Medpace Holdings, Inc. Reports Fourth Quarter and Full Year 2018 Results
Medpace Holdings, Inc. (Nasdaq: MEDP) (“Medpace”) today announced
financial results for the fourth quarter and full year ended December
31, 2018.
Fourth Quarter and Full Year 2018 Financial Results under ASC 606
Revenue for the three and twelve months ended December 31, 2018 was
$192.1 million and $704.6 million, respectively. Backlog as of December
31, 2018 was $1.1 billion and net new business awards were $231.2
million, representing a net book-to-bill ratio of 1.20x for the fourth
quarter of 2018. For the full year 2018, net new business awards were
$899.4 million, representing a net book-to-bill ratio of 1.28x. The
Company calculates the net book-to-bill ratio by dividing net new
business awards by revenue.
For the fourth quarter of 2018 and full year 2018, total direct costs
were $131.1 million and $489.1 million, respectively. Adjusted direct
costs were $131.9 million and $492.2 million in the fourth quarter of
2018 and full year 2018, respectively. Selling, general and
administrative (SG&A) expenses were $20.6 million and Adjusted SG&A
expenses were $20.8 million for the fourth quarter of 2018. For the full
year 2018, SG&A expenses were $75.7 million and Adjusted SG&A expenses
were $75.7 million.
GAAP net income for the fourth quarter of 2018 was $22.8 million, or
$0.61 per diluted share, which resulted in a net income margin of 11.8%.
GAAP net income for the full year of 2018 was $73.2 million, or $1.97
per diluted share, which resulted in a net income margin of 10.4%.
Adjusted EBITDA for the fourth quarter of 2018 was $39.7 million, or
20.7% of revenue. Adjusted EBITDA for the full year of 2018 was $137.8
million, or 19.6% of revenue. Adjusted Net Income was $28.1 million, and
Adjusted Net Income per diluted share was $0.76 for the fourth quarter
of 2018. Adjusted Net Income was $95.5 million, and Adjusted Net Income
per diluted share was $2.59 for the full year of 2018.
Fourth Quarter and Full Year 2018 Financial Results under ASC 605
Net service revenue for the three months ended December 31, 2018
increased 28.6% to $127.9 million, compared to $99.4 million for the
comparable prior-year period. Net service revenue for the year ended
December 31, 2018 increased 23.7% to $478.1 million, compared to $386.5
million for the year ended December 31, 2017. On a constant currency
basis, net service revenue for the fourth quarter of 2018 increased
29.1% compared to the fourth quarter of 2017 and increased 23.4% for the
year ended December 31, 2018 compared to the year ended December 31,
2017.
Backlog as of December 31, 2018 grew 19.4% to $626.1 million from $524.4
million as of December 31, 2017. Net new business awards were $146.7
million, representing a net book-to-bill ratio of 1.15x for the fourth
quarter of 2018, as compared to $114.7 million for the comparable
prior-year period. For the year ended December 31, 2018, net new
business awards were $581.0 million, representing a net book-to-bill
ratio of 1.22x, compared to $426.1 million for the year ended December
31, 2017.
For the fourth quarter of 2018, Direct service costs, excluding
depreciation and amortization, were $67.9 million, compared to $55.6
million in the fourth quarter of 2017. Adjusted Direct service costs
were $68.7 million for the fourth quarter 2018, compared to $56.4
million in the fourth quarter of 2017. For the full year 2018, Direct
service costs, excluding depreciation and amortization, were $252.3
million, compared to $211.8 million in the full year 2017. Adjusted
Direct service costs were $255.4 million for the full year 2018,
compared to $215.0 million in the full year 2017.
SG&A expenses were $20.6 million in the fourth quarter of 2018, compared
to $16.8 million in the fourth quarter of 2017. Adjusted SG&A expenses
were $20.8 million for the fourth quarter 2018 versus $16.4 million in
the fourth quarter of 2017. For the full year 2018, SG&A expenses were
$75.7 million, compared to $63.4 million for the full year 2017.
Adjusted SG&A expenses were $75.7 million for the full year 2018 versus
$63.1 million for the full year 2017.
