Medpace Holdings, Inc. Reports First Quarter 2019 Results
- Revenue of
$200.7 million in the first quarter of 2019 increased 23.1% from revenue of$163.1 million for the comparable prior-year period, representing a backlog conversion rate of 19.0%. - Net new business awards were
$248.7 million in the first quarter of 2019, representing an increase of 23.9% from net new business awards of$200.7 million for the comparable prior-year period, which resulted in a net book-to-bill ratio of 1.24x. - First quarter of 2019 GAAP net income was
$19.2 million , or$0.51 per diluted share, versus GAAP net income of$14.6 million , or$0.40 per diluted share, for the comparable prior-year period. Net income margin was 9.6% and 8.9% for the first quarter of 2019 and 2018, respectively. - EBITDA was
$33.4 million for the first quarter of 2019, an increase of 12.7% from EBITDA of$29.7 million for the comparable prior-year period, resulting in an EBITDA margin of 16.7%. - Adjusted Net Income was
$23.8 million , or$0.64 per diluted share, for the first quarter of 2019, an increase of 18.9% from the comparable prior-year period.
First Quarter 2019 Financial Results
Revenue for the three months ended
Backlog as of
For the first quarter of 2019, total direct costs were
GAAP net income for the first quarter of 2019 was
EBITDA for the first quarter of 2019 increased 12.7% to
Adjusted Net Income for the first quarter of 2019 increased 18.9% to
A reconciliation of the Company’s non-GAAP financial measures, including EBITDA, EBITDA margin, Adjusted Net Income, and Adjusted Net Income per diluted share to the corresponding GAAP measures is provided below.
Balance Sheet and Liquidity
The Company’s Cash and cash equivalents were
In
| ASSETS | As of | ||||||||||
| January 1, 2019 | Adjustments | December 31, 2018 | |||||||||
| Current assets: | |||||||||||
| Prepaid expenses and other current assets | 21,013 | (370 | ) | 21,383 | |||||||
| Total current assets | 177,744 | (370 | ) | 178,114 | |||||||
| Property and equipment, net | 37,613 | (14,642 | ) | 52,255 | |||||||
| Operating lease right-of-use assets | 51,854 | 51,854 | - | ||||||||
| Total assets | $ | 1,004,775 | $ | 36,842 | $ | 967,933 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Other current liabilities | 10,951 | 6,090 | 4,861 | ||||||||
| Total current liabilities | 263,116 | 6,090 | 257,026 | ||||||||
| Operating lease liabilities | 45,294 | 45,294 | - | ||||||||
| Deemed landlord liability, less current portion | - | (24,484 | ) | 24,484 | |||||||
| Deferred income tax liability | 3,158 | 2,719 | 439 | ||||||||
| Other long-term liabilities | 14,630 | (1,930 | ) | 16,560 | |||||||
| Total liabilities | 405,919 | 27,689 | 378,230 | ||||||||
| Shareholders’ equity: | |||||||||||
| Accumulated deficit | (32,334 | ) | 9,153 | (41,487 | ) | ||||||
| Total shareholders’ equity | 598,856 | 9,153 | 589,703 | ||||||||
| Total liabilities and shareholders’ equity | $ | 1,004,775 | $ | 36,842 | $ | 967,933 | |||||
Financial Guidance
The Company forecasts 2019 revenue in the range of
Based on forecasted 2019 revenue of
Conference Call Details
To participate in the conference call, dial 800-219-7113 (domestic) or 574-990-1030 (international) using the passcode 8067378.
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,” “forecast,” “may,” “could,” “likely,” “anticipate,” “project,” “goal,” “objective,” similar expressions, and variations or negatives of these words.
These forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees, but
involve known and unknown risks, uncertainties and other important
factors that may cause our financial condition, actual results,
performance (including share price performance), or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements,
including, but not limited to, the following: the potential loss, delay
or non-renewal of our contracts, or the non-payment by customers for
services we have performed; the failure to convert backlog to revenue at
our present or historical conversion rate; fluctuation in our results
between fiscal quarters and years; decreased operating margins due to
increased pricing pressure or other pressures; failure to perform our
services in accordance with contractual requirements, government
regulations and ethical considerations; the impact of underpricing our
contracts, overrunning our cost estimates or failing to receive approval
for or experiencing delays with documentation of change orders; our
failure to successfully execute our growth strategies; the impact of a
failure to retain key executives or other personnel or recruit
experienced personnel; the risks associated with our information systems
infrastructure, including potential security breaches and other
disruptions which could compromise our information; our failure to
manage our growth effectively; adverse results from customer or
therapeutic area concentration; the risks associated with doing business
internationally, including the effects of tariffs and trade wars; the
risks associated with the Foreign Corrupt Practices Act and other
anti-corruption laws; future net losses; the impact of changes in tax
laws and regulations; the risks associated with our intercompany pricing
policies; our failure to attract suitable investigators and patients to
our clinical trials; the liability risks associated with our research
and development services; the risks related to our Phase I clinical
services; inadequate insurance coverage for our operations and
indemnification obligations; fluctuations in exchange rates; the risks
related to our relationships with existing or potential customers who
are in competition with each other; our failure to successfully
integrate potential future acquisitions; potential impairment of
goodwill or other intangible assets; our limited ability to utilize our
net operating loss carryforwards or other tax attributes; the risks
associated with the use and disposal of hazardous substances and waste;
the failure of third parties to provide us critical support services;
our limited ability to protect our intellectual property rights; the
risks associated with potential future investments in our customers’
business or drugs; general economic conditions in the markets in which
we operate, including financial market conditions; the impact of a
natural disaster or other catastrophic event; negative outsourcing
trends in the biopharmaceutical industry and a reduction in aggregate
expenditures and research and development budgets; our inability to
compete effectively with other CROs; the impact of healthcare reform;
the impact of recent consolidation in the biopharmaceutical industry;
failure to comply with federal, state and foreign healthcare laws; the
effect of current and proposed laws and regulations regarding the
protection of personal data; our potential involvement in costly
intellectual property lawsuits; actions by regulatory authorities or
customers to limit the scope of or withdraw an approved drug, biologic
or medical device from the market; failure to keep pace with rapid
technological changes; the impact of industry-wide reputational harm to
CROs; the end result of any negotiations between the
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, EBITDA margin, Adjusted Net Income, and Adjusted Net Income per
diluted share, are not recognized under generally accepted accounting
principles in
EBITDA, EBITDA margin, 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, EBITDA margin, 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 and EBITDA margin
We believe that EBITDA and 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 and 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
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||
| (Amounts in thousands, except per share amounts) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| Revenue, net | $ | 200,741 | $ | 163,077 | ||||
| Operating expenses: | ||||||||
| Direct service costs, excluding depreciation and amortization | 75,109 | 60,341 | ||||||
| Reimbursed out-of-pocket expenses | 70,594 | 56,913 | ||||||
| Total direct costs | 145,703 | 117,254 | ||||||
| Selling, general and administrative | 21,308 | 15,999 | ||||||
| Depreciation | 1,991 | 2,314 | ||||||
| Amortization | 5,844 | 7,391 | ||||||
