Medpace Holdings, Inc. 10-Q

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, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 339,009 $ 277,766 Accounts receivable and unbilled, net (includes $ 6.1 million and $ 2.6 million with related parties at June 30, 2021 and December 31, 2020, respectively) 161,489 160,962 Prepaid expenses and other current assets 49,602 34,923 Total current assets 550,100 473,651 Property and equipment, net 86,195 85,017 Operating lease right-of-use assets 110,730 113,809 Goodwill 662,396 662,396 Intangible assets, net 43,917 46,474 Deferred income taxes 540 536 Other assets 15,830 8,794 Total assets $ 1,469,708 $ 1,390,677 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable (includes $ 0.7 million and $ 0.2 million with related parties at June 30, 2021 and December 31, 2020, respectively) $ 23,326 $ 26,552 Accrued expenses 145,847 134,367 Advanced billings (includes $ 5.9 million and $ 6.5 million with related parties at June 30, 2021 and December 31, 2020, respectively) 282,217 255,664 Other current liabilities 21,217 23,527 Total current liabilities 472,607 440,110 Operating lease liabilities 112,850 115,143 Deferred income tax liability 16,242 13,551 Other long-term liabilities 16,127 16,094 Total liabilities 617,826 584,898 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 June 30, 2021 and December 31, 2020, respectively - - Common stock - $ 0.01 par-value; 250,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively; 35,819,012 and 35,519,989 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 358 355 Treasury stock - 185,000 shares at June 30, 2021 and December 31, 2020, respectively ( 5,578 ) ( 5,578 ) Additional paid-in capital 716,547 695,904 Retained earnings 142,315 115,229 Accumulated other comprehensive loss ( 1,760 ) ( 131 ) Total shareholders’ equity 851,882 805,779 Total liabilities and shareholders’ equity $ 1,469,708 $ 1,390,677 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, 2021 2020 2021 2020 Revenue, net (includes $ 9.9 million and $ 2.7 million with related parties for the three months ended June 30, 2021 and 2020, respectively, and $ 15.2 million and $ 8.2 million with related parties for the six months ended June 30, 2021 and 2020, respectively) $ 278,293 $ 204,995 $ 538,258 $ 435,874 Operating expenses: Direct service costs, excluding depreciation and amortization 108,233 86,625 209,620 175,420 Reimbursed out-of-pocket expenses 95,409 61,733 175,560 138,739 Total direct costs 203,642 148,358 385,180 314,159 Selling, general and administrative 26,973 21,855 52,711 46,979 Depreciation 3,951 2,674 7,763 5,127 Amortization 1,279 1,980 2,557 3,977 Total operating expenses 235,845 174,867 448,211 370,242 Income from operations 42,448 30,128 90,047 65,632 Other income, net: Miscellaneous income, net 265 239 1,189 856 Interest (expense) income, net ( 27 ) ( 5 ) ( 41 ) 352 Total other income, net 238 234 1,148 1,208 Income before income taxes 42,686 30,362 91,195 66,840 Income tax provision 2,752 6,258 7,955 13,782 Net income $ 39,934 $ 24,104 $ 83,240 $ 53,058 Net income per share attributable to common shareholders: Basic $ 1.11 $ 0.68 $ 2.32 $ 1.48 Diluted $ 1.06 $ 0.64 $ 2.20 $ 1.40 Weighted average common shares outstanding: Basic 35,894 35,386 35,825 35,705 Diluted 37,714 37,328 37,737 37,680 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, 2021 2020 2021 2020 Net income $ 39,934 $ 24,104 $ 83,240 $ 53,058 Other comprehensive income Foreign currency translation adjustments, net of taxes 506 506 ( 1,629 ) ( 482 ) Comprehensive income $ 40,440 $ 24,610 $ 81,611 $ 52,576 See notes to condensed consolidated financial statements. - 5 - 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, 2019 $ 360 $ ( 6,030 ) $ 666,585 $ 68,109 $ ( 2,741 ) $ 726,283 Net income 28,954 28,954 Foreign currency translation ( 988 ) ( 988 ) Stock-based compensation expense 5,445 5,445 Stock options exercised 1 1,342 1,343 Repurchases of common stock ( 6 ) ( 43,232 ) ( 43,238 ) BALANCE — March 31, 2020 $ 355 $ ( 6,030 ) $ 673,372 $ 53,831 $ ( 3,729 ) $ 717,799 Net income 24,104 24,104 Foreign currency translation 506 506 Stock-based compensation expense 2,616 2,616 Stock options exercised 633 633 Repurchases of common stock ( 1 ) ( 7,588 ) ( 7,589 ) BALANCE — June 30, 2020 $ 354 $ ( 6,030 ) $ 676,621 $ 70,347 $ ( 3,223 ) $ 738,069 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 Net income 39,934 39,934 Foreign currency translation 506 506 Stock-based