Good day, ladies and gentlemen, and welcome to the Medpace first quarter earnings conference call. At this time, our participant lines are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require operator assistance, please press star then the zero key on your touch-tone telephone. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference call, Kevin Brady, Medpace Executive Director of Finance. You may begin.
Good morning, and thank you for joining Medpace's first quarter 2020 earnings conference call. Also on the call today is our President and CEO, August Troendle, and our CFO and COO of Laboratory Operations, Jesse Geiger. 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 other important factors that could cause actual results to differ materially from our current expectations, including the impact of the changes to the revenue recognition standards. These factors are discussed in the Risk Factors section of our Form 10-K and other filings with the SEC. Please note that we assume no obligation to update forward-looking statements in the future, even if estimates change.
Accordingly, you should not rely on any of today's forward-looking statements as representing our view as of any date after today. During this call, we will 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 the earnings press release and the 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.
Good morning. The COVID-19 pandemic has presented a significant challenge to the global clinical trial industry. Diversion of resources at investigative sites has slowed recruitment, in many cases, reduced the frequency of protocol-driven patient visits. Travel restrictions and access to sites by sponsors and CROs have necessarily reduced the usual on-site monitoring and auditing of trials for compliance with regulatory and protocol requirements. Most companies, including ours, have been forced to move most employees to a remote working environment, which can impact workflow and training of new staff. Fortunately, we have systems, processes, and experience running trials with minimal on-site presence and with virtual site visits and monitoring. The sudden conversion of an ongoing trial from classical site monitoring to virtual site visits is unusual, but has been accomplished across our portfolio of studies with minimal disruption or loss of trial data quality.
Patient safety, our primary concern, has not been jeopardized by the change. We are appreciative of the regulatory bodies taking a pragmatic approach within their released guidances related to COVID-19. We have made a number of changes to our operations to address the pandemic challenges. These include the following. One, established an incident response team to address emergent issues and set company-wide policy and workplace requirements. Two, established a cross-functional operations response team to develop or revise processes for oversight and management of trials. Three, implemented a global communication plan for updating worldwide staff to process changes. Four, organized weekly mandatory training sessions for project leadership teams to review, process, and implement industry or regulatory-driven updates. Five, we suspended all non-essential travel. Six, moved most staff to remote work while keeping essential functions that require office space presence operational.
Seen, updated customized monitoring plans as needed for all studies to address virtual site monitoring in lieu of on-site visits, as well as activating support technology solutions for source data verification. Eight, organized systems and processes for patient home visits and support. Nine, taken actions to align staff with the current and near-term future needs, including the removal of many administrative employee supporting office-based staff. I would like to provide some detail, a picture perhaps, of the extent of the disruption. The World Health Organization declared a pandemic on Wednesday, March 11, 2020. I will take this as time zero, as until then, the disruption to sites was largely an issue in China only. Since March 11 was a Wednesday, that week showed only modest impact. Lab samples were down 6% and patient screenings, i.e., patients seen as part of recruitment for trials, was relatively normal.
The following week, lab sample volumes were down 21% and patient screenings were down 54%. The week after that, the week of March 22nd, lab samples were down 34% and patient screenings were down 75%. More recently, lab sample volume has been down 40% and patient screenings down 85%. This has been stable the past few weeks but has shown no signs of recovery. Patient visits for ongoing patients already enrolled in trials is down about 55%. Physical monitoring visits are down 95%, but about 60% of the lost physical visits are being replaced by virtual site visits. Site activations are down 80%. We have had multiple cancellations of ongoing studies due to the challenges and uncertainty of the pandemic.
Since the operational and financial impact of the pandemic response on a trial is influenced by the stage of the trial, I would like to provide some demographics on our business portfolio of awarded trials. The following analysis is based on an April to December 2020 roll-off from awarded studies and is summarized in slide three of our earnings presentation. We have placed our awarded studies into 3 buckets. 1, studies where recruitment is completed. This subset comprises 30% of a projected April to December revenue. For 92% of this category by revenue, i.e., of this 30%, we expect no substantial impact on progress or revenue. Studies in recruitment. This subset comprises 58% of our April to December projected revenue.