| Total operating expenses | 174,846 | 142,958 | ||||||
| Income from operations | 25,895 | 20,119 | ||||||
| Other expense, net: | ||||||||
| Miscellaneous expense, net | (282 | ) | (153 | ) | ||||
| Interest expense, net | (955 | ) | (2,309 | ) | ||||
| Total other expense, net | (1,237 | ) | (2,462 | ) | ||||
| Income before income taxes | 24,658 | 17,657 | ||||||
| Income tax provision | 5,460 | 3,106 | ||||||
| Net income | $ | 19,198 | $ | 14,551 | ||||
| Net income per share attributable to common shareholders: | ||||||||
| Basic | $ | 0.54 | $ | 0.41 | ||||
| Diluted | $ | 0.51 | $ | 0.40 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 35,698 | 35,486 | ||||||
| Diluted | 37,285 | 36,449 | ||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
| (Amounts in thousands, except share amounts) | As Of | |||||||
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 30,127 | $ | 23,275 | ||||
| Restricted cash | - | 7 | ||||||
| Accounts receivable and unbilled, net | 129,624 | 133,449 | ||||||
| Prepaid expenses and other current assets | 22,624 | 21,383 | ||||||
| Total current assets | 182,375 | 178,114 | ||||||
| Property and equipment, net | 37,639 | 52,255 | ||||||
| Operating lease right-of-use assets | 53,627 | - | ||||||
| Goodwill | 662,380 | 660,981 | ||||||
| Intangible assets, net | 63,335 | 69,179 | ||||||
| Deferred income taxes | 330 | 713 | ||||||
| Other assets | 6,831 | 6,691 | ||||||
| Total assets | $ | 1,006,517 | $ | 967,933 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 13,626 | $ | 16,737 | ||||
| Accrued expenses | 82,247 | 87,493 | ||||||
| Advanced billings | 150,243 | 147,935 | ||||||
| Other current liabilities | 18,425 | 4,861 | ||||||
| Total current liabilities | 264,541 | 257,026 | ||||||
| Long-term debt, net, less current portion | 55,781 | 79,721 | ||||||
| Operating lease liabilities | 46,238 | - | ||||||
| Deemed landlord liability, less current portion | - | 24,484 | ||||||
| Deferred income tax liability | 3,435 | 439 | ||||||
| Other long-term liabilities | 14,625 | 16,560 | ||||||
| Total liabilities | 384,620 | 378,230 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock - $0.01 par-value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | - | - | ||||||
| Common stock - $0.01 par-value; 250,000,000 shares authorized at March 31, 2019 and December 31, 2018, respectively; 35,728,989 and 35,665,910 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 357 | 356 | ||||||
| Treasury stock - 200,000 shares at March 31, 2019 and December 31, 2018, respectively | (6,030 | ) | (6,030 | ) | ||||
| Additional paid-in capital | 643,497 | 639,381 | ||||||
| Accumulated deficit | (13,136 | ) | (41,487 | ) | ||||
| Accumulated other comprehensive loss | (2,791 | ) | (2,517 | ) | ||||
| Total shareholders’ equity | 621,897 | 589,703 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,006,517 | $ | 967,933 | ||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
| (Amounts in thousands) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 19,198 | $ | 14,551 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 1,991 | 2,314 | ||||||
| Amortization | 5,844 | 7,391 | ||||||
| Stock-based compensation expense | 3,183 | 1,467 | ||||||
| Amortization of debt issuance costs and discount | 138 | 159 | ||||||
| Noncash lease expense | 2,363 | - | ||||||
| Deferred income tax provision (benefit) | 656 | (248 | ) | |||||
| Amortization and adjustment of deferred credit | (200 | ) | (203 | ) | ||||
| Other | (43 | ) | (32 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable and unbilled, net | 4,255 | (17,760 | ) | |||||
| Prepaid expenses and other current assets | (1,642 | ) | (214 | ) | ||||
| Accounts payable | (2,684 | ) | 699 | |||||
| Accrued expenses | (5,221 | ) | 5,268 | |||||
| Advanced billings | 2,437 | 6,817 | ||||||
| Lease liabilities | (2,041 | ) | - | |||||
| Other assets and liabilities, net | 5,771 | 3,089 | ||||||
| Net cash provided by operating activities | 34,005 | 23,298 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Property and equipment expenditures | (2,520 | ) | (3,951 | ) | ||||
| Other | (1,322 | ) | 23 | |||||
| Net cash used in investing activities | (3,842 | ) | (3,928 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from stock option exercises | 972 | 566 | ||||||
| Payment of debt | (24,000 | ) | (4,125 | ) | ||||
| Payments on revolving loan | - | (20,000 | ) | |||||
| Payment of deemed landlord liability | - | (451 | ) | |||||
| Net cash used in financing activities | (23,028 | ) | (24,010 | ) | ||||
| EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (290 | ) | 400 | |||||
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 6,845 | (4,240 | ) | |||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | 23,282 | 26,492 | ||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | 30,127 | $ | 22,252 | ||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) | ||||||||
