Medpace Holdings Inc

Previous wording

Net new business awards represent gross new business awards received in a period offset by total cancellations in that period. Net new business awards were $615.6 million and $555.8 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Net new business awards represent gross new business awards received in a period offset by total cancellations in that period. Net new business awards were $551.0 million and $1,166.5 million for the three and six months ended June 30, 2024, respectively. Net new business awards were $574.8 million and $1,130.6 million for the three and six months ended June 30, 2023, respectively.

Previous wording

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. As of March 31, 2024, our backlog increased by $447.0 million, or 18.2%, to $2,907.1 million compared to $2,460.1 million as of March 31, 2023. Included within backlog as of March 31, 2024 was approximately $1,550.0 million to $1,570.0 million that we expect to convert to net revenue over the next twelve months, with the remainder expected to convert to net revenue thereafter.

Current wording

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. As of June 30, 2024, our backlog increased by $353.0 million, or 13.7%, to $2,924.9 million compared to $2,571.9 million as of June 30, 2023. Included within backlog as of June 30, 2024 was approximately $1,575.0 million to $1,595.0 million that we expect to convert to net revenue over the next twelve months, with the remainder expected to convert to net revenue thereafter.

Previous wording

The effect of foreign currency adjustments on backlog was as follows: unfavorable foreign currency adjustments of $6.8 million for the three months ended March 31, 2024 and favorable foreign currency adjustments of $3.0 million for the three months ended March 31, 2023.

Current wording

The effect of foreign currency adjustments on backlog was as follows: unfavorable foreign currency adjustments of $1.2 million for the three months ended June 30, 2024; unfavorable foreign currency adjustments of $8.0 million for the six months ended June 30, 2024; favorable foreign currency adjustments of $0.9 million for the three months ended June 30, 2023; and favorable foreign currency adjustments of $3.9 million for the six months ended June 30, 2023.

Previous wording

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

Current wording

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:

Previous wording

Total revenue increased by $77.0 million to $511.0 million for the three months ended March 31, 2024, from $434.1 million for the three months ended March 31, 2023. The increase for the three months ended March 31, 2024 was broad based, but primarily driven by growth within the Metabolic, Oncology, AVAI and Other uncategorized therapeutic areas, compared to the same period in the prior year.

Current wording

Total revenue increased by $67.2 million to $528.1 million for the three months ended June 30, 2024, from $460.9 million for the three months ended June 30, 2023. Total revenue increased by $144.2 million to $1,039.1 million for the six months ended June 30, 2024, from $894.9 million for the six months ended June 30, 2023. The increase for the three and six months ended June 30, 2024 was broad based, but primarily driven by growth within the Metabolic, Oncology and Other uncategorized therapeutic areas, compared to the same period in the prior year.

Previous wording

Total direct costs increased by $52.0 million, to $355.9 million for the three months ended March 31, 2024 from $303.9 million for the three months ended March 31, 2023. The increase was primarily attributed to higher reimbursed out-of-pocket expenses and higher personnel costs 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 and closeout, increased $31.6 million for the three months ended March 31, 2024, compared to the same period in the prior year. The higher personnel costs portion increased by $20.2 million for the three months ended March 31, 2024, compared to the same periods in the prior year.

Current wording

Total direct costs increased by $37.7 million, to $374.3 million for the three months ended June 30, 2024 from $336.6 million for the three months ended June 30, 2023. Total direct costs increased by $89.7 million, to $730.2 million for the six months ended June 30, 2024 from $640.4 million for the six months ended June 30, 2023. The increase was primarily attributed to higher reimbursed out-of-pocket expenses and higher personnel costs 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 and closeout, increased $24.7 million and $56.3 million for the three and six months ended June 30, 2024, compared to the same period in the prior year. The higher personnel costs portion increased by $12.0 million and $32.2 million for the three and six months ended June 30, 2024, compared to the same periods in the prior year.

