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 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, 2022.2023.

In the fourth quarter of 2022, the Board approved a new 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 and six months ended June 30,March 31, 2023, the Company repurchased 126,281 shares and 781,068654,787 shares for $23.9 million and $144.0 million, respectively.$120.1 million. As of June 30, 2023, we haveMarch 31, 2024, the Company has remaining authorization of $308.8 million under the new repurchase program.

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 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:

Contract assets and liabilities are reflected in the Company’s condensed consolidated balance sheets within the accounts reflected below.

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.

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.

Intangible assets, net consisted of the following (in thousands):

Accrued expenses consisted of the following (in thousands):

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 1716 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 Company granted 28,4122,491 awards to employees under the 2016 Incentive Award Plan during the sixthree months ended June 30, 2023,March 31, 2024, consisting of 27,1622,491 RSU and 1,250 stock option awards having fourfive year vesting schedules. The Company granted an additional 11,187 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the six months ended June 30, 2023. These awards are scheduled to vest on the earlier of (a) the day immediately preceding the date of the first annual meeting following the date of grant and (b) the first anniversary of the date of grant, subject to the non-employee director continuing in service through the applicable vesting date.

The following table sets forth the Company’s stock option activity:

The Company’s effective income tax rate was 19.4%9.0% and 20.4%15.3% for the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively. The Company's effective income tax rate was 17.2% and 13.1% for the six months ended June 30, 2023 and 2022, respectively. The Company’s effective income tax rate for the three months ended June 30, 2023 and the six months ended June 30, 2023March 31, 2024 varied from the U.S. statutory rate of 21% primarily due to the impact of the 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).

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, 2023March 31, 2024 and December 31, 2022.2023. 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, 2023.March 31, 2024.

The Company has several minimum purchase commitments for project related supplies totaling $17.1$14.9 million as of June 30, 2023.March 31, 2024. In return for the commitment, Medpace receives preferential pricing. The commitments expire at various times through 2029.

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 $0.3 million existed at June 30, 2023March 31, 2024 and December 31, 2022, respectively,2023, 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.

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 $9.7$6.5 million and $13.3 million during the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively, and $23.0 million and $17.1 million during the six months ended June 30, 2023 and 2022, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2023March 31, 2024 and December 31, 2022, respectively,2023 the Company had Advanced billings from LIB of $11.6$6.8 million and $7.4$7.6 million, respectively, in the condensed consolidated balance sheets. In addition, as of June 30, 2023March 31, 2024 and December 31, 2022, respectively,2023 the Company had Accounts receivable and unbilled, net from LIB of $3.1$0.4 million and $5.5$0.5 million, respectively, in the condensed consolidated balance sheets. The Company had Other current liabilities with LIB of $9.0 million and $12.5 million in the consolidated balance sheets at June 30, 2023 and December 31, 2022.

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 $3.6$6.3 million and $7.5$2.5 million during the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively, and $6.1 million and $13.3 million during the six months ended June 30, 2023 and 2022, respectively, in the Company’s condensed consolidated statements of operations. As of June 30, 2023March 31, 2024 and December 31, 2022, respectively,2023 the Company had Advanced billings from CinRx of $2.7$4.1 million and $1.4$2.5 million, respectively, in the condensed consolidated balance sheets. As of June 30, 2023March 31, 2024 and December 31, 20222023 the Company had Accounts receivable and unbilled, net from CinRx of $1.6$1.4 million and $2.2$1.9 million, respectively, in the condensed consolidated balance sheets. Certain affiliatesIn addition, as of March 31, 2024 and December 31, 2023 the Company had Prepaid expenses and other current assets with CinRx included in previous reported quarters are no longer disclosed due to changes in the affiliate relationships.

The Company entered into an operating lease for the occupancy of office space in a building in Cincinnati, Ohio 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 was renewed in the first quarter of fiscal year 2023 for a term of ten years through December 2032 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. The Company has determined that the lease is an operating lease. Operating lease cost recognized for the three months ended June 30,March 31, 2024 and 2023 and 2022 was $0.7 million and $0.5$0.6 million, and $1.3 million and $1.1 million for the six months ended June 30, 2023 and 2022, 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, 2023March 31, 2024 and December 31, 20222023 were $20.2$18.9 million and $18.2$19.3 million, respectively, in the condensed consolidated balance sheets. The current and long-term portions of the lease liabilities at June 30, 2023March 31, 2024 were $1.4$1.5 million and $18.9$17.7 million, respectively, 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, 20222023 were $1.5 million and $16.7$18.1 million, respectively, and were recognized in Other current liabilities and Operating lease liabilities in the condensed consolidated balance sheets.

The Company incurs expenses for travel services for company executives provided by private aviation charter companies which 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.

