10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             .

Commission file number: 001-37856

Medpace Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	32-0434904
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5375 Medpace Way, Cincinnati, OH 45227

(Address of principal executive offices) (Zip Code)

(513) 579-9911

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

Class	Number of Shares Outstanding
Common Stock $0.01 par value	35,605,064 shares outstanding as of October 26, 2018

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018

TABLE OF CONTENTS

Item Number		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	PART II — OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
EXHIBIT INDEX		32
SIGNATURES		33

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share amounts)	As Of
	September 30,			December 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	22,244		$	26,485
Restricted cash		7			7
Accounts receivable and unbilled, net (includes $2.4 million and $1.0 million with related parties at September 30, 2018 and December 31, 2017, respectively)		108,285			83,079
Prepaid expenses and other current assets		22,549			20,400
Total current assets		153,085			129,971
Property and equipment, net		52,030			48,739
Goodwill		660,981			660,981
Intangible assets, net		76,569			98,740
Deferred income taxes		446			6,343
Other assets		6,732			5,943
Total assets	$	949,843		$	950,717
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,602		$	16,674
Accrued expenses		80,328			23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)		-			57,406
Advanced billings (includes $0.2 million and $1.7 million with related parties at September 30, 2018 and December 31, 2017, respectively)		133,403			73,756
Current portion of long-term debt		-			16,500
Other current liabilities		4,794			4,697
Total current liabilities		232,127			192,706
Long-term debt, net, less current portion		113,689			205,111
Deemed landlord liability, less current portion		25,035			26,602
Deferred income tax liability		2,636			560
Deferred credit		3,953			11,468
Other long-term liabilities		11,014			10,740
Total liabilities		388,454			447,187
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 September 30, 2018 and December 31, 2017, respectively		-			-
Common stock - $0.01 par-value; 250,000,000 shares authorized at September 30, 2018 and December 31, 2017, respectively; 35,587,848 and 35,466,510 shares issued and outstanding at September 30, 2018 and December31, 2017, respectively		356			355
Treasury stock - 200,000 shares at September 30, 2018 and December 31, 2017		(6,030	)		(6,030	)
Additional paid-in capital		636,536			630,341
Accumulated deficit		(67,294	)		(120,402	)
Accumulated other comprehensive loss		(2,179	)		(734	)
Total shareholders’ equity		561,389			503,530
Total liabilities and shareholders’ equity	$	949,843		$	950,717

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except per share amounts)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue:
Revenue, net (includes $5.1 million and $9.2 million with related parties for the three and nine months ended September 30, 2018, respectively)	$	179,253		$	-		$	512,474		$	-
Service revenue, net (includes $2.0million and $8.9 million with related parties for the three and nine months ended September 30, 2017, respectively)		-			98,681			-			287,014
Reimbursed out-of-pocket revenue (includes $0.2 million and $1.3 million with related parties for the three and nine months ended September 30, 2017, respectively)		-			11,962			-			36,456
Total revenue		179,253			110,643			512,474			323,470
Operating expenses:
Direct service costs, excluding depreciation and amortization		62,520			53,144			184,339			156,204
Reimbursed out-of-pocket expenses		61,476			11,962			173,587			36,456
Total direct costs		123,996			65,106			357,926			192,660
Selling, general and administrative		18,606			16,606			55,112			46,515
Depreciation		2,343			2,237			6,883			6,468
Amortization		7,390			9,496			22,171			28,406
Total operating expenses		152,335			93,445			442,092			274,049
Income from operations		26,918			17,198			70,382			49,421
Other expense, net:
Miscellaneous income (expense), net		482			(145	)		807			(642	)
Interest expense, net		(1,941	)		(1,906	)		(6,558	)		(5,508	)
Total other expense, net		(1,459	)		(2,051	)		(5,751	)		(6,150	)
Income before income taxes		25,459			15,147			64,631			43,271
Income tax provision		6,154			5,316			14,207			15,440
Net income	$	19,305		$	9,831		$	50,424		$	27,831
Net income per share attributable to common shareholders:
Basic	$	0.54		$	0.25		$	1.41		$	0.70
Diluted	$	0.52		$	0.25		$	1.36		$	0.69
Weighted average common shares outstanding:
Basic		35,569			38,579			35,525			39,803
Diluted		37,125			39,329			36,795			40,537

