Medpace Holdings, Inc. Reports First Quarter 2017 Results; Board Authorizes $50 Million Share Repurchase Program
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Net service revenue of
$93.8 million in the first quarter increased 6.8% from net service revenue of$87.8 million for the comparable prior-year period, representing a backlog conversion rate of 19.4%. -
Net new business awards totaled
$93.9 million in the first quarter, representing a decline of 11.8% from net new business awards of$106.4 million for the comparable prior-year period and a net book-to-bill ratio of 1.00x. -
First quarter 2017 GAAP net income was
$8.4 million , or$0.20 per diluted share, versus a GAAP net income of$3.4 million , or$0.11 per diluted share, for the comparable prior-year period. Net income margin was 9.0% and 3.9% for the first quarter of 2017 and 2016, respectively. -
Adjusted EBITDA was
$26.2 million , an increase of 1.8% versus the comparable prior-year period, resulting in an Adjusted EBITDA margin of 28.0% for the first quarter of 2017. -
Adjusted Net Income was
$14.1 million , or$0.34 per diluted share, an increase of 21.7% from the comparable prior-year period.
First Quarter 2017 Financial Results
Net service revenue for the three months ended
Backlog as of
For the first quarter of 2017, Direct costs, excluding depreciation and
amortization, were
For the first quarter of 2017, Selling, general and administrative
expenses were
GAAP net income for the first quarter of 2017 was
Adjusted EBITDA for the first quarter of 2017 increased 1.8% to
Adjusted Net Income for the first quarter of 2017 increased 21.7% to
A reconciliation of the Company’s non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share to the corresponding GAAP measures are provided below.
Share Repurchase Authorization
The Company’s Board of Directors has authorized a share repurchase
program of up to
Balance Sheet and Liquidity
The Company’s Cash and cash equivalents were
Financial Guidance
The Company forecasts 2017 net service revenue in the range of
Based on forecasted 2017 net service revenue of
Conference Call Details
To participate in the conference call, dial 800-219-7113 (domestic) or 574-990-1030 (international) using the passcode 8146223.
To access the conference call via webcast, visit the “Investors” section of Medpace’s website at medpace.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.
A supplemental slide presentation will also be available at the “Investors” section of Medpace’s website prior to the start of the call.
A recording of the call will be available at
About
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding our anticipated financial results and effective tax rate used for non-GAAP adjustment purposes. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words.
These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: the potential loss, delay or non-renewal of our contracts, or the non-payment by customers for services we have performed; the failure to convert backlog to revenue at our present or historical conversion rate; fluctuation in our results between fiscal quarters and years; decreased operating margins due to increased pricing pressure or other pressures; failure to perform our services in accordance with contractual requirements, government regulations and ethical considerations; the impact of underpricing our contracts, overrunning our cost estimates or failing to receive approval for or experiencing delays with documentation of change orders; our failure to successfully execute our growth strategies; the impact of a failure to retain key personnel or recruit experienced personnel; the risks associated with our information systems infrastructure; our failure to manage our growth effectively; adverse results from customer or therapeutic area concentration; the risks associated with doing business internationally; the risks associated with the Foreign Corrupt Practices Act and other anti-corruption laws; future net losses; the impact of income tax rate fluctuations on operations, earnings and earnings per share; the risks associated with our intercompany pricing policies; our failure to attract suitable investigators and patients to our clinical trials; the liability risks associated with our research and development services; the risks related to our Phase I clinical services; inadequate insurance coverage for our operations and indemnification obligations; fluctuations in exchange rates; the risks related to our relationships with existing or potential customers who are in competition with each other; our failure to successfully integrate potential future acquisitions; potential impairment of goodwill or other intangible assets; our limited ability to utilize our net operating loss carryforwards or other tax attributes; the risks associated with the use and disposal of hazardous substances and waste; the failure of third parties to provide us critical support services; our limited ability to protect our intellectual property rights; the risks associated with potential future investments in our customers’ business or drugs; general economic conditions in the markets in which we operate, including financial market conditions; the impact of a natural disaster or other catastrophic event; negative outsourcing trends in the biopharmaceutical industry and a reduction in aggregate expenditures and research and development budgets; our inability to compete effectively with other CROs; the impact of healthcare reform; the impact of recent consolidation in the biopharmaceutical industry; failure to comply with federal, state and foreign healthcare laws; the effect of current and proposed laws and regulations regarding the protection of personal data; our potential involvement in costly intellectual property lawsuits; actions by regulatory authorities or customers to limit the scope of or withdraw an approved drug, biologic or medical device from the market; failure to keep pace with rapid technological changes; the impact of industry-wide reputational harm to CROs; our ability to fulfill our debt obligations; the risks associated with incurring additional debt or undertaking additional debt obligations; the effect of covenant restrictions under our debt agreements on our ability to operate our business; our inability to generate sufficient cash to service all of our indebtedness; fluctuations in interest rates; and our dependence on our lenders, which may not be able to fund borrowings under the credit commitments, and our inability to borrow.
