CINCINNATI--(BUSINESS WIRE)--Medpace Holdings, Inc. (Nasdaq: MEDP) (“Medpace”) today announced financial results for the second quarter ended June 30, 2018.
Second Quarter 2018 Financial Results under ASC 606
Revenue for the three months ended June 30, 2018 was $170.1 million. Backlog as of June 30, 2018 was $979.7 million and net new business awards were $239.9 million, representing a net book-to-bill ratio of 1.41x for the second quarter of 2018. The Company calculates the net book-to-bill ratio by dividing net new business awards by revenue.
For the second quarter of 2018, total direct costs were $116.7 million, and Adjusted direct costs were $117.4 million. Selling, general and administrative expenses were $20.5 million and Adjusted Selling, general and administrative expenses were $20.2 million for the second quarter 2018.
GAAP net income for the second quarter of 2018 was $16.6 million, or $0.45 per diluted share, which resulted in a net income margin of 9.7%. Adjusted EBITDA for the second quarter of 2018 was $32.9 million, or 19.4% of revenue. Adjusted Net Income was $22.4 million, and Adjusted Net Income per diluted share was $0.61 for the second quarter of 2018.
Second Quarter 2018 Financial Results under ASC 605
Net service revenue for the three months ended June 30, 2018 increased 24.6% to $117.8 million, compared to $94.6 million for the comparable prior-year period. On a constant currency basis, net service revenue for the second quarter of 2018 increased 24.0% compared to the second quarter of 2017.
Backlog as of June 30, 2018 grew 17.7% to $583.6 million from $495.9 million as of June 30, 2017. Net new business awards were $155.9 million, representing a net book-to-bill ratio of 1.32x for the second quarter of 2018, as compared to $105.4 million for the comparable prior-year period.
For the second quarter of 2018, Direct service costs, excluding depreciation and amortization, were $61.5 million, compared to $52.0 million in the second quarter of 2017. Adjusted Direct service costs were $62.3 million for the second quarter 2018, compared to $52.8 million in the second quarter of 2017.
Selling, general and administrative expenses were $20.5 million in the second quarter of 2018, compared to $14.8 million in the second quarter of 2017. Adjusted Selling, general and administrative expenses were $20.2 million for the second quarter 2018 versus $14.9 million in the second quarter of 2017.
GAAP net income for the second quarter of 2018 was $18.8 million, or $0.51 per diluted share, versus GAAP net income of $9.6 million, or $0.23 per diluted share, for the second quarter of 2017. This resulted in a net income margin of 15.9% and 10.1% for the second quarter of 2018 and 2017, respectively.
Adjusted EBITDA for the second quarter of 2018 increased 33.6% to $35.8 million, or 30.4% of net service revenue, compared to $26.8 million, or 28.3% of net service revenue, for the comparable prior-year period. On a constant currency basis, Adjusted EBITDA for the second quarter of 2018 increased 33.7% from the second quarter of 2017.
Adjusted Net Income for the second quarter of 2018 increased 58.9% to $24.6 million, compared to $15.5 million for the comparable prior-year period. Adjusted Net Income per diluted share for the second quarter of 2018 was $0.67 compared to Adjusted Net Income per diluted share of $0.38 for the comparable prior-year period.
A reconciliation of the Company’s non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share to the corresponding GAAP measures is provided below.
Balance Sheet and Liquidity
The Company’s Cash and cash equivalents were $22.2 million at June 30, 2018, and the Company generated $41.3 million in cash flow from operating activities during the second quarter of 2018.
Financial Guidance
On January 1, 2018, the Company adopted ASC 606 “Revenue from Contracts with Customers.” For full-year 2018, the Company is providing guidance under ASC 605, excluding the impact of the new accounting standard, for comparability purposes. The Company forecasts 2018 net service revenue in the range of $461 million to $473 million, representing growth of 19.3% to 22.4% over 2017 net service revenue of $386.5 million. GAAP net income for full year 2018 is forecasted in the range of $69.8 million to $73.9 million. Additionally, full-year 2018 Adjusted EBITDA is expected in the range of $135 million to $141 million.
Based on forecasted 2018 net service revenue of $461 million to $473 million and GAAP net income of $69.8 million to $73.9 million, diluted earnings per share (GAAP) is forecasted in the range of $1.90 to $2.01. Adjusted Net Income for 2018 is forecasted in the range of $92.0 million to $96.0 million, compared to Adjusted Net Income of $60.5 million for 2017. Furthermore, Adjusted Net Income per diluted share for 2018 is expected in the range of $2.51 to $2.62 per share.