For this subset, we expect 32% by revenue to have no substantial impact on progression, 29% to have significant impact on progression, but recruitment is continuing, and 39% where recruitment has been interrupted. The third bucket, studies in start-up but prior to first patient first visit. This subset is 12% of projected April to December revenue. For this subset, 45% are progressing toward first patient first visit, and the other 55% are currently on hold for first patient first visit. A decision to delay first patient first visit may still be made for the 45% currently progressing toward it.
From a current period revenue by task perspective for ongoing studies in the first two buckets, i.e., in recruitment or recruitment complete, the impact of COVID-19 will be greatest in areas where there is high level of unitized services where the units are likely to be delayed, such as laboratory as well as our clinics business where we directly perform phase I- IV site activities. Pass-through costs, the bulk of which represent independent investigative site payments and monitoring travel, are also disproportionately impacted. These revenues are mostly delayed rather than lost over the course of the trial. At the other end of the spectrum are other clinical trial services such as program management, monitoring, safety surveillance and reporting, and medical monitoring that are primarily based on an FTE or effort-based activity which will be minimally impacted from a current period revenue recognition perspective.
In fact, program management and site support may require increased efforts over the short term to plan and implement regulatory compliant accommodations to the trials even while recruitment is stopped. In general, recruitment delays will significantly increase the future revenue and total trial cost of FTE-based activities for these trials due to the extended timeline. For the third bucket, pre-recruitment trials, the impact for 2020 is primarily related to the timing of study start, with significant delays likely for many and therefore lower revenue in 2020. Whether recruitment delays will slow these studies once started is unknown. To complete the picture, I should provide a rough breakout of our service functions. Project management, monitoring, data safety, medical and reporting, the largest portion of clinical trial services, is approximately 84% of our total revenue. Labs make up 14%, and clinics 1.5%- 2% of revenue.
On a longer-term basis, our business and revenue will be impacted by reluctance of sponsors to initiate new trials or award new business in an uncertain environment where costs may be higher due to extended timelines. This is already apparent in Q1 new business awards. The reduced future revenue from delayed trial starts, cancellations, and reduced new business awards will be partially offset by additional revenue from extension of ongoing trials, as discussed above, where recruitment is delayed. Recruitment has slowed, I should say. However, the elongated timelines of studies where recruitment has slowed may challenge our smaller clients' ability to financially support a more expensive and delayed trial. A majority of our clients are small and many do not have cash on their balance sheet to complete their trial without raising additional funds. Due to the challenges we face from COVID-19 pandemic.
We now expect revenue and profit for the full year 2020 to be down from 2019. The extent of the drop cannot be reasonably estimated at this time. For this reason, we are withdrawing rather than updating our previous guidance. Jesse will now cover our financial performance for the quarter.
Thank you, August. Good morning, everyone. Net new business awards entering backlog in the first quarter decreased 0.7% from the prior year to $246.9 million, resulting in a 1.07 net book-to-bill. Ending backlog as of March 31st was $1.3 billion, an increase of 16.8% from the prior year. Revenue was $230.9 million in the first quarter of 2020, which represents year-over-year growth of 15% on a reported basis and 15.2% on a constant currency organic basis. EBITDA of $40.6 million increased 21.3% compared to $33.4 million in the first quarter of 2019. On a constant currency basis, first quarter EBITDA increased 19.1% compared to the prior year. EBITDA margin for the first quarter was 17.6%, compared to 16.7% in the prior year period. The increase was primarily attributable to lower reimbursed out-of-pocket expenses on higher revenue, partially offset by higher employee-related costs.
In the first quarter of 2020, GAAP net income was $29 million, compared to GAAP net income of $19.2 million in the prior year period. Net income growth was primarily driven by revenue growth and reduced amortization expense, partially offset by higher employee-related costs and reimbursed out-of-pocket expenses. GAAP net income per diluted share for the quarter was $0.76, compared to $0.51 in the prior year period. Regarding customer concentration, our top five and top 10 customers represented roughly 17% and 26%, respectively, of our total revenue for the quarter. In the first quarter, we generated $49.1 million in cash flow from operating activities, and our net days sales outstanding decreased compared to the fourth quarter from -14.7 days to -21 days.
