Medpace Holdings, Inc. [MEDP] Filings

10-Q 1 medp-20220331.htm 10-Q 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 March 31, 2022


☐	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 Global Select Market

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		33,647,133 shares outstanding as of April 22, 2022

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR QUARTERLY PERIOD ENDED MARCH 31, 2022

TABLE OF CONTENTS


Item Number		Page
	PART I — FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021	5
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

	PART II — OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
	EXHIBIT INDEX	27
	SIGNATURES	28

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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
	March 31,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	82,843		$	461,304
Accounts receivable and unbilled, net (includes $6.0 million and $2.7 million with related parties at March 31, 2022 and December 31, 2021, respectively)		224,759			186,432
Prepaid expenses and other current assets		48,367			43,176
Total current assets		355,969			690,912
Property and equipment, net		98,529			93,153
Operating lease right-of-use assets		141,638			129,558
Goodwill		662,396			662,396
Intangible assets, net		40,522			41,360
Deferred income taxes		25,809			25,134
Other assets		19,483			17,422
Total assets	$	1,344,346		$	1,659,935
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable (includes $0.7 million and $0.3 million with related parties at March 31, 2022 and December 31, 2021, respectively)	$	25,434		$	25,678
Accrued expenses		155,018			159,286
Advanced billings (includes $11.4 million and $8.3 million with related parties at March 31, 2022 and December 31, 2021, respectively)		367,221			344,641
Other current liabilities		31,755			27,612
Total current liabilities		579,428			557,217
Operating lease liabilities		141,624			130,965
Deferred income tax liability		1,055			1,080
Other long-term liabilities		17,223			17,745
Total liabilities		739,330			707,007
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 March 31, 2022 and December 31, 2021, respectively		-			-
Common stock - $0.01 par-value; 250,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively; 33,651,360 and 36,006,778 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		336			360
Treasury stock - 81,573 and 180,000 shares at March 31, 2022 and December 31, 2021, respectively		(14,243	)		(5,427	)
Additional paid-in capital		746,123			727,857
(Accumulated deficit) Retained earnings		(120,812	)		234,984
Accumulated other comprehensive loss		(6,388	)		(4,846	)
Total shareholders’ equity		605,016			952,928
Total liabilities and shareholders’ equity	$	1,344,346		$	1,659,935

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
	March 31,
	2022		2021
Revenue, net (includes $13.3 million and $5.3 million with related parties for the three months ended March 31, 2022 and 2021, respectively)	$	330,947	$	259,965
Operating expenses:
Direct service costs, excluding depreciation and amortization		125,434		101,387
Reimbursed out-of-pocket expenses		106,836		80,151
Total direct costs		232,270		181,538
Selling, general and administrative		29,366		25,738
Depreciation		4,270		3,812
Amortization		838		1,278
Total operating expenses		266,744		212,366
Income from operations		64,203		47,599
Other income, net:
Miscellaneous income, net		1,067		924
Interest income (expense), net		54		(14	)
Total other income, net		1,121		910
Income before income taxes		65,324		48,509
Income tax provision		4,013		5,203
Net income	$	61,311	$	43,306
Net income per share attributable to common shareholders:
Basic	$	1.75	$	1.21
Diluted	$	1.69	$	1.14
Weighted average common shares outstanding:
Basic		34,918		35,753
Diluted		36,364		37,749

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
	March 31,
	2022			2021
Net income	$	61,311		$	43,306
Other comprehensive income
Foreign currency translation adjustments, net of taxes		(1,542	)		(2,135	)
Comprehensive income	$	59,769		$	41,171

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(Amounts in thousands)												Accumulated
							Additional					Other
	Common			Treasury			Paid-In		Retained			Comprehensive
	Stock			Stock			Capital		Earnings			Loss			Total
BALANCE — December 31, 2020	$	355		$	(5,578	)	$	695,904	$	115,229		$	(131	)	$	805,779
Net income										43,306						43,306
Foreign currency translation													(2,135	)		(2,135	)
Stock-based compensation expense								2,871								2,871
Stock options exercised		4						9,102								9,106
BALANCE — March 31, 2021	$	359		$	(5,578	)	$	707,877	$	158,535		$	(2,266	)	$	858,927


									(Accumulated			Accumulated
							Additional		Deficit)			Other
	Common			Treasury			Paid-In		Retained			Comprehensive
	Stock			Stock			Capital		Earnings			Loss			Total
BALANCE — December 31, 2021	$	360		$	(5,427	)	$	727,857	$	234,984		$	(4,846	)	$	952,928
Net income										61,311						61,311
Foreign currency translation													(1,542	)		(1,542	)
Stock-based compensation expense								4,372								4,372
Stock options exercised		3						13,894								13,897
Repurchases of common stock		(27	)		(14,243	)				(411,680	)					(425,950	)
Retirement of treasury stock					5,427					(5,427	)					-
BALANCE — March 31, 2022	$	336		$	(14,243	)	$	746,123	$	(120,812	)	$	(6,388	)	$	605,016