GAAP net income for the fourth quarter of 2018 was $22.5 million, or
$0.60 per diluted share, versus GAAP net income of $11.3 million, or
$0.30 per diluted share, for the fourth quarter of 2017. This resulted
in a net income margin of 17.6% and 11.4% for the fourth quarter of 2018
and 2017, respectively. GAAP net income for full year 2018 was $81.6
million, or $2.20 per diluted share, versus GAAP net income of $39.1
million, or $0.98 per diluted share, for the full year 2017. This
resulted in a net income margin of 17.1% and 10.1% for the full year
2018 and 2017, respectively.
Adjusted EBITDA for the fourth quarter of 2018 increased 43.0% to $38.6
million, or 30.2% of net service revenue, compared to $27.0 million, or
27.2% of net service revenue, for the comparable prior-year period.
Adjusted EBITDA for the full year 2018 increased 37.0% to $148.0
million, or 31.0% of net service revenue, compared to $108.0 million, or
28.0% of net service revenue, for the prior year. On a constant currency
basis, Adjusted EBITDA for the fourth quarter of 2018 increased 38.0%
from the fourth quarter of 2017 and increased 36.2% for the full year
2018 compared to the full year 2017.
Adjusted Net Income for the fourth quarter of 2018 increased 88.2% to
$27.8 million, compared to $14.8 million for the comparable prior-year
period. Adjusted Net Income per diluted share for the fourth quarter of
2018 was $0.75 compared to Adjusted Net Income per diluted share of
$0.39 for the comparable prior-year period. Adjusted Net Income for the
full year 2018 increased 71.7% to $103.8 million, compared to $60.5
million for the prior year. Adjusted Net Income per diluted share for
the full year 2018 was $2.81 compared to Adjusted Net Income per diluted
share of $1.52 for the prior year.
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 $23.3 million at December
31, 2018, and the Company generated $39.4 million in cash flow from
operating activities during the fourth quarter of 2018.
Financial Guidance
For full year 2019, the Company is providing guidance under ASC 606. The
Company forecasts 2019 revenue in the range of $783.0 million to $807.0
million, representing growth of 11.1% to 14.5% over 2018 revenue of
$704.6 million. GAAP net income for full year 2019 is forecasted in the
range of $85.2 million to $89.2 million. Additionally, full year 2019
Adjusted EBITDA is expected in the range of $137.0 million to $145.0
million.
Based on forecasted 2019 revenue of $783.0 million to $807.0 million and
GAAP net income of $85.2 million to $89.2 million, diluted earnings per
share (GAAP) is forecasted in the range of $2.27 to $2.38. Adjusted Net
Income for 2019 is forecasted in the range of $97.0 million to $101.0
million, compared to Adjusted Net Income of $95.5 million for 2018.
Furthermore, Adjusted Net Income per diluted share for 2019 is expected
in the range of $2.58 to $2.69 per share.
Conference Call Details
Medpace will host a conference call at 9:00 a.m. ET, Tuesday, February
26, 2019, to discuss its fourth quarter and full year 2018 results.
To participate in the conference call, dial 800-219-7113 (domestic) or
574-990-1030 (international) using the passcode 5975717.
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,
February 26, 2019 until 12:00 p.m. ET on Tuesday, March 12, 2018. To
hear this recording, dial 855-859-2056 (domestic) or 404-537-3406
(international) using the passcode 5975717.
