10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             .

Commission file number: 001-37856

Medpace Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	32-0434904
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5375 Medpace Way, Cincinnati, OH 45227

(Address of principal executive offices) (Zip Code)

(513) 579-9911

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Class	Number of Shares Outstanding
Common Stock $0.01 par value	35,555,874 shares outstanding as of July 27, 2018

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR QUARTERLY PERIOD ENDED JUNE 30, 2018

TABLE OF CONTENTS

Item Number		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
	PART II — OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
EXHIBIT INDEX		31
SIGNATURES		32

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share amounts)	As Of
	June 30,			December 31.
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	22,230		$	26,485
Restricted cash		7			7
Accounts receivable and unbilled, net (includes $2.1 million and $1.0 million with related parties at June 30, 2018 and December 31, 2017, respectively)		115,398			83,079
Prepaid expenses and other current assets		20,844			20,400
Total current assets		158,479			129,971
Property and equipment, net		52,360			48,739
Goodwill		660,981			660,981
Intangible assets, net		83,959			98,740
Deferred income taxes		5,972			6,343
Other assets		6,430			5,943
Total assets	$	968,181		$	950,717
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,859		$	16,674
Accrued expenses		72,925			23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)		-			57,406
Advanced billings (includes $0.6 million and $1.7 million with related parties at June 30, 2018 and December 31, 2017, respectively)		120,945			73,756
Current portion of long-term debt		16,500			16,500
Other current liabilities		5,933			4,697
Total current liabilities		233,162			192,706
Long-term debt, net, less current portion		147,021			205,111
Deemed landlord liability, less current portion		25,571			26,602
Deferred income tax liability		602			560
Deferred credit		11,061			11,468
Other long-term liabilities		10,683			10,740
Total liabilities		428,100			447,187
Commitments and contingencies (see Note 11)
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 December31, 2017, respectively		356			355
Treasury stock - 200,000 shares at June 30, 2018 and December 31, 2017		(6,030	)		(6,030	)
Additional paid-in capital		634,469			630,341
Accumulated deficit		(86,599	)		(120,402	)
Accumulated other comprehensive loss		(2,115	)		(734	)
Total shareholders’ equity		540,081			503,530
Total liabilities and shareholders’ equity	$	968,181		$	950,717

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except per share amounts)	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenue:
Revenue, net (includes $2.6 million and $4.1 million with related parties for the three and six months ended June 30, 2018, respectively)	$	170,144		$	-		$	333,221		$	-
Service revenue, net (includes $2.9million and $6.9 million with related parties for the three and six months ended June 30, 2017, respectively)		-			94,552			-			188,333
Reimbursed out-of-pocket revenue (includes $0.4 million and $1.1 million with related parties for the three and six months ended June 30, 2017, respectively)		-			11,664			-			24,494
Total revenue		170,144			106,216			333,221			212,827
Operating expenses:
Direct service costs, excluding depreciation and amortization		61,478			51,955			121,819			103,060
Reimbursed out-of-pocket expenses		55,198			11,664			112,111			24,494
Total direct costs		116,676			63,619			233,930			127,554
Selling, general and administrative		20,507			14,755			36,506			29,909
Depreciation		2,226			2,101			4,540			4,231
Amortization		7,390			9,462			14,781			18,910
Total operating expenses		146,799			89,937			289,757			180,604
Income from operations		23,345			16,279			43,464			32,223
Other expense, net:
Miscellaneous income (expense), net		478			(125	)		325			(497	)
Interest expense, net		(2,308	)		(1,808	)		(4,617	)		(3,602	)
Total other expense, net		(1,830	)		(1,933	)		(4,292	)		(4,099	)
Income before income taxes		21,515			14,346			39,172			28,124
Income tax provision		4,947			4,793			8,053			10,124
Net income	$	16,568		$	9,553		$	31,119		$	18,000
Net income per share attributable to common shareholders:
Basic	$	0.46		$	0.24		$	0.87		$	0.44
Diluted	$	0.45		$	0.23		$	0.85		$	0.44
Weighted average common shares outstanding:
Basic		35,519			40,183			35,503			40,425
Diluted		36,664			40,825			36,586			41,158

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in thousands)	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018			2017		2018			2017
Net income	$	16,568		$	9,553	$	31,119		$	18,000
Other comprehensive income
Foreign currency translation adjustments, net of taxes		(2,010	)		1,118		(1,381	)		1,714
Comprehensive income	$	14,558		$	10,671	$	29,738		$	19,714

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)	Six Months Ended
	June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	31,119		$	18,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,540			4,231
Amortization		14,781			18,910
Stock-based compensation expense		2,954			2,234
Amortization of debt issuance costs and discount		317			332
Deferred income tax benefit		(286	)		(864	)
Amortization and adjustment of deferred credit		(407	)		-
Other		743			(744	)
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(20,289	)		3,405
Prepaid expenses and other current assets		(804	)		(519	)
Accounts payable		1,375			(2,855	)
Accrued expenses		14,184			(8,398	)
Pre-funded study costs		-			(3,510	)
Advanced billings		15,846			(294	)
Other assets and liabilities, net		568			(195	)
Net cash provided by operating activities		64,641			29,733
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(9,793	)		(6,019	)
Acquisition of intangibles		-			(515	)
Other		(178	)		29
Net cash used in investing activities		(9,971	)		(6,505	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercises		1,175			955
Repurchases of common stock		-			(26,405	)
Payment of debt		(8,250	)		(6,187	)
Payments on revolving loan		(50,000	)		-
Payment of deemed landlord liability		(910	)		(813	)
Net cash used in financing activities		(57,985	)		(32,450	)
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(940	)		1,145
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(4,255	)		(8,077	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period		26,492			37,407
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	22,237		$	29,330

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2018

(1) Basis of Presentation

Description of Business

Medpace Holdings, Inc. together with its subsidiaries, (“Medpace” or the “Company”), a Delaware corporation, is a global provider of clinical research-based drug and medical device development services. The Company partners with pharmaceutical, biotechnology, and medical device companies in the development and execution of clinical trials. The Company’s drug development services focus on full service Phase I-IV clinical development services and include development plan design, coordinated central laboratory, project management, regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance new drug application submissions, and post-marketing clinical support. The Company also provides bio-analytical laboratory services, clinical human pharmacology, imaging services, and electrocardiography reading support for clinical trials.

The Company’s operations are principally based in North America, Europe, and Asia.

Unaudited Interim Financial Information

The interim condensed consolidated financial statements include the accounts of the Company, are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), and are unaudited. In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. The preparation of the interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes could differ from management’s estimates and assumptions. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2017.

Secondary Offerings

During the three and six months ended June 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 6,000,000 shares of the Company’s common stock as part of two secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.4 million during the three and six months ended June 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of June 30, 2018, Cinven owned 29.3% of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Note 3 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2017. Significant changes to our accounting policies as a result of adopting Accounting Standards Codification Topic 606 (“ASC 606”) are discussed below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be

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transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

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For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On June 30, 2018, we had approximately $1,014.2 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (ASC 606) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.  

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In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	170,144	$	(170,144	)	$	-
Service revenue, net		-		117,792			117,792
Reimbursed out-of-pocket revenue		-		19,044			19,044
Total revenue		170,144		(33,308	)		136,836
Operating expenses:
Direct service costs, excluding depreciation and amortization		61,478		-			61,478
Reimbursed out-of-pocket expenses		55,198		(36,154	)		19,044
Total direct costs		116,676		(36,154	)		80,522
Total operating expenses		146,799		(36,154	)		110,645
Income from operations		23,345		2,846			26,191
Income before income taxes		21,515		2,846			24,361
Income tax provision		4,947		653			5,600
Net income	$	16,568	$	2,193		$	18,761
Net income per share attributable to common shareholders:
Basic	$	0.46	$	0.07		$	0.53
Diluted	$	0.45	$	0.06		$	0.51
Weighted average common shares outstanding:
Basic		35,519		-			35,519
Diluted		36,664		-			36,664
	Six Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	333,221	$	(333,221	)	$	-
Service revenue, net		-		226,220			226,220
Reimbursed out-of-pocket revenue		-		34,061			34,061
Total revenue		333,221		(72,940	)		260,281
Operating expenses:
Direct service costs, excluding depreciation and amortization		121,819		-			121,819
Reimbursed out-of-pocket expenses		112,111		(78,050	)		34,061
Total direct costs		233,930		(78,050	)		155,880
Total operating expenses		289,757		(78,050	)		211,707
Income from operations		43,464		5,110			48,574
Income before income taxes		39,172		5,110			44,282
Income tax provision		8,053		1,164			9,217
Net income	$	31,119	$	3,946		$	35,065
Net income per share attributable to common shareholders:
Basic	$	0.87	$	0.11		$	0.98
Diluted	$	0.85	$	0.10		$	0.95
Weighted average common shares outstanding:
Basic		35,503		-			35,503
Diluted		36,586		-			36,586

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ASSETS	As of June 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		115,398			(11,252	)		104,146
Total current assets		158,479			(11,252	)		147,227
Deferred income taxes		5,972			703			6,675
Total assets	$	968,181		$	(10,549	)	$	957,632
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		72,925			(47,935	)		24,990
Pre-funded study costs		-			57,900			57,900
Advanced billings		120,945			(22,940	)		98,005
Other current liabilities		5,933			1,164			7,097
Total current liabilities		233,162			(11,811	)		221,351
Total liabilities		428,100			(11,811	)		416,289
Shareholders’ equity:
Accumulated deficit		(86,599	)		1,262			(85,337	)
Total shareholders’ equity		540,081			1,262			541,343
Total liabilities and shareholders’ equity	$	968,181		$	(10,549	)	$	957,632

CASH FLOWS FROM OPERATING ACTIVITIES:	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		31,119			3,946			35,065
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(20,289	)		(1,623	)		(21,912	)
Accrued expenses		14,184			(12,589	)		1,595
Pre-funded study costs		-			504			504
Advanced billings		15,846			8,598			24,444
Other assets and liabilities, net		568			1,164			1,732
Net cash provided by operating activities		64,641			-			64,641

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 will be applied on a modified retrospective basis to each prior reporting period presented and is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

(3) Net Income Per Share

Basic and diluted earnings or loss per share (“EPS”) are computed using the two-class method, which is an earnings allocation that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Restricted Stock Awards (“RSAs”) are considered participating securities because they are legally issued at the date of grant and holders are entitled to receive non-forfeitable dividends during the vesting term.

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The computation of diluted EPS includes additional common shares, such as unvested stock options with exercise prices less than the average market price of the Company’s common stock during the period (“in-the-money options”), which would be considered outstanding under the treasury stock method. The treasury stock method assumes that additional shares would have to be issued in cases where the exercise price of stock options is less than the value of the common stock being acquired because the cash proceeds received from the stock option holder would not be sufficient to acquire that same number of shares. The Company does not compute diluted EPS in cases where the inclusion of such additional shares would be anti-dilutive in effect.

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,519		40,183		35,503		40,425
RSAs		144		59		145		59
Total weighted-average shares		35,663		40,242		35,648		40,484
Earnings per common share—Basic
Net income	$	16,568	$	9,553	$	31,119	$	18,000
Less: Undistributed earnings allocated to RSAs		67		14		127		26
Net income available to common shareholders—Basic	$	16,501	$	9,539	$	30,992	$	17,974
Net income per common share—Basic	$	0.46	$	0.24	$	0.87	$	0.44
Basic weighted-average common shares outstanding		35,519		40,183		35,503		40,425
Effect of diluted shares		1,145		642		1,083		733
Diluted weighted-average shares outstanding		36,664		40,825		36,586		41,158
Net income per common share—Diluted	$	0.45	$	0.23	$	0.85	$	0.44

During the three and six months ended June 30, 2018, the Company had 24,381 and 56,881 stock options, respectively, that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period. During the three and six months ended June 30, 2017, the Company had 697,850 and 27,500 stock options, respectively, that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period.

(4) Fair Value Measurements

The Company follows accounting guidance related to fair value measurements that defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy for inputs used in measuring fair value. This hierarchy maximizes the use of “observable” inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy specifies three levels based on the inputs, as follows:

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities.

Level 2: Valuations based on directly observable inputs or unobservable inputs corroborated by market data.

Level 3: Valuations based on unobservable inputs supported by little or no market activity representing management’s determination of assumptions of how market participants would price the assets or liabilities. 

The fair value of financial instruments such as cash and cash equivalents, accounts receivable and unbilled, net, accounts payable, accrued expenses and advanced billings approximate their carrying amounts due to their short term maturities.

The Company does not have any recurring fair value measurements as of June 30, 2018. There were no transfers between Level 1, Level 2 or Level 3 during the three and six months ended June 30, 2018 or 2017.

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(5) Contract Assets and Contract Liabilities

Contract assets and liabilities are reflected in the Company’s condensed consolidated balance sheets within the accounts reflected below.  

Contract Assets

Accounts receivable represent amounts due from the Company’s customers who are concentrated primarily in the pharmaceutical, biotechnology, and medical device industries. Unbilled represents revenue recognized to date that has not been billed or is not yet contractually billable to the customer. In general, amounts become billable upon the achievement of negotiated contractual events, in accordance with predetermined payment schedules or when a reimbursable expense has been incurred. Amounts classified to unbilled are those billable to customers within one year from the respective balance sheet date.

Accounts receivable and unbilled, net consisted of the following (in thousands):

	As of
	June 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	71,062		$	55,599		$	-	$	55,599
Unbilled receivables		45,701			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,365	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	115,398		$	95,954		$	12,875	$	83,079

Unbilled receivables increased from $41.0 million at January 1, 2018, which includes adjustments of $12.9 million related to the adoption of ASC 606, to $45.7 million at June 30, 2018. The increase is primarily driven by revenue recognized on certain contracts in advance of customer invoicing.

Contract Liabilities

Advanced billings represents cash received from customers, or billed amounts per an agreed upon payment schedule, in advance of services being performed or revenue being recognized.