Conference Call Details
Medpace will host a conference call at 9:00 a.m. ET, Tuesday, July 31, 2018, to discuss its second quarter 2018 results.
To participate in the conference call, dial 800-219-7113 (domestic) or 574-990-1030 (international) using the passcode 7865703.
To access the conference call via webcast, visit the “Investors” section of Medpace’s website at medpace.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.
A supplemental slide presentation will also be available at the “Investors” section of Medpace’s website prior to the start of the call.
A recording of the call will be available at 12:00 p.m. ET on Tuesday, July 31, 2018 until 12:00 p.m. ET on Tuesday, August 14, 2018. To hear this recording, dial 855-859-2056 (domestic) or 404-537-3406 (international) using the passcode 7865703.
About Medpace
Medpace is a scientifically-driven, global, full-service clinical contract research organization (CRO) providing Phase I-IV clinical development services to the biotechnology, pharmaceutical and medical device industries. Medpace’s mission is to accelerate the global development of safe and effective medical therapeutics through its high-science and disciplined operating approach that leverages regulatory and therapeutic expertise across all major areas including oncology, cardiology, metabolic disease, endocrinology, central nervous system and anti-viral and anti-infective. Headquartered in Cincinnati, Ohio, Medpace employs approximately 2,700 people across 36 countries.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding our anticipated financial results and effective tax rate used for non-GAAP adjustment purposes. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” “forecast,” “may,” “could,” “likely,” “anticipate,” “project,” “goal,” “objective,” similar expressions, and variations or negatives of these words.
These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our financial condition, actual results, performance (including share price performance), or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the potential loss, delay or non-renewal of our contracts, or the non-payment by customers for services we have performed; the failure to convert backlog to revenue at our present or historical conversion rate; fluctuation in our results between fiscal quarters and years; decreased operating margins due to increased pricing pressure or other pressures; failure to perform our services in accordance with contractual requirements, government regulations and ethical considerations; the impact of underpricing our contracts, overrunning our cost estimates or failing to receive approval for or experiencing delays with documentation of change orders; our failure to successfully execute our growth strategies; the impact of a failure to retain key executives or other personnel or recruit experienced personnel; the risks associated with our information systems infrastructure, including potential security breaches and other disruptions which could compromise our information; our failure to manage our growth effectively; adverse results from customer or therapeutic area concentration; the risks associated with doing business internationally, including the effects of tariffs and trade wars; the risks associated with the Foreign Corrupt Practices Act and other anti-corruption laws; future net losses; the impact of changes in tax laws and regulations; the risks associated with our intercompany pricing policies; our failure to attract suitable investigators and patients to our clinical trials; the liability risks associated with our research and development services; the risks related to our Phase I clinical services; inadequate insurance coverage for our operations and indemnification obligations; fluctuations in exchange rates; the risks related to our relationships with existing or potential customers who are in competition with each other; our failure to successfully integrate potential future acquisitions; potential impairment of goodwill or other intangible assets; our limited ability to utilize our net operating loss carryforwards or other tax attributes; the risks associated with the use and disposal of hazardous substances and waste; the failure of third parties to provide us critical support services; our limited ability to protect our intellectual property rights; the risks associated with potential future investments in our customers’ business or drugs; general economic conditions in the markets in which we operate, including financial market conditions; the impact of a natural disaster or other catastrophic event; negative outsourcing trends in the biopharmaceutical industry and a reduction in aggregate expenditures and research and development budgets; our inability to compete effectively with other CROs; the impact of healthcare reform; the impact of recent consolidation in the biopharmaceutical industry; failure to comply with federal, state and foreign healthcare laws; the effect of current and proposed laws and regulations regarding the protection of personal data; our potential involvement in costly intellectual property lawsuits; actions by regulatory authorities or customers to limit the scope of or withdraw an approved drug, biologic or medical device from the market; failure to keep pace with rapid technological changes; the impact of industry-wide reputational harm to CROs; the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.'s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU; changes in U.S. generally accepted accounting principles, including the impact of the changes to the revenue recognition standards; risks related to internal control over financial reporting; our ability to fulfill our debt obligations; the risks associated with incurring additional debt or undertaking additional debt obligations; the effect of covenant restrictions under our debt agreements on our ability to operate our business; our inability to generate sufficient cash to service all of our indebtedness; fluctuations in interest rates; and our dependence on our lenders, which may not be able to fund borrowings under the credit commitments, and our inability to borrow.