During the quarter, we repurchased approximately 0.7 million shares for a total of $43.2 million. We have $56.8 million remaining under our current share repurchase authorization. Our strong balance sheet is important in this current environment. We ended the first quarter with $134 million of cash, no outstanding debt, and $50 million of undrawn capacity on our revolving line of credit. As August mentioned, due to the economic uncertainty, we are withdrawing previously provided 2020 guidance. We will provide updated guidance when we can reasonably estimate the impacts of the COVID-19 pandemic on our business results. With that, I will turn the call back over to the operator so we can take your questions.
Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Once again, if you would like to ask a question, that is star one. Our first question is going to come from Dave Windley from Jefferies. Your line is now open.
Great. Good morning. Thanks for the detail, August. Appreciate your candor here, as always. Was curious if you could talk a little bit more about, add some color to how the clients are acting. You mentioned you've seen cancellations. That's something that we haven't necessarily heard from some of the other CRO players so far. It sounds like it's also affecting gross new business as well. If you could comment on the relative impacts on gross new business and then also cancellations. Thanks.
Sure. Dave, hi. Yeah, we are seeing an impact, of course, our recognition of work into backlog requires the study progressing. A lot of things are put on hold. A lot of others do it more based upon just an award was made, and they think it'll eventually start going, or there's contract was signed. Ours have to be moving forward. End of the quarter, there was quite a bit of clients pausing and holding things and not moving forward with the project at this time. That did affect our bookings, and we have had several, more than five, cancellations related to COVID. You can always take a cancellation and identify multiple reasons, and not much was canceled exclusively. Something was going great and then, oh, COVID's going to make us decide to cancel a study.
These are projects that might have been as their strongest opportunity or whatever. The reason has been that COVID, it would have progressed if not for. We have seen cancellations. I'm surprised others haven't.
Thanks for that. I think I fixed my echo. Sorry about that. The follow-up question, your model has historically had your people more centralized, less field-based CRAs, et cetera. Has that made it easier or harder for you to transition to work from home? In terms of supporting your clients' trials, I would guess that, for example, having a bolus of your employees in Cincinnati and having trials distributed and their need to travel out to those trials, not having regional field-based CRAs might make it more difficult for you to get the sites as they begin to open up. Can you talk about how your labor force can adjust to a new COVID-affected world? Thanks.
Sure. We do have more of , certainly in the U.S. anyway, more of an office-based staff. Some are more regionally based, although that tends to be largely one of where the CRAs are based out of. Yeah, you asked the question that, once things are open, will CRAs be able to travel as effectively as where some other company might have a person on site in that city? The reality of it is that most CRAs wind up having to get on a flight no matter where they're based. I do not anticipate that air flights are going to be the factor restricting access to sites. That's been mainly one of physical access at the site itself and not ability to perform air travel. I don't anticipate that being a factor.
Certainly our office-based core operations in Cincinnati were substantially changed in terms of sending everyone home. We did have a great deal of IT infrastructure there and support and moved a lot of people who had never worked from home before into a work from home environment very effectively. I don't know whether that was a help or a hindrance. I don't really think there's any differentiation there.
Okay. That's great. Thank you for the answers. I'll yield the floor.
Thank you. Our next question comes from John Kreger from William Blair. Your line is now open.
Hi. Thanks very much. August or Jesse, realize that there's too much uncertainty to provide any sort of commentary on the year, but with being one month into the second quarter, would you be able to just talk about how much you think revenues might be down from Q1- Q2? Is that possible?
I don't think we can estimate that. Not with any kind of certainty. I think that's why we've removed guidance. We're not providing one for second quarter even.
Okay, understood. Have you had any collection issues from your smaller clients?
Jesse, you want to take that?