Company had Accounts payable to the Aircraft Management Company of $0.4$0.1 million and $0.3$0.4 million, respectively, in the condensed consolidated balance sheets.

The following table disaggregates our revenue by major source (in thousands):

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 and with the information under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.2023. This item and the related discussion contain forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those indicated in such forward-looking statements. Important factors that may cause such differences include, but are not limited to, those discussed under the “Forward-Looking Statements” below and “Risk Factors” in “Item 1A Risk Factors” of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.2023.

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained herein, are forward looking statements. Forward looking statements include, without limitation, statements regarding our results of operations; financial position and performance; liquidity and our ability to fund our business operations and initiatives; capital expenditure and debt service obligations; business strategies, plans and goals, including those related to marketing, acquisitions and expansion of our business; product approvals and plans; industry trends; general economic conditions, including inflation and other pricing pressures that could decrease our operating margins; expectations regarding consumer behaviors and trends; our culture and operating philosophy; human resource management; arrangements with and delivery of our services to the customers; conversion of backlog; dividend policy; legal proceedings; and our objectives for future operations. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” “likely,” “opportunity,” “may,” “could,” “outlook,” “can,” “trend,” “might,” “drives,” “hope,” “potential,” “project,” “predict,” and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are based largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. Any forward-looking statement speaks only as of the date it is made. These forward-looking statements are subject to inherent uncertainties, risks, changes in circumstances and other important factors that are difficult to predict. Moreover, we operate in a very competitive and rapidly changing environment in which new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all important factors on our business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed may not occur and our financial condition and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In other words, these statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. We caution you therefore against relying on these forward-looking statements.

We are one of the world’s leading clinical contract research organizations, or CROs, by revenue, solely focused on providing scientifically-driven outsourced clinical development services to the biotechnology, pharmaceutical and medical device industries. Our mission is to accelerate the global development of safe and effective medical therapeutics. We differentiate ourselves from our competitors by our disciplined operating model centered on providing full-service Phase I-IV clinical development services and our therapeutic expertise. We believe this combination results in timely and cost-effective delivery of clinical development services for our customers. We believe that we are a partner of choice for small- and mid-sized biopharmaceutical companies based on our ability to consistently utilize our full-service, disciplined operating model to deliver timely and high-quality results for our customers.

We earn fees through the performance of services detailed in our customer contracts. Contract scope and pricing is typically based on either a fixed-fee or unit-of-service model, with consideration of activities performed by third parties, as well as ancillary costs necessary to deliver on the contract scope that are reimbursable by our customers. Our contracts can range in duration from a few months to several years. These contracts are individually priced and negotiated based on the anticipated project scope, including the complexity of the project and the performance risks inherent in the project. The majority of our contracts are structured with an upfront fee that is collected at the time of contract signing, and the balance of the fee is collected over the duration of the contract either through an arranged billing schedule or upon completion of certain performance targets or defined milestones.

Our costs and expenses are comprised primarily of our total direct costs, selling, general and administrative costs, depreciation and amortization and income taxes.

Total direct costs are primarily driven by labor and related employee benefits, but also include contracted third party service related expenses, fees paid to site investigators, reimbursed out of pocket expenses, laboratory supplies and other expenses contributing to service delivery. The other costs of service delivery can include office rent, utilities, supplies and software licenses which are allocated between Total direct costs and selling, general and administrative expenses based on the estimated contribution among service delivery and support function efforts on a percentage basis. Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope. Total direct costs, as a percentage of net revenue, can vary from period to period due to project labor efficiencies, changes in workforce, compensation/bonus programs and service mix.

Selling, general and administrative expenses are primarily driven by compensation and related employee benefits, as well as rent, utilities, supplies, software licenses, professional fees (e.g., legal and accounting expenses), bad debt expense, travel, marketing and other operating expenses.

Depreciation is provided on our property and equipment on the straight-line method at rates adequate to allocate the cost of the applicable assets over their estimated useful lives, which is three to five years for computer hardware, software, phone, and medical imaging equipment, five to seven years for furniture and fixtures and other equipment, and thirty to forty years for buildings. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the improvement or the associated remaining lease term.

Amortization relates to finite-lived intangible assets recognized as expense using the straight-line method or using an accelerated method over their estimated useful lives of 15 years.

Income tax provision consists of federal, state and local taxes on income in multiple jurisdictions. Our income tax is impacted by the pre-tax earnings in jurisdictions with varying tax rates and any related tax credits that may be available to us. Our current and future provision for income taxes will vary from statutory rates due to the impact of valuation allowances in certain countries, income tax incentives, certain non-deductible expenses, and other discrete items.

To evaluate the performance of our business, we utilize a variety of financial and performance metrics. These key measures include new business awards, cancellations and backlog.