These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on February 27, 2018, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. We cannot guarantee that any forward-looking statement will be realized. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.
Non-GAAP Financial Measures
Certain financial measures presented in this press release, such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share, are not recognized under generally accepted accounting principles in the United States of America, or U.S. GAAP. Management uses EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share or comparable metrics as a measurement used in evaluating our operating performance on a consistent basis, as a consideration to assess incentive compensation for our employees, for planning purposes, including the preparation of our internal annual operating budget, and to evaluate the performance and effectiveness of our operational strategies.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share have important limitations as analytical tools and you should not consider them in isolation, or as a substitute for, analysis of our results as reported under U.S. GAAP. See the condensed consolidated financial statements included elsewhere in this release for our U.S. GAAP results. Additionally, for reconciliations of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, Adjusted Net Income per diluted share to our closest reported U.S. GAAP measures, refer to the appendix of this press release.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
We believe that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are useful to provide additional information to investors about certain material non-cash and non-recurring items. While we believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors, because not all companies use identical calculations, this presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies and should not be considered as an alternative to performance measures derived in accordance with U.S. GAAP. EBITDA is calculated as net income (loss) attributable to Medpace Holdings, Inc. before income tax expense, interest expense, net, depreciation and amortization with Adjusted EBITDA being further adjusted for unusual and other items. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Service revenue, net for each period. Our presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Adjusted Net Income and Adjusted Net Income per diluted share
Adjusted Net Income measures our operating performance by adjusting net income (loss) attributable to Medpace Holdings, Inc. to include cash expenditures related to rental payments on leases classified for accounting purposes as deemed landlord liabilities, and exclude amortization expense, certain stock based compensation award non-cash expenses, certain litigation expenses, deferred financing fees and certain other non-recurring items. Adjusted Net Income per diluted share measures Adjusted Net Income on a per diluted share basis. Management uses these measures to evaluate our core operating results as it excludes certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business, but includes certain items such as depreciation, interest expense and tax expense, which are otherwise excluded from Adjusted EBITDA. We believe the presentation of Adjusted Net Income and Adjusted Net Income per diluted share enhances our investors’ overall understanding of the financial performance. You should not consider Adjusted Net Income or Adjusted Net Income per diluted share as an alternative to Net income (loss) or Net income per diluted share attributable to Medpace Holdings Inc., determined in accordance with U.S. GAAP, as an indicator of operating performance.
Adjusted Direct costs and Adjusted Selling, general and administrative expenses