Yeah. Thanks, John. We have not seen, to date, any uptick in collection issues. We recorded no bad debt expense in the first quarter. Given the customer segment focus in small biotech, we're monitoring credit risk exposure very closely and staying in contact with clients, but we've not seen any impact currently.
Okay, thanks. Finally, can you give us a sense about how your activity levels spread across U.S., Europe, and Asia? Are you starting to see any patterns of sites reopening that might give some insight about when some movement back towards normalcy could start to happen?
Yeah. Look, it is very country specific. China's begun to open up again. There are some areas in Asia particularly where site visits are now possible again, and we're getting more openness of the sites there, beginning to have more activity. You look at the overall global numbers, and again, we've seen very little evidence of recovery to date. We're hoping very shortly things will start improving, but sites are still pretty inaccessible and disrupted. In a lot of these cases, it's the coordinators, the site coordinator at the site is working from home. It's got nothing to do with our staff or the availability to get there. It's the operations at the site are disrupted.
Okay. Thank you.
Thank you. Our next question comes from Sandy Draper from SunTrust. Your line is now open.
Thanks very much, and we'll also really appreciate all the level of detail, although I think it's going to take my brain a little while to process all that. Maybe one follow-up initially on this. When you think about the reimbursables versus the service revenue, obviously the first quarter, we didn't see that much of an impact. Jesse or August, how should we think about the relative impact? Should it be more on the reimbursable revenue because that's mostly travel? I'm just trying to understand when I'm thinking through the buckets you talked about, where that sort of flows through into reimbursables versus the service revenue.
Sure, Sandy.
Yeah, thanks. Go ahead.
I'll take that, Jesse. Things that are directly driven by sites is going to be down. Patient visits at sites, laboratory samples are going to be down. Sites generally are very unitized in terms of visits, in terms of payments. They get paid for doing evaluations on patients. If they don't have the visit, they don't do the evaluation, or they do a partial evaluation or whatever. They may not be able to bill it. Them meeting their criteria for being paid is delayed until they do the site visit with the patient. That is the largest impact. Our passthrough investigator payments are hit more than our services, which are more FTE and a lot of work regardless of whether the patient comes in or not.
They were doing a lot of work with sites and, in fact, sometimes trying to facilitate a remote visit or a home visit. There's a lot of regulatory and other activities that continue on. Anyway, pass-throughs to sites as well as travel. Again, yes, there's virtually no travel going on, so that's substantially impacted, although that's smaller than investigator site payments. Site payments are down, investigator payments, laboratory samples, so laboratory's down. Other CRO oversight, regulatory and monitoring, et cetera, are less impacted. Yes, you'll see the pass-through costs are hit more than the service revenue costs.
Okay. That's really helpful. Maybe just one quick follow-up to that question is, you commented that you expect revenue and profits to be down year-over-year. Within revenue, clearly from what you just said, reimbursables are going to be down year-over-year. It sounds like also service revenue will also likely be down year-over-year. Is that a fair assessment?
I don't think we're giving guidance on either.
Okay.
We do think that overall revenue will be down.
Okay. Got it. That's fair. Maybe my final question, I'll jump back in the queue. Obviously, you're in a fortunate capital situation with a lot of cash, no debt. You bought a little bit of stock back. Do you have a view of right now you're in preserve cash mode, we're not going to spend? Do you feel comfortable enough that you could be in the market for repurchases? Because a lot of companies have basically said, "We're not paying dividends. We're not buying back stock during this time." Does the board have a similar philosophy, or do you feel like you've got enough of a cushion where you will potentially deploy capital in this environment? Thank you.
Jesse?
Yeah. Thanks, Sandy. From a share buyback perspective, we did buy in the first quarter. We'll take a balanced view as we go through the rest of the year. We're not actively suspending opportunistic share repurchases.
Okay, great. Really helpful. Thanks for all the questions.
Thank you. Our next question comes from Eric Coldwell from Baird. Your line is now open.