Advanced billings consisted of the following (in thousands):

	As of
	June 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	120,945	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

Advanced billings increased from $105.3 million at January 1, 2018, which includes adjustments of $31.5 million related to the adoption of ASC 606, to $120.9 million at June 30, 2018. The increase is primarily driven by billing and/or collection activity in the six months ended June 30, 2018 in advance of revenue being earned for delivery of service obligations.

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(6) Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(101,649	)		(92,661	)
Developed technologies		(46,304	)		(40,856	)
Other		(2,334	)		(1,989	)
Total accumulated amortization		(222,917	)		(208,136	)
Total finite-lived intangible assets, net		52,313			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	83,959		$	98,740

As of June 30, 2018, estimated amortization expense of the Company’s intangible assets for each of the next five years and thereafter is as follows (in thousands):

	Amortization
Remainder of 2018	$	14,780
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	52,313

(7) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	June 30,		December 31,
	2018		2017
Employee compensation and benefits	$	20,094	$	19,707
Project related reimbursable expenses		47,935		-
Other		4,896		3,966
Total accrued expenses	$	72,925	$	23,673

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(8) Debt

Debt consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Revolving credit facility	$	20,000		$	70,000
Term loan		144,375			152,625
Less unamortized discount		(336	)		(399	)
Less unamortized term loan debt issuance costs		(518	)		(615	)
Less current portion of long-term debt		(16,500	)		(16,500	)
Long-term debt, net, less current portion	$	147,021		$	205,111

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	8,250
2019		16,500
2020		20,625
2021		119,000
Total	$	164,375

The estimated fair value of the Company’s debt based on Level 2 inputs using the market approach, which is primarily based on rates at which the debt is traded among financial institutions, approximates the carrying value as of June 30, 2018 and December 31, 2017.

(9) Shareholder’s Equity and Stock-Based Compensation

The Company granted 537,000 awards to employees under the 2016 Incentive Award Plan, during the six months ended June 30, 2018, consisting of 439,000 stock option awards and 98,000 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 24,381 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan, during the six months ended June 30, 2018. The Company granted 727,550 stock option awards, vesting after four years, to employees under the 2016 Incentive Award Plan during the six months ended June 30, 2017. The Company granted an additional 41,346 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan during the six months ended June 30, 2017.    

Award Activity

The following table sets forth the Company’s stock option activity:

	Six Months Ended June 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		463,381		$	33.09
Exercised		(78,715	)	$	14.93
Forfeited/Expired		(130,761	)	$	22.94
Outstanding - end of period		3,036,773		$	22.67
Exercisable - end of period		1,092,261		$	15.83

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The following table sets forth the Company’s RSA/RSU activity:

	Six Months Ended
	June 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		98,000
Vested		-
Forfeited		(9,000	)
Outstanding and unvested - end of period		272,629
Cumulative vested shares - end of period		1,884,287

Stock-based compensation expense recognized in the condensed consolidated statements of operations related to all outstanding stock based compensation awards is summarized below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Total direct costs	$	901	$	573	$	1,744	$	1,115
Selling, general and administrative		586		627		1,210		1,119
Total stock-based compensation expense	$	1,487	$	1,200	$	2,954	$	2,234

(10) Income Taxes

The Company’s effective income tax rate was 23.0% and 33.4% for the three months ended June 30, 2018 and 2017, respectively. The Company’s effective income tax rate was 20.6% and 36.0% for the six months ended June 30, 2018 and 2017, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2018 varied from the U.S. statutory rate of 21% primarily due to the impact of state taxes and the benefit of uncertain tax positions coupled with a favorable tax impact associated with previously acquired tax attributes.

The Company recognized the income tax effects of the “Tax Cuts and Jobs Act” (TCJA) in its audited consolidated financial statements on our 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides Securities and Exchange Commission staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial results reflected the provisional estimate of the income tax effects of the TCJA. No subsequent adjustments have been made to the amounts recorded as of December 31, 2017, which continue to represent a provisional estimate of the impact of TCJA. Accordingly, there is no impact to the June 30, 2018 effective tax rate for such provisional amounts.  The estimate of the impact of TCJA is based on certain assumptions and the Company's current interpretation, and may change, as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.

TCJA made broad and complex changes to the U.S. tax code, including a new tax law that may subject the Company to a tax on global intangible low-taxed income (“GILTI”) beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for 2018.

(11) Commitments and Contingencies

Legal Proceedings

The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claims related to other business transactions. The Company cannot predict with certainty the outcome of such proceedings, but it believes that adequate reserves have been recorded and losses already recognized with respect to such proceedings, which were immaterial as of June 30, 2018 and December 31, 2017.  There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, the Company believes that such potential losses were immaterial as of June 30, 2018.

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(12) Related Party Transactions

Employee Loans

The Company periodically extends short term loans or advances to employees, typically upon commencement of employment.  Total receivables as a result of these employee advances of $0.2 million existed at June 30, 2018 and December 31, 2017, respectively, and are included in the Prepaid expenses and other current assets and Other assets line items of the condensed consolidated balance sheets, respectively, depending on the contractual repayment date.

Service Agreements

Coherus BioSciences, Inc. (“Coherus”)

The chief executive officer of the Company was a member of Coherus’s board of directors until his resignation in the first quarter of 2018. Coherus is no longer considered a related party as of the first quarter of 2018. During the three months ended June 30, 2017, the Company recognized service revenue from Coherus of $1.8 million and during the six months ended June 30, 2017, the Company recognized service revenue from Coherus of $5.1 million in the Company’s condensed consolidated statements of operations. In addition, the Company recognized Reimbursed out-of-pocket revenue with Coherus in the condensed consolidated statements of operations of $0.4 million during the three months ended June 30, 2017 and $1.0 million during the six months ended June 30, 2017. As of December 31, 2017, the Company had Accounts receivable and unbilled, net from Coherus of $0.3 million recorded in the condensed consolidated balance sheets. As of December 31, 2017, the Company had, from Coherus, $1.5 million of Advanced billings and $1.0 million of Pre-funded study costs, in the condensed consolidated balance sheets.

Xenon Pharmaceuticals, Inc. (“Xenon”)

Certain executives and employees of the Company, including the chief executive officer, have held equity investments in Xenon, a clinical-stage biopharmaceutical company. During the second quarter of 2017, the chief executive officer sold his entire equity position held in Xenon. Xenon is no longer considered to be a related party subsequent to this sale. The Company recognized service revenue from Xenon of $0.1 million during the three months ended June 30, 2017 and service revenue from Xenon of $0.6 million during the six months ended June 30, 2017 in the Company’s condensed consolidated statements of operations.

Cymabay Therapeutics, Inc. (“Cymabay”)

Cymabay is a clinical-stage biopharmaceutical company developing therapies to treat metabolic diseases with high unmet medical need, including serious rare and orphan disorders. During the first quarter of 2016, it was announced that a Medpace employee would join Cymabay’s board of directors. The Company and Cymabay entered into a MSA dated October 21, 2016. Subsequently, the Company and Cymabay have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from Cymabay of $1.4 million and $2.1 million, respectively, and for the three months and six months ended June 30, 2017, the Company recognized service revenue from Cymabay of $0.2 million and $0.3 million, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from Cymabay of $0.6 million and $0.1 million recorded in the condensed consolidated balance sheets.

LIB Therapeutics LLC (“LIB”)

Certain executives and employees of the Company, including the chief executive officer, are members of LIB’s board of managers. The Company entered into a MSA dated November 24, 2015 with LIB, a company that engages in research, development, marketing and commercialization of pharmaceutical drugs. Subsequently, the Company and LIB have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from LIB of $1.0 million and $1.8 million, respectively, and for the three and six months ended June 30, 2017, the Company recognized service revenue from LIB of $0.5 million and $0.6 million, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2018 and December 31, 2017, respectively, the Company had Advanced billings from LIB of $0.6 million and $0.2 million recorded in the condensed consolidated balance sheets. In addition, as of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from LIB of $1.3 million and $0.5 million recorded in the condensed consolidated balance sheets.

CinRX Pharma (“CinRx”)

Certain executives and employees of the Company, including the chief executive officer, are members of CinRx’s board of managers and/or have equity investments in CinRx, a biotech company. The Company and CinRx have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from CinRx of $0.2 million, respectively, and for the three and six months ended June 30, 2017, the Company recognized service revenue from CinRx of $0.2 million, respectively, in the Company’s condensed consolidated statements of

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operations. In addition, as of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from CinRx of $0.2 million and $0.1 million recorded in the condensed consolidated balance sheets.

Purchase of Real Estate Properties

In December 2016, the Company entered into a purchase agreement for four parcels of real estate property that are closely situated to the Medpace campus in Cincinnati, Ohio, from AT Redevelopment Company, LLC, which is wholly-owned by the Company’s chief executive officer. The purchase price of the real estate property was $0.4 million as determined by an independent third party broker's opinion of value. The transaction closed on January 11, 2017.

Leased Real Estate

Headquarters Lease

The Company entered into an operating lease for its corporate headquarters with an entity that is wholly owned by the chief executive officer of the Company. The Company has evaluated its relationship with the related party and concluded that the related party is not a variable interest entity because the Company has no direct ownership interest or relationship other than the lease. The lease for headquarters is for an initial term of twelve years through November 2022 with a renewal option for one 10-year term at prevailing market rates. The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property. Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. Lease expense recognized for each of the three months ended June 30, 2018 and 2017 was $0.6 million, respectively, and lease expense recognized for each of the six months ended June 30, 2018 and 2017 was $1.1 million, respectively. The lease expense was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations.

Deemed Assets and Deemed Landlord Liabilities

The Company entered into two multi-year lease agreements governing the occupancy of space of two buildings in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family. In accordance with the accounting guidance related to leases, the Company was deemed in substance to be the owner of the property during the construction phase and at completion. Accordingly, the Company reflected the buildings and related liabilities as deemed assets from landlord building construction in Property and equipment, net, Other current liabilities, and Deemed landlord liability, less current portion, respectively, on the condensed consolidated balance sheets. The Company assumed occupancy in 2012 and the leases expire in 2027 with the Company having one 10-year option to extend the lease term. The deemed assets are being fully depreciated, on a straight line basis, over the 15-year term of the lease. Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties. Accretion expense is being recorded over the term of the lease as a component of Interest expense, net in the Company’s condensed consolidated statements of operations. The Company paid $0.9 million and $1.0 million during the three months ended June 30, 2018 and 2017, respectively, and $1.9 million during each of the six months ended June 30, 2018 and 2017, respectively. The current and long-term portions of the Deemed landlord liability at June 30, 2018 were $2.0 million and $25.6 million, respectively. The current and long-term portions of the Deemed landlord liability at December 31, 2017 were $1.9 million and $26.6 million, respectively. The Company has recognized deemed assets, net of $15.5 million and $16.3 million at June 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets.

Travel Services

The Company incurs expenses for travel services for company executives provided by a private aviation charter company that is owned by the chief executive officer and the executive vice president of operations of the Company (“private aviation charter”). The Company may contract directly with the private aviation charter for the use of its aircraft or indirectly through a third party aircraft management and jet charter company (the “Aircraft Management Company”). The travel services provided are primarily for business purposes, with certain personal travel paid for as part of the executives’ compensation arrangements. The Aircraft Management Company also makes the private aviation charter aircraft available to third parties. The Company incurred travel expenses of $0.2 million and $0.3 million during the three months ended June 30, 2018 and 2017, respectively, and $0.6 million during the six months ended June 30, 2018 and 2017, respectively, related to these travel services. These travel expenses are recorded in Selling, general and administrative in the Company’s condensed consolidated statements of operations.

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(13) Entity Wide Disclosures

Revenue by Category

The following table disaggregates our revenue by major source (in thousands):

	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Therapeutic Area
Oncology	$	43,002	$	86,855
Other		37,059		71,276
Cardiology		24,508		48,244
Metabolic		22,890		44,945
AVAI		20,187		36,866
Central Nervous System		13,113		26,278
Endocrine		6,952		13,410
Medical Devices		2,433		5,347
Total revenue	$	170,144	$	333,221

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and with the information under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. This item and the related discussion contain forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those indicated in such forward-looking statements. Important factors that may cause such differences include, but are not limited to, those discussed under the “Forward-Looking Statements” below and “Risk Factors” in “Item 1A Risk Factors” of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, business strategy, product approvals and plans and our objectives for future operations, are forward looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions are intended to identify forward looking statements. Forward looking statements are based largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward looking statements are subject to inherent uncertainties, risks, changes in circumstances and other important factors that are difficult to predict. Moreover, we operate in a very competitive and rapidly changing environment in which new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all important factors on our business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forward looking statements we may make. In light of these risks, uncertainties and assumptions, the forward looking events and circumstances discussed may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward looking statements. We caution you therefore against relying on these forward looking statements.

We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. For a further discussion of the risks relating to our business, see “Item 1A Risk Factors” of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Business Overview

We are one of the world’s leading clinical contract research organizations, or CROs, by revenue, solely focused on providing scientifically-driven outsourced clinical development services to the biotechnology, pharmaceutical and medical device industries. Our mission is to accelerate the global development of safe and effective medical therapeutics. We differentiate ourselves from our competitors by our disciplined operating model centered on providing full-service Phase I-IV clinical development services and our therapeutic expertise. We believe this combination results in timely and cost-effective delivery of clinical development services for our customers. We believe that we are a partner of choice for small- and mid-sized biopharmaceutical companies based on our ability to consistently utilize our full-service, disciplined operating model to deliver timely and high-quality results for our customers.

We focus on conducting clinical trials across all major therapeutic areas, with particular strength in Cardiology, Metabolic Disease, Oncology, Endocrinology, Central Nervous System (“CNS”), Antiviral and Anti-infective (“AVAI”), as well as therapeutic expertise in Medical Devices. Our global platform includes approximately 2,700 employees across 36 countries, providing our customers with broad access to diverse markets and patient populations as well as local regulatory expertise and market knowledge.