Adjusted Direct costs and Adjusted Selling, general and administrative expenses are useful to provide information to investors to evaluate core operating expenses as they exclude certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business, but includes certain items such as certain lease payments which are otherwise excluded from core operating expenses. We believe that reporting these metrics enhance our investors’ overall understanding of our core recurring operating expenses. You should not consider Adjusted Direct costs and Adjusted Selling, general and administrative expenses as an alternative to Direct costs, excluding depreciation and amortization and Selling, general and administrative expenses, determined in accordance with U.S. GAAP, as an indicator of operating performance.
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under | under | under | ||||||||||||||
| ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
|
(Amounts in thousands, except per share amounts) |
Three Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| Revenue: | ||||||||||||||||
| Revenue, net | $ | 170,144 | $ | (170,144 | ) | $ | - | $ | - | |||||||
| Service revenue, net | - | 117,792 | 117,792 | 94,552 | ||||||||||||
| Reimbursed out-of-pocket revenue | - | 19,044 | 19,044 | 11,664 | ||||||||||||
| Total revenue | 170,144 | (33,308 | ) | 136,836 | 106,216 | |||||||||||
| Operating expenses: | ||||||||||||||||
| Direct service costs, excluding depreciation and amortization | 61,478 | - | 61,478 | 51,955 | ||||||||||||
| Reimbursed out-of-pocket expenses | 55,198 | (36,154 | ) | 19,044 | 11,664 | |||||||||||
| Total direct costs | 116,676 | (36,154 | ) | 80,522 | 63,619 | |||||||||||
| Selling, general and administrative | 20,507 | - | 20,507 | 14,755 | ||||||||||||
| Depreciation | 2,226 | - | 2,226 | 2,101 | ||||||||||||
| Amortization | 7,390 | - | 7,390 | 9,462 | ||||||||||||
| Total operating expenses | 146,799 | (36,154 | ) | 110,645 | 89,937 | |||||||||||
| Income from operations | 23,345 | 2,846 | 26,191 | 16,279 | ||||||||||||
| Other expense, net: | ||||||||||||||||
| Miscellaneous income (expense), net | 478 | - | 478 | (125 | ) | |||||||||||
| Interest expense, net | (2,308 | ) | - | (2,308 | ) | (1,808 | ) | |||||||||
| Total other expense, net | (1,830 | ) | - | (1,830 | ) | (1,933 | ) | |||||||||
| Income before income taxes | 21,515 | 2,846 | 24,361 | 14,346 | ||||||||||||
| Income tax provision | 4,947 | 653 | 5,600 | 4,793 | ||||||||||||
| Net income | $ | 16,568 | $ | 2,193 | $ | 18,761 | $ | 9,553 | ||||||||
| Net income per share attributable to common shareholders: | ||||||||||||||||
| Basic | $ | 0.46 | $ | 0.07 | $ | 0.53 | $ | 0.24 | ||||||||
| Diluted | $ | 0.45 | $ | 0.06 | $ | 0.51 | $ | 0.23 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 35,519 | - | 35,519 | 40,183 | ||||||||||||
| Diluted | 36,664 | - | 36,664 | 40,825 | ||||||||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under | under | under | ||||||||||||||
| ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
| (Amounts in thousands, except per share amounts) | Six Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| Revenue: | ||||||||||||||||
| Revenue, net | $ | 333,221 | $ | (333,221 | ) | $ | - | $ | - | |||||||
| Service revenue, net | - | 226,220 | 226,220 | 188,333 | ||||||||||||
| Reimbursed out-of-pocket revenue | - | 34,061 | 34,061 | 24,494 | ||||||||||||
| Total revenue | 333,221 | (72,940 | ) | 260,281 | 212,827 | |||||||||||
| Operating expenses: | ||||||||||||||||
| Direct service costs, excluding depreciation and amortization | 121,819 | - | 121,819 | 103,060 | ||||||||||||
| Reimbursed out-of-pocket expenses | 112,111 | (78,050 | ) | 34,061 | 24,494 | |||||||||||
| Total direct costs | 233,930 | (78,050 | ) | 155,880 | 127,554 | |||||||||||
| Selling, general and administrative | 36,506 | - | 36,506 | 29,909 | ||||||||||||
| Depreciation | 4,540 | - | 4,540 | 4,231 | ||||||||||||
| Amortization | 14,781 | - | 14,781 | 18,910 | ||||||||||||
| Total operating expenses | 289,757 | (78,050 | ) | 211,707 | 180,604 | |||||||||||
| Income from operations | 43,464 | 5,110 | 48,574 | 32,223 | ||||||||||||
| Other expense, net: | ||||||||||||||||
| Miscellaneous income (expense), net | 325 | - | 325 | (497 | ) | |||||||||||
| Interest expense, net | (4,617 | ) | - | (4,617 | ) | (3,602 | ) | |||||||||
| Total other expense, net | (4,292 | ) | - | (4,292 | ) | (4,099 | ) | |||||||||
