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, 2019

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.01 par value	MEDP	NASDAQ

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	35,896,510 shares outstanding as of July 26, 2019

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR QUARTERLY PERIOD ENDED JUNE 30, 2019

TABLE OF CONTENTS

Item Number		Page
	PART I — FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
	PART II — OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
EXHIBIT INDEX		29
SIGNATURES		30

- 2 -

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.
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	20,098		$	23,275
Restricted cash		-			7
Accounts receivable and unbilled, net (includes $2.6 million and $3.8 million with related parties at June 30, 2019 and December 31, 2018, respectively)		149,860			133,449
Prepaid expenses and other current assets		24,386			21,383
Total current assets		194,344			178,114
Property and equipment, net		39,749			52,255
Operating lease right-of-use assets		51,809			-
Goodwill		662,427			660,981
Intangible assets, net		60,340			69,179
Deferred income taxes		313			713
Other assets		7,879			6,691
Total assets	$	1,016,861		$	967,933
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable (includes $0.1 million and $0.3 million with related parties at June 30, 2019 and December 31, 2018, respectively)	$	22,691		$	16,737
Accrued expenses		93,604			87,493
Advanced billings (includes $1.6 million and $0.4 million with related parties at June 30, 2019 and December 31, 2018, respectively)		165,447			147,935
Other current liabilities		14,331			4,861
Total current liabilities		296,073			257,026
Long-term debt, net, less current portion		-			79,721
Operating lease liabilities		43,731			-
Deemed landlord liability, less current portion		-			24,484
Deferred income tax liability		4,599			439
Other long-term liabilities		14,403			16,560
Total liabilities		358,806			378,230
Commitments and contingencies (see Note 12)
Shareholders’ equity:
Preferred stock - $0.01 par-value; 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		-			-
Common stock - $0.01 par-value; 250,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively; 35,894,048 and 35,665,910 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		359			356
Treasury stock - 200,000 shares at June 30, 2019 and December 31, 2018, respectively		(6,030	)		(6,030	)
Additional paid-in capital		651,784			639,381
Retained earnings (accumulated deficit)		14,319			(41,487	)
Accumulated other comprehensive loss		(2,377	)		(2,517	)
Total shareholders’ equity		658,055			589,703
Total liabilities and shareholders’ equity	$	1,016,861		$	967,933

See notes to condensed consolidated financial statements.

- 3 -

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,
	2019			2018			2019			2018
Revenue, net (includes $4.0 million and $2.6 million with related parties for the three months ended June 30, 2019 and 2018, respectively, and $9.1 million and $4.1 million with related parties for the six months ended June 30, 2019 and 2018, respectively)	$	214,104		$	170,144		$	414,845		$	333,221
Operating expenses:
Direct service costs, excluding depreciation and amortization		79,327			61,478			154,436			121,819
Reimbursed out-of-pocket expenses		70,985			55,198			141,579			112,111
Total direct costs		150,312			116,676			296,015			233,930
Selling, general and administrative		23,556			20,507			44,864			36,506
Depreciation		1,982			2,226			3,973			4,540
Amortization		2,995			7,390			8,839			14,781
Total operating expenses		178,845			146,799			353,691			289,757
Income from operations		35,259			23,345			61,154			43,464
Other expense, net:
Miscellaneous (expense) income, net		(19	)		478			(301	)		325
Interest expense, net		(748	)		(2,308	)		(1,703	)		(4,617	)
Total other expense, net		(767	)		(1,830	)		(2,004	)		(4,292	)
Income before income taxes		34,492			21,515			59,150			39,172
Income tax provision		7,037			4,947			12,497			8,053
Net income	$	27,455		$	16,568		$	46,653		$	31,119
Net income per share attributable to common shareholders:
Basic	$	0.76		$	0.46		$	1.30		$	0.87
Diluted	$	0.73		$	0.45		$	1.24		$	0.85
Weighted average common shares outstanding:
Basic		35,839			35,519			35,772			35,503
Diluted		37,389			36,664			37,377			36,586

See notes to condensed consolidated financial statements.

- 4 -

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,
	2019		2018			2019		2018
Net income	$	27,455	$	16,568		$	46,653	$	31,119
Other comprehensive income
Foreign currency translation adjustments, net of taxes		414		(2,010	)		140		(1,381	)
Comprehensive income	$	27,869	$	14,558		$	46,793	$	29,738

See notes to condensed consolidated financial statements.

- 5 -

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in thousands)								(Accumulated			Accumulated
						Additional		Deficit)			Other
	Common		Treasury			Paid-In		Retained			Comprehensive
	Stock		Stock			Capital		Earnings			Income (Loss)			Total
BALANCE — December 31, 2017	$	355	$	(6,030	)	$	630,341	$	(120,402	)	$	(734	)	$	503,530
Impact to Retained Earnings from adoption of ASU 2014-09									5,730						5,730
BALANCE — January 1, 2018		355		(6,030	)		630,341		(114,672	)		(734	)		509,260
Net income									14,551						14,551
Foreign currency translation												629			629
Stock-based compensation expense							1,467								1,467
Stock options exercised							566								566
BALANCE — March 31, 2018		355		(6,030	)		632,374		(100,121	)		(105	)		526,473
Net income									16,568						16,568
Foreign currency translation												(2,010	)		(2,010	)
Stock-based compensation expense							1,487								1,487
Stock options exercised		1					608								609
BALANCE — June 30, 2018	$	356	$	(6,030	)	$	634,469	$	(83,553	)	$	(2,115	)	$	543,127
								(Accumulated			Accumulated
						Additional		Deficit)			Other
	Common		Treasury			Paid-In		Retained			Comprehensive
	Stock		Stock			Capital		Earnings			Income (Loss)			Total
BALANCE — December 31, 2018	$	356	$	(6,030	)	$	639,381	$	(41,487	)	$	(2,517	)	$	589,703
Impact to Retained Earnings from adoption of ASU 2016-02									9,153						9,153
BALANCE — January 1, 2019		356		(6,030	)		639,381		(32,334	)		(2,517	)		598,856
Net income									19,198						19,198
Foreign currency translation												(274	)		(274	)
Stock-based compensation expense							3,183								3,183
Stock options exercised		1					933								934
BALANCE — March 31, 2019	$	357	$	(6,030	)	$	643,497	$	(13,136	)	$	(2,791	)	$	621,897
Net income									27,455						27,455
Foreign currency translation												414			414
Stock-based compensation expense							5,385								5,385
Stock options exercised		2					2,902								2,904
BALANCE — June 30, 2019	$	359	$	(6,030	)	$	651,784	$	14,319		$	(2,377	)	$	658,055
See notes to condensed consolidated financial statements.

- 6 -

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	46,653		$	31,119
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		3,973			4,540
Amortization		8,839			14,781
Stock-based compensation expense		8,568			2,954
Amortization of debt issuance costs and discount		874			317
Noncash lease expense		4,787			-
Deferred income tax provision (benefit)		1,840			(286	)
Amortization and adjustment of deferred credit		(400	)		(407	)
Other		10			743
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(15,470	)		(20,289	)
Prepaid expenses and other current assets		(3,414	)		(804	)
Accounts payable		5,338			1,375
Accrued expenses		6,066			14,184
Advanced billings		17,546			15,846
Lease liabilities		(4,338	)		-
Other assets and liabilities, net		(237	)		568
Net cash provided by operating activities		80,635			64,641
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(5,990	)		(9,793	)
Other		(1,292	)		(178	)
Net cash used in investing activities		(7,282	)		(9,971	)
CASH FLOWS FROM FINANCING ACTIVITIES: