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Good day, ladies and gentlemen, and welcome to the Medpace Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct question-and-answer session, and instruction will follow at that time. [Operator Instructions] As a reminder, this call may be recorded.
I would now like to introduce your host for today's conference call, Lauren Morris, Medpace Associate Director of Investors Relations. Lauren, you may begin.
Good morning and thank you for joining Medpace's second quarter 2021 earnings conference call. Also on the call today is our President and CEO, August Troendle; our CFO and COO of Laboratory Operations, Jesse Geiger; and our Executive Director of Finance, 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 including the ongoing impact of COVID-19 on our business 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 a 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 our earnings press release and earnings call presentation slides provided in connection with today's call. The slides are available in the Investor Relations section of our website at investor.medpace.com.
With that, I would now like to turn the call over to August Troendle.
Thank you, Lauren. Good morning, everyone.
In the press release issued yesterday, we announced several changes to our senior management team. Effective August 1st, Jesse Geiger will be elevated to the position of President, and Kevin Brady will succeed Jesse as Chief Financial Officer. I will continue to serve as Chairman of the Board and Chief Executive Officer.
Jesse has served as our Chief Financial Officer since 2011 and expanded that role in 2014 to include the title of Chief Operating Officer, Laboratory Operations. Jesse has played key roles during our rapid growth in the past decade and we are fortunate to have his leadership to drive our growth going forward.
Oversight of the operating activities of the company will increasingly be a shared responsibility of Jesse and myself. Kevin, who served as our Executive Director Finance and Treasurer since joining Medpace in 2018 with oversight of the company's finance function. We are confident that Kevin's current and previous experience in public company finance will serve Medpace well in his new role.
And now, I'd like to turn the call over to Jesse.
Thank you, August, and good morning everyone.
In the second quarter, the business and funding environment remained strong. We continue to see robust RFP flow and our competitive win rate also remained strong. We did see some improvement in site activity in the quarter despite COVID-19 challenges.
Our revenue for the second quarter of 2021 was $278.3 million, which represents a year-over-year increase of 35.8%. Net new business awards entering backlog in the second quarter increased 52.5% from the prior year to $387.6 million. This resulted in a 1.39 net book-to-bill.
Ending backlog as of June 30 was $1.7 billion, an increase of 29.8% from the prior year. And overall our COVID-19 related work represented only 2% of both revenue and net new business awards in the second quarter.
We project that approximately $925 million of backlog will convert to revenue in the next 12 months and backlog conversion in the second quarter was 17.1% of beginning backlog.
And with that, I will turn the call over to Kevin to review our financial performance in more detail.
Thank you Jesse and good morning to everyone listening in.
As Jesse mentioned, revenue was $278.3 million in the second quarter of 2021, which represented year-over-year growth of 35.8% on a reported basis, and 34.4% on a constant currency organic basis.
EBITDA of $47.9 million increased 36.9% compared to $35 million in the second quarter of 2020. On a constant currency basis, second quarter EBITDA increased 41.5% compared to the prior year.
EBITDA margin for the second quarter was 17.2% compared to 17.1% in the prior-year period. As expected, EBITDA margin declined sequentially reflecting increased cost related to the robust hiring.
In the second quarter of 2021, net income was $39.9 million compared to net income of $24.1 million in the prior-year period. Net income growth was primarily driven by higher EBITDA as well as a lower effective tax rate. Net income per diluted share for the quarter was $1.06 compared to $0.64 in the prior-year period.
Regarding customer concentration, our top five and top 10 customers represent roughly 17% and 24% respectively of our first half of 2021 revenue. In the second quarter, we generated $62.8 million in cash flow from operating activities and our net days sales outstanding was negative 39.5 days.
During the quarter, we repurchased approximately 343,000 shares at an average price of $163.61 for a total of $56.1 million. We have $196.4 million remaining under our current share repurchase authorization. We ended the second quarter with $339 million of cash, no outstanding debt and $50 million of undrawn capacity on our revolving line of credit.
Moving now to our updated guidance for 2021. We are now forecasting total revenue in the range of $1.11 billion to $1.15 billion for the full-year 2021 representing growth of 19.9% to 24.2% over 2020 total revenue of $925.9 million. Our 2021 EBITDA guidance is unchanged in the range of $205 million to $215 million representing growth of 9.2% to 14.5% compared to EBITDA of $187.8 million in 2020.
We anticipate our 2021 effective tax rate to be in the range of 11% to 12%. We have assumed 37.7 million fully diluted shares for 2021 and there are no additional share repurchases In our guidance. We forecast 2021 net income in the range of $162.5 million to $169.5 million and earnings per diluted share in the range of $4.31 to $4.50 with the increased expectation for net income and earnings per diluted share driven by the anticipated lower tax rate.
With that, I will turn the call back over to the operator, so we can take your questions.