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 2,900 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 | ||||||||||||||||
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 | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
Revenue: | ||||||||||||||||
Revenue, net | $ | 192,115 | $ | (192,115 | ) | $ | - | $ | - | |||||||
Service revenue, net | - | 127,853 | 127,853 | 99,448 | ||||||||||||
Reimbursed out-of-pocket revenue | - | 18,142 | 18,142 | 13,234 | ||||||||||||
Total revenue | 192,115 | (46,120 | ) | 145,995 | 112,682 | |||||||||||
Operating expenses: | ||||||||||||||||
Direct service costs, excluding depreciation and amortization | 67,945 | - | 67,945 | 55,569 | ||||||||||||
Reimbursed out-of-pocket expenses | 63,188 | (45,046 | ) | 18,142 | 13,234 | |||||||||||
Total direct costs | 131,133 | (45,046 | ) | 86,087 | 68,803 | |||||||||||
Selling, general and administrative | 20,569 | - | 20,569 | 16,842 | ||||||||||||
Depreciation | 2,357 | - | 2,357 | 2,106 | ||||||||||||
Amortization | 7,390 | - | 7,390 | 9,494 | ||||||||||||
Total operating expenses | 161,449 | (45,046 | ) | 116,403 | 97,245 | |||||||||||
Income from operations | 30,666 | (1,074 | ) | 29,592 | 15,437 | |||||||||||
Other expense, net: | ||||||||||||||||
Miscellaneous income, net | 253 | - | 253 | 288 | ||||||||||||
Interest expense, net | (1,599 | ) | - | (1,599 | ) | (2,051 | ) | |||||||||
Total other expense, net | (1,346 | ) | - | (1,346 | ) | (1,763 | ) | |||||||||
Income before income taxes | 29,320 | (1,074 | ) | 28,246 | 13,674 | |||||||||||
Income tax provision | 6,559 | (804 | ) | 5,755 | 2,383 | |||||||||||
Net income | $ | 22,761 | $ | (270 | ) | $ | 22,491 | $ | 11,291 | |||||||
Net income per share attributable to common shareholders: | ||||||||||||||||
Basic | $ | 0.64 | $ | (0.01 | ) | $ | 0.63 | $ | 0.30 | |||||||
Diluted | $ | 0.61 | $ | (0.01 | ) | $ | 0.60 | $ | 0.30 | |||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 35,612 | - | 35,612 | 36,840 | ||||||||||||
Diluted | 37,198 | - | 37,198 | 37,755 | ||||||||||||
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
As Reported | As Revised | As Reported | ||||||||||||||
under | under | under | ||||||||||||||
ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
(Amounts in thousands, except per share amounts) | Twelve Months Ended | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
Revenue: | ||||||||||||||||
Revenue, net | $ | 704,589 | $ | (704,589 | ) | $ | - | $ | - | |||||||
Service revenue, net | - | 478,063 | 478,063 | 386,462 | ||||||||||||
Reimbursed out-of-pocket revenue | - | 71,305 | 71,305 | 49,690 | ||||||||||||
Total revenue | 704,589 | (155,221 | ) | 549,368 | 436,152 | |||||||||||
Operating expenses: | ||||||||||||||||
Direct service costs, excluding depreciation and amortization | 252,284 | - | 252,284 | 211,773 | ||||||||||||
Reimbursed out-of-pocket expenses | 236,775 | (165,470 | ) | 71,305 | 49,690 | |||||||||||
Total direct costs | 489,059 | (165,470 | ) | 323,589 | 261,463 | |||||||||||
Selling, general and administrative | 75,681 | - | 75,681 | 63,357 | ||||||||||||
Depreciation | 9,240 | - | 9,240 | 8,574 | ||||||||||||
Amortization | 29,561 | - | 29,561 | 37,900 | ||||||||||||
Total operating expenses | 603,541 | (165,470 | ) | 438,071 | 371,294 | |||||||||||
Income from operations | 101,048 | 10,249 | 111,297 | 64,858 | ||||||||||||
Other expense, net: | ||||||||||||||||
Miscellaneous income (expense), net | 1,060 | - | 1,060 | (354 | ) | |||||||||||
Interest expense, net | (8,157 | ) | - | (8,157 | ) | (7,559 | ) | |||||||||
Total other expense, net | (7,097 | ) | - | (7,097 | ) | (7,913 | ) | |||||||||
Income before income taxes | 93,951 | 10,249 | 104,200 | 56,945 | ||||||||||||