How We Generate Revenue

We earn fees through the performance of services detailed in our customer contracts. Contract scope and pricing is typically based on either a fixed-fee or unit-of-service model, with consideration of activities performed by third parties, as well as ancillary costs necessary to deliver on the contract scope that are reimbursable by our customers. Our contracts can range in duration from a few months to several years. These contracts are individually priced and negotiated based on the anticipated project scope, including the complexity of the project and the performance risks inherent in the project. The majority of our contracts are structured with an upfront fee that is collected at the time of contract signing, and the balance of the fee is collected over the duration of the contract either through an arranged billing schedule or upon completion of certain performance targets or defined milestones.

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Revenue, which is distinct from billing and cash receipt, is recognized based the satisfaction of the individual performance obligations identified in each contract. Substantially all of our customer contracts consist of a single performance obligation, as the promise to transfer the individual services defined in the contracts are not separately identifiable from other promises in the contract, and therefore not distinct.  Our performance obligations are generally satisfied over time and recognized as services are performed.  The progression of our contract performance obligations are measured primarily utilizing the input method of cost to cost.  Cancellation provisions in our contracts allow our customers to terminate a contract either immediately or according to advance notice terms specified within the applicable contract, which is typically 30 days. Contract cancellation may occur for various reasons, including, but not limited to, adverse patient reactions, lack of efficacy, or inadequate patient enrollment. Upon cancellation, we are entitled to fees for services rendered and reimbursable costs incurred through the date of termination, including payment for subsequent services necessary to conclude the study or close out the contract. These fees are typically discussed and agreed upon with the customer and are realized as revenue when we believe the amount can be estimated reliably and its realization is probable.  Changes in revenue from period to period are driven primarily by new business volume and task order execution activity, project cancellations, changes in estimated costs to complete performance obligations, and the mix of active studies during a given period that can vary based on therapeutic area and or study life cycle stage.

Costs and Expenses

Our costs and expenses are comprised primarily of our total direct costs, selling, general and administrative costs, depreciation and amortization and income taxes.

Total Direct Costs

Total direct costs are primarily driven by labor and related employee benefits, but also include contracted third party service related expenses, fees paid to site investigators, reimbursed out of pocket expenses, laboratory supplies and other expenses contributing to service delivery. The other costs of service delivery can include office rent, utilities, supplies and software licenses which are allocated between Total direct costs and selling, general and administrative expenses based on the estimated contribution among service delivery and support function efforts on a percentage basis. Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope. Total direct costs, as a percentage of net service revenue, can vary from period to period due to project labor efficiencies, changes in workforce, compensation/bonus programs and service mix.

Selling, General and Administrative

Selling, general and administrative expenses are primarily driven by compensation and related employee benefits, as well as rent, utilities, supplies, software licenses, professional fees (e.g., legal and accounting expenses), bad debt expense, travel, marketing and other operating expenses.

Depreciation

Depreciation is provided on our property and equipment on the straight-line method at rates adequate to allocate the cost of the applicable assets over their estimated useful lives, which is three to five years for computer hardware, software, phone, and medical imaging equipment, five to seven years for furniture and fixtures and other equipment, and thirty to forty years for buildings. Leasehold improvements and deemed assets from landlord building construction are amortized on a straight-line basis over the shorter of the estimated useful life of the improvement or the associated remaining lease term.

Amortization

Amortization relates to finite-lived intangible assets recognized as expense using the straight-line method or using an accelerated method over their estimated useful lives, which range in term from 17 months to 15 years. 

Income Tax Provision

Income tax provision consists of federal, state and local taxes on income in multiple jurisdictions.  Our income tax is impacted by the pre-tax earnings in jurisdictions with varying tax rates and any related tax credits that may be available to us.  Our current and future provision for income taxes will vary from statutory rates due to the impact of valuation allowances in certain countries, income tax incentives, certain non-deductible expenses, and other discrete items.

Key Performance Metrics

To evaluate the performance of our business, we utilize a variety of financial and performance metrics. These key measures include new business awards, cancellations and backlog.

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New Business Awards, Cancellations and Backlog

New business awards represent the value of anticipated future revenue that has been awarded during the period that is recognized in backlog. This value is recognized upon the signing of a contract or receipt of a written pre-contract confirmation from a customer that confirms an agreement in principle on budget and scope. New business awards also include contract amendments, or changes in scope, where the customer has provided written authorization for changes in budget and scope or has approved us to perform additional work as of the measurement date. Awards may not be recognized as backlog after consideration of a number of factors, including whether (i) the relevant revenue is expected only after a pending regulatory hurdle, which might result in cancellation of the study, (ii) the customer funding needed for commencement of the study is not believed to have been secured or (iii) study timelines are uncertain or not well defined. In addition, study amounts that extend beyond a three-year timeline are not included in backlog. The number and amount of new business awards can vary significantly from period to period, and an award’s contractual duration can range from several months to several years based on customer and project specifications.

Cancellations arise in the normal course of business and are reflected when we receive written confirmation from the customer to cease work on a contractual agreement. The majority of our customers can terminate our contracts without cause upon 30 days’ notice. Similar to new business awards, the number and amount of cancellations can vary significantly period over period due to timing of customer correspondence and study-specific circumstances. Total cancellations in a period are offset against gross new business awards received in a period to determine net new business awards in our backlog calculation. On an Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”) basis, net new business awards were $239.9 million and $440.7 million for the three and six months ended June 30, 2018, respectively. On an Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”) basis, net new business awards were $155.9 million and $105.3 million for the three months ended June 30, 2018 and 2017, respectively. On an ASC 605 basis, net new business awards were $284.1 million and $199.2 million for the six months ended June 30, 2018 and 2017, respectively.

Backlog represents anticipated future net revenue from net new business awards that have not commenced or are currently in process but not complete. Reported backlog will fluctuate based on new business awards, changes in the scope of existing contracts, cancellations, revenue recognition on existing contracts and foreign exchange adjustments from non-U.S. dollar denominated backlog. On an ASC 606 basis, as of June 30, 2018, our backlog was $979.7 million. On an ASC 605 basis, as of June 30, 2018, our backlog increased by $87.7 million, or 17.7%, to $583.6 million compared to $495.9 million as of June 30, 2017. Included within backlog on an ASC 605 basis as of June 30, 2018 was approximately $335 million to $345 million that we expect to convert to net service revenue over the next twelve months, with the remainder expected to convert to net service revenue thereafter.

On an ASC 605 basis, the effect of foreign currency adjustments on backlog was as follows: unfavorable foreign currency adjustments of $1.5 million for the three months ended June 30, 2018; favorable foreign currency adjustments of $0.9 million for the six months ended June 30, 2018; favorable foreign currency adjustments of $1.3 million for the three months ended June 30, 2017; and favorable foreign currency adjustments of $1.1 million for the six months ended June 30, 2017.

Backlog and net new business award metrics may not be reliable indicators of our future period revenue as they are subject to a variety of factors that may cause material fluctuations from period to period. These factors include, but are not limited to, changes in the scope of projects, cancellations, and duration and timing of services provided.

Exchange Rate Fluctuations

The majority of our contracts and operational transactions are U.S. dollar denominated.  The Euro represents the largest foreign currency denomination of our contractual and operational exposure.  As a result, a portion of our revenue and expenses are subject to exchange rate fluctuations. We have translated the Euro into U.S. dollars using the following average exchange rates based on data obtained from www.xe.com:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
U.S. Dollars per Euro:		1.19		1.10		1.21		1.08

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Results of Operations

Three Months Ended June 30, 2018 compared to Three Months Ended June 30, 2017

	As Reported under ASC 606			Adjustments			As Revised under ASC 605			As Reported under ASC 605
	Three Months Ended
	June 30,
(Amounts in thousands, except percentages)	2018			2018			2018			2017			Change			% Change
Revenue, net	$	170,144		$	(170,144	)	$	—		$	—		$	170,144			100.0	%
Service revenue, net		—			117,792			117,792			94,552			(94,552	)		(100.0	)%
Reimbursed out-of-pocket revenue		—			19,044			19,044			11,664			(11,664	)		(100.0	)%
Total revenue		170,144			(33,308	)		136,836			106,216			63,928			60.2	%
Direct service costs, excluding depreciation and amortization		61,478			—			61,478			51,955			9,523			18.3	%
Reimbursed out-of-pocket expenses		55,198			(36,154	)		19,044			11,664			43,534			373.2	%
Total direct costs		116,676			(36,154	)		80,522			63,619			53,057			83.4	%
Selling, general and administrative		20,507			—			20,507			14,755			5,752			39.0	%
Depreciation		2,226			—			2,226			2,101			125			5.9	%
Amortization		7,390			—			7,390			9,462			(2,072	)		(21.9	)%
Total operating expenses		146,799			(36,154	)		110,645			89,937			56,862			63.2	%
Income from operations		23,345			2,846			26,191			16,279			7,066
Miscellaneous income (expense), net		478			—			478			(125	)		603
Interest expense, net		(2,308	)		—			(2,308	)		(1,808	)		(500	)
Income before income taxes		21,515			2,846			24,361			14,346			7,169
Income tax provision		4,947			653			5,600			4,793			154
Net income	$	16,568		$	2,193		$	18,761		$	9,553		$	7,015

Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017

	As Reported under ASC 606			Adjustments			As Revised under ASC 605			As Reported under ASC 605
	Six Months Ended
	June 30,
(Amounts in thousands, except percentages)	2018			2018			2018			2017			Change			% Change
Revenue, net	$	333,221		$	(333,221	)	$	—		$	—		$	333,221			100.0	%
Service revenue, net		—			226,220			226,220			188,333			(188,333	)		(100.0	)%
Reimbursed out-of-pocket revenue		—			34,061			34,061			24,494			(24,494	)		(100.0	)%
Total revenue		333,221			(72,940	)		260,281			212,827			120,394			56.6	%
Direct service costs, excluding depreciation and amortization		121,819			—			121,819			103,060			18,759			18.2	%
Reimbursed out-of-pocket expenses		112,111			(78,050	)		34,061			24,494			87,617			357.7	%
Total direct costs		233,930			(78,050	)		155,880			127,554			106,376			83.4	%
Selling, general and administrative		36,506			—			36,506			29,909			6,597			22.1	%
Depreciation		4,540			—			4,540			4,231			309			7.3	%
Amortization		14,781			—			14,781			18,910			(4,129	)		(21.8	)%
Total operating expenses		289,757			(78,050	)		211,707			180,604			109,153			60.4	%
Income from operations		43,464			5,110			48,574			32,223			11,241
Miscellaneous income (expense), net		325			—			325			(497	)		822
Interest expense, net		(4,617	)		—			(4,617	)		(3,602	)		(1,015	)
Income before income taxes		39,172			5,110			44,282			28,124			11,048
Income tax provision		8,053			1,164			9,217			10,124			(2,071	)
Net income	$	31,119		$	3,946		$	35,065		$	18,000		$	13,119

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Total Revenue

Total revenue increased by $63.9 million to $170.1 million for the three months ended June 30, 2018, from $106.2 million for the three months ended June 30, 2017. Total revenue increased by $120.4 million to $333.2 million for the six months ended June 30, 2018, from $212.8 million for the six months ended June 30, 2017. This was primarily driven by ASC 606 adoption, which resulted in an increase of $33.3 million for the three months ended June 30, 2018 and $72.9 million for the six months ended June 30, 2018. The remaining increase for the three months ended June 30, 2018 was primarily driven by growth within the AVAI, Metabolic, and other uncategorized therapeutic areas. The remaining increase for the six months ended June 30, 2018 was primarily driven by growth within the Oncology, Cardiology, and other uncategorized therapeutic areas.

Reimbursed out-of-pocket revenue decreased by $11.7 million to $0.0 million for the three months ended June 30, 2018, from $11.7 million for the three months ended June 30, 2017. Reimbursed out-of-pocket revenue decreased by $24.5 million to $0.0 million for the six months ended June 30, 2018, from $24.5 million for the six months ended June 30, 2017. This decrease was fully due to ASC 606 adoption.

Total direct costs

Total direct costs increased by $53.1 million, to $116.7 million for the three months ended June 30, 2018 from $63.6 million for the three months ended June 30, 2017. Total direct costs increased by $106.4 million, to $233.9 million for the six months ended June 30, 2018 from $127.6 million for the six months ended June 30, 2017. This was primarily driven by ASC 606 adoption, which resulted in an increase of $36.2 million for the three months ended June 30, 2018 and $78.1 million for the six months ended June 30, 2018. The remaining increase was primarily attributed to higher reimbursed out-of-pocket expenses, higher personnel costs, lab related costs and contracted services to support the growth in service activities. Reimbursed out-of-pocket expenses, which can fluctuate significantly from period to period based on the timing of program initiation or closeout, increased $7.4 million and $9.6 million for the three and six months ended June 30, 2018. The higher personnel costs portion increased by $5.8 million and $10.3 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Lab related costs increased by $2.1 million and $4.8 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Contracted service costs increased by $1.1 million and $2.4 million for the three and six months ended June 30, 2018, compared to the same period in the prior year.

Selling, general and administrative

Selling, general and administrative expenses increased by $5.8 million, to $20.5 million for the three months ended June 30, 2018 from $14.8 million for the three months ended June 30, 2017. Selling, general and administrative expenses increased by $6.6 million, to $36.5 million for the six months ended June 30, 2018 from $29.9 million for the six months ended June 30, 2017. This increase was primarily driven by higher personnel costs, bad debt expense, secondary offering costs, exit charges and local non-income tax costs. The employee related costs portion increased by $1.9 million and $3.6 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Bad debt expense increased by $1.2 million and $1.5 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Secondary offering costs increased by $0.4 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Exit charges increased by $0.5 million for the three and six months ended June 30, 2018, compared to the same period in the prior year. Local non-income tax costs increased by $0.6 million for the three months ended June 30, 2018, compared to the same period in the prior year.

Depreciation and Amortization

Depreciation and amortization expense decreased by $1.9 million, to $9.6 million for the three months ended June 30, 2018 from $11.6 for the three months ended June 30, 2017. Depreciation and amortization expense decreased by $3.8 million, to $19.3 million for the six months ended June 30, 2018 from $23.1 for the six months ended June 30, 2017.  The decrease in depreciation and amortization was primarily related to the continued amortization of our definite lived intangible assets, which are amortized on an accelerated basis.

