks for taking my extra questions. Thanks, Dave. Thank you. Ladies and gentlemen, I'm sure no further questions in the queue. I would now like to turn the call back to Lauren for closing remarks. 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 Q3 2024 earnings call. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.