Hey, thanks very much, and good morning. First off, with your client base, I know that to the best of your ability, you do financial reviews of your clients, and obviously, given the mix, collecting as much upfront and being certain of funding is very important to you. I was hoping you could give us a little more detail on what you're seeing right now. A lot of conversations out there about how biotechs maybe are funded for an average of one, two, or three years, depending on what source you use. Obviously, that means some are funded only months or quarters. I don't know if you have an aging schedule or something like that you could share with us, but any details on that would be helpful.
Jesse, you want to take a crack at it?
Yeah, Eric. I don't have an exact aging schedule to share, but it is a mix. Our clients, these small biotechs, some have cash on balance sheets, some have committed investors who are funding as the trial progresses. Across the portfolio, they have various amounts of cash or access to cash. As August mentioned in his opening remarks, some of those will need to go to new capital or additional capital as the trial progresses and if things elongate, may need to raise more than they would have otherwise. I guess a little perspective maybe I can give on the portfolio composition, is that about 75% of the backlog is with small biotech. The backlog mix is consistent with the revenue, and 40% of that small biotech backlog is with companies who have partnered products with large pharma.
40% of the 75% category of small biotech has funding sources in markets, but also is partially funded through their partnerships with large pharma. Another way to look at this is, Public versus private companies, 100% of our large and mid-size company backlog is with public companies. Our small biotech backlog is approximately 70% with public companies and 30% with privately funded companies. I know that those don't give any insight into the cash on balance sheet, but provides maybe a little bit of insight into what the composition is of their funding sources at current state.
That's nice. Helpful. Thank you. On the pass-through topic, you did mention investigator and site payments being the biggest, travel smaller, maybe lab and other external payments smaller. I was hoping you could give us maybe percentages, if you don't mind, or at least some color on the mix of those various buckets in pass-throughs.
I'm sorry, percentages in what sort of?
Yeah. Like investigators, site payments, maybe, I'm going to guess 50%, 60%, 70% of pass-through revenue and travel maybe 30%, maybe lab and other external payments 5%, 10% is my guess, but I'd love your color.
Okay. Yeah, Jesse, do you have that?
Not at my fingertips. Let me follow up, Eric.
Okay. That's fair. Maybe just two quick ones. Decremental margin, I know you're not giving guidance, but could you give any color, perhaps breaking out clinic, lab, and then separately core clinical trial activities? Do you have any views on decremental margin on the revenue slowdown?
Jesse, do you have any input on that?
Eric, could you repeat the question? I apologize.
No. Decremental margin. The revenue drop through, how much of that would fall to EBITDA? If you have that, maybe overall, we're seeing other CROs come up with basically implied ranges of anywhere from, say, 35%-40%, 45% decremental margin net of cost to action. I'm curious if you're in a similar ballpark and then if you could maybe carve it out by lab and clinic as opposed to traditional site business, if possible.
No, I don't have that either. You're asking for the.
Okay
from the forecast, from the guidance, what margin reduction we would anticipate from the lab business, labs and clinics versus the rest of the company? Is that your question?
Just in total, if it's easier.
I don't think we have that at our fingertips, but it would be pretty high. Thinking labs and clinic, you're talking about it's got to be at least 40%.
Yeah.
I do not have it.
That's fair. Then last one, business development. I'm just curious, I know the world's changing quickly. We've all been pushed into the deep end of the pool on work from home and virtual and doing things telephonically. How much business development do you think can truly get done telephonically or virtually, video conference, as opposed to needing to be at the client's headquarters or at their site shaking hands and having all-day conversations? I'm just curious how much you think you could actually foreseeably get done over the next year if travel remains a bit of a challenge.
Yeah. I'll take that, Eric. I actually think we're, and I guess it's probably everyone, in pretty good shape in that regard, but the demand's there. They have to reach out. Most of our clients don't have a preferred provider. I think we're in the mix, and I don't think it's a matter of us necessarily knocking on the door, and everyone else has the same disadvantage that you're doing now a remote virtual bid defense and a virtual presentation. I think if our strategy was to break into new markets and address clients that had an existing provider pool, look, that's not going to happen in this environment. That's something that's dead in the water. That means for those who have those relationships, it means very good for them, the ones that already have them.