| Income before income taxes | 39,172 | 5,110 | 44,282 | 28,124 | ||||||||||||
| Income tax provision | 8,053 | 1,164 | 9,217 | 10,124 | ||||||||||||
| Net income | $ | 31,119 | $ | 3,946 | $ | 35,065 | $ | 18,000 | ||||||||
| Net income per share attributable to common shareholders: | ||||||||||||||||
| Basic | $ | 0.87 | $ | 0.11 | $ | 0.98 | $ | 0.44 | ||||||||
| Diluted | $ | 0.85 | $ | 0.10 | $ | 0.95 | $ | 0.44 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 35,503 | - | 35,503 | 40,425 | ||||||||||||
| Diluted | 36,586 | - |
36,586 |
41,158 | ||||||||||||
|
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under | under | under | ||||||||||||||
| ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
| (Amounts in thousands, except share amounts) | As Of | |||||||||||||||
| June 30, | December 31, | |||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 22,230 | $ | - | $ | 22,230 | $ | 26,485 | ||||||||
| Restricted cash | 7 | - | 7 | 7 | ||||||||||||
| Accounts receivable and unbilled, net | 115,398 | (11,252 | ) | 104,146 | 83,079 | |||||||||||
| Prepaid expenses and other current assets | 20,844 | - | 20,844 | 20,400 | ||||||||||||
| Total current assets | 158,479 | (11,252 | ) | 147,227 | 129,971 | |||||||||||
| Property and equipment, net | 52,360 | - | 52,360 | 48,739 | ||||||||||||
| Goodwill | 660,981 | - | 660,981 | 660,981 | ||||||||||||
| Intangible assets, net | 83,959 | - | 83,959 | 98,740 | ||||||||||||
| Deferred income taxes | 5,972 | 703 | 6,675 | 6,343 | ||||||||||||
| Other assets | 6,430 | - | 6,430 | 5,943 | ||||||||||||
| Total assets | $ | 968,181 | $ | (10,549 | ) | $ | 957,632 | $ | 950,717 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 16,859 | $ | - | $ | 16,859 | $ | 16,674 | ||||||||
| Accrued expenses | 72,925 | (47,935 | ) | 24,990 | 23,673 | |||||||||||
| Pre-funded study costs | - | 57,900 | 57,900 | 57,406 | ||||||||||||
| Advanced billings | 120,945 | (22,940 | ) | 98,005 | 73,756 | |||||||||||
| Current portion of long-term debt | 16,500 | - | 16,500 | 16,500 | ||||||||||||
| Other current liabilities | 5,933 | 1,164 | 7,097 | 4,697 | ||||||||||||
| Total current liabilities | 233,162 | (11,811 | ) | 221,351 | 192,706 | |||||||||||
| Long-term debt, net, less current portion | 147,021 | - | 147,021 | 205,111 | ||||||||||||
| Deemed landlord liability, less current portion | 25,571 | - | 25,571 | 26,602 | ||||||||||||
| Deferred income tax liability | 602 | - | 602 | 560 | ||||||||||||
| Deferred credit | 11,061 | - | 11,061 | 11,468 | ||||||||||||
| Other long-term liabilities | 10,683 | - | 10,683 | 10,740 | ||||||||||||
| Total liabilities | 428,100 | (11,811 | ) | 416,289 | 447,187 | |||||||||||
| Commitments and contingencies | ||||||||||||||||
| Shareholders’ equity: | ||||||||||||||||
| Preferred stock - $0.01 par-value; 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | - | - | - | - | ||||||||||||
| Common stock - $0.01 par-value; 250,000,000 shares authorized at June 30, 2018 and December 31, 2017, respectively; 35,545,233 and 35,466,510 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 356 | - | 356 | 355 | ||||||||||||
| Treasury stock - 200,000 shares at June 30, 2018 and December 31, 2017 | (6,030 | ) | - | (6,030 | ) | (6,030 | ) | |||||||||
| Additional paid-in capital | 634,469 | - | 634,469 | 630,341 | ||||||||||||
| Accumulated deficit | (86,599 | ) | 1,262 | (85,337 | ) | (120,402 | ) | |||||||||
| Accumulated other comprehensive loss | (2,115 | ) | - | (2,115 | ) | (734 | ) | |||||||||
| Total shareholders’ equity | 540,081 | 1,262 | 541,343 | 503,530 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 968,181 | $ | (10,549 |
) |
$ | 957,632 | $ | 950,717 | |||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under |
|
under | under | |||||||||||||
| ASC 606 |
Adjustments |
ASC 605 | ASC 605 | |||||||||||||
| (Amounts in thousands) | Six Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net income | $ | 31,119 | $ | 3,946 | $ | 35,065 | $ | 18,000 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Depreciation | 4,540 | - | 4,540 | 4,231 | ||||||||||||