Previous wording

Selling, general and administrative expenses increased by $6.1 million, to $44.1 million for the three months ended March 31, 2024 from $38.0 million for the three months ended March 31, 2023. The increase was primarily attributed to higher personnel costs to support the growth in service activities. The higher personnel costs portion increased by $4.7 million for the three months ended March 31, 2024, compared to the same periods in the prior year.

Current wording

Selling, general and administrative expenses increased by $2.0 million, to $41.5 million for the three months ended June 30, 2024 from $39.4 million for the three months ended June 30, 2023. Selling, general and administrative expenses increased by $8.1 million, to $85.5 million for the six months ended June 30, 2024 from $77.4 million for the six months ended June 30, 2023. The increase was primarily attributed to higher personnel costs to support the growth in service activities. The higher personnel costs portion increased by $2.7 million and $7.4 million for the three and six months ended June 30, 2024, compared to the same periods in the prior year.

Previous wording

Depreciation and amortization expense increased by $1.0 million to $7.0 million for the three months ended March 31, 2024 from $6.0 million for the three months ended March 31, 2023. The increase in depreciation and amortization was primarily related to increased depreciation related to Property and equipment, net.

Current wording

Depreciation and amortization expense increased by $0.7 million, to $7.2 million for the three months ended June 30, 2024 from $6.5 million for the three months ended June 30, 2023. Depreciation and amortization expense increased by $1.7 million, to $14.2 million for the six months ended June 30, 2024 from $12.5 million for the six months ended June 30, 2023. The increase was primarily related to increased depreciation related to Property and equipment, net, compared to the same periods in the prior year.

Previous wording

Miscellaneous income, net increased by $3.9 million to $4.6 million for the three months ended March 31, 2024 from $0.7 million for the three months ended March 31, 2023. These changes were mainly attributable to foreign exchange gains and losses that arise in connection with the revaluation of short-term intercompany balances between our domestic and international subsidiaries and 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 and proceeds from the recovery of a note receivable.

Current wording

Miscellaneous income (expense), net changed by $1.2 million to $0.1 million of expense for the three months ended June 30, 2024 from $1.3 million of expense for the three months ended June 30, 2023. Miscellaneous income (expense), net changed by $5.1 million to $4.5 million of income for the six months ended June 30, 2024 from $0.6 million of expense for the six months ended June 30, 2023. These changes were mainly attributable to foreign exchange gains and losses that arise in connection with the revaluation of short-term intercompany balances between our domestic and international subsidiaries and 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, third-party investment gains or losses and proceeds from the recovery of a note receivable.

Previous wording

Income tax provision decreased by $2.9 million, to $10.2 million for the three months ended March 31, 2024 from $13.1 million for the three months ended March 31, 2023. The overall effective tax rate for the three months ended March 31, 2024 was 9.0%, compared to an overall effective tax rate of 15.3% for the three months ended March 31, 2023. The decrease in the income tax provision was primarily attributable to an increase in excess tax benefits recognized from share-based compensation and tax benefits related to Foreign Derived Intangible Income (“FDII”) which was partially offset by an increase in pre-tax book income compared to the same period in the prior year. The decrease in the overall effective tax rate for the three months ended March 31, 2024 was primarily attributable to an increase in excess tax benefits recognized from share-based compensation and tax benefits related to FDII compared to the same period in the prior year.

Current wording

Income tax provision increased by $7.5 million, to $22.1 million for the three months ended June 30, 2024 from $14.7 million for the three months ended June 30, 2023. Income tax provision increased by $4.5 million, to $32.3 million for the six months ended June 30, 2024 from $27.8 million for the six months ended June 30, 2023. The overall effective tax rate for the three months ended June 30, 2024 was 20.0%, compared to an overall effective tax rate of 19.4% for the three months ended June 30, 2023. The overall effective tax rate for the six months ended June 30, 2024 was 14.5% compared to an overall effective tax rate of 17.2% for the six months ended June 30, 2023. The increase in the income tax provision and overall effective tax rate for the three months ended June 30, 2024 was primarily attributable to an increase in pre-tax book income and a decrease in excess tax benefits recognized from share-based compensation, which was partially offset by an increase in tax benefits related to Foreign Derived Intangible Income (FDII) compared to the same period in the prior year. The increase in the income tax provision for the six months ended June 30, 2024 was primarily attributable to an increase in pre-tax book income, which was partially offset by an increase in excess tax benefits recognized from share-based compensation and tax benefits related to FDII compared to the same period in the prior year. The decrease in the overall effective tax rate for the six months ended June 30, 2024 was primarily attributable to an increase in excess tax benefits recognized from share-based compensation and tax benefits related to FDII compared to the same period in the prior year.