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in thousands)	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2018			2017		2018			2017
Net income	$	19,305		$	9,831	$	50,424		$	27,831
Other comprehensive income
Foreign currency translation adjustments, net of taxes		(64	)		765		(1,445	)		2,479
Comprehensive income	$	19,241		$	10,596	$	48,979		$	30,310

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)	Nine Months Ended
	September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	50,424		$	27,831
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,883			6,468
Amortization		22,171			28,406
Stock-based compensation expense		4,386			3,215
Amortization of debt issuance costs and discount		471			498
Deferred income tax provision (benefit)		7,260			(420	)
Amortization and adjustment of deferred credit		(7,515	)		-
Other		487			(615	)
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(12,845	)		5,340
Prepaid expenses and other current assets		(2,542	)		(1,271	)
Accounts payable		(1,323	)		(467	)
Accrued expenses		21,613			(4,840	)
Pre-funded study costs		-			1,149
Advanced billings		28,277			2,381
Other assets and liabilities, net		(605	)		1,058
Net cash provided by operating activities		117,142			68,733
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(12,575	)		(8,329	)
Acquisition of intangibles		-			(569	)
Other		(186	)		44
Net cash used in investing activities		(12,761	)		(8,854	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercises		1,810			1,187
Repurchases of common stock		-			(95,260	)
Payment of debt		(38,156	)		(9,281	)
Proceeds from revolving loan		-			40,000
Payments on revolving loan		(70,000	)		(10,000	)
Payment of deemed landlord liability		(1,387	)		(1,240	)
Net cash used in financing activities		(107,733	)		(74,594	)
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(889	)		1,555
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(4,241	)		(13,160	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period		26,492			37,407
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$	22,251		$	24,247

See notes to condensed consolidated financial statements.

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MEDPACE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2018

(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, coordinated central laboratory, project management, regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance new drug application submissions, and post-marketing clinical support. The Company also provides bio-analytical 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, 2017.

Secondary Offerings

During the three and nine months ended September 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 10,399,997 and 16,399,997 shares, respectively, of the Company’s common stock as part of multiple secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.3 million and $0.7 million, respectively, during the three and nine months ended September 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of August 27, 2018, Cinven does not beneficially own any shares of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Note 3 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2017. Significant changes to our accounting policies as a result of adopting Accounting Standards Codification Topic 606 (“ASC 606”) are discussed below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

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Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

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For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On September 30, 2018, we had approximately $1,047.1 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (“ASC 606”) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.

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In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	179,253	$	(179,253	)	$	-
Service revenue, net		-		123,990			123,990
Reimbursed out-of-pocket revenue		-		19,102			19,102
Total revenue		179,253		(36,161	)		143,092
Operating expenses:
Direct service costs, excluding depreciation and amortization		62,520		-			62,520
Reimbursed out-of-pocket expenses		61,476		(42,374	)		19,102
Total direct costs		123,996		(42,374	)		81,622
Total operating expenses		152,335		(42,374	)		109,961
Income from operations		26,918		6,213			33,131
Income before income taxes		25,459		6,213			31,672
Income tax provision		6,154		1,522			7,676
Net income	$	19,305	$	4,691		$	23,996
Net income per share attributable to common shareholders:
Basic	$	0.54	$	0.13		$	0.67
Diluted	$	0.52	$	0.12		$	0.64
Weighted average common shares outstanding:
Basic		35,569		-			35,569
Diluted		37,125		-			37,125
	Nine Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	512,474	$	(512,474	)	$	-
Service revenue, net		-		350,210			350,210
Reimbursed out-of-pocket revenue		-		53,163			53,163
Total revenue		512,474		(109,101	)		403,373
Operating expenses:
Direct service costs, excluding depreciation and amortization		184,339		-			184,339
Reimbursed out-of-pocket expenses		173,587		(120,424	)		53,163
Total direct costs		357,926		(120,424	)		237,502
Total operating expenses		442,092		(120,424	)		321,668
Income from operations		70,382		11,323			81,705
Income before income taxes		64,631		11,323			75,954
Income tax provision		14,207		2,686			16,893
Net income	$	50,424	$	8,637		$	59,061
Net income per share attributable to common shareholders:
Basic	$	1.41	$	0.25		$	1.66
Diluted	$	1.36	$	0.24		$	1.60
Weighted average common shares outstanding:
Basic		35,525		-			35,525
Diluted		36,795		-			36,795