compensation expense 3,570 3,570 Stock options exercised 2 5,100 5,102 Repurchases of common stock ( 3 ) ( 56,154 ) ( 56,157 ) BALANCE — June 30, 2021 $ 358 $ ( 5,578 ) $ 716,547 $ 142,315 $ ( 1,760 ) $ 851,882 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, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 83,240 $ 53,058 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,763 5,127 Amortization 2,557 3,977 Stock-based compensation expense 6,441 8,061 Noncash lease expense 7,899 6,288 Deferred income tax provision 2,667 2,416 Amortization and adjustment of deferred credit ( 334 ) ( 356 ) Other 131 ( 265 ) Changes in assets and liabilities: Accounts receivable and unbilled, net ( 353 ) 28,524 Prepaid expenses and other current assets ( 14,889 ) ( 860 ) Accounts payable ( 270 ) ( 7,173 ) Accrued expenses 11,937 ( 5,933 ) Advanced billings 26,553 3,094 Lease liabilities ( 7,956 ) ( 4,933 ) Other assets and liabilities, net ( 5,306 ) 2,390 Net cash provided by operating activities 120,080 93,415 CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment expenditures ( 12,515 ) ( 14,885 ) Other ( 3,133 ) 48 Net cash used in investing activities ( 15,648 ) ( 14,837 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercises 14,200 1,976 Repurchases of common stock ( 55,877 ) ( 50,827 ) Net cash used in financing activities ( 41,677 ) ( 48,851 ) EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 1,512 ) ( 744 ) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 61,243 28,983 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period 277,766 131,920 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period $ 339,009 $ 160,903 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION— Acquisition of property and equipment—non-cash $ 5,824 $ 11,697 See notes to condensed consolidated financial statements. - 7 - MEDPACE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2021 (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, 2020 . Share Repurchases In the first quarter of 2020, the Board of Directors approved an increase in the stock repurchase authorization by $ 50.0 million. In the fourth quarter of 2020, the Board approved the stock repurchase authorization up to $ 150.0 million. 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. During the three and six months ended June 30, 2021, the Company repurchased 343,159 shares for $ 56.1 million, respectively. During the three and six months ended June 30, 2020, the Company repurchased 110,488 and 772,125 shares for $ 7.6 million and $ 50.8 million, respectively. As of June 30, 2021, we have remaining authorization of $ 196.4 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, with all amounts paid in excess of par value reflected within Retained earnings in the Company’s condensed consolidated balance sheets. The repurchase program may be suspended or discontinued at any time without notice. Supplemental Cash Flow Disclosure During the six months ended June 30, 2021, the Company engaged in a non-cash financing activity of $ 0.3 million related to share repurchases executed, but not yet paid as of period end. Recently Adopted Accounting Standards In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The new guidance includes several provisions to reduce the complexity of accounting for income taxes for financial reporting purposes and increasing consistency and clarity for financial statement readers. The new guidance is effective for public entities for fiscal years, and the related interim periods, beginning after December 15, 2020. The Company adopted this standard in the first quarter of 2021 and it has no material impact on the condensed consolidated financial statements. - 8 - (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 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 and six months ended June 30, 2021 and 2020 (in thousands, except for earnings per share): Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Weighted-average shares: Common shares outstanding 35,894 35,386 35,825 35,705 RSAs 114 95 115 95 Total weighted-average shares 36,008 35,481 35,940 35,800 Earnings per common share—Basic Net income $ 39,934 $ 24,104 $ 83,240 $ 53,058 Less: Undistributed earnings allocated to RSAs 127 65 267 141 Net income available to common shareholders—Basic $ 39,807 $ 24,039 $ 82,973 $ 52,917 Net income per common share—Basic $ 1.11 $ 0.68 $ 2.32 $ 1.48 Basic weighted-average common shares outstanding 35,894 35,386 35,825 35,705 Effect