They're sitting on the relationship, and it's unlikely to be moved in this environment. You can't attack other people's sticky relationships. I think in terms of just clients that don't have those type of preferred provider, which largely we're working with a group that's coming to us for an opportunity, and they're reaching out to several companies. We're competing, but we're competing on level ground because everyone's in the same predicament and they're going to outsource the work. I really don't see a significant impact because our strategy is not based upon attacking preferred provider relationships of others and trying to break in for the first time.
Okay. That's very helpful. Good insights. Thank you very much.
Thank you. Again, ladies and gentlemen, if you have a question, that is star one. Again, if you have a question that is star one. Our next question comes from Donald Hooker from KeyBank. Your line is now open.
Great, good morning. I see you guys brought on new employees in the quarter. Looks like it was up 150 or so in the quarter. That's great. How are you managing, how are you thinking about hiring over the course of the year? I know you guys are involved in a fairly sizable internal capacity expansion at your headquarters. Has that been delayed, or how should we think about both of those things moving forward given the disruption to demand?
Yeah. Okay. First off, that expansion in Cincinnati, we are a little bit delayed. We were planning on getting in there end of first quarter. It's now looking like May, but we are still moving forward with that, and actually it gives us a nice separation of staff that has been not possible in some of our existing infrastructure because we were overcrowded. It does permit us to get back into office maybe sooner with social distancing. We do expect staff numbers to probably be about flat on the year. We did have some reductions, as I mentioned, in staff in the past month, and we expect to end the year about where we entered the year in terms of staff numbers.
Okay. That's helpful visibility. Maybe separately, always interested in your broader perspectives on the space. The movement to virtual trials and risk-based remote monitoring. I guess one ongoing debate is how sustainable is that going to be, maybe after COVID-19 winds down? What is your just broader view of that? Is this potentially, in your mind, a catalyst for your clients to maybe, for your client vertical to maybe reconsider how studies are done in any way?
I think, this gives an emphasis to the overall industry, for the short term. It may facilitate some technologies longer term, but the regulatory authorities have been very accommodative, have been very helpful in allowing us to work around difficulties. Most of the trials we're doing are not designed and not appropriately able to long term meet the regulatory requirements with virtual visits. There will be required on-site visits. You can do more remotely, and over time, we've done more and more remotely. It still does require on-site visits to verify things, and some things just require that on-site review. I don't see that, none of these trials have been converted to a virtual visit type environment, and meet the expectations for the whole trial.
There will be makeup, there will be some time spent on site in the future to try to catch up and to meet all the requirements of the trial. I don't think it's going to push the industry to switch and for regulatory authorities to accept the type of trial oversight that's currently ongoing for a longer period of time.
Okay. Thank you for that perspective.
Thank you. Our next question comes from Dave Windley from Jefferies. Your line is now open.
Hi. Thanks. Thought I'd come back since your call is relatively short. Gives us a little more time. Follow-up questions are these. One is around cost actions that you've taken. August, you talked about reducing some in-office admin support. Are you also taking action on direct headcount, on billable headcount, or has it been mostly limited to admin and I guess just if you can put an order of magnitude on what actions you've taken, I'd appreciate it.
Okay. Yeah. The overall action represents about close to 10% of staff, but again, heavily weighted towards admin and other functions. It does include some billable staff, et cetera. We had, as you know, going into the year, expected at least 15% growth in revenue. We're shooting for even more and we're preparing for 20%, and we'd caught up with our hiring needs, and we're getting well ahead for that growth. Now we expect no growth over the year. We did have to readdress that, but I think we have plenty of staff in place to, when things turn around, to be able to grow rapidly.
Okay. In thinking about one of the early slide, I guess it was slide three that you had your pie charts on affected trials by bucket. Do you think you're largely using the same sites that your peer CROs are using, and so your level of access is going to be the same as theirs? Or are there differences either in the sites that you use or your access to the sites that you use that would be different from, say, a larger peer that is perhaps, maybe they have more pull because they're doing more studies with a particular site, or you have that because you are, for example? Are there nuanced differences in your ability to access a site?