Previous wording

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 from borrowings under our unsecured credit facility consisting of up to a $10.0 million revolving line of credit which we entered into on September 30, 2019 (the “Credit Facility”), and has subsequently been amended. As of March 31, 2024, we had cash and cash equivalents of $407.0 million which increased from $245.4 million as of December 31, 2023. Approximately $24.0 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of March 31, 2024.

Current wording

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 from borrowings under our unsecured credit facility consisting of up to a $10.0 million revolving line of credit which we entered into on September 30, 2019 (the “Credit Facility”), and has subsequently been amended. As of June 30, 2024, we had cash and cash equivalents of $510.9 million which increased from $245.4 million as of December 31, 2023. Approximately $20.6 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of June 30, 2024.

Previous wording

As of March 31, 2024, we had $10.0 million available for borrowing under the Credit Facility. Our expected primary cash needs on both a short and long-term basis are for investment in operational growth, including additional lease commitments, capital expenditures, 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. As of March 31, 2024, cash commitments to support operating business needs include lease liabilities discussed in Note 8 of the Condensed Consolidated Financial Statements, purchase commitments discussed in Note 11 of the Condensed Consolidated Financial Statements and capital expenditures primarily related to infrastructure investments in our facilities, equipment and technology. Capital spending as a percentage of revenue decreased by 111 basis points to 1.08% in the three months ended March 31, 2024, compared to the same period in the prior year. 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 or other debt. We have deemed that foreign earnings will be indefinitely reinvested and therefore we have not provided taxes on these earnings. While we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and borrowings under existing and future credit facilities, we would incur taxes on these earnings if the need for repatriation due to liquidity purposes arises.

Current wording

As of June 30, 2024, we had $10.0 million available for borrowing under the Credit Facility. Our expected primary cash needs on both a short and long-term basis are for investment in operational growth, including additional lease commitments, capital expenditures, 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. As of June 30, 2024, cash commitments to support operating business needs include lease liabilities discussed in Note 8 of the Condensed Consolidated Financial Statements, purchase commitments discussed in Note 11 of the Condensed Consolidated Financial Statements and capital expenditures primarily related to infrastructure investments in our facilities, equipment and technology. Capital spending as a percentage of revenue decreased by 24 basis points to 1.77% in the six months ended June 30, 2024, compared to the same period in the prior year. 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 or other debt. We have deemed that foreign earnings will be indefinitely reinvested and therefore we have not provided taxes on these earnings. While we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and borrowings under existing

Previous wording

Cash flows from operations are driven mainly by net income, depreciation, stock-based compensation expense, noncash lease expense and net movement in advanced billings, accrued expenses and accounts receivable and unbilled, net. Accounts receivable and unbilled, net and advanced billings 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.

Current wording

Cash flows from operations are driven mainly by net income, depreciation, noncash lease expense, stock-based compensation expense, and net movement in advanced billings and accounts receivable and unbilled, net. Advanced billings and accounts receivable and unbilled, net 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.

Previous wording

Net cash flows provided by operating activities was $80.1 million for the three months ended March 31, 2023 beginning with net income of $72.9 million. Adjustments to reconcile net income to net cash provided by operating activities were $13.6 million, primarily related to stock based compensation expense of $5.4 million, depreciation of $5.4 million and noncash lease expense of $4.8 million. Changes in operating assets and liabilities used $6.5 million in operating cash flows and was primarily driven by increased prepaid expenses and other current assets of $10.2 million, decreased accrued expenses of $9.4 million and decreased lease liabilities of $5.3 million, offset by increased other assets and liabilities, net of $15.0 million and increased accounts payable of $4.5 million.