These and other important factors discussed under the caption “Risk
Factors” in our Annual Report on Form 10-K filed with the
Non-GAAP Financial Measures
Certain financial measures presented in this press release, such as
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs,
Adjusted Selling, general and administrative expenses, Adjusted Net
Income, and Adjusted Net Income per diluted share, are not recognized
under generally accepted accounting principles in
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, and Adjusted Net Income per diluted share have important limitations as analytical tools and you should not consider them in isolation, or as a substitute for, analysis of our results as reported under U.S. GAAP. See the condensed consolidated financial statements included elsewhere in this release for our U.S. GAAP results. Additionally, for reconciliations of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Direct costs, Adjusted Selling, general and administrative expenses, Adjusted Net Income, Adjusted Net Income per diluted share to our closest reported U.S. GAAP measures, refer to the appendix of this press release.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin
We believe that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are
useful to provide additional information to investors about certain
material non-cash and non-recurring items. While we believe these
financial measures are commonly used by investors to evaluate our
performance and that of our competitors, because not all companies use
identical calculations, this presentation of EBITDA, Adjusted EBITDA and
Adjusted EBITDA margin may not be comparable to other similarly titled
measures of other companies and should not be considered as an
alternative to performance measures derived in accordance with U.S.
GAAP. EBITDA is calculated as net income (loss) attributable to
Adjusted Net Income and Adjusted Net Income per diluted share
Adjusted Net Income measures our operating performance by adjusting net
income (loss) attributable to
Adjusted Direct costs and Adjusted Selling, general and administrative expenses
Adjusted Direct costs and Adjusted Selling, general and administrative expenses are useful to provide information to investors to evaluate core operating expenses as they exclude certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business, but includes certain items such as certain lease payments which are otherwise excluded from core operating expenses. We believe that reporting these metrics enhance our investors’ overall understanding of our core recurring operating expenses. You should not consider Adjusted Direct costs and Adjusted Selling, general and administrative expenses as an alternative to Direct costs, excluding depreciation and amortization and Selling, general and administrative expenses, determined in accordance with U.S. GAAP, as an indicator of operating performance.
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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
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| (Amounts in thousands, except per share amounts) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenue: | ||||||||
| Service revenue, net | $ | 93,781 | $ | 87,800 | ||||
| Reimbursed out-of-pocket revenue | 12,830 | 11,786 | ||||||
| Total revenue | 106,611 | 99,586 | ||||||
| Operating expenses: | ||||||||
| Direct costs, excluding depreciation and amortization | 51,105 | 46,981 | ||||||
| Reimbursed out-of-pocket expenses | 12,830 | 11,786 | ||||||
| Selling, general and administrative | 15,154 | 13,509 | ||||||
| Depreciation | 2,130 | 1,773 | ||||||
| Amortization | 9,448 | 12,668 | ||||||
| Total operating expenses | 90,667 | 86,717 | ||||||
| Income from operations | 15,944 | 12,869 | ||||||
| Other expense, net: | ||||||||
| Miscellaneous expense, net | (372 | ) | (935 | ) | ||||
| Interest expense, net | (1,794 | ) | (5,973 | ) | ||||
| Total other expense, net | (2,166 | ) | (6,908 | ) | ||||
| Income before income taxes | 13,778 | 5,961 | ||||||
| Income tax provision | 5,331 | 2,513 | ||||||
| Net income | $ | 8,447 | $ | 3,448 | ||||
| Net income per share attributable to common shareholders: | ||||||||
| Basic | $ | 0.21 | $ | 0.11 | ||||
| Diluted | $ | 0.20 | $ | 0.11 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 40,669 | 32,625 | ||||||
| Diluted | 41,508 | 32,625 | ||||||
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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
| (Amounts in thousands, except share amounts) | As Of | |||||||
| March 31, | December 31. | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 29,316 | $ | 37,099 | ||||
| Restricted cash | 293 | 308 | ||||||
| Accounts receivable and unbilled, net | 82,283 | 79,767 | ||||||
| Prepaid expenses and other current assets | 16,433 | 16,074 | ||||||