| Amortization | 14,781 | - | 14,781 | 18,910 | ||||||||||||
| Stock-based compensation expense | 2,954 | - | 2,954 | 2,234 | ||||||||||||
| Amortization of debt issuance costs and discount | 317 | - | 317 | 332 | ||||||||||||
| Deferred income tax benefit | (286 | ) | - | (286 | ) | (864 | ) | |||||||||
| Amortization and adjustment of deferred credit | (407 | ) | - | (407 | ) | - | ||||||||||
| Other | 743 | - | 743 | (744 | ) | |||||||||||
| Changes in assets and liabilities: | ||||||||||||||||
| Accounts receivable and unbilled, net | (20,289 | ) | (1,623 | ) | (21,912 | ) | 3,405 | |||||||||
| Prepaid expenses and other current assets | (804 | ) | - | (804 | ) | (519 | ) | |||||||||
| Accounts payable | 1,375 | - | 1,375 | (2,855 | ) | |||||||||||
| Accrued expenses | 14,184 | (12,589 | ) | 1,595 | (8,398 | ) | ||||||||||
| Pre-funded study costs | - | 504 | 504 | (3,510 | ) | |||||||||||
| Advanced billings | 15,846 | 8,598 | 24,444 | (294 | ) | |||||||||||
| Other assets and liabilities, net | 568 | 1,164 | 1,732 | (195 | ) | |||||||||||
| Net cash provided by operating activities | 64,641 | - | 64,641 | 29,733 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Property and equipment expenditures | (9,793 | ) | - | (9,793 | ) | (6,019 | ) | |||||||||
| Acquisition of intangibles | - | - | - | (515 | ) | |||||||||||
| Other | (178 | ) | - | (178 | ) | 29 | ||||||||||
| Net cash used in investing activities | (9,971 | ) | - | (9,971 | ) | (6,505 | ) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Proceeds from stock option exercises | 1,175 | - | 1,175 | 955 | ||||||||||||
| Repurchases of common stock | - | - | - | (26,405 | ) | |||||||||||
| Payment of debt | (8,250 | ) | - | (8,250 | ) | (6,187 | ) | |||||||||
| Payments on revolving loan | (50,000 | ) | - | (50,000 | ) | - | ||||||||||
| Payment of deemed landlord liability | (910 | ) | - | (910 | ) | (813 | ) | |||||||||
| Net cash used in financing activities | (57,985 | ) | - | (57,985 | ) | (32,450 | ) | |||||||||
| EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (940 | ) | - | (940 | ) | 1,145 | ||||||||||
| DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (4,255 | ) | - | (4,255 | ) | (8,077 | ) | |||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | 26,492 | - | 26,492 | 37,407 | ||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | 22,237 | $ | - | $ | 22,237 | $ | 29,330 | ||||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) | ||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under | under | under | ||||||||||||||
| ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
| (Amounts in thousands, except per share amounts) | Three Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
| Net income (GAAP) | $ | 16,568 | $ | 2,193 | $ | 18,761 | $ | 9,553 | ||||||||
| Interest expense, net | 2,308 | - | 2,308 | 1,808 | ||||||||||||
| Income tax provision | 4,947 | 653 | 5,600 | 4,793 | ||||||||||||
| Depreciation | 2,226 | - | 2,226 | 2,101 | ||||||||||||
| Amortization | 7,390 | - | 7,390 | 9,462 | ||||||||||||
| EBITDA (Non-GAAP) | $ | 33,439 | $ | 2,846 | $ | 36,285 | $ | 27,717 | ||||||||
| Corporate campus lease payments (a) | (953 | ) | - | (953 | ) | (936 | ) | |||||||||
| Other transaction expenses (c) | 448 | - | 448 | - | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 32,934 | $ | 2,846 | $ | 35,780 | $ | 26,781 | ||||||||
| Net income margin (GAAP) | 9.7 | % | 15.9 | % | 10.1 | % | ||||||||||
| Adjusted EBITDA margin (Non-GAAP) | 19.4 | % | 30.4 | % | 28.3 | % | ||||||||||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||||||||||
| Net income (GAAP) | $ | 16,568 | $ | 2,193 | 18,761 | $ | 9,553 | |||||||||
| Amortization | 7,390 | - | 7,390 | 9,462 | ||||||||||||
| Corporate campus lease payments - principal portion (a) | (459 | ) | - | (459 | ) | (409 | ) | |||||||||
| Other transaction expenses (c) | 448 | - | 448 | - | ||||||||||||
| Deferred financing fees (b) | 158 | - | 158 | 167 | ||||||||||||
| Income tax effect of adjustments (d) | (1,734 | ) | - | (1,734 | ) | (3,319 | ) | |||||||||
| Adjusted net income (Non-GAAP) | $ | 22,371 | $ | 2,193 | $ | 24,564 | $ | 15,454 | ||||||||