Income tax provision | 20,766 | 1,882 | 22,648 | 17,823 | ||||||||||||
Net income | $ | 73,185 | $ | 8,367 | $ | 81,552 | $ | 39,122 | ||||||||
Net income per share attributable to common shareholders: | ||||||||||||||||
Basic | $ | 2.05 | $ | 0.24 | $ | 2.29 | $ | 1.00 | ||||||||
Diluted | $ | 1.97 | $ | 0.23 | $ | 2.20 | $ | 0.98 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 35,547 | - | 35,547 | 39,056 | ||||||||||||
Diluted | 36,912 | - | 36,912 | 39,839 | ||||||||||||
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||||||
As Reported | As Revised | As Reported | ||||||||||||||
under | under | under | ||||||||||||||
ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
(Amounts in thousands, except share amounts) | As Of | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 23,275 | $ | - | $ | 23,275 | $ | 26,485 | ||||||||
Restricted cash | 7 | - | 7 | 7 | ||||||||||||
Accounts receivable and unbilled, net | 133,449 | (28,729 | ) | 104,720 | 83,079 | |||||||||||
Prepaid expenses and other current assets | 21,383 | 1,147 | 22,530 | 20,400 | ||||||||||||
Total current assets | 178,114 | (27,582 | ) | 150,532 | 129,971 | |||||||||||
Property and equipment, net | 52,255 | - | 52,255 | 48,739 | ||||||||||||
Goodwill | 660,981 | - | 660,981 | 660,981 | ||||||||||||
Intangible assets, net | 69,179 | - | 69,179 | 98,740 | ||||||||||||
Deferred income taxes | 713 | (389 | ) | 324 | 6,343 | |||||||||||
Other assets | 6,691 | - | 6,691 | 5,943 | ||||||||||||
Total assets | $ | 967,933 | $ | (27,971 | ) | $ | 939,962 | $ | 950,717 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | 16,737 | - | $ | 16,737 | $ | 16,674 | ||||||||||
Accrued expenses | 87,493 | (51,109 | ) | 36,384 | 23,673 | |||||||||||
Pre-funded study costs | - | 61,156 | 61,156 | 57,406 | ||||||||||||
Advanced billings | 147,935 | (41,732 | ) | 106,203 | 73,756 | |||||||||||
Current portion of long-term debt | - | - | - | 16,500 | ||||||||||||
Other current liabilities | 4,861 | (590 | ) | 4,271 | 4,697 | |||||||||||
Total current liabilities | 257,026 | (32,275 | ) | 224,751 | 192,706 | |||||||||||
Long-term debt, net, less current portion | 79,721 | - | 79,721 | 205,111 | ||||||||||||
Deemed landlord liability, less current portion | 24,484 | - | 24,484 | 26,602 | ||||||||||||
Deferred income tax liability | 439 | 2,049 | 2,488 | 560 | ||||||||||||
Deferred credit | 3,756 | - | 3,756 | 11,468 | ||||||||||||
Other long-term liabilities | 12,804 | (382 | ) | 12,422 | 10,740 | |||||||||||
Total liabilities | 378,230 | (30,608 | ) | 347,622 | 447,187 | |||||||||||
Commitments and contingencies | ||||||||||||||||
Shareholders’ equity: | ||||||||||||||||
Preferred stock - $0.01 par-value; 5,000,000 shares authorized; no shares issued and outstanding at December 31, 2018 and 2017, respectively |
- | - | - | - | ||||||||||||
Common stock - $0.01 par-value; 250,000,000 shares authorized at December 31, 2018 and 2017, respectively; 35,665,910 and 35,466,510 shares issued and outstanding at December 31, 2018 and 2017, respectively |
356 | - | 356 | 355 | ||||||||||||
Treasury stock - 200,000 shares at December 31, 2018 and 2017, respectively |
(6,030 | ) | - | (6,030 | ) | (6,030 | ) | |||||||||
Additional paid-in capital | 639,381 | - | 639,381 | 630,341 | ||||||||||||
Accumulated deficit | (41,487 | ) | 2,637 | (38,850 | ) | (120,402 | ) | |||||||||
Accumulated other comprehensive loss | (2,517 | ) | - | (2,517 | ) | (734 | ) | |||||||||
Total shareholders’ equity | 589,703 | 2,637 | 592,340 | 503,530 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 967,933 | $ | (27,971 | ) | $ | 939,962 | $ | 950,717 | |||||||
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
As Reported | As Revised | As Reported | ||||||||||||||