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ASSETS	As of September 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		108,285			(14,113	)		94,172
Total current assets		153,085			(14,113	)		138,972
Total assets	$	949,843		$	(14,113	)	$	935,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		80,328			(49,739	)		30,589
Pre-funded study costs		-			61,136			61,136
Advanced billings		133,403			(33,446	)		99,957
Other current liabilities		4,794			2,686			7,480
Total current liabilities		232,127			(19,363	)		212,764
Deferred income tax liability		2,636			(703	)		1,933
Total liabilities		388,454			(20,066	)		368,388
Shareholders’ equity:
Accumulated deficit		(67,294	)		5,953			(61,341	)
Total shareholders’ equity		561,389			5,953			567,342
Total liabilities and shareholders’ equity	$	949,843		$	(14,113	)	$	935,730

CASH FLOWS FROM OPERATING ACTIVITIES:	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		50,424			8,637			59,061
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(12,845	)		1,238			(11,607	)
Accrued expenses		21,613			(14,393	)		7,220
Pre-funded study costs		-			3,732			3,732
Advanced billings		28,277			(1,900	)		26,377
Other assets and liabilities, net		(605	)		2,686			2,081
Net cash provided by operating activities		117,142			-			117,142

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). The guidance in ASC 842 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13) (“ASC 840”). ASC 842 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASC 842 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

ASC 842 allows by policy election, an entity to choose its transition approach.  Entities must adopt ASC 842 on a either a modified retrospective basis to each prior reporting period presented or through an optional alternative method referred to as the “Comparatives Under ASC 840 Approach” which allows entities to apply the new requirements to only those leases that exist as of January 1, 2019.  The Company has elected to adopt ASC 842 utilizing the Comparatives Under ASC 840 Approach.  As such, ASC 842 will be applied on a prospective basis as of January 1, 2019 and any cumulative catch up adjustment for differences between ASC 842 and ASC 840 will be recorded upon adoption.

ASC 842 also allows for the election of certain practical expedients that are meant to ease the burden of transitioning to ASC 842 while still achieving compliance.  The Company will elect the “package of three” practical expedient allowing the Company to carry forward decisions made and documented under current US GAAP, rather than reassessing all of the Company’s contracts to determine whether they are or contain leases and how they would be classified under ASC 842.  The Company has decided not to elect the hindsight practical expedient, which if elected would require the Company to reassess the lease term and assessment of impairment for all of the Company’s leases using the facts and circumstances known up to the adoption date of the standard.  

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

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(3) 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. Restricted Stock Awards (“RSAs”) 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 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 under the treasury stock method. The treasury stock method 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 nine months ended September 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,569		38,579		35,525		39,803
RSAs		141		62		144		60
Total weighted-average shares		35,710		38,641		35,669		39,863
Earnings per common share—Basic
Net income	$	19,305	$	9,831	$	50,424	$	27,831
Less: Undistributed earnings allocated to RSAs		76		16		204		42
Net income available to common shareholders—Basic	$	19,229	$	9,815	$	50,220	$	27,789
Net income per common share—Basic	$	0.54	$	0.25	$	1.41	$	0.70
Basic weighted-average common shares outstanding		35,569		38,579		35,525		39,803
Effect of diluted shares		1,556		750		1,270		734
Diluted weighted-average shares outstanding		37,125		39,329		36,795		40,537
Net income per common share—Diluted	$	0.52	$	0.25	$	1.36	$	0.69

During the three and nine months ended September 30, 2018, the Company had 13,420 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 nine months ended September 30, 2017, the Company had 27,500 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.

(4) 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. 

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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.

The Company does not have any recurring fair value measurements as of September 30, 2018. There were no transfers between Level 1, Level 2 or Level 3 during the three and nine months ended September 30, 2018 or 2017.

(5) 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
	September 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	60,275		$	55,599		$	-	$	55,599
Unbilled receivables		49,072			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,062	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	108,285		$	95,954		$	12,875	$	83,079

Unbilled receivables increased from $41.0 million at January 1, 2018, which includes adjustments of $12.9 million related to the adoption of ASC 606, to $49.1 million at September 30, 2018. The increase is primarily driven by revenue recognized on certain contracts in advance of customer invoicing.