Current wording

Net cash flows provided by operating activities was $269.1 million for the six months ended June 30, 2024 beginning with net income of $190.9 million. Adjustments to reconcile net income to net cash provided by operating activities were $28.8 million, primarily related to depreciation of $13.5 million, noncash lease expense of 11.5 million and stock-based compensation expense of $7.9 million. Changes in operating assets and liabilities provided $49.4 million in operating cash flows and was primarily driven by increased advanced billings of $78.6 million, partially offset by increased prepaid expenses and other current assets of $11.3 million and decreased lease liabilities of $11.0 million.

Previous wording

Net cash flows provided by operating activities was $152.7 million for the three months ended March 31, 2024 beginning with net income of $102.6 million. Adjustments to reconcile net income to net cash provided by operating activities were $11.9 million, primarily related to depreciation of $6.6 million, noncash lease expense of $5.7 million and stock based compensation expense of $4.3 million. Changes in operating assets and liabilities provided $38.2 million in operating cash flows and was primarily driven by increased advanced billings of $56.8 million and decreased accounts receivable and unbilled, net of $19.1 million, partially offset by decreased accrued expenses of $21.1 million and increased prepaid expenses and other current assets of $9.2 million.

Current wording

Net cash flows provided by operating activities was $162.6 million for the six months ended June 30, 2023 beginning with net income of $134.0 million. Adjustments to reconcile net income to net cash provided by operating activities were $27.9 million, primarily related to deprecation of $11.4 million, stock-based compensation expense of $10.3 million and noncash lease expense of $9.7 million. Changes in operating assets and liabilities provided $0.7 million in operating cash flows and was primarily driven by increased advanced billings of $27.8 million and increased accrued expenses of $21.3 million, partially offset by increased accounts receivable and unbilled, net of $21.7 million and increased prepaid expenses and other current assets of $11.8 million.

Previous wording

Net cash provided by investing activities was $2.5 million for the three months ended March 31, 2024 primarily consisting of $8.0 million in other investing activity, partially offset by $5.5 million of property and equipment expenditures.

Current wording

Net cash used in investing activities was $10.3 million for the six months ended June 30, 2024 primarily consisting of property and equipment expenditures of $18.4 million, partially offset by $8.1 million in other investing activity.

Previous wording

Net cash used in investing activities was $9.5 million for the three months ended March 31, 2023 primarily consisting of property and equipment expenditures.

Current wording

Net cash used in investing activities was $18.0 million for the six months ended June 30, 2023 primarily consisting of property and equipment expenditures.

Previous wording

Net cash provided by financing activities was $7.7 million for the three months ended March 31, 2024 related to proceeds from stock option exercises.

Current wording

Net cash provided by financing activities was $8.3 million for the six months ended June 30, 2024 related to proceeds from stock option exercises.

Previous wording

Net cash used in financing activities was $52.7 million for the three months ended March 31, 2023 primarily related to $120.1 million in repurchases of common stock and $25.0 million in repayments of the Credit Facility, partially offset by $90.0 million in proceeds related to the Credit Facility and $2.5 million in proceeds from stock option exercises.

Current wording

Net cash used in financing activities was $134.9 million for the six months ended June 30, 2023 primarily related to $144.0 million in repurchases of common stock and $100.0 million in repayments of the Credit Facility, partially offset by $105.0 million in proceeds related to the Credit Facility and $4.1 million in proceeds from stock option exercises.

Previous wording

In the fourth quarter of 2022, the Board approved a stock repurchase program of up to $500.0 million. The Company did not execute any share repurchases during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company repurchased 654,787 shares for $120.1 million. As of March 31, 2024, the Company has remaining authorization of $308.8 million under the repurchase program.

Current wording

In the fourth quarter of 2022, the Board approved a stock repurchase program of up to $500.0 million. The Company did not execute any share repurchases during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, the Company repurchased 126,281 shares and 781,068 shares for $23.9 million and $144.0 million, respectively. As of June 30, 2024, the Company has remaining authorization of $308.8 million under the repurchase program.