Miscellaneous income (expense), net

Miscellaneous income (expense), net increased by $0.6 million, to $0.5 million of income for the three months ended June 30, 2018 from $0.1 million of expense for the three months ended June 30, 2017. Miscellaneous income (expense), net increased by $0.8 million, to $0.3 million of income for the six months ended June 30, 2018 from $0.5 million of expense for the six months ended June 30, 2017. These changes were mainly attributable to foreign exchange gains or losses that arise in connection with the revaluation of short-term intercompany balances between our domestic and international subsidiaries, gains or losses from foreign currency transactions, such as those resulting from the settlement of third-party accounts receivables and payables denominated in a currency other than the local currency of the entity making the payment.

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Interest expense, net

Interest expense, net increased by $0.5 million to $2.3 million for the three months ended June 30, 2018 from $1.8 million for the three months ended June 30, 2017. Interest expense, net increased by $1.0 million to $4.6 million for the six months ended June 30, 2018 from $3.6 million for the six months ended June 30, 2017. The increase in interest expense, net was related to higher average outstanding balance under our Senior Secured Revolving Credit Facility (as defined below), as well as a higher effective interest rate as a result of the variable interest rate on the Senior Secured Credit Facilities (as described below).  

Income tax provision

Income tax provision increased by $0.2 million, to $4.9 million for the three months ended June 30, 2018 from $4.8 million for the three months ended June 30, 2017. Income tax provision decreased by $2.1 million, to $8.1 million for the six months ended June 30, 2018 from $10.1 million for the six months ended June 30, 2017.  The overall effective tax rate for the three months ended June 30, 2018 was 23.0%, compared to an overall effective tax rate of 33.4% for the three months ended June 30, 2017. The overall effective tax rate for the six months ended June 30, 2018 was 20.6%, compared to an overall effective tax rate of 36.0% for the six months ended June 30, 2017. The decrease in the effective tax rate for the three and six months ended June 30, 2018 and the decrease in the income tax provision for the six months ended June 30, 2018 was primarily due to the U.S. government enacted comprehensive tax legislation commonly referred to as “Tax Cuts and Jobs Act” (TCJA), which reduced the U.S. corporate income tax rate from 35% to 21% for the three and six months ended June 30, 2018 compared to the same period in the prior year, coupled with the impact of state taxes and a favorable impact associated with uncertain tax positions and acquired tax attributes. The increase in the income tax provision for the three months ended June 30, 2018 was primarily due to an increase in pre-tax book income compared to the same period in the prior year.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal sources of liquidity are operating cash flows and funds available for borrowing under our Senior Secured Revolving Credit Facility (as defined below). As of June 30, 2018, we had cash and cash equivalents of $22.2 million, including an immaterial amount of restricted cash. Approximately $11.0 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of June 30, 2018. On December 8, 2016, the Company entered into a credit agreement (the “Senior Secured Credit Agreement”) consisting of a $165.0 million term loan (the “Senior Secured Term Loan Facility”) and a $150.0 million revolving credit facility (the “Senior Secured Revolving Credit Facility” and, together with the Senior Secured Term Loan Facility, the “Senior Secured Credit Facilities”). As of June 30, 2018, we had $129.8 million available for borrowing under our Senior Secured Revolving Credit Facility. Our expected primary cash needs on both a short and long-term basis are for investment in operational growth, capital expenditures, payment of debt, share repurchases, selective strategic bolt-on acquisitions, other investments, and other general corporate needs. We have historically funded our operations and growth with cash flow from operations and borrowings under our credit facilities. We expect to continue expanding our operations through organic growth and potentially highly selective bolt-on acquisitions and investments. We expect these activities will be funded from existing cash, cash flow from operations and, if necessary, borrowings under our existing or future credit facilities.  The Company is still evaluating the impacts of the TCJA and how it will affect the Company’s current accounting position to indefinitely reinvest unremitted foreign earnings. While we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and available borrowings under existing and future credit facilities, we would incur taxes on these earnings if the need for repatriation due to liquidity purposes arises. 

	Six Months Ended
	June 30,
Cash Flows (Amounts in thousands)	2018			2017
Net cash provided by operating activities	$	64,641		$	29,733
Net cash used in investing activities		(9,971	)		(6,505	)
Net cash used in financing activities		(57,985	)		(32,450	)
Effect of exchange rates on cash, cash equivalents and restricted cash		(940	)		1,145
Decrease in cash, cash equivalents and restricted cash	$	(4,255	)	$	(8,077	)

Cash Flow from Operating Activities

Cash flows from operations are driven mainly by net income and net movement in accounts receivable and unbilled, net, advanced billings, pre-funded liabilities, accounts payable, accrued expenses, deferred taxes and deferred credits. Accounts receivable and unbilled, net, advanced billings and pre-funded liabilities fluctuate on a regular basis as we perform our services, bill our customers and ultimately collect on those receivables. We attempt to negotiate payment terms in order to provide for payments prior to or soon after the provision of services, but this timing of collection can vary significantly on a period by period comparative basis.

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Net cash flows provided by operating activities was $64.6 million for the six months ended June 30, 2018 beginning with net income of $31.1 million. Adjustments to reconcile net income to net cash provided by operating activities were $22.6 million, primarily related to amortization of intangibles of $14.8 million, depreciation of $4.5 million and stock based compensation expense of $3.0 million. Changes in operating assets and liabilities provided $10.9 million in operating cash flows and was primarily driven by increased accrued expenses of $14.2 million, an increase in advanced billings of $15.8 million, offset by increased accounts receivable and unbilled, net of $20.3 million.

Net cash flows provided by operating activities was $29.7 million for the six months ended June 30, 2017 beginning with net income of $18.0 million. Adjustments to reconcile net income to net cash provided by operating activities were $24.1 million, primarily related to amortization of intangibles of $18.9 million, depreciation of $4.2 million and stock based compensation expense of $2.2 million, offset by $0.9 million of benefit from deferred taxes. Changes in operating assets and liabilities used $12.4 million in operating cash flows and was primarily driven by decreased accrued expenses of $8.4 million, decreased accounts payable of $2.9 million and decreased pre-funded study costs of $3.5 million offset by decreased accounts receivable and unbilled, net of $3.4 million.

Cash Flow from Investing Activities

Net cash used in investing activities was $10.0 million for the six months ended June 30, 2018 primarily consisting of property and equipment expenditures.

Net cash used in investing activities was $6.5 million for the six months ended June 30, 2017 primarily consisting of property and equipment expenditures and an acquisition of intangible assets.

Cash Flow from Financing Activities

Net cash used in financing activities was $58.0 million for the six months ended June 30, 2018 primarily related to $50.0 million in principal payments on our Senior Secured Revolving Credit Facility and $8.3 million in principal payments on our Senior Secured Term Loan Facility.

Net cash used in financing activities was $32.5 million for the six months ended June 30, 2017 primarily related to $26.4 million in repurchases of common stock and $6.2 million in principal payments on our Senior Secured Term Loan Facility.

Indebtedness

As of June 30, 2018, we had total indebtedness of $164.4 million, which was attributed to outstanding borrowings on the Senior Secured Credit Facilities. There was $20.0 million in outstanding borrowings under the Senior Secured Revolving Credit Facility as of June 30, 2018. As of June 30, 2018, we had $0.2 million in letters of credit outstanding related to certain operating lease obligations, which are secured by the Senior Secured Revolving Credit Facility. See Note 8 to our audited consolidated financial statements on our 2017 Annual Report on Form 10-K for details regarding our Senior Secured Credit Facilities.

Contractual Obligations and Commercial Commitments

We have various contractual obligations, which are recorded as liabilities in our condensed consolidated financial statements. Other items, such as operating lease obligations, are not recognized as liabilities in our condensed consolidated financial statements but are required to be disclosed. The following table summarizes future payments and interest related to indebtedness for the partial and full years subsequent to the quarter ended June 30, 2018.

There have been no material changes, except as follows, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

	Payments Due by Period
Contractual Obligations (In thousands)	Total		Remaining 2018		1-3 years		3-5 years		More than 5 years
Long-term debt obligations	$	164,375	$	8,250	$	37,125	$	119,000	$	-
Interest on long-term debt		17,530		3,022		10,553		3,955	-

Principal payments in the above table are based on the terms contained in our agreements. Interest payments are based on the interest rate in effect on June 30, 2018.

Off-Balance Sheet Arrangements

Off balance sheet arrangements refer to any transaction, agreement or other contractual arrangement to which an entity not consolidated under our entity structure exists, where we have an obligation arising under a guarantee contract, derivative instrument or

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variable interest or a retained or contingent interest in assets transferred to such an entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. We have no off balance sheet arrangements currently.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, requires us to make a variety of decisions which affect reported amounts and related disclosures, including the selection of appropriate accounting principles and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgment based on our understanding and analysis of the relevant circumstances, including our historical experience and other assumptions. Actual results could differ from our estimates. We are committed to incorporating accounting principles, assumptions and estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information included in the financial statements.

There have been no significant changes in the critical accounting policies and estimates as previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, except for the below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018.  Revenue on contracts is recognized,  when or as we satisfy the contract performance obligations by transferring control of the services provided to the customer, at the amount that reflects the consideration to which we expect to be entitled in exchange for transferring those services.  Our performance obligations are generally satisfied over time and recognized as work progresses.

Contract Assumptions

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs.  We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred while performing our contacted obligations.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, labor productivity, the complexity of the study, the participating geographic locations and the Company’s historical experience.  To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer.  If our customers do not agree to pricing changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met.  These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when

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there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct.  Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress.  Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress.  These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

Effect of Recent Accounting Pronouncements

Refer to Note 2 of the Condensed Consolidated Financial Statements for management’s discussion of the effect of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2018.

Changes in Internal Control over Financial Reporting

During the six months ended June 30, 2018, we implemented material changes to our revenue recognition processes in response to the adoption of ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” that became effective January 1, 2018. These included the development of new policies based on the five-step model provided in the new revenue standard, new training, ongoing contract review requirements, and gathering of information provided for disclosures. The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls over financial reporting. Other than these changes, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 28 -

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are party to legal proceedings incidental to our business. While the outcome of these matters could differ from management’s expectations, we do not believe that the resolution of these matters is reasonably likely to have a material adverse effect to our financial statements.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. There have been no significant changes from the risk factors previously disclosed in our Annual Report.

Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds

Recent Sales of Unregistered Securities

On April 2, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,481 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $24,000.

On April 3, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 555 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $9,000.

On April 5, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 370 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $6,000.

On April 10, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 333 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $4,800.

On May 2, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 278 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $4,500.

On May 3, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 666 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $9,600.

On May 7, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,000 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $14,400.

On May 14, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 2,500 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $36,000.

On May 16, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,416 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $22,900 and 592 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $8,500.

On May 18, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 3,611 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $52,000.

On May 24, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,111 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $18,000 and 1,944 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $28,000.

On June 4, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,389 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $22,500 and 4,166 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $60,000.

On June 10, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 463 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $6,700.

- 29 -

On June 11, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 200 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $3,200 and 5,591 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $80,600.

On June 12, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 2,222 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $32,000.

On June 13, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 892 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $12,900.

On June 14, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 4,444 shares of our common stock at a price of $16.88 per share for an aggregate purchase price of approximately $75,000.

On June 15, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 1,462 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $21,100.

On June 19, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 833 shares of our common stock at a price of $16.20 per share for an aggregate purchase price of approximately $13,500 and 1,388 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $20,000.

On June 21, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 259 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $3,700.

On June 25, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 740 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $10,700.

On June 28, 2018, employees exercised stock options granted under the 2014 Equity Incentive Plan to purchase a total of 648 shares of our common stock at a price of $14.41 per share for an aggregate purchase price of approximately $9,300.

All of the forgoing transactions are exempt from registration pursuant to Rule 701 promulgated under the Securities Act of 1933, as amended.

Use of Proceeds from Registered Securities

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits in the accompanying Exhibit Index preceding the signature page are filed or furnished as a part of this report and are incorporated herein by reference.

- 30 -

EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed/ Furnished Herewith
31.1	Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer					*
31.2	Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer					*
32.1	Section 1350 Certification of Chief Executive Officer					**
32.2	Section 1350 Certification of Chief Financial Officer					**
101.INS	XBRL Instance Document					*
101.SCH	XBRL Taxonomy Extension Schema Document					*
101.CAL	XBRL Taxonomy Calculation Linkbase Document					*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document					*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document					*
101.PRE	XBRL Taxonomy Extension Presentation					*

* Filed herewith.

** Furnished herewith.

- 31 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDPACE HOLDINGS, INC.