| Net income per diluted share (GAAP) | $ | 0.45 | $ | 0.06 | $ | 0.51 | $ | 0.23 | ||||||||
| Adjusted net income per diluted share (Non-GAAP) | $ | 0.61 | $ | 0.06 | $ | 0.67 | $ | 0.38 | ||||||||
| Diluted average common shares outstanding | 36,664 | - | 36,664 | 40,825 | ||||||||||||
| RECONCILIATION OF ADJUSTED DIRECT COSTS | ||||||||||||||||
| Total direct costs (GAAP) | $ | 116,676 | (36,154 | ) | 80,522 | $ | 63,619 | |||||||||
| Corporate campus lease payments (a) | 772 | - | 772 | 795 | ||||||||||||
| Adjusted total direct costs (Non-GAAP) | $ | 117,448 | $ | (36,154 | ) | $ | 81,294 | $ | 64,414 | |||||||
| RECONCILIATION OF ADJUSTED DIRECT SERVICE COSTS | ||||||||||||||||
| Direct service costs, excluding depreciation and amortization (GAAP) | $ | 61,478 | $ | - | 61,478 | $ | 51,955 | |||||||||
| Corporate campus lease payments (a) | 772 | - | 772 | 795 | ||||||||||||
| Adjusted direct service costs (Non-GAAP) | $ | 62,250 | $ | - | $ | 62,250 | $ | 52,750 | ||||||||
| RECONCILIATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE | ||||||||||||||||
| Selling, general and administrative (GAAP) | $ | 20,507 | $ | - | 20,507 | $ | 14,755 | |||||||||
| Corporate campus lease payments (a) | 181 | - | 181 | 141 | ||||||||||||
| Other transaction expenses (c) | (448) | - | (448) | - | ||||||||||||
| Adjusted selling, general and administrative (Non-GAAP) | $ | 20,240 | $ | - | $ | 20,240 | $ | 14,896 | ||||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) | ||||||||||||||||
| As Reported | As Revised | As Reported | ||||||||||||||
| under | under | under | ||||||||||||||
| ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
| (Amounts in thousands, except per share amounts) | Six Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2018 | 2018 | 2018 | 2017 | |||||||||||||
| RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
| Net income (GAAP) | $ | 31,119 | $ | 3,946 | $ | 35,065 | $ | 18,000 | ||||||||
| Interest expense, net | 4,617 | - | 4,617 | 3,602 | ||||||||||||
| Income tax provision | 8,053 | 1,164 | 9,217 | 10,124 | ||||||||||||
| Depreciation | 4,540 | - | 4,540 | 4,231 | ||||||||||||
| Amortization | 14,781 | - | 14,781 | 18,910 | ||||||||||||
| EBITDA (Non-GAAP) | $ | 63,110 | $ | 5,110 | $ | 68,220 | $ | 54,867 | ||||||||
| Corporate campus lease payments (a) | (1,906 | ) | - | (1,906 | ) | (1,872 | ) | |||||||||
| Other transaction expenses (c) | 448 | - | 448 | - | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 61,652 | $ | 5,110 | $ | 66,762 | $ | 52,995 | ||||||||
| Net income margin (GAAP) | 9.3 | % | 15.5 | % | 9.6 | % | ||||||||||
| Adjusted EBITDA margin (Non-GAAP) | 18.5 | % | 29.5 | % | 28.1 | % | ||||||||||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||||||||||
| Net income (GAAP) | $ | 31,119 | $ | 3,946 | $ | 35,065 | $ | 18,000 | ||||||||
| Amortization | 14,781 | - | 14,781 | 18,910 | ||||||||||||
| Corporate campus lease payments - principal portion (a) | (910 | ) | - | (910 | ) | (813 | ) | |||||||||
| Other transaction expenses (c) | 448 | - | 448 | - | ||||||||||||
| Deferred financing fees (b) | 317 | - | 317 | 332 | ||||||||||||
| Income tax effect of adjustments (d) |
(3,367 |
) | - |
(3,367 |
) | (6,634 | ) | |||||||||
| Adjusted net income (Non-GAAP) | $ |
42,388 |
$ | 3,946 | $ |
46,334 |
$ | 29,795 | ||||||||
| Net income per diluted share (GAAP) | $ | 0.85 | $ | 0.10 | $ | 0.95 | $ | 0.44 | ||||||||
| Adjusted net income per diluted share (Non-GAAP) | $ | 1.16 | $ | 0.11 | $ | 1.27 | $ | 0.72 | ||||||||
| Diluted average common shares outstanding |
36,586 |
- |
36,586 |
41,158 | ||||||||||||
| RECONCILIATION OF ADJUSTED DIRECT COSTS | ||||||||||||||||
| Total direct costs (GAAP) | $ | 233,930 | $ | (78,050 | ) | $ | 155,880 | $ | 127,554 | |||||||
| Corporate campus lease payments (a) | 1,544 | - | 1,544 | 1,591 | ||||||||||||
| Adjusted total direct costs (Non-GAAP) | $ | 235,474 | $ | (78,050 | ) | $ | 157,424 | $ | 129,145 | |||||||
| RECONCILIATION OF ADJUSTED DIRECT SERVICE COSTS | ||||||||||||||||
| Direct service costs, excluding depreciation and amortization (GAAP) | $ | 121,819 | $ | - | $ | 121,819 | $ | 103,060 | ||||||||