| Total current assets | 128,325 | 133,248 | ||||||
| Property and equipment, net | 44,976 | 43,805 | ||||||
| Goodwill | 660,981 | 660,981 | ||||||
| Intangible assets, net | 126,623 | 136,071 | ||||||
| Deferred income taxes | 154 | 97 | ||||||
| Other assets | 5,034 | 4,903 | ||||||
| Total assets | $ | 966,093 | $ | 979,105 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,345 | $ | 10,911 | ||||
| Accrued expenses | 14,083 | 24,417 | ||||||
| Pre-funded study costs | 48,473 | 51,948 | ||||||
| Advanced billings | 60,474 | 65,668 | ||||||
| Current portion of long-term debt | 13,406 | 12,375 | ||||||
| Other current liabilities | 5,264 | 3,284 | ||||||
| Total current liabilities | 150,045 | 168,603 | ||||||
| Long-term debt, net, less current portion | 147,230 | 151,267 | ||||||
| Deemed landlord liability, less current portion | 28,063 | 28,527 | ||||||
| Deferred income tax liability | 11,683 | 12,030 | ||||||
| Other long-term liabilities | 8,092 | 7,968 | ||||||
| Total liabilities | 345,113 | 368,395 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock - $0.01 par-value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2017 and December 31, 2016 | - | - | ||||||
|
Common stock - $0.01 par-value; 250,000,000 shares authorized at March 31, 2017 and December 31, 2016, respectively; 40,675,553 and 40,662,856 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively |
407 | 407 | ||||||
| Additional paid-in capital | 625,296 | 623,629 | ||||||
| Accumulated deficit | (1,577 | ) | (9,584 | ) | ||||
| Accumulated other comprehensive loss | (3,146 | ) | (3,742 | ) | ||||
| Total shareholders’ equity | 620,980 | 610,710 | ||||||
| Total liabilities and shareholders’ equity | $ | 966,093 | $ | 979,105 | ||||
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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
| (Amounts in thousands) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 8,447 | $ | 3,448 | ||||
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation | 2,130 | 1,773 | ||||||
| Amortization | 9,448 | 12,668 | ||||||
| Stock-based compensation expense | 1,034 | 1,009 | ||||||
| Amortization of debt issuance costs and discount | 165 | 672 | ||||||
| Deferred income tax benefit | (410 | ) | (310 | ) | ||||
| Other | (252 | ) | 46 | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable and unbilled, net | (2,292 | ) | (9,927 | ) | ||||
| Prepaid expenses and other current assets | (247 | ) | (1,264 | ) | ||||
| Accounts payable | (1,331 | ) | (2,027 | ) | ||||
| Accrued expenses | (10,508 | ) | (5,004 | ) | ||||
| Pre-funded study costs | (3,497 | ) | 1,305 | |||||
| Advanced billings | (5,246 | ) | 9,669 | |||||
| Other assets and liabilities, net | 1,884 | 567 | ||||||
| Net cash (used in) provided by operating activities | (675 | ) | 12,625 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Property and equipment expenditures | (4,374 | ) | (3,456 | ) | ||||
| Other | 16 | 32 | ||||||
| Net cash used in investing activities | (4,358 | ) | (3,424 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from stock option exercises | 193 | 7 | ||||||
| Payment of debt | (3,094 | ) | (18 | ) | ||||
| Payment of deemed landlord liability | (404 | ) | (369 | ) | ||||
| Net cash used in financing activities | (3,305 | ) | (380 | ) | ||||
| EFFECTS OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 540 | 384 | ||||||
| (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (7,798 | ) | 9,205 | |||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period | 37,407 | 17,737 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period | $ | 29,609 | $ | 26,942 | ||||
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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
| (Amounts in thousands, except per share amounts) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||
| Net income (GAAP) | $ | 8,447 | $ | 3,448 | ||||
| Interest expense, net | 1,794 | 5,973 | ||||||
| Income tax provision | 5,331 | 2,513 | ||||||
| Depreciation | 2,130 | 1,773 | ||||||
| Amortization | 9,448 | 12,668 | ||||||
| EBITDA (Non-GAAP) | $ | 27,150 | $ | 26,375 | ||||
| Corporate campus lease payments (b) | (936 | ) | (930 | ) | ||||
| Other transaction expenses (d) | - | 314 | ||||||
| Adjusted EBITDA (Non-GAAP) | $ | 26,214 | $ | 25,759 | ||||
| Net income margin (GAAP) | 9.0 | % | 3.9 | % | ||||
| Adjusted EBITDA margin (Non-GAAP) | 28.0 | % | 29.3 | % | ||||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||
| Net income as reported (GAAP) | $ | 8,447 | $ | 3,448 | ||||
| Amortization | 9,448 | 12,668 | ||||||
| Corporate campus lease payments - principal portion (b) | (404 | ) | (369 | ) | ||||
| Other transaction expenses (d) | - | 314 | ||||||
| Deferred financing fees (c) | 165 | 672 | ||||||
| Income tax effect of adjustments (39.0%) (e) | (3,592 | ) | (5,181 | ) | ||||