| (Amounts in thousands, except per share amounts) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| RECONCILIATION OF GAAP NET INCOME TO EBITDA | ||||||||
| Net income (GAAP) | $ | 19,198 | $ | 14,551 | ||||
| Interest expense, net | 955 | 2,309 | ||||||
| Income tax provision | 5,460 | 3,106 | ||||||
| Depreciation | 1,991 | 2,314 | ||||||
| Amortization | 5,844 | 7,391 | ||||||
| EBITDA (Non-GAAP) | $ | 33,448 | $ | 29,671 | ||||
| Net income margin (GAAP) | 9.6 | % | 8.9 | % | ||||
| EBITDA margin (Non-GAAP) | 16.7 | % | 18.2 | % | ||||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME | ||||||||
| Net income (GAAP) | $ | 19,198 | $ | 14,551 | ||||
| Amortization | 5,844 | 7,391 | ||||||
| Corporate campus lease payments - principal portion (a) | - | (451 | ) | |||||
| Deferred financing fees (b) | 138 | 159 | ||||||
| Income tax effect of adjustments (d) | (1,376 | ) | (1,633 | ) | ||||
| Adjusted net income (Non-GAAP) | $ | 23,804 | $ | 20,017 | ||||
| Net income per diluted share (GAAP) | $ | 0.51 | $ | 0.40 | ||||
| Adjusted net income per diluted share (Non-GAAP) | $ | 0.64 | $ | 0.55 | ||||
| Diluted average common shares outstanding | 37,285 | 36,449 | ||||||
| MEDPACE HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
| FY 2019 GUIDANCE RECONCILIATION UNDER ASC 606 (UNAUDITED) | ||||||||||||||||||||||||
| (Amounts in millions, except per share amounts) | Forecast 2019 | Forecast 2019 | ||||||||||||||||||||||
| Adjusted Diluted Earnings | Year ended | |||||||||||||||||||||||
| Adjusted Net Income | Per Share | December 31, 2018 | ||||||||||||||||||||||
| Adjusted | ||||||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||
| Adjusted | per diluted | |||||||||||||||||||||||
| Low | High | Low | High | Net Income | share | |||||||||||||||||||
| Net income and diluted earnings per share (GAAP) | $ | 85.2 | $ | 89.2 | $ | 2.27 | $ | 2.38 | $ | 73.2 | $ | 1.97 | ||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Amortization | 14.8 | 14.8 | 0.39 | 0.39 | 29.6 | 0.80 | ||||||||||||||||||
| Other transaction expenses (c) | - | - | - | - | 0.7 | 0.02 | ||||||||||||||||||
|
Corporate campus lease payments - principal portion (a) |
- | - | - | - | (1.9 | ) | (0.05 | ) | ||||||||||||||||
| Deferred financing fees (b) | 0.6 | 0.6 | 0.02 | 0.02 | 0.6 | 0.02 | ||||||||||||||||||
| Income tax effect of adjustments (d) | (3.6 | ) | (3.6 | ) | (0.10 | ) | (0.10 | ) | (6.7 | ) | (0.18 | ) | ||||||||||||
| Tax reform adjustments (e) | - | - | - | - | (0.1 | ) | - | |||||||||||||||||
|
Adjusted net income and adjusted net income per diluted share (Non-GAAP) |
$ | 97.0 | $ | 101.0 | $ | 2.58 | $ | 2.69 | $ | 95.5 | $ | 2.59 | ||||||||||||
| Depreciation | 9.7 | 9.7 | ||||||||||||||||||||||
| Income tax provision | 28.6 | 32.6 | ||||||||||||||||||||||
| Interest expense, net | 1.7 | 1.7 | ||||||||||||||||||||||
| EBITDA (Non-GAAP) | $ | 137.0 | $ | 145.0 | ||||||||||||||||||||
| (a) | Represents cash rental payments on two corporate headquarter buildings that were accounted for as deemed assets and subject to depreciation expense over the life of the lease. Payments made for these leases were accounted for with a principal portion and an interest portion, consistent with deemed landlord liability accounting. The interest portion of these payments was included in net cash provided by operating activities in our statement of cash flows. The principal portion was reflected as a financing activity in our statement of cash flows. These adjustments for purposes of arriving at Adjusted Net Income had the effect of presenting these leases consistently with all other office lease rentals that we have globally. As of January 1, 2019, we converted these buildings from deemed assets and liabilities to operating leases due to the adoption of ASC 842. Therefore, we no longer have the adjustment. | |
| (b) | Represents amortization of the discount and issuance costs deferred on the consolidated balance sheet associated with the issuance of the Senior Secured Credit Facility. | |
| (c) | Represents advisory costs and other fees incurred in connection with the 2017 S-3 registration statement and follow-on offerings. | |
| (d) | Represents the tax effect of the total adjustments at 23% for 2018. First quarter of 2019 is reflective of an estimated effective tax rate of 23%. For full year 2019 guidance, a tax rate of 22.0% to 24.0% is assumed. | |
| (e) | Consists of a one-time adjustment due to the finalization of U.S. federal tax reform. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190429005690/en/
Source:
Media Contact:
Julie Hopkins
Medpace Holdings, Inc.
513.579.9911
x12627
j.hopkins@medpace.com
Investor Contact:
investor@medpace.com