| Corporate campus lease payments (a) | 1,544 | - | 1,544 | 1,591 | ||||||||||||
| Adjusted direct service costs (Non-GAAP) | $ | 123,363 | $ | - | $ | 123,363 | $ | 104,651 | ||||||||
| RECONCILIATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE | ||||||||||||||||
| Selling, general and administrative (GAAP) | $ | 36,506 | $ | - | $ | 36,506 | $ | 29,909 | ||||||||
| Corporate campus lease payments (a) | 362 | - | 362 | 281 | ||||||||||||
| Other transaction expenses (c) | (448) | - | (448) | - | ||||||||||||
| Adjusted selling, general and administrative (Non-GAAP) | $ | 36,420 | $ | - | $ | 36,420 | $ | 30,190 | ||||||||
|
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
||||||||||||||||||||||||
|
FY 2018 GUIDANCE RECONCILIATION UNDER ASC 605 (UNAUDITED) |
||||||||||||||||||||||||
|
(Amounts in millions, except per share amounts) |
Forecast 2018 | Forecast 2018 | ||||||||||||||||||||||
| Adjusted Diluted Earnings | Year ended | |||||||||||||||||||||||
| Adjusted Net Income | Per Share | December 31, 2017 | ||||||||||||||||||||||
| Adjusted | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Adjusted | per diluted | |||||||||||||||||||||||
| Low | High | Low | High | Net Income | share | |||||||||||||||||||
| Net income and diluted earnings per share (GAAP) | $ | 69.8 | $ | 73.9 | $ | 1.90 | $ | 2.01 | $ | 39.1 | $ | 0.98 | ||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Amortization | 29.6 | 29.6 | 0.81 | 0.81 | 37.9 | 0.95 | ||||||||||||||||||
| Other transaction expenses (c) | 0.4 | 0.4 | 0.01 | 0.01 | 0.8 | 0.02 | ||||||||||||||||||
|
Corporate campus lease payments - principal portion (a) |
(1.9 | ) | (1.9 | ) | (0.05 | ) | (0.05 | ) | (1.6 | ) | (0.04 | ) | ||||||||||||
| Deferred financing fees (b) | 0.7 | 0.7 | 0.02 | 0.02 | 0.7 | 0.02 | ||||||||||||||||||
| Income tax effect of adjustments (d) | (6.6 | ) | (6.7 | ) | (0.18 | ) | (0.18 | ) | (13.6 | ) | (0.34 | ) | ||||||||||||
| Tax reform adjustments (e) | - | - | - | - | (2.8 | ) | (0.07 | ) | ||||||||||||||||
|
Adjusted net income and adjusted net income per diluted share (Non-GAAP) |
$ | 92.0 | $ | 96.0 | $ | 2.51 | $ | 2.62 | $ | 60.5 | $ | 1.52 | ||||||||||||
| Depreciation | 9.4 | 9.4 | ||||||||||||||||||||||
| Income tax provision | 27.2 | 29.2 | ||||||||||||||||||||||
| Interest expense, net | 6.4 | 6.4 | ||||||||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 135.0 | $ | 141.0 | ||||||||||||||||||||
| (a) | Represents cash rental payments on two corporate headquarter buildings that are accounted for as deemed assets and subject to depreciation expense over the life of the lease. Payments made for these leases are accounted for with a principal portion and an interest portion, consistent with deemed landlord liability accounting. The interest portion of these payments is included in net cash provided by operating activities in our statement of cash flows. The principal portion is reflected as a financing activity in our statement of cash flows. These adjustments for purposes of arriving at Adjusted EBITDA, Adjusted Direct costs, Adjusted Selling, general and administrative expenses and Adjusted Net Income have the effect of presenting these leases consistently with all other office lease rentals that we have globally. | |
| (b) | Represents amortization of the discount and issuance costs deferred on the consolidated balance sheet associated with the issuance of the Senior Secured Credit Facility. | |
| (c) | Represents advisory costs and other fees incurred in connection with the 2017 S-3 registration statement and follow-on offerings. | |
| (d) | Represents the tax effect of the total adjustments at 36% for 2017. Second quarter of 2018 is reflective of an estimated effective tax rate of 23%. For full year 2018 guidance, a tax rate of 22.0% to 25.0% is assumed. | |
| (e) | Consists of one time adjustments due to U.S. federal tax reform passed in December 2017, including revaluation of deferred credit, partially offset by revaluation of deferred tax assets and deferred tax liabilities, transition tax, and other miscellaneous tax reform related items. |