of diluted shares 1,820 1,942 1,912 1,975 Diluted weighted-average shares outstanding 37,714 37,328 37,737 37,680 Net income per common share—Diluted $ 1.06 $ 0.64 $ 2.20 $ 1.40 During the three and six months ended June 30, 2021, the Company had 0 and 273,588 stock options, respectively, that were excluded due to the exercise price exceeding the average fair value of the Company’s common stock during the period. During the three and six months ended June 30, 2020, the Company had 439,405 stock options, respectively, 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. - 9 - The Company does not have any recurring fair value measurements as of June 30, 2021. There were no transfers between Level 1, Level 2 or Level 3 during the three and six months ended June 30, 2021 or 2020. (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 June 30, December 31, 2021 2020 Accounts receivable $ 127,696 $ 137,912 Unbilled receivables 34,139 23,396 Less: allowance for doubtful accounts ( 346 ) ( 346 ) Total accounts receivable and unbilled, net $ 161,489 $ 160,962 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 June 30, December 31, 2021 2020 Advanced billings $ 282,217 $ 255,664 As of June 30, 2021, we had approximately $ 1.9 billion of performance obligations remaining to be performed for active projects. (5) Intangible Assets, Net Intangible assets, net consisted of the following (in thousands): As of June 30, December 31, 2021 2020 Intangible assets: Finite-lived intangible assets: Carrying amount: Customer relationships 145,051 145,051 Accumulated amortization: Customer relationships ( 132,780 ) ( 130,223 ) Total finite-lived intangible assets, net 12,271 14,828 Trade name (indefinite-lived) 31,646 31,646 Total intangible assets, net $ 43,917 $ 46,474 - 10 - As of June 30, 2021, estimated amortization expense of the Company’s intangible assets for each of the next five years and thereafter is as follows (in thousands): Amortization Remainder of 2021 $ 2,557 2022 3,353 2023 2,199 2024 1,443 2025 946 Later years 1,773 $ 12,271 (6) Accrued Expenses Accrued expenses consisted of the following (in thousands): As of June 30, December 31, 2021 2020 Employee compensation and benefits $ 38,843 $ 40,208 Project related reimbursable expenses 97,790 87,092 Other 9,214 7,067 Total accrued expenses $ 145,847 $ 134,367 (7) Debt On September 30, 2019, the Company obtained an unsecured credit facility in an aggregate principal amount up to $ 50.0 million (the “Credit Facility”) through its wholly owned subsidiaries, Medpace, Inc., as borrower, and Medpace IntermediateCo, Inc., as guarantor. Outstanding balances under the Credit Facility bear interest at a rate of LIBOR plus 100 basis points (1.00%). On March 30, 2020, the Company amended the credit facility to extend its expiration date to March 31, 2021 and add provisions for alternative interest rates when certain interbank market offered rates are not available. On March 29, 2021 the Company amended the credit facility expiration date to March 31, 2022 . As of June 30, 2021, there were no outstanding borrowings under the Credit Facility and $ 0.2 million in letters of credit outstanding related to certain operating lease obligations, which are secured by the Credit Facility. (8) Leases The Company enters into leases for real estate and equipment. Real estate leases are for our corporate office space and laboratories around the world. Real estate leases have remaining lease terms of less than 1 year to 19 years. Many of the Company’s leases include options to extend the leases on a month to month basis or for set periods for up to 20 years. Many leases also include options to terminate the leases within 1 year or per other contractual terms. The components of lease expense were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Operating lease cost $ 5,817 $ 4,871 $ 11,547 $ 8,639 Variable lease cost 1,112 1,184 2,816 2,070 Supplemental cash flow information related to the leases was as follows (in thousands): - 11 - Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 8,185 $ 6,111 Right-of-use assets obtained in exchange for lease obligations: Operating leases 4,851 68,171 Supplemental balance sheet information related to the leases was as follows (in thousands): As of June 30, December 31, 2021 2020 Operating lease right-of-use assets $ 110,730 $ 113,809 Other current liabilities $ 15,179 $ 15,890 Operating lease liabilities 112,850 115,143 Total operating lease liabilities $ 