No, I'm not aware of any. I've never heard of such a thing where you'd allow one client in and not another. One study to be reviewed, not another. One CRO access and not another. By and large, the sites we use are the same as others, but again, it depends on the study and the therapeutic area and whatever you're doing currently. It's an overlapping subset of sites that everybody's using. You could go to the sites that are most capable of recruiting patients, and you go to the geographies and sites where they can be effectively found and entered and retained and participate in a trial. That winds up being the same sites across everyone. I guess you might say there's certainly a high concentration of owned sites would be used by one CRO.
A CRO that owns their own sites, they would be predominantly used by them. Otherwise, you're talking about largely the same pool of sites that is used variously in trials, and I don't believe there's any different access other than, again, in those owned site networks.
Got it. Thank you for that. You talked about having conversations, kind of operational crisis action plans and interacting with clients on a study-by-study basis about how to keep those moving forward or keep them alive. I suspect that kind of operations and clinical and patient safety come first, and then the discussions around change orders and things like that come second. I appreciate, again, the candor on where some of your clients sit. I'm wondering if you've gotten to the point with most of those clients of talking about, "Hey, to get this study finished, it's going to cost this much more." I'm thinking that that conversation then makes perhaps your clients in particular have to think about how much cash they have and can they do it.
Have you gotten to that point, or is there still perhaps a waterfall event as you begin to address the financial side of all these changes?
It is in process. It is ongoing discussion. Our clients, by and large, we keep them appraised. If there is delays in the project, we like to make sure we're proactive in letting them know about anything that might be coming up. They are also been very proactive, many asking about what the impact of this is. There's this now delayed the recruitment in this study. How does that feed through into our total cost so we can be prepared? It's a two-way discussion. It's ongoing. As I did say, by and large, many of our activities are not highly unitized.
They are mostly based on allocation of staff, and you can change the allocation of staff, and if you knew that recruitment was going to go at 1/3 of the rate that you'd anticipated initially, you might be able to do it with a different staffing model, a different number of staff on the project. In the middle of the project, you have to take off some staff and reassign some things and restructure the staffing on the project, which then if recruitment picked up again, you'd have to maybe restructure a third time again because now you need more staff on the project. Clients are reluctant to pull people off and then put them back on. There's a lot of transition costs, continuity, quality can be jeopardized. It does wind up making the project more expensive to us and more expensive to the client.
Those discussions are ongoing and generally proactively looked at.
Last question from me. You've talked about kind of the impact to my earlier question about kind of cancellation or lack of inclusion in a booking because of the timeliness of when you recognize that. That kind of addresses the very kind of the bottom of the funnel, I'll call it, things that are very ripe and mature and moving into study. What about, I think to Eric's question, what does the top of the funnel look like? How much change has there been in inquiry and RFP issuance by your clients that would represent bookings in the next quarter or two? Thanks.
Well, if I went by COVID-19 projects, it would be fantastic. They're exploding. Overall, our RFP flow has been about flat, which means pretty darn good because things were good in Q4. I think that there is a lot of activity. Obviously, a lot better near-term interest in specific therapeutic areas. Like I said, COVID-19, actual ADA trials addressing the pandemic itself make our overall antiviral, anti-infective group very busy. That's been kind of a shift towards an ID group. Oncology has continued to be pretty strong. It's one of the areas where there continues to be demand despite the environment. Most other therapeutic areas are a little bit less near-term active, but still have projects that are moving to be, once things open up, want to go forward. I think that overall, the fundamental demand is substantial.
We've seen times in which funding was challenged, and you still see a lot of opportunities. I think we see a lot of pretty well-funded, good opportunities that are held only in view of the greater cost and uncertainty around running a trial today rather than hopefully three months from now or six months from now. I do think demand is looking pretty good and pretty consistent with what it was last year.
Okay, fantastic. Thanks for the extra answers.
Thank you. Now I'm showing no further questions. I would now like to turn the call back over to Kevin Brady for current 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 second quarter 2020 earnings call. Thanks, and have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you, participant. You may now disconnect.