/s/ Jesse J. Geiger

Jesse J. Geiger

Chief Financial Officer, and Chief Operating Officer, Laboratory Operations

(Authorized Officer and Principal Financial Officer)

Date: July 31, 2018

- 32 -

EX-31.1

Exhibit 31.1

I, Dr. August J. Troendle, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Medpace Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2018

/s/ August J. Troendle

Dr. August J. Troendle

President, Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Jesse Geiger, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Medpace Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2018

/s/ Jesse Geiger

Jesse Geiger

Chief Financial Officer and Chief Operating Officer, Laboratory Operations

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medpace Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. August J. Troendle, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: July 31, 2018

By:	/s/ August J. Troendle
	Dr. August J. Troendle
	President, Chief Executive Officer and Chairman of the Board of Directors
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medpace Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jesse Geiger, Chief Financial Officer and Chief Operating Officer, Laboratory Operations of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: July 31, 2018

By:	/s/ Jesse Geiger
	Jesse Geiger
	Chief Financial Officer and Chief Operating Officer, Laboratory Operations
	(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 27, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Trading Symbol	MEDP
Entity Registrant Name	Medpace Holdings, Inc.
Entity Central Index Key	0001668397
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,555,874

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 22,230	$ 26,485
Restricted cash	7	7
Accounts receivable and unbilled, net (includes $2.1 million and $1.0 million with related parties at June 30, 2018 and December 31, 2017, respectively)	115,398	83,079
Prepaid expenses and other current assets	20,844	20,400
Total current assets	158,479	129,971
Property and equipment, net	52,360	48,739
Goodwill	660,981	660,981
Intangible assets, net	83,959	98,740
Deferred income taxes	5,972	6,343
Other assets	6,430	5,943
Total assets	968,181	950,717
Current liabilities:
Accounts payable	16,859	16,674
Accrued expenses	72,925	23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0	57,406
Advanced billings (includes $0.6 million and $1.7 million with related parties at June 30, 2018 and December 31, 2017, respectively)	120,945	73,756
Current portion of long-term debt	16,500	16,500
Other current liabilities	5,933	4,697
Total current liabilities	233,162	192,706
Long-term debt, net, less current portion	147,021	205,111
Deemed landlord liability, less current portion	25,571	26,602
Deferred income tax liability	602	560
Deferred credit	11,061	11,468
Other long-term liabilities	10,683	10,740
Total liabilities	428,100	447,187
Commitments and contingencies (see Note 11)
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	0	0
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	355
Treasury stock - 200,000 shares at June 30, 2018 and December 31, 2017	(6,030)	(6,030)
Additional paid-in capital	634,469	630,341
Accumulated deficit	(86,599)	(120,402)
Accumulated other comprehensive loss	(2,115)	(734)
Total shareholders’ equity	540,081	503,530
Total liabilities and shareholders’ equity	$ 968,181	$ 950,717

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Accounts receivable, unbilled services with related parties	$ 2.1	$ 1.0
Pre-funded study costs with related parties		1.0
Advanced billings with related parties	$ 0.6	$ 1.7
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock shares authorized	250,000,000	250,000,000
Common stock shares issued	35,545,233	35,466,510
Common stock shares outstanding	35,545,233	35,466,510
Treasury stock shares	200,000	200,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue:
Total revenue	$ 170,144	$ 106,216	$ 333,221	$ 212,827
Operating expenses:
Direct service costs, excluding depreciation and amortization	61,478	51,955	121,819	103,060
Reimbursed out-of-pocket expenses	55,198	11,664	112,111	24,494
Total direct costs	116,676	63,619	233,930	127,554
Selling, general and administrative	20,507	14,755	36,506	29,909
Depreciation	2,226	2,101	4,540	4,231
Amortization	7,390	9,462	14,781	18,910
Total operating expenses	146,799	89,937	289,757	180,604
Income from operations	23,345	16,279	43,464	32,223
Other expense, net:
Miscellaneous income (expense), net	478	(125)	325	(497)
Interest expense, net	(2,308)	(1,808)	(4,617)	(3,602)
Total other expense, net	(1,830)	(1,933)	(4,292)	(4,099)
Income before income taxes	21,515	14,346	39,172	28,124
Income tax provision	4,947	4,793	8,053	10,124
Net income	$ 16,568	$ 9,553	$ 31,119	$ 18,000
Net income per share attributable to common shareholders:
Basic	$ 0.46	$ 0.24	$ 0.87	$ 0.44
Diluted	$ 0.45	$ 0.23	$ 0.85	$ 0.44
Weighted average common shares outstanding:
Basic	35,519	40,183	35,503	40,425
Diluted	36,664	40,825	36,586	41,158
Revenue Net
Revenue:
Total revenue	$ 170,144	$ 0	$ 333,221	$ 0
Direct Service Revenue
Revenue:
Total revenue	0	94,552	0	188,333
Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	$ 0	$ 11,664	$ 0	$ 24,494

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue Net
Revenue with related parties	$ 2.6		$ 4.1
Direct Service Revenue
Revenue with related parties		2.9		6.9
Reimbursed Out of Pocket Revenue
Revenue with related parties		$ 0.4		$ 1.1

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 16,568	$ 9,553	$ 31,119	$ 18,000
Other comprehensive income
Foreign currency translation adjustments, net of taxes	(2,010)	1,118	(1,381)	1,714
Comprehensive income	$ 14,558	$ 10,671	$ 29,738	$ 19,714

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 31,119	$ 18,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4,540	4,231
Amortization	14,781	18,910
Stock-based compensation expense	2,954	2,234
Amortization of debt issuance costs and discount	317	332
Deferred income tax benefit	(286)	(864)
Amortization and adjustment of deferred credit	(407)	0
Other	743	(744)
Changes in assets and liabilities:
Accounts receivable and unbilled, net	(20,289)	3,405
Prepaid expenses and other current assets	(804)	(519)
Accounts payable	1,375	(2,855)
Accrued expenses	14,184	(8,398)
Pre-funded study costs	0	(3,510)
Advanced billings	15,846	(294)
Other assets and liabilities, net	568	(195)
Net cash provided by operating activities	64,641	29,733
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures	(9,793)	(6,019)
Acquisition of intangibles	0	(515)
Other	(178)	29
Net cash used in investing activities	(9,971)	(6,505)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercises	1,175	955
Repurchases of common stock	0	(26,405)
Payment of debt	(8,250)	(6,187)
Payments on revolving loan	(50,000)	0
Payment of deemed landlord liability	(910)	(813)
Net cash used in financing activities	(57,985)	(32,450)
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(940)	1,145
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(4,255)	(8,077)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	26,492	37,407
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$ 22,237	$ 29,330

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

(1) Basis of Presentation

Description of Business

Medpace Holdings, Inc. together with its subsidiaries, (“Medpace” or the “Company”), a Delaware corporation, is a global provider of clinical research-based drug and medical device development services. The Company partners with pharmaceutical, biotechnology, and medical device companies in the development and execution of clinical trials. The Company’s drug development services focus on full service Phase I-IV clinical development services and include development plan design, coordinated central laboratory, project management, regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance new drug application submissions, and post-marketing clinical support. The Company also provides bio-analytical laboratory services, clinical human pharmacology, imaging services, and electrocardiography reading support for clinical trials.

The Company’s operations are principally based in North America, Europe, and Asia.

Unaudited Interim Financial Information

The interim condensed consolidated financial statements include the accounts of the Company, are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), and are unaudited. In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. The preparation of the interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes could differ from management’s estimates and assumptions. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2017.

Secondary Offerings

During the three and six months ended June 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 6,000,000 shares of the Company’s common stock as part of two secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.4 million during the three and six months ended June 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of June 30, 2018, Cinven owned 29.3% of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Note 3 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2017. Significant changes to our accounting policies as a result of adopting Accounting Standards Codification Topic 606 (“ASC 606”) are discussed below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On June 30, 2018, we had approximately $1,014.2 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (ASC 606) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.  

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	170,144	$	(170,144	)	$	-
Service revenue, net		-		117,792			117,792
Reimbursed out-of-pocket revenue		-		19,044			19,044
Total revenue		170,144		(33,308	)		136,836
Operating expenses:
Direct service costs, excluding depreciation and amortization		61,478		-			61,478
Reimbursed out-of-pocket expenses		55,198		(36,154	)		19,044
Total direct costs		116,676		(36,154	)		80,522
Total operating expenses		146,799		(36,154	)		110,645
Income from operations		23,345		2,846			26,191
Income before income taxes		21,515		2,846			24,361
Income tax provision		4,947		653			5,600
Net income	$	16,568	$	2,193		$	18,761
Net income per share attributable to common shareholders:
Basic	$	0.46	$	0.07		$	0.53
Diluted	$	0.45	$	0.06		$	0.51
Weighted average common shares outstanding:
Basic		35,519		-			35,519
Diluted		36,664		-			36,664
	Six Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	333,221	$	(333,221	)	$	-
Service revenue, net		-		226,220			226,220
Reimbursed out-of-pocket revenue		-		34,061			34,061
Total revenue		333,221		(72,940	)		260,281
Operating expenses:
Direct service costs, excluding depreciation and amortization		121,819		-			121,819
Reimbursed out-of-pocket expenses		112,111		(78,050	)		34,061
Total direct costs		233,930		(78,050	)		155,880
Total operating expenses		289,757		(78,050	)		211,707
Income from operations		43,464		5,110			48,574
Income before income taxes		39,172		5,110			44,282
Income tax provision		8,053		1,164			9,217
Net income	$	31,119	$	3,946		$	35,065
Net income per share attributable to common shareholders:
Basic	$	0.87	$	0.11		$	0.98
Diluted	$	0.85	$	0.10		$	0.95
Weighted average common shares outstanding:
Basic		35,503		-			35,503
Diluted		36,586		-			36,586

ASSETS	As of June 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		115,398			(11,252	)		104,146
Total current assets		158,479			(11,252	)		147,227
Deferred income taxes		5,972			703			6,675
Total assets	$	968,181		$	(10,549	)	$	957,632
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		72,925			(47,935	)		24,990
Pre-funded study costs		-			57,900			57,900
Advanced billings		120,945			(22,940	)		98,005
Other current liabilities		5,933			1,164			7,097
Total current liabilities		233,162			(11,811	)		221,351
Total liabilities		428,100			(11,811	)		416,289
Shareholders’ equity:
Accumulated deficit		(86,599	)		1,262			(85,337	)
Total shareholders’ equity		540,081			1,262			541,343
Total liabilities and shareholders’ equity	$	968,181		$	(10,549	)	$	957,632

CASH FLOWS FROM OPERATING ACTIVITIES:	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		31,119			3,946			35,065
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(20,289	)		(1,623	)		(21,912	)
Accrued expenses		14,184			(12,589	)		1,595
Pre-funded study costs		-			504			504
Advanced billings		15,846			8,598			24,444
Other assets and liabilities, net		568			1,164			1,732
Net cash provided by operating activities		64,641			-			64,641

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 will be applied on a modified retrospective basis to each prior reporting period presented and is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

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Net Income Per Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Net Income Per Share

(3) Net Income Per Share

Basic and diluted earnings or loss per share (“EPS”) are computed using the two-class method, which is an earnings allocation that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Restricted Stock Awards (“RSAs”) are considered participating securities because they are legally issued at the date of grant and holders are entitled to receive non-forfeitable dividends during the vesting term.

The computation of diluted EPS includes additional common shares, such as unvested stock options with exercise prices less than the average market price of the Company’s common stock during the period (“in-the-money options”), which would be considered outstanding under the treasury stock method. The treasury stock method assumes that additional shares would have to be issued in cases where the exercise price of stock options is less than the value of the common stock being acquired because the cash proceeds received from the stock option holder would not be sufficient to acquire that same number of shares. The Company does not compute diluted EPS in cases where the inclusion of such additional shares would be anti-dilutive in effect.

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,519		40,183		35,503		40,425
RSAs		144		59		145		59
Total weighted-average shares		35,663		40,242		35,648		40,484
Earnings per common share—Basic
Net income	$	16,568	$	9,553	$	31,119	$	18,000
Less: Undistributed earnings allocated to RSAs		67		14		127		26
Net income available to common shareholders—Basic	$	16,501	$	9,539	$	30,992	$	17,974
Net income per common share—Basic	$	0.46	$	0.24	$	0.87	$	0.44
Basic weighted-average common shares outstanding		35,519		40,183		35,503		40,425
Effect of diluted shares		1,145		642		1,083		733
Diluted weighted-average shares outstanding		36,664		40,825		36,586		41,158
Net income per common share—Diluted	$	0.45	$	0.23	$	0.85	$	0.44

During the three and six months ended June 30, 2018, the Company had 24,381 and 56,881 stock options, respectively, that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period. During the three and six months ended June 30, 2017, the Company had 697,850 and 27,500 stock options, respectively, that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

(4) Fair Value Measurements

The Company follows accounting guidance related to fair value measurements that defines fair value, establishes a framework for measuring fair value, and establishes a hierarchy for inputs used in measuring fair value. This hierarchy maximizes the use of “observable” inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy specifies three levels based on the inputs, as follows:

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities.

Level 2: Valuations based on directly observable inputs or unobservable inputs corroborated by market data.

Level 3: Valuations based on unobservable inputs supported by little or no market activity representing management’s determination of assumptions of how market participants would price the assets or liabilities. 

The fair value of financial instruments such as cash and cash equivalents, accounts receivable and unbilled, net, accounts payable, accrued expenses and advanced billings approximate their carrying amounts due to their short term maturities.

The Company does not have any recurring fair value measurements as of June 30, 2018. There were no transfers between Level 1, Level 2 or Level 3 during the three and six months ended June 30, 2018 or 2017.

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Contract Assets and Contract Liabilities

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customer [Abstract]

Contract Assets and Contract Liabilities

(5) Contract Assets and Contract Liabilities

Contract assets and liabilities are reflected in the Company’s condensed consolidated balance sheets within the accounts reflected below.  

Contract Assets

Accounts receivable represent amounts due from the Company’s customers who are concentrated primarily in the pharmaceutical, biotechnology, and medical device industries. Unbilled represents revenue recognized to date that has not been billed or is not yet contractually billable to the customer. In general, amounts become billable upon the achievement of negotiated contractual events, in accordance with predetermined payment schedules or when a reimbursable expense has been incurred. Amounts classified to unbilled are those billable to customers within one year from the respective balance sheet date.

Accounts receivable and unbilled, net consisted of the following (in thousands):

	As of
	June 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	71,062		$	55,599		$	-	$	55,599
Unbilled receivables		45,701			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,365	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	115,398		$	95,954		$	12,875	$	83,079

Unbilled receivables increased from $41.0 million at January 1, 2018, which includes adjustments of $12.9 million related to the adoption of ASC 606, to $45.7 million at June 30, 2018. The increase is primarily driven by revenue recognized on certain contracts in advance of customer invoicing.

Contract Liabilities

Advanced billings represents cash received from customers, or billed amounts per an agreed upon payment schedule, in advance of services being performed or revenue being recognized.

Advanced billings consisted of the following (in thousands):

	As of
	June 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	120,945	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

Advanced billings increased from $105.3 million at January 1, 2018, which includes adjustments of $31.5 million related to the adoption of ASC 606, to $120.9 million at June 30, 2018. The increase is primarily driven by billing and/or collection activity in the six months ended June 30, 2018 in advance of revenue being earned for delivery of service obligations.