| Adjusted net income (Non-GAAP) | $ | 14,064 | $ | 11,552 | ||||
| Net income per diluted share (GAAP) | $ | 0.20 | $ | 0.11 | ||||
| Adjusted net income per diluted share (Non-GAAP) | $ | 0.34 | $ | 0.35 | ||||
| Diluted average common shares outstanding | 41,508 | 32,625 | ||||||
| RECONCILIATION OF ADJUSTED DIRECT COSTS | ||||||||
| Direct costs, excluding depreciation and amortization (GAAP) | $ | 51,105 | $ | 46,981 | ||||
| Corporate campus lease payments (b) | 796 | 790 | ||||||
| Adjusted direct costs (Non-GAAP) | $ | 51,901 | $ | 47,771 | ||||
| RECONCILIATION OF ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE | ||||||||
| Selling, general and administrative (GAAP) | $ | 15,154 | $ | 13,509 | ||||
| Corporate campus lease payments (b) | 140 | 140 | ||||||
| Other transaction expenses (d) | - | (314 | ) | |||||
| Adjusted selling, general and administrative (Non-GAAP) | $ | 15,294 | $ | 13,335 | ||||
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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES |
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| (Amounts in millions, except per share amounts) | Forecast 2017 | Forecast 2017 | ||||||||||||||||||||||
| Adjusted Net Income |
Adjusted Diluted Earnings |
Year ended
December 31, 2016 |
||||||||||||||||||||||
| Low | High | Low | High |
Adjusted |
Adjusted |
|||||||||||||||||||
| Net income and diluted earnings per share (GAAP) | $ | 32.0 | $ | 35.4 | $ | 0.77 | $ | 0.85 | $ | 13.4 | $ | 0.37 | ||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Amortization | 37.8 | 37.8 | 0.91 | 0.91 | 50.7 | 1.39 | ||||||||||||||||||
|
Stock compensation expense: liability awards mark-to-market (a) |
- | - | - | - | 5.7 | 0.16 | ||||||||||||||||||
| Other transaction expenses (d) | - | - | - | - | 1.2 | 0.03 | ||||||||||||||||||
|
Corporate campus lease payments - principal portion (b) |
(1.7 | ) | (1.7 | ) | (0.04 | ) | (0.04 | ) | (1.5 | ) | (0.04 | ) | ||||||||||||
| Loss on extinguishment of debt (f) | - | - | - | - | 10.7 | 0.29 | ||||||||||||||||||
| Deferred financing fees (c) | 0.7 | 0.7 | 0.02 | 0.02 | 2.6 | 0.07 | ||||||||||||||||||
| Income tax effect of adjustments (e) | (14.8 | ) | (14.2 | ) | (0.36 | ) | (0.34 | ) | (27.1 | ) | (0.74 | ) | ||||||||||||
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Adjusted net income and adjusted net income per diluted share (Non-GAAP) |
$ | 54.0 | $ | 58.0 | $ | 1.30 | $ | 1.40 | $ | 55.7 | $ | 1.53 | ||||||||||||
| Depreciation | 9.1 | 9.1 | ||||||||||||||||||||||
| Income tax provision | 36.3 | 36.3 | ||||||||||||||||||||||
| Interest expense, net | 4.6 | 4.6 | ||||||||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 104.0 | $ | 108.0 | ||||||||||||||||||||
| (a) | Consists of period end mark-to-market fair value adjustments associated with liability classified awards and the impact of a one-time stock based compensation award to our chief executive officer. Future stock based awards activity is expected to be classified as equity for accounting purposes and will not be subject to period ending fair value adjustments. | |
| (b) | Represents cash rental payments on two corporate headquarter buildings that are accounted for as deemed assets and subject to depreciation expense over the life of the lease. Payments made for these leases are accounted for with a principal portion and an interest portion, consistent with deemed landlord liability accounting. The interest portion of these payments is included in net cash provided by operating activities in our statement of cash flows. The principal portion is reflected as a financing activity in our statement of cash flows. These adjustments for purposes of arriving at Adjusted EBITDA, Adjusted Direct costs, Adjusted Selling, general and administrative expenses and Adjusted Net Income have the effect of presenting these leases consistently with all other office lease rentals that we have globally. | |
| (c) | Represents amortization of the discount and issuance costs deferred on the consolidated balance sheet associated with the issuance of the Senior Secured Credit Facility. | |
| (d) | Represents advisory costs and other fees incurred in connection with the August 2016 initial public offering. | |
| (e) | Represents the tax effect of the total adjustments at 39% for 2016. For full year 2017 guidance, a tax rate of 38.5% to 39.5% is assumed. | |
| (f) | Represents a loss on extinguishment of long-term debt in connection with the repayment and extinguishment of our obligations under the previous Senior Secured Credit Facilities during the fourth quarter of 2016. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170501006199/en/
Source:
Medpace Holdings, Inc.
Media Contact:
Mary Kuramoto,
513-579-9911 x12523
m.kuramoto@medpace.com
or
Investor
Contact:
investor@medpace.com