under | under | under | ||||||||||||||
ASC 606 | Adjustments | ASC 605 | ASC 605 | |||||||||||||
(Amounts in thousands) | Twelve Months Ended | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 73,185 | $ | 8,367 | $ | 81,552 | $ | 39,122 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||||||
Depreciation | 9,240 | - | 9,240 | 8,574 | ||||||||||||
Amortization | 29,561 | - | 29,561 | 37,900 | ||||||||||||
Stock-based compensation expense | 6,499 | - | 6,499 | 4,463 | ||||||||||||
Amortization of debt issuance costs and discount | 615 | - | 615 | 662 | ||||||||||||
Deferred income tax provision (benefit) | 3,942 | 4,002 | 7,944 | 3,237 | ||||||||||||
Amortization and adjustment of deferred credit | (7,712 | ) | - | (7,712 | ) | (8,781 | ) | |||||||||
Other | 1,653 | - | 1,653 | (673 | ) | |||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Accounts receivable and unbilled, net | (27,047 | ) | 4,842 | (22,205 | ) | (2,898 | ) | |||||||||
Prepaid expenses and other current assets | (1,241 | ) | (1,147 | ) | (2,388 | ) | (3,533 | ) | ||||||||
Accounts payable | 1,342 | - | 1,342 | 4,816 | ||||||||||||
Accrued expenses | 29,029 | (15,967 | ) | 13,062 | (1,313 | ) | ||||||||||
Pre-funded study costs | - | 3,782 | 3,782 | 5,292 | ||||||||||||
Advanced billings | 35,593 | (2,907 | ) | 32,686 | 7,735 | |||||||||||
Other assets and liabilities, net | 1,925 | (972 | ) | 953 | 2,782 | |||||||||||
Net cash provided by operating activities | 156,584 | - | 156,584 | 97,385 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Property and equipment expenditures | (16,024 | ) | - | (16,024 | ) | (11,724 | ) | |||||||||
Acquisition of intangibles | - | - | - | (569 | ) | |||||||||||
Other | (949 | ) | - | (949 | ) | 56 | ||||||||||
Net cash used in investing activities | (16,973 | ) | - | (16,973 | ) | (12,237 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from stock option exercises | 2,489 | - | 2,489 | 1,812 | ||||||||||||
Repurchases of common stock | - | - | - | (155,583 | ) | |||||||||||
Payment of debt | (72,188 | ) | - | (72,188 | ) | (12,375 | ) | |||||||||
Proceeds from revolving loan | - | - | - | 100,000 | ||||||||||||
Payments on revolving loan | (70,000 | ) | - | (70,000 | ) | (30,000 | ) | |||||||||
Payment of deemed landlord liability | (1,881 | ) | - | (1,881 | ) | (1,682 | ) | |||||||||
Net cash used in financing activities | (141,580 | ) | - | (141,580 | ) | (97,828 | ) | |||||||||
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
(1,241 | ) | - | (1,241 | ) | 1,765 | ||||||||||
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (3,210 | ) | - | (3,210 | ) | (10,915 | ) | |||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | 26,492 | - | 26,492 | 37,407 | ||||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | 23,282 | $ | - | $ | 23,282 | $ | 26,492 | ||||||||
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 | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
Net income (GAAP) | $ | 22,761 | $ | (270 | ) | $ | 22,491 | $ | 11,291 | |||||||
Interest expense, net | 1,599 | - | 1,599 | 2,051 | ||||||||||||
Income tax provision | 6,559 | (804 | ) | 5,755 | 2,383 | |||||||||||
Depreciation | 2,357 | - | 2,357 | 2,106 | ||||||||||||
Amortization | 7,390 | - | 7,390 | 9,494 | ||||||||||||
EBITDA (Non-GAAP) | $ | 40,666 | $ | (1,074 | ) | $ | 39,592 | $ | 27,325 | |||||||
Corporate campus lease payments (a) | (972 | ) | - | (972 | ) | (954 | ) | |||||||||
Other transaction expenses (c) | - | - | - | 630 | ||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 39,694 | $ | (1,074 | ) | $ | 38,620 | $ | 27,001 | |||||||
Net income margin (GAAP) | 11.8 | % | 17.6 | % | 11.4 | % | ||||||||||
Adjusted EBITDA margin (Non-GAAP) | 20.7 | % | 30.2 | % | 27.2 | % | ||||||||||