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Intangible Assets, Net

6 Months Ended

Jun. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets, Net

(6) Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(101,649	)		(92,661	)
Developed technologies		(46,304	)		(40,856	)
Other		(2,334	)		(1,989	)
Total accumulated amortization		(222,917	)		(208,136	)
Total finite-lived intangible assets, net		52,313			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	83,959		$	98,740

As of June 30, 2018, estimated amortization expense of the Company’s intangible assets for each of the next five years and thereafter is as follows (in thousands):

	Amortization
Remainder of 2018	$	14,780
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	52,313

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Accrued Expenses

6 Months Ended

Jun. 30, 2018

Payables And Accruals [Abstract]

Accrued Expenses

(7) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	June 30,		December 31,
	2018		2017
Employee compensation and benefits	$	20,094	$	19,707
Project related reimbursable expenses		47,935		-
Other		4,896		3,966
Total accrued expenses	$	72,925	$	23,673

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Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Debt

(8) Debt

Debt consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Revolving credit facility	$	20,000		$	70,000
Term loan		144,375			152,625
Less unamortized discount		(336	)		(399	)
Less unamortized term loan debt issuance costs		(518	)		(615	)
Less current portion of long-term debt		(16,500	)		(16,500	)
Long-term debt, net, less current portion	$	147,021		$	205,111

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	8,250
2019		16,500
2020		20,625
2021		119,000
Total	$	164,375

The estimated fair value of the Company’s debt based on Level 2 inputs using the market approach, which is primarily based on rates at which the debt is traded among financial institutions, approximates the carrying value as of June 30, 2018 and December 31, 2017.

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Shareholder's Equity and Stock-Based Compensation

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Shareholder's Equity and Stock-Based Compensation

(9) Shareholder’s Equity and Stock-Based Compensation

The Company granted 537,000 awards to employees under the 2016 Incentive Award Plan, during the six months ended June 30, 2018, consisting of 439,000 stock option awards and 98,000 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 24,381 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan, during the six months ended June 30, 2018. The Company granted 727,550 stock option awards, vesting after four years, to employees under the 2016 Incentive Award Plan during the six months ended June 30, 2017. The Company granted an additional 41,346 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan during the six months ended June 30, 2017.    

Award Activity

The following table sets forth the Company’s stock option activity:

	Six Months Ended June 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		463,381		$	33.09
Exercised		(78,715	)	$	14.93
Forfeited/Expired		(130,761	)	$	22.94
Outstanding - end of period		3,036,773		$	22.67
Exercisable - end of period		1,092,261		$	15.83

The following table sets forth the Company’s RSA/RSU activity:

	Six Months Ended
	June 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		98,000
Vested		-
Forfeited		(9,000	)
Outstanding and unvested - end of period		272,629
Cumulative vested shares - end of period		1,884,287

Stock-based compensation expense recognized in the condensed consolidated statements of operations related to all outstanding stock based compensation awards is summarized below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Total direct costs	$	901	$	573	$	1,744	$	1,115
Selling, general and administrative		586		627		1,210		1,119
Total stock-based compensation expense	$	1,487	$	1,200	$	2,954	$	2,234

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

(10) Income Taxes

The Company’s effective income tax rate was 23.0% and 33.4% for the three months ended June 30, 2018 and 2017, respectively. The Company’s effective income tax rate was 20.6% and 36.0% for the six months ended June 30, 2018 and 2017, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2018 varied from the U.S. statutory rate of 21% primarily due to the impact of state taxes and the benefit of uncertain tax positions coupled with a favorable tax impact associated with previously acquired tax attributes.

The Company recognized the income tax effects of the “Tax Cuts and Jobs Act” (TCJA) in its audited consolidated financial statements on our 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides Securities and Exchange Commission staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial results reflected the provisional estimate of the income tax effects of the TCJA. No subsequent adjustments have been made to the amounts recorded as of December 31, 2017, which continue to represent a provisional estimate of the impact of TCJA. Accordingly, there is no impact to the June 30, 2018 effective tax rate for such provisional amounts.  The estimate of the impact of TCJA is based on certain assumptions and the Company's current interpretation, and may change, as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.

TCJA made broad and complex changes to the U.S. tax code, including a new tax law that may subject the Company to a tax on global intangible low-taxed income (“GILTI”) beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for 2018.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

(11) Commitments and Contingencies

Legal Proceedings

The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claims related to other business transactions. The Company cannot predict with certainty the outcome of such proceedings, but it believes that adequate reserves have been recorded and losses already recognized with respect to such proceedings, which were immaterial as of June 30, 2018 and December 31, 2017.  There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, the Company believes that such potential losses were immaterial as of June 30, 2018.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

(12) Related Party Transactions

Employee Loans

The Company periodically extends short term loans or advances to employees, typically upon commencement of employment.  Total receivables as a result of these employee advances of $0.2 million existed at June 30, 2018 and December 31, 2017, respectively, and are included in the Prepaid expenses and other current assets and Other assets line items of the condensed consolidated balance sheets, respectively, depending on the contractual repayment date.

Service Agreements

Coherus BioSciences, Inc. (“Coherus”)

The chief executive officer of the Company was a member of Coherus’s board of directors until his resignation in the first quarter of 2018. Coherus is no longer considered a related party as of the first quarter of 2018. During the three months ended June 30, 2017, the Company recognized service revenue from Coherus of $1.8 million and during the six months ended June 30, 2017, the Company recognized service revenue from Coherus of $5.1 million in the Company’s condensed consolidated statements of operations. In addition, the Company recognized Reimbursed out-of-pocket revenue with Coherus in the condensed consolidated statements of operations of $0.4 million during the three months ended June 30, 2017 and $1.0 million during the six months ended June 30, 2017. As of December 31, 2017, the Company had Accounts receivable and unbilled, net from Coherus of $0.3 million recorded in the condensed consolidated balance sheets. As of December 31, 2017, the Company had, from Coherus, $1.5 million of Advanced billings and $1.0 million of Pre-funded study costs, in the condensed consolidated balance sheets.

Xenon Pharmaceuticals, Inc. (“Xenon”)

Certain executives and employees of the Company, including the chief executive officer, have held equity investments in Xenon, a clinical-stage biopharmaceutical company. During the second quarter of 2017, the chief executive officer sold his entire equity position held in Xenon. Xenon is no longer considered to be a related party subsequent to this sale. The Company recognized service revenue from Xenon of $0.1 million during the three months ended June 30, 2017 and service revenue from Xenon of $0.6 million during the six months ended June 30, 2017 in the Company’s condensed consolidated statements of operations.

Cymabay Therapeutics, Inc. (“Cymabay”)

Cymabay is a clinical-stage biopharmaceutical company developing therapies to treat metabolic diseases with high unmet medical need, including serious rare and orphan disorders. During the first quarter of 2016, it was announced that a Medpace employee would join Cymabay’s board of directors. The Company and Cymabay entered into a MSA dated October 21, 2016. Subsequently, the Company and Cymabay have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from Cymabay of $1.4 million and $2.1 million, respectively, and for the three months and six months ended June 30, 2017, the Company recognized service revenue from Cymabay of $0.2 million and $0.3 million, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from Cymabay of $0.6 million and $0.1 million recorded in the condensed consolidated balance sheets.

LIB Therapeutics LLC (“LIB”)

Certain executives and employees of the Company, including the chief executive officer, are members of LIB’s board of managers. The Company entered into a MSA dated November 24, 2015 with LIB, a company that engages in research, development, marketing and commercialization of pharmaceutical drugs. Subsequently, the Company and LIB have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from LIB of $1.0 million and $1.8 million, respectively, and for the three and six months ended June 30, 2017, the Company recognized service revenue from LIB of $0.5 million and $0.6 million, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2018 and December 31, 2017, respectively, the Company had Advanced billings from LIB of $0.6 million and $0.2 million recorded in the condensed consolidated balance sheets. In addition, as of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from LIB of $1.3 million and $0.5 million recorded in the condensed consolidated balance sheets.

CinRX Pharma (“CinRx”)

Certain executives and employees of the Company, including the chief executive officer, are members of CinRx’s board of managers and/or have equity investments in CinRx, a biotech company. The Company and CinRx have entered into several task orders for the Company to perform clinical trial related services. During the three and six months ended June 30, 2018, the Company recognized total revenue from CinRx of $0.2 million, respectively, and for the three and six months ended June 30, 2017, the Company recognized service revenue from CinRx of $0.2 million, respectively, in the Company’s condensed consolidated statements of operations. In addition, as of June 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from CinRx of $0.2 million and $0.1 million recorded in the condensed consolidated balance sheets.

Purchase of Real Estate Properties

In December 2016, the Company entered into a purchase agreement for four parcels of real estate property that are closely situated to the Medpace campus in Cincinnati, Ohio, from AT Redevelopment Company, LLC, which is wholly-owned by the Company’s chief executive officer. The purchase price of the real estate property was $0.4 million as determined by an independent third party broker's opinion of value. The transaction closed on January 11, 2017.

Leased Real Estate

Headquarters Lease

The Company entered into an operating lease for its corporate headquarters with an entity that is wholly owned by the chief executive officer of the Company. The Company has evaluated its relationship with the related party and concluded that the related party is not a variable interest entity because the Company has no direct ownership interest or relationship other than the lease. The lease for headquarters is for an initial term of twelve years through November 2022 with a renewal option for one 10-year term at prevailing market rates. The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property. Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. Lease expense recognized for each of the three months ended June 30, 2018 and 2017 was $0.6 million, respectively, and lease expense recognized for each of the six months ended June 30, 2018 and 2017 was $1.1 million, respectively. The lease expense was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations.

Deemed Assets and Deemed Landlord Liabilities

The Company entered into two multi-year lease agreements governing the occupancy of space of two buildings in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family. In accordance with the accounting guidance related to leases, the Company was deemed in substance to be the owner of the property during the construction phase and at completion. Accordingly, the Company reflected the buildings and related liabilities as deemed assets from landlord building construction in Property and equipment, net, Other current liabilities, and Deemed landlord liability, less current portion, respectively, on the condensed consolidated balance sheets. The Company assumed occupancy in 2012 and the leases expire in 2027 with the Company having one 10-year option to extend the lease term. The deemed assets are being fully depreciated, on a straight line basis, over the 15-year term of the lease. Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties. Accretion expense is being recorded over the term of the lease as a component of Interest expense, net in the Company’s condensed consolidated statements of operations. The Company paid $0.9 million and $1.0 million during the three months ended June 30, 2018 and 2017, respectively, and $1.9 million during each of the six months ended June 30, 2018 and 2017, respectively. The current and long-term portions of the Deemed landlord liability at June 30, 2018 were $2.0 million and $25.6 million, respectively. The current and long-term portions of the Deemed landlord liability at December 31, 2017 were $1.9 million and $26.6 million, respectively. The Company has recognized deemed assets, net of $15.5 million and $16.3 million at June 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets.

Travel Services

The Company incurs expenses for travel services for company executives provided by a private aviation charter company that is owned by the chief executive officer and the executive vice president of operations of the Company (“private aviation charter”). The Company may contract directly with the private aviation charter for the use of its aircraft or indirectly through a third party aircraft management and jet charter company (the “Aircraft Management Company”). The travel services provided are primarily for business purposes, with certain personal travel paid for as part of the executives’ compensation arrangements. The Aircraft Management Company also makes the private aviation charter aircraft available to third parties. The Company incurred travel expenses of $0.2 million and $0.3 million during the three months ended June 30, 2018 and 2017, respectively, and $0.6 million during the six months ended June 30, 2018 and 2017, respectively, related to these travel services. These travel expenses are recorded in Selling, general and administrative in the Company’s condensed consolidated statements of operations.

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Entity Wide Disclosures

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customer [Abstract]

Entity Wide Disclosures

(13) Entity Wide Disclosures

Revenue by Category

The following table disaggregates our revenue by major source (in thousands):

	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Therapeutic Area
Oncology	$	43,002	$	86,855
Other		37,059		71,276
Cardiology		24,508		48,244
Metabolic		22,890		44,945
AVAI		20,187		36,866
Central Nervous System		13,113		26,278
Endocrine		6,952		13,410
Medical Devices		2,433		5,347
Total revenue	$	170,144	$	333,221

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The interim condensed consolidated financial statements include the accounts of the Company, are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), and are unaudited. In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. The preparation of the interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and outcomes could differ from management’s estimates and assumptions. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2017.

Secondary Offerings

Secondary Offerings

During the three and six months ended June 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 6,000,000 shares of the Company’s common stock as part of two secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.4 million during the three and six months ended June 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of June 30, 2018, Cinven owned 29.3% of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

Revenue Recognition

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On June 30, 2018, we had approximately $1,014.2 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (ASC 606) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.  

