Market Overview

Medpace Holdings, Inc. Reports Second Quarter 2018 Results

Share:
  • Revenue was $170.1 million in the second quarter of 2018. (Under
    ASC 605, net service revenue of $117.8 million increased 24.6% from
    net service revenue of $94.6 million for the comparable prior-year
    period, representing a backlog conversion rate of 21.5%.)
  • Net new business awards were $239.9 million in the second quarter.
    (Under ASC 605, net new business awards were $155.9 million in the
    second quarter, representing an increase of 47.9% from net new
    business awards of $105.4 million for the comparable prior-year
    period, which resulted in a net book-to-bill ratio of 1.32x.)
  • GAAP net income was $16.6 million, or $0.45 per diluted share, and
    net income margin was 9.7% in the second quarter of 2018. (Under ASC
    605, second quarter 2018 GAAP net income 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 comparable prior-year period. Net income
    margin was 15.9% and 10.1% for the second quarter of 2018 and 2017,
    respectively.)
  • Adjusted EBITDA was $32.9 million for the second quarter of 2018,
    resulting in an Adjusted EBITDA margin of 19.4%. (Under ASC 605,
    Adjusted EBITDA of $35.8 million for the second quarter increased
    33.6% from the comparable prior-year period, resulting in an Adjusted
    EBITDA margin of 30.4%.)
  • Adjusted Net Income was $22.4 million, or $0.61 per diluted share,
    for the second quarter of 2018. (Under ASC 605, Adjusted Net Income of
    $24.6 million for the second quarter increased 58.9% from the
    comparable prior-year period. Adjusted Net Income per diluted share of
    $0.67 for the second quarter of 2018 increased 76.3% from the
    comparable prior-year period.)

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.

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