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||||||||||
Net income (GAAP) | $ | 22,761 | $ | (270 | ) | $ | 22,491 | $ | 11,291 | |||||||
Amortization | 7,390 | - | 7,390 | 9,494 | ||||||||||||
Corporate campus lease payments - principal portion (a) | (494 | ) | - | (494 | ) | (442 | ) | |||||||||
Other transaction expenses (c) | - | - | - | 630 | ||||||||||||
Deferred financing fees (b) | 144 | - | 144 | 164 | ||||||||||||
Income tax effect of adjustments (d) | (1,619 | ) | - | (1,619 | ) | (3,545 | ) | |||||||||
Tax reform adjustments (e) | (69 | ) | - | (69 | ) | (2,795 | ) | |||||||||
Adjusted net income (Non-GAAP) | $ | 28,113 | $ | (270 | ) | $ | 27,843 | $ | 14,797 | |||||||
Net income per diluted share (GAAP) | $ | 0.61 | $ | (0.01 | ) | $ | 0.60 | $ | 0.30 | |||||||
Adjusted net income per diluted share (Non-GAAP) | $ | 0.76 | $ | (0.01 | ) | $ | 0.75 | $ | 0.39 | |||||||
Diluted average common shares outstanding | 37,198 | - | 37,198 | 37,755 | ||||||||||||
RECONCILIATION OF ADJUSTED DIRECT COSTS | ||||||||||||||||
Total direct costs (GAAP) | $ | 131,133 | $ | (45,046 | ) | $ | 86,087 | $ | 68,803 | |||||||
Corporate campus lease payments (a) | 787 | - | 787 | 811 | ||||||||||||
Adjusted total direct costs (Non-GAAP) | $ | 131,920 | $ | (45,046 | ) | $ | 86,874 | $ | 69,614 | |||||||
RECONCILIATION OF ADJUSTED DIRECT SERVICE COSTS | ||||||||||||||||
Direct service costs, excluding depreciation and amortization (GAAP) | $ | 67,945 | $ | - | $ | 67,945 | $ | 55,569 | ||||||||
Corporate campus lease payments (a) | 787 | - | 787 | 811 | ||||||||||||
Adjusted direct service costs (Non-GAAP) | $ | 68,732 | $ | - | $ | 68,732 | $ | 56,380 | ||||||||
RECONCILIATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE | ||||||||||||||||
Selling, general and administrative (GAAP) | $ | 20,569 | $ | - | $ | 20,569 | $ | 16,842 | ||||||||
Corporate campus lease payments (a) | 185 | - | 185 | 143 | ||||||||||||
Other transaction expenses (c) | - | - | - | (630 | ) | |||||||||||
Adjusted selling, general and administrative (Non-GAAP) | $ | 20,754 | $ | - | $ | 20,754 | $ | 16,355 | ||||||||
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) | Twelve Months Ended | |||||||||||||||
December 31, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | |||||||||||||
RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
Net income (GAAP) | $ | 73,185 | $ | 8,367 | $ | 81,552 | $ | 39,122 | ||||||||
Interest expense, net | 8,157 | - | 8,157 | 7,559 | ||||||||||||
Income tax provision | 20,766 | 1,882 | 22,648 | 17,823 | ||||||||||||
Depreciation | 9,240 | - | 9,240 | 8,574 | ||||||||||||
Amortization | 29,561 | - | 29,561 | 37,900 | ||||||||||||
EBITDA (Non-GAAP) | $ | 140,909 | $ | 10,249 | $ | 151,158 | $ | 110,978 | ||||||||
Corporate campus lease payments (a) | (3,840 | ) | - | (3,840 | ) | (3,771 | ) | |||||||||
Other transaction expenses (c) | 726 | - | 726 | 835 | ||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 137,795 | $ | 10,249 | $ | 148,044 | $ | 108,042 | ||||||||
Net income margin (GAAP) | 10.4 | % | 17.1 | % | 10.1 | % | ||||||||||
Adjusted EBITDA margin (Non-GAAP) | 19.6 | % | 31.0 | % | 28.0 | % | ||||||||||
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||||||||||
Net income (GAAP) | $ | 73,185 | $ | 8,367 | $ | 81,552 | $ | 39,122 | ||||||||
Amortization | 29,561 | - | 29,561 | 37,900 | ||||||||||||
Corporate campus lease payments - principal portion (a) | (1,881 | ) | - | (1,881 | ) | (1,682 | ) | |||||||||
Other transaction expenses (c) | 726 | - | 726 | 835 | ||||||||||||
Deferred financing fees (b) | 615 | - | 615 | 662 | ||||||||||||
Income tax effect of adjustments (d) | (6,675 | ) | - | (6,675 | ) | (13,577 | ) | |||||||||