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	170,144	$	(170,144	)	$	-
Service revenue, net		-		117,792			117,792
Reimbursed out-of-pocket revenue		-		19,044			19,044
Total revenue		170,144		(33,308	)		136,836
Operating expenses:
Direct service costs, excluding depreciation and amortization		61,478		-			61,478
Reimbursed out-of-pocket expenses		55,198		(36,154	)		19,044
Total direct costs		116,676		(36,154	)		80,522
Total operating expenses		146,799		(36,154	)		110,645
Income from operations		23,345		2,846			26,191
Income before income taxes		21,515		2,846			24,361
Income tax provision		4,947		653			5,600
Net income	$	16,568	$	2,193		$	18,761
Net income per share attributable to common shareholders:
Basic	$	0.46	$	0.07		$	0.53
Diluted	$	0.45	$	0.06		$	0.51
Weighted average common shares outstanding:
Basic		35,519		-			35,519
Diluted		36,664		-			36,664
	Six Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	333,221	$	(333,221	)	$	-
Service revenue, net		-		226,220			226,220
Reimbursed out-of-pocket revenue		-		34,061			34,061
Total revenue		333,221		(72,940	)		260,281
Operating expenses:
Direct service costs, excluding depreciation and amortization		121,819		-			121,819
Reimbursed out-of-pocket expenses		112,111		(78,050	)		34,061
Total direct costs		233,930		(78,050	)		155,880
Total operating expenses		289,757		(78,050	)		211,707
Income from operations		43,464		5,110			48,574
Income before income taxes		39,172		5,110			44,282
Income tax provision		8,053		1,164			9,217
Net income	$	31,119	$	3,946		$	35,065
Net income per share attributable to common shareholders:
Basic	$	0.87	$	0.11		$	0.98
Diluted	$	0.85	$	0.10		$	0.95
Weighted average common shares outstanding:
Basic		35,503		-			35,503
Diluted		36,586		-			36,586

ASSETS	As of June 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		115,398			(11,252	)		104,146
Total current assets		158,479			(11,252	)		147,227
Deferred income taxes		5,972			703			6,675
Total assets	$	968,181		$	(10,549	)	$	957,632
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		72,925			(47,935	)		24,990
Pre-funded study costs		-			57,900			57,900
Advanced billings		120,945			(22,940	)		98,005
Other current liabilities		5,933			1,164			7,097
Total current liabilities		233,162			(11,811	)		221,351
Total liabilities		428,100			(11,811	)		416,289
Shareholders’ equity:
Accumulated deficit		(86,599	)		1,262			(85,337	)
Total shareholders’ equity		540,081			1,262			541,343
Total liabilities and shareholders’ equity	$	968,181		$	(10,549	)	$	957,632

CASH FLOWS FROM OPERATING ACTIVITIES:	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		31,119			3,946			35,065
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(20,289	)		(1,623	)		(21,912	)
Accrued expenses		14,184			(12,589	)		1,595
Pre-funded study costs		-			504			504
Advanced billings		15,846			8,598			24,444
Other assets and liabilities, net		568			1,164			1,732
Net cash provided by operating activities		64,641			-			64,641

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 will be applied on a modified retrospective basis to each prior reporting period presented and is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Summary of Impact of Adoption of Accounting Standards

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	170,144	$	(170,144	)	$	-
Service revenue, net		-		117,792			117,792
Reimbursed out-of-pocket revenue		-		19,044			19,044
Total revenue		170,144		(33,308	)		136,836
Operating expenses:
Direct service costs, excluding depreciation and amortization		61,478		-			61,478
Reimbursed out-of-pocket expenses		55,198		(36,154	)		19,044
Total direct costs		116,676		(36,154	)		80,522
Total operating expenses		146,799		(36,154	)		110,645
Income from operations		23,345		2,846			26,191
Income before income taxes		21,515		2,846			24,361
Income tax provision		4,947		653			5,600
Net income	$	16,568	$	2,193		$	18,761
Net income per share attributable to common shareholders:
Basic	$	0.46	$	0.07		$	0.53
Diluted	$	0.45	$	0.06		$	0.51
Weighted average common shares outstanding:
Basic		35,519		-			35,519
Diluted		36,664		-			36,664
	Six Months Ended June 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	333,221	$	(333,221	)	$	-
Service revenue, net		-		226,220			226,220
Reimbursed out-of-pocket revenue		-		34,061			34,061
Total revenue		333,221		(72,940	)		260,281
Operating expenses:
Direct service costs, excluding depreciation and amortization		121,819		-			121,819
Reimbursed out-of-pocket expenses		112,111		(78,050	)		34,061
Total direct costs		233,930		(78,050	)		155,880
Total operating expenses		289,757		(78,050	)		211,707
Income from operations		43,464		5,110			48,574
Income before income taxes		39,172		5,110			44,282
Income tax provision		8,053		1,164			9,217
Net income	$	31,119	$	3,946		$	35,065
Net income per share attributable to common shareholders:
Basic	$	0.87	$	0.11		$	0.98
Diluted	$	0.85	$	0.10		$	0.95
Weighted average common shares outstanding:
Basic		35,503		-			35,503
Diluted		36,586		-			36,586

ASSETS	As of June 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		115,398			(11,252	)		104,146
Total current assets		158,479			(11,252	)		147,227
Deferred income taxes		5,972			703			6,675
Total assets	$	968,181		$	(10,549	)	$	957,632
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		72,925			(47,935	)		24,990
Pre-funded study costs		-			57,900			57,900
Advanced billings		120,945			(22,940	)		98,005
Other current liabilities		5,933			1,164			7,097
Total current liabilities		233,162			(11,811	)		221,351
Total liabilities		428,100			(11,811	)		416,289
Shareholders’ equity:
Accumulated deficit		(86,599	)		1,262			(85,337	)
Total shareholders’ equity		540,081			1,262			541,343
Total liabilities and shareholders’ equity	$	968,181		$	(10,549	)	$	957,632

CASH FLOWS FROM OPERATING ACTIVITIES:	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		31,119			3,946			35,065
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(20,289	)		(1,623	)		(21,912	)
Accrued expenses		14,184			(12,589	)		1,595
Pre-funded study costs		-			504			504
Advanced billings		15,846			8,598			24,444
Other assets and liabilities, net		568			1,164			1,732
Net cash provided by operating activities		64,641			-			64,641

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Schedule of Reconciliation of Denominators and Additional Shares that are Excluded from the Calculation of EPS

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,519		40,183		35,503		40,425
RSAs		144		59		145		59
Total weighted-average shares		35,663		40,242		35,648		40,484
Earnings per common share—Basic
Net income	$	16,568	$	9,553	$	31,119	$	18,000
Less: Undistributed earnings allocated to RSAs		67		14		127		26
Net income available to common shareholders—Basic	$	16,501	$	9,539	$	30,992	$	17,974
Net income per common share—Basic	$	0.46	$	0.24	$	0.87	$	0.44
Basic weighted-average common shares outstanding		35,519		40,183		35,503		40,425
Effect of diluted shares		1,145		642		1,083		733
Diluted weighted-average shares outstanding		36,664		40,825		36,586		41,158
Net income per common share—Diluted	$	0.45	$	0.23	$	0.85	$	0.44

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Contract Assets and Contract Liabilities (Tables)

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Company's Contract Asset and Contract Liability

Accounts receivable and unbilled, net consisted of the following (in thousands):

	As of
	June 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	71,062		$	55,599		$	-	$	55,599
Unbilled receivables		45,701			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,365	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	115,398		$	95,954		$	12,875	$	83,079

Advanced billings consisted of the following (in thousands):

	As of
	June 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	120,945	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

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Intangible Assets, Net (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(101,649	)		(92,661	)
Developed technologies		(46,304	)		(40,856	)
Other		(2,334	)		(1,989	)
Total accumulated amortization		(222,917	)		(208,136	)
Total finite-lived intangible assets, net		52,313			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	83,959		$	98,740

Schedule of Estimated Amortization Expense of Intangible Assets

As of June 30, 2018, estimated amortization expense of the Company’s intangible assets for each of the next five years and thereafter is as follows (in thousands):

	Amortization
Remainder of 2018	$	14,780
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	52,313

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2018

Payables And Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	June 30,		December 31,
	2018		2017
Employee compensation and benefits	$	20,094	$	19,707
Project related reimbursable expenses		47,935		-
Other		4,896		3,966
Total accrued expenses	$	72,925	$	23,673

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Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of Debt

Debt consisted of the following (in thousands):

	As of
	June 30,			December 31,
	2018			2017
Revolving credit facility	$	20,000		$	70,000
Term loan		144,375			152,625
Less unamortized discount		(336	)		(399	)
Less unamortized term loan debt issuance costs		(518	)		(615	)
Less current portion of long-term debt		(16,500	)		(16,500	)
Long-term debt, net, less current portion	$	147,021		$	205,111

Schedule of Principal Payments on Debt Due

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	8,250
2019		16,500
2020		20,625
2021		119,000
Total	$	164,375

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Shareholder's Equity and Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Schedule of Stock Option Activity

The following table sets forth the Company’s stock option activity:

	Six Months Ended June 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		463,381		$	33.09
Exercised		(78,715	)	$	14.93
Forfeited/Expired		(130,761	)	$	22.94
Outstanding - end of period		3,036,773		$	22.67
Exercisable - end of period		1,092,261		$	15.83

Schedule of RSA/RSU Activity

The following table sets forth the Company’s RSA/RSU activity:

	Six Months Ended
	June 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		98,000
Vested		-
Forfeited		(9,000	)
Outstanding and unvested - end of period		272,629
Cumulative vested shares - end of period		1,884,287

Summary of Stock-Based Compensation Expense Recognized in Statements of Operations Related to All Outstanding Stock Based Compensation Awards

Stock-based compensation expense recognized in the condensed consolidated statements of operations related to all outstanding stock based compensation awards is summarized below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Total direct costs	$	901	$	573	$	1,744	$	1,115
Selling, general and administrative		586		627		1,210		1,119
Total stock-based compensation expense	$	1,487	$	1,200	$	2,954	$	2,234

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Entity Wide Disclosures (Tables)

6 Months Ended

Jun. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Revenue by Major Source

The following table disaggregates our revenue by major source (in thousands):

	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Therapeutic Area
Oncology	$	43,002	$	86,855
Other		37,059		71,276
Cardiology		24,508		48,244
Metabolic		22,890		44,945
AVAI		20,187		36,866
Central Nervous System		13,113		26,278
Endocrine		6,952		13,410
Medical Devices		2,433		5,347
Total revenue	$	170,144	$	333,221

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Basis of Presentation - Additional Information (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($) shares	Jun. 30, 2018 USD ($) Offering shares
Basis Of Presentation [Line Items]
Number of offerings | Offering		2
Secondary Offering
Basis Of Presentation [Line Items]
Percentage of outstanding common stock owned		29.30%
Secondary Offering | Cinven
Basis Of Presentation [Line Items]
Shares issued and sold | shares	6,000,000	6,000,000
Secondary Offering | Operating Expenses
Basis Of Presentation [Line Items]
Professional fees | $	$ 0.4	$ 0.4

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Summary Of Significant Accounting Policies [Line Items]
Performance obligations remaining to be performed	$ 1,014,200
Accumulated deficit	(86,599)		$ (120,402)
Accounts receivable and unbilled, net	115,398		83,079
Deferred income taxes	5,972		6,343
Accrued expenses	72,925		23,673
Pre-funded study costs	0		57,406
Advanced billings	120,945		$ 73,756
ASC 606
Summary Of Significant Accounting Policies [Line Items]
Accounts receivable and unbilled, net		$ 95,954
Advanced billings		105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Summary Of Significant Accounting Policies [Line Items]
Accumulated deficit	1,262	2,700
Accounts receivable and unbilled, net	(11,252)	12,875
Deferred income taxes	703	(700)
Accrued expenses	(47,935)	35,400
Pre-funded study costs	57,900	(57,406)
Advanced billings	$ (22,940)	$ 31,548

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Summary of Significant Accounting Policies - Summary of Impact of Adoption of Accounting Standards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jan. 01, 2018	Dec. 31, 2017
Revenue:
Total revenue	$ 170,144	$ 106,216	$ 333,221	$ 212,827
Operating expenses:
Direct service costs, excluding depreciation and amortization	61,478	51,955	121,819	103,060
Reimbursed out-of-pocket expenses	55,198	11,664	112,111	24,494
Total direct costs	116,676	63,619	233,930	127,554
Total operating expenses	146,799	89,937	289,757	180,604
Income from operations	23,345	16,279	43,464	32,223
Income before income taxes	21,515	14,346	39,172	28,124
Income tax provision	4,947	4,793	8,053	10,124
Net income	$ 16,568	$ 9,553	$ 31,119	$ 18,000
Net income per share attributable to common shareholders:
Basic	$ 0.46	$ 0.24	$ 0.87	$ 0.44
Diluted	$ 0.45	$ 0.23	$ 0.85	$ 0.44
Weighted average common shares outstanding:
Basic	35,519	40,183	35,503	40,425
Diluted	36,664	40,825	36,586	41,158
Current assets:
Accounts receivable and unbilled, net	$ 115,398		$ 115,398			$ 83,079
Total current assets	158,479		158,479			129,971
Deferred income taxes	5,972		5,972			6,343
Total assets	968,181		968,181			950,717
Current liabilities:
Accrued expenses	72,925		72,925			23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0		0			57,406
Advanced billings	120,945		120,945			73,756
Other current liabilities	5,933		5,933			4,697
Total current liabilities	233,162		233,162			192,706
Total liabilities	428,100		428,100			447,187
Shareholders’ equity:
Accumulated deficit	(86,599)		(86,599)			(120,402)
Total shareholders’ equity	540,081		540,081			503,530
Total liabilities and shareholders’ equity	968,181		968,181			$ 950,717
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			31,119	$ 18,000
Changes in assets and liabilities:
Accounts receivable and unbilled, net			(20,289)	3,405
Accrued expenses			14,184	(8,398)
Pre-funded study costs			0	(3,510)
Advanced billings			15,846	(294)
Other assets and liabilities, net			568	(195)
Net cash provided by operating activities			64,641	29,733
Revenue Net
Revenue:
Total revenue	170,144	$ 0	333,221	0
Direct Service Revenue
Revenue:
Total revenue	0	94,552	0	188,333
Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	0	$ 11,664	0	$ 24,494
ASC 606
Current assets:
Accounts receivable and unbilled, net					$ 95,954
Current liabilities:
Advanced billings					105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Revenue:
Total revenue	(33,308)		(72,940)
Operating expenses:
Direct service costs, excluding depreciation and amortization	0		0
Reimbursed out-of-pocket expenses	(36,154)		(78,050)
Total direct costs	(36,154)		(78,050)
Total operating expenses	(36,154)		(78,050)
Income from operations	2,846		5,110
Income before income taxes	2,846		5,110
Income tax provision	653		1,164
Net income	$ 2,193		$ 3,946
Net income per share attributable to common shareholders:
Basic	$ 0.07		$ 0.11
Diluted	$ 0.06		$ 0.10
Weighted average common shares outstanding:
Basic	0		0
Diluted	0		0
Current assets:
Accounts receivable and unbilled, net	$ (11,252)		$ (11,252)		12,875
Total current assets	(11,252)		(11,252)
Deferred income taxes	703		703		(700)
Total assets	(10,549)		(10,549)
Current liabilities:
Accrued expenses	(47,935)		(47,935)		35,400
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	57,900		57,900		(57,406)
Advanced billings	(22,940)		(22,940)		31,548
Other current liabilities	1,164		1,164
Total current liabilities	(11,811)		(11,811)
Total liabilities	(11,811)		(11,811)
Shareholders’ equity:
Accumulated deficit	1,262		1,262		$ 2,700
Total shareholders’ equity	1,262		1,262
Total liabilities and shareholders’ equity	(10,549)		(10,549)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			3,946
Changes in assets and liabilities:
Accounts receivable and unbilled, net			(1,623)
Accrued expenses			(12,589)
Pre-funded study costs			504
Advanced billings			8,598
Other assets and liabilities, net			1,164
Net cash provided by operating activities			0
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Revenue Net
Revenue:
Total revenue	(170,144)		(333,221)
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Direct Service Revenue
Revenue:
Total revenue	117,792		226,220
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	19,044		34,061
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605
Revenue:
Total revenue	136,836		260,281
Operating expenses:
Direct service costs, excluding depreciation and amortization	61,478		121,819
Reimbursed out-of-pocket expenses	19,044		34,061
Total direct costs	80,522		155,880
Total operating expenses	110,645		211,707
Income from operations	26,191		48,574
Income before income taxes	24,361		44,282
Income tax provision	5,600		9,217
Net income	$ 18,761		$ 35,065
Net income per share attributable to common shareholders:
Basic	$ 0.53		$ 0.98
Diluted	$ 0.51		$ 0.95
Weighted average common shares outstanding:
Basic	35,519		35,503
Diluted	36,664		36,586
Current assets:
Accounts receivable and unbilled, net	$ 104,146		$ 104,146
Total current assets	147,227		147,227
Deferred income taxes	6,675		6,675
Total assets	957,632		957,632
Current liabilities:
Accrued expenses	24,990		24,990
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	57,900		57,900
Advanced billings	98,005		98,005
Other current liabilities	7,097		7,097
Total current liabilities	221,351		221,351
Total liabilities	416,289		416,289
Shareholders’ equity:
Accumulated deficit	(85,337)		(85,337)
Total shareholders’ equity	541,343		541,343
Total liabilities and shareholders’ equity	957,632		957,632
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			35,065
Changes in assets and liabilities:
Accounts receivable and unbilled, net			(21,912)
Accrued expenses			1,595
Pre-funded study costs			504
Advanced billings			24,444
Other assets and liabilities, net			1,732
Net cash provided by operating activities			64,641
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Revenue Net
Revenue:
Total revenue	0		0
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Direct Service Revenue
Revenue:
Total revenue	117,792		226,220
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	$ 19,044		$ 34,061