[Operator Instructions] Our first question comes from the line of John Kreger from William Blair. Your line is open.
This is Justin Lin speaking on behalf of John Kreger. So just I guess a quick question on margins. So we see the margins were softer in Q2 than we expected, I guess hard day trending versus internal expectations and what exactly is causing the pressure in addition to the increased hiring pressure? Thank you.
Yes. Justin, this is Kevin. I would say that, overall it is in line with what we were expecting, as we had stated in the first quarter, we were anticipating some robust hiring carryover from the first quarter and further into the second quarter.
Got it. Thank you. And I have a second one if I can see that. So just a question on your DCT capabilities. Currently, I guess, what percentage of your clients are asking for this and how do you feel about your current capabilities to enroll, interact with and monitor patients remotely?
Yes, Justin, this decentralized trial today is really a function of our component of a lot of different trials. I don't have an exact percentage, but we're operating well in a hybrid environment with our activities being somewhat in person visiting sites and somewhat remote-based monitoring, as well as utilizing technologies wherever we can to connect directly with patients.
Next question comes from the line of Dave Windley from Jefferies. Your line is open.
I wanted to ask In broad terms if there are factors that are limiting your ability to execute work and the spirit I'm trying to get at based on the demand, based on the backlog that you have, could you be growing even faster, it was obviously very fast growth, if sites were fully opened or if you were able to hire faster, are those rate limiting steps or are you basically keeping up?
Yes, Dave, maybe I'll take that question. Yes, look, I think we're keeping up well. But we - it is a robust environment and opportunities are plentiful and so we have been a fair amount more restrictive for selectives in our choice of programs to go after.
So yes, I think there are opportunities to grow faster if we were to approach other companies but we'd have to scale more rapidly and of course we want to scale in a controlled way and so I think the environment is in that way kind of overheated but we will - I found that we can grow at this rate, roughly 20-plus percent and I think that's sustainable for - while this environment lasts.
That's very helpful August. Thank you. In your restriction, are you - maybe it's all the above, but are you limiting on more attractive margin or less likely to cancel or what are the factors that are influencing what you take and what you pass on?
Yes, I mean it's - there are a number of factors, but critical is the likelihood we feel - likelihood of the program progressing. So yes lack of cancellation risk, good solid science looks like there's further program hedge. So we may bid on a study that's a Phase 2 but we think there is a Phase 3 program opportunity ahead, but it's relationship with the client is also critical, so prior relationship obviously takes a higher priority than one that we don't have a relationship with. So, it's multiple factors but generally what the future potential is for that client.
Very good. Thank you. And on the labor side, you had signaled that you would be hiring fairly aggressively, it sounds like that did happen. Is that a pace that you expect to either continue at or accelerate from for the rest of the year? And then, would you describe the cost pressure in the quarter from that labor? Is it simply volume of hires or are you also seeing some wage rate pressure that is influencing that cost line? Thanks.
Sure. We're continuing to hire in line with the first two quarters, but late year does give a bit more challenging in terms of adding staff just to seasonally, but Jesse, go ahead.
No, you hit it August. Yeah, we continue to plan to continue hiring at a pretty good pace as we move through the year as best as we can from a cost pressure standpoint, it is a competitive market as August mentioned earlier, we are seeing some pressures there. So it is a function of both the volume of hiring and some wage rate pressure which is both factored into our guidance range.
And then last question from me. I appreciate the updates on the management progression. Congrats to those with promotions. August, I wondered if you'd be willing to comment on if this influences any - very significantly your thoughts about your longevity within your current role or not, should we read anything into the announcements yesterday? Thank you.
Yes, well, I think what you read in the announcements is I feel comfortable that if I were to step away that the company would be well handled. So I think there isn't a concern of whether I stay. But I have no near-term expectation of leaving my role as CEO and even when I do that, I would continue with involvement with the company I think. So, yes, so I think it's a longer-term planning and growth of staff that we have.
[Operator Instructions] Our next question comes from the line of Sandy Draper from Truist. Your line is open.
This is Mitchell on for Sandy. Thanks for taking my question. I think you guys have answered it pretty well because it was mostly around the wage inflation but I'm just wondering if you could add anything else to how you're going about the hiring environment and like what you're doing to recruit and retain people differently I guess, now a days?
Yes, thanks Mitchell. The approach to hiring is pretty consistent with what we've done in the past. We target new hires, new grads, a lot of folks fresh out of school, we target people with experience in healthcare background but really just more attention company-wide in each area to get to the numbers that we need to add to different departments to keep up with the continued growth.
So it's a heavy area of focus. But we really haven't changed on strategy as it relates to hiring. And then on retention, we're deploying a number of different strategies making sure that compensation is well aligned with the market and then also the hiring also helps with retention of those that are dealing with the volume of work that we have right now.
Thank you. And I would like to turn the call over to Lauren Morris 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 third quarter 2021 earnings call.
That concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.