Tax reform adjustments (e) | (69 | ) | - | (69 | ) | (2,795 | ) | |||||||||
Adjusted net income (Non-GAAP) | $ | 95,462 | $ | 8,367 | $ | 103,829 | $ | 60,465 | ||||||||
Net income per diluted share (GAAP) | $ | 1.97 | $ | 0.23 | $ | 2.20 | $ | 0.98 | ||||||||
Adjusted net income per diluted share (Non-GAAP) | $ | 2.59 | $ | 0.22 | $ | 2.81 | $ | 1.52 | ||||||||
Diluted average common shares outstanding | 36,912 | - | 36,912 | 39,839 | ||||||||||||
RECONCILIATION OF ADJUSTED DIRECT COSTS | ||||||||||||||||
Total direct costs (GAAP) | $ | 489,059 | $ | (165,470 | ) | $ | 323,589 | $ | 261,463 | |||||||
Corporate campus lease payments (a) | 3,110 | - | 3,110 | 3,205 | ||||||||||||
Adjusted total direct costs (Non-GAAP) | $ | 492,169 | $ | (165,470 | ) | $ | 326,699 | $ | 264,668 | |||||||
RECONCILIATION OF ADJUSTED DIRECT SERVICE COSTS | ||||||||||||||||
Direct service costs, excluding depreciation and amortization (GAAP) | $ | 252,284 | $ | - | $ | 252,284 | $ | 211,773 | ||||||||
Corporate campus lease payments (a) | 3,110 | - | 3,110 | 3,205 | ||||||||||||
Adjusted direct service costs (Non-GAAP) | $ | 255,394 | $ | - | $ | 255,394 | $ | 214,978 | ||||||||
RECONCILIATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE | ||||||||||||||||
Selling, general and administrative (GAAP) | $ | 75,681 | $ | - | $ | 75,681 | $ | 63,357 | ||||||||
Corporate campus lease payments (a) | 730 | - | 730 | 566 | ||||||||||||
Other transaction expenses (c) | (726 | ) | - | (726 | ) | (835 | ) | |||||||||
Adjusted selling, general and administrative (Non-GAAP) | $ | 75,685 | $ | - | $ | 75,685 | $ | 63,088 | ||||||||
MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
FY 2019 GUIDANCE RECONCILIATION UNDER ASC 606 (UNAUDITED) | ||||||||||||||||||||||||
(Amounts in millions, except per share amounts) | Forecast 2019 | Forecast 2019 | ||||||||||||||||||||||
Adjusted Diluted Earnings | Year ended | |||||||||||||||||||||||
Adjusted Net Income | Per Share | December 31, 2018 | ||||||||||||||||||||||
Adjusted | ||||||||||||||||||||||||
Net Income | ||||||||||||||||||||||||
Adjusted |
per diluted |
|||||||||||||||||||||||
Low | High | Low | High |
Net Income |
share | |||||||||||||||||||
Net income and diluted earnings per share (GAAP) | $ | 85.2 | $ | 89.2 | $ | 2.27 | $ | 2.38 | $ | 73.2 | $ | 1.97 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
Amortization | 14.8 | 14.8 | 0.39 | 0.39 | 29.6 | 0.80 | ||||||||||||||||||
Other transaction expenses (c) | - | - | - | - | 0.7 | 0.02 | ||||||||||||||||||
Corporate campus lease payments - principal portion (a) |
- | - | - | - | (1.9 | ) | (0.05 | ) | ||||||||||||||||
Deferred financing fees (b) | 0.6 | 0.6 | 0.02 | 0.02 | 0.6 | 0.02 | ||||||||||||||||||
Income tax effect of adjustments (d) | (3.6 | ) | (3.6 | ) | (0.10 | ) | (0.10 | ) | (6.7 | ) | (0.18 | ) | ||||||||||||
Tax reform adjustments (e) | - | - | - | - | (0.1 | ) | - | |||||||||||||||||
Adjusted net income and adjusted net income per diluted share |
$ | 97.0 | $ | 101.0 | $ | 2.58 | $ | 2.69 | $ | 95.5 | $ | 2.59 | ||||||||||||
Depreciation | 9.7 | 9.7 | ||||||||||||||||||||||
Income tax provision | 28.6 | 32.6 | ||||||||||||||||||||||
Interest expense, net | 1.7 | 1.7 | ||||||||||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 137.0 | $ | 145.0 | ||||||||||||||||||||
(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. Fourth quarter of 2018 and full year 2018 is reflective of an estimated effective tax rate of 23%. For full year 2019 guidance, a tax rate of 22.0% to 24.0% is assumed. |
|
(e) |
Consists of one time adjustments in 4Q17 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, and a one-time adjustment in 2018 due to the finalization of those tax reform items. |
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