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Net Income Per Share - Schedule of Reconciliation of Denominators and Additional Shares that are Excluded from the Calculation of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Weighted-average shares:
Basic weighted-average common shares outstanding	35,519	40,183	35,503	40,425
Total weighted-average shares	35,663	40,242	35,648	40,484
Earnings per common share—Basic
Net income	$ 16,568	$ 9,553	$ 31,119	$ 18,000
Net income available to common shareholders—Basic	$ 16,501	$ 9,539	$ 30,992	$ 17,974
Net income per common share—Basic	$ 0.46	$ 0.24	$ 0.87	$ 0.44
Basic weighted-average common shares outstanding	35,519	40,183	35,503	40,425
Effect of diluted shares	1,145	642	1,083	733
Diluted weighted-average shares outstanding	36,664	40,825	36,586	41,158
Net income per common share—Diluted	$ 0.45	$ 0.23	$ 0.85	$ 0.44
RSAs
Weighted-average shares:
Basic weighted-average common shares outstanding	144	59	145	59
Earnings per common share—Basic
Less: Undistributed earnings allocated to RSAs	$ 67	$ 14	$ 127	$ 26
Basic weighted-average common shares outstanding	144	59	145	59
Common Stock
Weighted-average shares:
Basic weighted-average common shares outstanding	35,519	40,183	35,503	40,425
Earnings per common share—Basic
Basic weighted-average common shares outstanding	35,519	40,183	35,503	40,425

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Net Income Per Share - Additional Information (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted EPS	24,381	697,850	56,881	27,500

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Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Fair Value Disclosures [Abstract]
Fair value measurements transfers between level 1, level 2, or level 3	$ 0	$ 0	$ 0	$ 0

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Contract Assets and Contract Liabilities - Summary of Accounts Receivable and Unbilled, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Accounts receivable	$ 71,062		$ 55,599
Unbilled receivables	45,701		28,153
Less: allowance for doubtful accounts	(1,365)		(673)
Total accounts receivable and unbilled, net	115,398		$ 83,079
ASC 606
Contract With Customer Asset And Liability [Line Items]
Accounts receivable		$ 55,599
Unbilled receivables		41,028
Less: allowance for doubtful accounts		(673)
Total accounts receivable and unbilled, net		95,954
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		12,875
Total accounts receivable and unbilled, net	$ (11,252)	$ 12,875

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Contract Assets and Contract Liabilities - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables	$ 45,701		$ 28,153
Advanced billings	120,945		$ 73,756
ASC 606
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		$ 41,028
Advanced billings		105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		12,875
Advanced billings	$ (22,940)	$ 31,548

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Contract Assets and Contract Liabilities - Summary of Advanced Bllings (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Advanced billings	$ 120,945		$ 73,756
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0		$ 57,406
ASC 606
Contract With Customer Asset And Liability [Line Items]
Advanced billings		$ 105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Advanced billings	(22,940)	31,548
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	$ 57,900	$ (57,406)

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Intangible Assets, Net - Schedule of Intangible Assets, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Finite-lived intangible assets:
Total finite-lived intangible assets	$ 275,230	$ 275,230
Accumulated amortization:
Total accumulated amortization	(222,917)	(208,136)
Total finite-lived intangible assets, net	52,313	67,094
Trade name (indefinite-lived)	31,646	31,646
Total intangible assets, net	83,959	98,740
Backlog
Finite-lived intangible assets:
Total finite-lived intangible assets	72,630	72,630
Accumulated amortization:
Total accumulated amortization	(72,630)	(72,630)
Customer Relationships
Finite-lived intangible assets:
Total finite-lived intangible assets	145,051	145,051
Accumulated amortization:
Total accumulated amortization	(101,649)	(92,661)
Developed Technologies
Finite-lived intangible assets:
Total finite-lived intangible assets	54,475	54,475
Accumulated amortization:
Total accumulated amortization	(46,304)	(40,856)
Other
Finite-lived intangible assets:
Total finite-lived intangible assets	3,074	3,074
Accumulated amortization:
Total accumulated amortization	$ (2,334)	$ (1,989)

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Intangible Assets, Net - Schedule of Estimated Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2018	$ 14,780
2019	14,829
2020	7,876
2021	5,114
2022	3,353
Later years	6,361
Total finite-lived intangible assets, net	$ 52,313	$ 67,094

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Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accrued Liabilities And Other Liabilities [Abstract]
Employee compensation and benefits	$ 20,094	$ 19,707
Project related reimbursable expenses	47,935	0
Other	4,896	3,966
Total accrued expenses	$ 72,925	$ 23,673

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Debt	$ 164,375
Less unamortized discount	(336)	$ (399)
Less unamortized term loan debt issuance costs	(518)	(615)
Less current portion of long-term debt	(16,500)	(16,500)
Long-term debt, net, less current portion	147,021	205,111
Revolving credit facility
Debt Instrument [Line Items]
Debt	20,000	70,000
Term loan
Debt Instrument [Line Items]
Debt	$ 144,375	$ 152,625

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Debt - Schedule of Principal Payments on Debt Due (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Debt Disclosure [Abstract]
2018 (remaining)	$ 8,250
2019	16,500
2020	20,625
2021	119,000
Total	$ 164,375

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Shareholder's Equity and Stock-Based Compensation - Additional Information (Details) - shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	463,381
2016 Incentive Award Plan | Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Awards granted	537,000
2016 Incentive Award Plan | Vesting After One Year | Non-employee Directors
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	24,381	41,346
Award vesting period	1 year	1 year
2016 Incentive Award Plan | Stock Options | Vesting After Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	439,000	727,550
Award vesting period	4 years	4 years
2016 Incentive Award Plan | Restricted Stock Units (RSU) | Vesting After Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting period	4 years
Shares granted	98,000

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Shareholder's Equity and Stock-Based Compensation - Schedule of Stock Option Activity (Details)	6 Months Ended
	Jun. 30, 2018 $ / shares shares
Equity [Abstract]
Number of Stock Options, Outstanding - beginning of period | shares	2,782,868
Number of Stock Options, Granted | shares	463,381
Number of Stock Options, Exercised | shares	(78,715)
Number of Stock Options, Forfeited/Expired | shares	(130,761)
Number of Stock Options, Outstanding - end of period | shares	3,036,773
Number of Stock Options, Exercisable - end of period | shares	1,092,261
Weighted Average Exercise Price, Outstanding - beginning of Period | $ / shares	$ 20.73
Weighted Average Exercise Price, Granted | $ / shares	33.09
Weighted Average Exercise Price, Exercised | $ / shares	14.93
Weighted Average Exercise Price, Forfeited/Expired | $ / shares	22.94
Weighted Average Exercise Price, Outstanding - end of period | $ / shares	22.67
Weighted Average Exercise Price, Exercisable - end of period | $ / shares	$ 15.83

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Shareholder's Equity and Stock-Based Compensation - Schedule of RSA/RSU Activity (Details) - RSA/RSU	6 Months Ended
	Jun. 30, 2018 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding and unvested - beginning of period	183,629
Granted	98,000
Vested	0
Forfeited	(9,000)
Outstanding and unvested - end of period	272,629
Cumulative vested shares - end of period	1,884,287

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Shareholder's Equity and Stock-Based Compensation - Summary of Stock-Based Compensation Expense Recognized in Statements of Operations Related to All Outstanding Stock Based Compensation Awards (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 1,487	$ 1,200	$ 2,954	$ 2,234
Total Direct Costs
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	901	573	1,744	1,115
Selling, General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 586	$ 627	$ 1,210	$ 1,119

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Income Taxes - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Effective income tax rate	23.00%	33.40%	20.60%	36.00%
U.S. statutory rate	21.00%		21.00%

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Related Party Transactions - Additional Information (Details) $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 11, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) RenewalOption Agreement Building	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 Parcel
Related Party Transaction [Line Items]
Accounts receivable and unbilled, net		$ 2,100		$ 2,100		$ 1,000
Advanced billings		600		600		1,700
Pre-funded study costs with related parties						1,000
Deemed landlord liability, long-term portions		25,571		25,571		26,602
Employee Loans | Prepaid Expenses and Other Current Assets and Other Assets
Related Party Transaction [Line Items]
Employee advances receivables		200		200		200
Service Agreements | Coherus Bio Sciences Inc
Related Party Transaction [Line Items]
Revenue with related parties			$ 1,800		$ 5,100
Reimbursed out-of-pocket revenue with related parties			400		1,000
Accounts receivable and unbilled, net						300
Advanced billings						1,500
Pre-funded study costs with related parties						1,000
Service Agreements | Xenon
Related Party Transaction [Line Items]
Revenue with related parties			100		600
Service Agreements | Cymabay
Related Party Transaction [Line Items]
Revenue with related parties			200		300
Accounts receivable and unbilled, net		600		600		100
Service Agreements | Cymabay | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		1,400		2,100
Service Agreements | LIB
Related Party Transaction [Line Items]
Revenue with related parties			500		600
Accounts receivable and unbilled, net		1,300		1,300		500
Advanced billings		600		600		200
Service Agreements | LIB | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		1,000		1,800
Service Agreements | CinRX Pharma
Related Party Transaction [Line Items]
Revenue with related parties			200		200
Accounts receivable and unbilled, net		200		200		100
Service Agreements | CinRX Pharma | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		$ 200		$ 200
Purchase of Real Estate Properties | Chief Executive Officer
Related Party Transaction [Line Items]
Number of parcel in real estate property | Parcel							4
Purchase price of real estate property	$ 400
Transaction closed date	Jan. 11, 2017
Leased Real Estate | Chief Executive Officer
Related Party Transaction [Line Items]
Term of lease		12 years		12 years
Lease expiration period				2022-11
Number of lease renewal, 10-year option | RenewalOption				1
Lease term upon renewal		10 years		10 years
Lease expense recognized		$ 600	600	$ 1,100	1,100
Leased Real Estate | Chief Executive Officer And Immediate Family
Related Party Transaction [Line Items]
Number of lease renewal, 10-year option | RenewalOption				1
Number of lease agreements | Agreement				2
Number of buildings | Building				2
Lease occupancy year				2012
Lease expiration year				2027
Lease term upon renewal				10 years
Term of lease				15 years
Related party capital lease payments		900	1,000	$ 1,900	1,900
Deemed landlord liability, current		2,000		2,000		1,900
Deemed landlord liability, long-term portions		25,600		25,600		26,600
Leased Real Estate | Property and Equipment, Net | Chief Executive Officer And Immediate Family | Building
Related Party Transaction [Line Items]
Deemed assets, net		15,500		15,500		$ 16,300
Travel Services | Chief Executive Officer
Related Party Transaction [Line Items]
Travel expenses with related party		$ 200	$ 300	$ 600	$ 600

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Entity Wide Disclosures - Summary of Revenue by Major Source (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation Of Revenue [Line Items]
Total revenue	$ 170,144	$ 106,216	$ 333,221	$ 212,827
Oncology
Disaggregation Of Revenue [Line Items]
Total revenue	43,002		86,855
Other
Disaggregation Of Revenue [Line Items]
Total revenue	37,059		71,276
Cardiology
Disaggregation Of Revenue [Line Items]
Total revenue	24,508		48,244
Metabolic
Disaggregation Of Revenue [Line Items]
Total revenue	22,890		44,945
AVAI
Disaggregation Of Revenue [Line Items]
Total revenue	20,187		36,866
Central Nervous System
Disaggregation Of Revenue [Line Items]
Total revenue	13,113		26,278
Endocrine
Disaggregation Of Revenue [Line Items]
Total revenue	6,952		13,410
Medical Devices
Disaggregation Of Revenue [Line Items]
Total revenue	2,433		5,347
Revenue Net
Disaggregation Of Revenue [Line Items]
Total revenue	$ 170,144	$ 0	$ 333,221	$ 0