New business awards represent the value of anticipated future net revenue that has been awarded during the period that is recognized in backlog. This value is recognized upon the signing of a contract or receipt of a written pre-contract confirmation from a customer that confirms an agreement in principle on budget and scope. New business awards also include contract amendments, or changes in scope, where the customer has provided written authorization for changes in budget and scope or has approved us to perform additional work as of the measurement date. Awards may not be recognized as backlog after consideration of a number of factors, including whether (i) the relevant net revenue is expected only after a pending regulatory hurdle, which might result in cancellation of the study, (ii) the customer funding needed for commencement of the study is not believed to have been secured or (iii) study timelines are uncertain or not well defined. In addition, study amounts that extend beyond a three-year timeline are not included in backlog. The number and amount of new business awards can vary significantly from period to period, and an award’s contractual duration can range from several months to several years based on customer and project specifications.

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:

Total revenue increased by $109.7$77.0 million to $460.9$511.0 million for the three months ended June 30, 2023,March 31, 2024, from $351.2$434.1 million for the three months ended June 30, 2022. Total revenue increased by $212.8 million to $894.9 million for the six months ended June 30, 2023, from $682.2 million for the six months ended June 30, 2022.March 31, 2023. The increase for the three months ended June 30, 2023March 31, 2024 was broad based, but primarily driven by growth within the Metabolic, Oncology, Metabolic, AVAI Cardiology and other therapeutic areas, compared to the same period in the prior year. The increase for the six months ended June 30, 2023 was primarily driven by growth within the Oncology, Metabolic, Cardiology and otherOther uncategorized therapeutic areas, compared to the same period in the prior year.

Total direct costs increased by $84.3$52.0 million, to $336.6$355.9 million for the three months ended June 30, 2023March 31, 2024 from $252.2$303.9 million for the three months ended June 30, 2022. Total direct costs increased by $156.0 million, to $640.4 million for the six months ended June 30, 2023 from $484.5 million for the six months ended June 30, 2022.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 $57.9 million and $103.9$31.6 million for the three and six months ended June 30, 2023,March 31, 2024, compared to the same period in the prior year. The higher personnel costs portion increased by $21.4 million and $40.9$20.2 million for the three and six months ended June 30, 2023,March 31, 2024, compared to the same periods in the prior year.

Selling, general and administrative expenses increased by $6.2$6.1 million, to $39.4$44.1 million for the three months ended June 30, 2023March 31, 2024 from $33.2$38.0 million for the three months ended June 30, 2022. Selling, general and administrative expenses increased by $14.9 million, to $77.4 million for the six months ended June 30, 2023 from $62.6 million for the six months ended June 30, 2022.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 $4.6 million and $9.5$4.7 million for the three and six months ended June 30, 2023,March 31, 2024, compared to the same periods in the prior year.

Miscellaneous income, net increased by $4.0$3.9 million to $0.6$4.6 million of expense for the sixthree months ended June 30, 2023March 31, 2024 from $3.4$0.7 million of income for the sixthree months ended June 30, 2022.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 third-party investment losses.proceeds from the recovery of a note receivable.

Income tax provision increaseddecreased by $2.0$2.9 million, to $14.7$10.2 million for the three months ended June 30, 2023March 31, 2024 from $12.6$13.1 million for the three months ended June 30, 2022. Income tax provision increased by $11.2 million, to $27.8 million for the six months ended June 30, 2023 from $16.7 million for the six months ended June 30, 2022.March 31, 2023. The overall effective tax rate for the three months ended June 30, 2023March 31, 2024 was 19.4%9.0%, compared to an overall effective tax rate of 20.4%15.3% for the three months ended June 30, 2022.March 31, 2023. The overall effective tax rate for the six months ended June 30, 2023 was 17.2% compared to an overall effective tax rate of 13.1% for the six months ended June 30, 2022. The increasedecrease in the income tax provision for the three months ended June 30, 2023 was primarily attributable to the 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 Foreign Derived Intangible Income (“FDII”) which was partially offset by an increase in pre-tax book income compared to the same periodsperiod in the prior year. The decrease in the overall effective tax rate for the three months ended June 30, 2023March 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 periods in the prior year. The increase in the income tax provision and overall effective tax rate for the six months ended June 30, 2023 was primarily attributable to the increase in pre-tax book income and a decrease in excess tax benefits recognized from share based compensation and benefits from uncertain tax positions compared to the same periodsperiod in the prior year.

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 $150.0$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, 2023,March 31, 2024, we had cash and cash equivalents of $39.1$407.0 million which increased from $28.3$245.4 million as of December 31, 2022.2023. Approximately $14.5$24.0 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of June 30, 2023.March 31, 2024.