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)	Three Months Ended
	March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	61,311		$	43,306
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,270			3,812
Amortization		838			1,278
Stock-based compensation expense		4,372			2,871
Noncash lease expense		4,537			3,903
Deferred income tax (benefit) provision		(713	)		1,289
Amortization and adjustment of deferred credit		(155	)		(167	)
Other		(265	)		124
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(38,224	)		1,089
Prepaid expenses and other current assets		(5,547	)		(6,073	)
Accounts payable		(1,041	)		(2,638	)
Accrued expenses		(3,651	)		(10,043	)
Advanced billings		22,580			22,143
Lease liabilities		(3,542	)		(3,155	)
Other assets and liabilities, net		1,486			(420	)
Net cash provided by operating activities		46,256			57,319
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(9,257	)		(6,507	)
Other		(1,951	)		(3,144	)
Net cash used in investing activities		(11,208	)		(9,651	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercises		13,867			9,102
Repurchases of common stock		(425,950	)		-
Proceeds from revolving loan		49,500			-
Payments on revolving loan		(49,500	)		-
Net cash (used in) provided by financing activities		(412,083	)		9,102
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(1,426	)		(1,659	)
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(378,461	)		55,111
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period		461,304			277,766
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	82,843		$	332,877
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION —
Acquistion of property and equipment—non-cash	$	7,375		$	6,531

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2022

(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, project management, regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance new drug application submissions, post-marketing clinical support, 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, 2021.

Share Repurchases

In the second quarter of 2021, the Board approved an increase of $150.0 million to the stock repurchase program bringing the total repurchase authorization up to $300.0 million. In the first quarter of 2022, the Board approved increases totaling $500.0 million to the Company's stock repurchase program. During the three months ended March 31, 2022, the Company repurchased 2,745,865 shares for $425.9 million. As of March 31, 2022, the Company has remaining authorization of $264.6 million under the repurchase program.

Repurchases under the share repurchase program are executed in the open market or negotiated transactions under trading plans put in place pursuant to Rule 10b5-1. The Company constructively retired the repurchased shares associated with these approved share repurchases, except for a small portion which were retained as Treasury Shares on the condensed consolidated statements of shareholders' equity. Retired share repurchase amounts paid in excess of par value are reflected within Accumulated deficit/Retained earnings in the Company’s condensed consolidated balance sheets. The repurchase program may be suspended or discontinued at any time without notice.

Recently Issued Accounting Standards

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance" which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity's financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements and related disclosures.

(2) 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

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undistributed earnings. The Company’s Restricted Stock Awards (“RSA”) 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 Restricted Stock Units (“RSU”) and 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. This 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 months ended March 31, 2022 and 2021 (in thousands, except for earnings per share):


	Three Months Ended
	March 31,
	2022			2021
Weighted-average shares:
Common shares outstanding		34,918			35,753
RSAs		21			116
Total weighted-average shares		34,939			35,869
Earnings per common share—Basic
Net income	$	61,311		$	43,306
Less: Undistributed earnings allocated to RSAs		(36	)		(140	)
Net income available to common shareholders—Basic	$	61,275		$	43,166

Net income per common share—Basic	$	1.75		$	1.21

Basic weighted-average common shares outstanding		34,918			35,753
Effect of diluted shares		1,446			1,996
Diluted weighted-average shares outstanding		36,364			37,749

Net income per common share—Diluted	$	1.69		$	1.14

During the three months ended March 31, 2022, the Company had (in thousands) 264 stock options that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period.

(3) 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 March 31, 2022. There were no transfers between Level 1, Level 2 or Level 3 during the three months ended March 31, 2022 or March 31, 2021.

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(4) 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
	March 31,			December 31,
	2022			2021
Accounts receivable	$	185,309		$	150,496
Unbilled receivables		39,620			36,107
Less: allowance for doubtful accounts		(170	)		(171	)
Total accounts receivable and unbilled, net	$	224,759		$	186,432

Contract Liabilities

Advanced billings represent 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
	March 31,	December 31,
	2022	2021
Advanced billings	$

Medpace Holdings, Inc. [MEDP] Filings
10-Q	[2022-04-26]
10-K	[2022-02-15]
10-Q	[2021-10-26]
10-Q	[2021-07-27]
10-Q	[2021-04-27]
10-K	[2021-02-16]
10-Q	[2020-10-27]
10-Q	[2020-07-28]
10-Q	[2020-04-29]
10-K	[2020-02-25]
10-Q	[2019-10-29]
10-Q	[2019-07-30]
10-Q	[2019-04-30]
10-K	[2019-02-26]
10-Q	[2018-10-30]
10-Q	[2018-07-31]
10-Q	[2018-05-01]
10-K	[2018-02-27]
10-Q	[2017-10-31]
10-Q	[2017-08-01]
10-Q	[2017-05-02]
10-K	[2017-02-28]
10-Q	[2016-11-03]
S-1	[2016-06-24]