128,029 $ 131,033 Weighted Average Remaining Lease Term (years) Operating leases 12.6 12.9 Weighted Average Discount Rate Operating leases 5.8 % 5.9 % Lease payments due related to lease liabilities as of June 30, 2021 were as follows (in thousands): Related Party Non-Related Parties Total Operating Leases Operating Leases Operating Leases Remainder of 2021 $ 5,274 $ 5,847 $ 11,121 2022 10,301 9,723 20,024 2023 8,771 8,323 17,094 2024 8,900 6,293 15,193 2025 9,032 4,775 13,807 Later years 103,006 10,081 113,087 Total lease payments 145,284 45,042 190,326 Less: imputed interest ( 57,047 ) ( 5,250 ) ( 62,297 ) Total $ 88,237 $ 39,792 $ 128,029 As of June 30, 2021, we have several additional leases with contractual obligations, which have not yet commenced, with future payment of $ 7.0 million. (9) Shareholder’s Equity and Stock-Based Compensation The Company granted 337,381 awards to employees under the 2016 Incentive Award Plan during the six months ended June 30, 2021, consisting of 74,725 RSU and 205,086 stock option awards vesting after four and a half years , and 57,570 stock option awards vesting after two years . The Company granted an additional 10,932 stock option awards, vesting after one year , to non-employee directors under the 2016 Incentive Award Plan, during the six months ended June 30, 2021. The Company granted 319,397 awards to employees under the 2016 Incentive Award Plan during the six months ended June 30, 2020, consisting of 20,724 RSA and 96,768 RSU vesting after four years , 2,500 RSU vesting after three years , and 199,405 fully-vested stock option awards. The Company granted an additional 23,148 stock option awards, vesting after one year , to non-employee directors under the 2016 Incentive Award Plan, during the six months ended June 30, 2020. - 12 - Award Activity The following table sets forth the Company’s stock option activity: Six Months Ended June 30, 2021 Weighted Average Stock Options Exercise Price Outstanding - beginning of period 2,500,727 $ 43.26 Granted 273,588 $ 166.65 Exercised ( 642,182 ) $ 22.12 Cancelled/Forfeited ( 21,332 ) $ 42.34 Expired ( 11,545 ) $ 14.41 Outstanding - end of period 2,099,256 $ 65.97 Exercisable - end of period 1,356,368 $ 55.28 The following table sets forth the Company’s RSA/RSU activity: Six Months Ended June 30, 2021 Shares/Units Outstanding and unvested - beginning of period 695,562 Granted 74,725 Vested - Forfeited ( 37,535 ) Outstanding and unvested - end of period 732,752 Cumulative vested shares - end of period 1,913,916 Stock-based compensation expense recognized in the condensed consolidated statements of operations related to all outstanding stock based compensation awards is summarized below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Total direct costs $ 2,187 $ 1,774 $ 4,234 $ 3,780 Selling, general and administrative 1,383 842 2,207 4,281 Total stock-based compensation expense $ 3,570 $ 2,616 $ 6,441 $ 8,061 (10) Income Taxes The Company’s effective income tax rate was 6.4 % and 20.6 % for the three months ended June 30, 2021 and 2020, respectively. The Company’s effective income tax rate was 8.7 % and 20.6 % for the six months ended June 30, 2021 and 2020, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2021 varied from the U.S. statutory rate of 21 % primarily due to the impact of state taxes, which was favorably offset by excess tax benefits recognized from share-based compensation and tax benefits related to Foreign Derived Intangible Income (FDII). (11) Commitments and Contingencies Legal Proceedings The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claims related to other business transactions. The Company cannot predict with certainty the outcome of such proceedings, but it believes that adequate reserves have been recorded and losses already recognized with respect to such proceedings, which were immaterial as of June 30, 2021 and December 31, 2020. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, the Company believes that such potential losses were immaterial as of June 30, 2021. - 13 - Purchase Commitments The Company has several minimum purchase commitments for project related supplies totaling $ 12.3 million as of June 30, 2021. In return for the commitment, Medpace receives preferential pricing. The commitments expire at various times through 2027. (12) Related Party Transactions Employee Loans The Company periodically extends short term loans or advances to employees, typically upon commencement of employment. Total receivables as a result of these employee advances of $ 0.2 million existed at June 30, 2021 and December 31, 2020, respectively, and are included in the Prepaid expenses and other current assets and Other assets line items of the condensed consolidated balance sheets, respectively, depending on the contractual repayment date. Service Agreement LIB Therapeutics LLC and subsidiaries (“LIB”) Certain executives and employees of the Company, including the chief executive officer, are members of LIB’s board of managers. The Company entered into a MSA dated November 24, 2015 with LIB, a company that engages in research, development, marketing and commercialization of pharmaceutical drugs. Subsequently, the Company and LIB have entered into several task orders for the Company to perform clinical trial related services. The Company recognized total revenue from LIB of $ 2.8 million and $ 0.4 million during the three months ended June 30, 2021 and 2020, respectively, and $ 3.3 million and $ 1.4 million during the six months ended June 30, 2021 and 2020, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, respectively, the Company had Advanced billings from LIB of $ 0.7 million in the condensed consolidated balance sheets. In addition, as of June 30, 2021 and December 31, 2020, respectively, the Company had Accounts receivable and unbilled, net from LIB of $ 2.3 million and $ 0.3 million in the condensed consolidated balance sheets. CinRX Pharma and subsidiaries (“CinRx”) Certain executives and employees of the Company, including the chief executive officer, are members of CinRx’s board of managers and/or have equity investments in CinRx, a biotech company. The Company and CinRx have entered into several task orders for the Company to perform clinical trial related services. The Company recognized total revenue from CinRx of $ 7.1 million and $ 2.4 million during the three months ended June 30, 2021 and 2020, respectively, and $ 11.9 million and $ 6.8 million during the six months ended June 30, 2021 and 2020, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, respectively, the Company had Advanced billings from CinRx of $ 5.1 million and $ 5.8 million in the condensed consolidated balance sheets. As of June 30, 2021 and December 31, 2020 the Company had Accounts receivable and unbilled, net from CinRx of $ 3.8 million and $ 2.2 million, respectively, in the condensed consolidated balance sheets. The Summit Hotel (“The Summit”) The Summit Hotel, located on the Medpace campus, is owned by the chief executive officer, and managed by an unrelated hospitality management entity. Medpace incurs travel lodging and meeting expenses at The Summit. Medpace incurred expenses of less than $ 0.1 million during the three months ended June 30, 2021 and 2020, respectively, and $ 0.1 million and $ 0.2 million during the six months ended June 30, 2021 and 2020 at The Summit, respectively. Leased Real Estate Headquarters Lease The Company entered into an operating lease for its corporate headquarters with an entity that is wholly owned by the chief executive officer of the Company. The Company has evaluated its relationship with the related party and concluded that the related party is not a variable interest entity because the Company has no direct ownership interest or relationship other than the lease. The lease for headquarters is for an initial term of twelve years through November 2022 with a renewal option for one 10 -year term at prevailing market rates. The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property. Annual base rent for its corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. Operating lease cost recognized for the three months ended June 30, 2021 and 2020 was $ 0.5 million, respectively, and $ 1.0 million for the six months ended June 30, 2021 and 2020, respectively. The operating lease cost was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations. The Operating lease right-of-use assets at June 30, 2021 and December 31, 2020 were $ 2.6 million and $ 3.5 million, respectively, in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at June 30, 2021 were $ 1.9 million and $ 0.7 million, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. The current and long-term - 14 - portions of the lease liabilities at D ecember 31, 2020 were $ 1.9 million and $ 1.6 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. In 2018, Medpace, Inc. entered into a multi-year lease agreement governing future occupancy of additional office space in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family. The Company began to occupy the premises in the second quarter of fiscal year 2020. The lease expires in 2040 and the Company has two 10 -year options to extend the term of the lease. The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property. Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. The Company has determined that the lease is an operating lease. Operating lease cost recognized for the three months ended June 30, 2021 and 2020 was $ 1.4 million and $ 0.9 million, respectively, and $ 2.8 million and $ 0.9 million for the six months ended June 30, 2021 and 2020, respectively. The operating lease cost was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations. The Operating lease right-of-use assets at June 30, 2021 and December 31, 2020 were $ 55.8 million and $ 56.6 million, respectively, in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at June 30, 2021 were $ 0.8 million and $ 66.4 million, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at December 31, 2020 were $ 0.7 million and $ 66.8 million, respectively and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. The Company entered into two multi-year lease agreements governing the occupancy of space of two buildings in Cincinnati, Ohio with an entity that is wholly owned by the Company’s chief executive officer and certain members of his immediate family. The Company assumed occupancy in 2012 and the leases expire in 2027 with the Company having one 10 -year option to extend the lease term. The Company pays rent, taxes, insurance, and maintenance expenses that arise from the use of the property. Annual base rent for the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. The Company has determined that the leases are operating leases. Operating lease cost recognized for the three months ended June 30, 2021 and 2020 was $ 0.9 million, respectively, and $ 1.8 million for the six months ended June 30, 2021 and 2020, respectively. The operating lease cost was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations. The Operating lease right-of-use assets at June 30, 2021 and December 31, 2020 were $ 18.5 million and $ 19.7 million, respectively, in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at June 30, 2021 were $ 2.5 million and $ 15.9 million, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at December 31, 2020 were $ 2.4 million and $ 17.2 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets. Travel Services The Company incurs expenses for travel services for company executives provided by private aviation charter companies which in 2020 was a company owned by the chief executive officer and the executive vice president of operations of the Company and commencing in 2021 is a company controlled by the chief executive officer of the Company (each a “private aviation charter”). The Company may contract directly with the private aviation charter for the use of its aircraft or indirectly through a third party aircraft management and jet charter company (the “Aircraft Management Company”). The travel services provided are primarily for business purposes, with certain personal travel paid for as part of the executives’ compensation arrangements. The Aircraft Management Company also makes the private aviation charter aircraft available to third parties. The Company incurred travel expenses of $ 0.4 million and $ 0.2 million during the three months ended June 30, 2021 and 2020, respectively, and $ 0.5 million and $ 0.4 million during the six months ended June 30, 2021 and 2020, respectively, related to these travel services. These travel expenses are recorded in Selling, general and administrative in the Company’s condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, the Company had Accounts payable to the Aircraft Management Company of $ 0.5 million and less than $ 0.1 million, respectively, in the condensed consolidated balance sheets. - 15 - (13) Entity Wide Disclosures Revenue by Category The following table disaggregates our revenue by major source (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Therapeutic Area Oncology $ 93,248 $ 65,629 $ 172,386 $ 134,841 Other 64,120 45,196 133,058 95,765 Metabolic 38,143 30,210 70,638 66,285 AVAI 26,191 22,987 57,011 48,134 Central Nervous System 28,551 19,218 53,363 43,195 Cardiology 28,040 21,755 51,802 47,654 Total revenue $ 278,293 $ 204,995 $ 538,258 $ 435,874 - 16 -