Contract Liabilities

Advanced billings represents 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
	September 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	133,403	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

Advanced billings increased from $105.3 million at January 1, 2018, which includes adjustments of $31.5 million related to the adoption of ASC 606, to $133.4 million at September 30, 2018. The increase is primarily driven by billing and/or collection activity in the nine months ended September 30, 2018 in advance of revenue being earned for delivery of service obligations.

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(6) Intangible Assets, Net

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

	As of
	September 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(106,142	)		(92,661	)
Developed technologies		(49,028	)		(40,856	)
Other		(2,507	)		(1,989	)
Total accumulated amortization		(230,307	)		(208,136	)
Total finite-lived intangible assets, net		44,923			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	76,569		$	98,740

As of September 30, 2018, 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 2018	$	7,390
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	44,923

(7) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	September 30,		December 31,
	2018		2017
Employee compensation and benefits	$	25,696	$	19,707
Project related reimbursable expenses		49,739		-
Other		4,893		3,966
Total accrued expenses	$	80,328	$	23,673

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(8) Debt

Debt consisted of the following (in thousands):

	As of
	September 30,			December 31,
	2018			2017
Revolving credit facility	$	-		$	70,000
Term loan		114,469			152,625
Less unamortized discount		(307	)		(399	)
Less unamortized term loan debt issuance costs		(473	)		(615	)
Less current portion of long-term debt		-			(16,500	)
Long-term debt, net, less current portion	$	113,689		$	205,111

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	-
2019		-
2020		15,469
2021		99,000
Total	$	114,469

The estimated fair value of the Company’s debt based on Level 2 inputs using the market approach, which is primarily based on rates at which the debt is traded among financial institutions, approximates the carrying value as of September 30, 2018 and December 31, 2017.

(9) Shareholder’s Equity and Stock-Based Compensation

The Company granted 722,200 awards to employees under the 2016 Incentive Award Plan, during the nine months ended September 30, 2018, consisting of 443,000 stock option awards and 279,200 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 33,801 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the nine months ended September 30, 2018. These awards will 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 Company granted 933,550 awards to employees under the 2016 Incentive Award Plan, during the nine months ended September 30, 2017, consisting of 777,550 stock option awards, 118,000 restricted stock awards (“RSA”) and 38,000 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 41,346 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan during the nine months ended September 30, 2017.    

Award Activity

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

	Nine Months Ended September 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		476,801		$	33.77
Exercised		(121,338	)	$	14.92
Forfeited/Expired		(212,217	)	$	23.55
Outstanding - end of period		2,926,114		$	22.89
Exercisable - end of period		1,119,216		$	15.91

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The following table sets forth the Company’s RSA/RSU activity:

	Nine Months Ended
	September 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		279,200
Vested		-
Forfeited		(16,000	)
Outstanding and unvested - end of period		446,829
Cumulative vested shares - end of period		1,884,287

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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total direct costs	$	875	$	389	$	2,619	$	1,504
Selling, general and administrative		557		592		1,767		1,711
Total stock-based compensation expense	$	1,432	$	981	$	4,386	$	3,215

(10) Income Taxes

The Company’s effective income tax rate was 24.2% and 35.1% for the three months ended September 30, 2018 and 2017, respectively. The Company’s effective income tax rate was 22.0% and 35.7% for the nine months ended September 30, 2018 and 2017, respectively. The Company’s effective income tax rate for the three and nine months ended September 30, 2018 varied from the U.S. statutory rate of 21% primarily due to the impact of state taxes and the benefit of uncertain tax positions coupled with a favorable tax impact associated with previously acquired tax attributes.

The Company recognized the income tax effects of the “Tax Cuts and Jobs Act” (TCJA) in its audited consolidated financial statements on our 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides Securities and Exchange Commission staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial results reflected the provisional estimate of the income tax effects of the TCJA. For the three months ended September 30, 2018, the Company revised the following provisional estimates for the amounts recorded as of December 31, 2017:

• Transition tax on unpatriated foreign earnings: The Company originally estimated a transition tax expense of $0.6 million; however, based on new guidance issued by Department of Treasury and the Internal Revenue Service, the revised provisional transition tax liability is $0.4 million. This adjustment favorably impacted the effective tax rate for the nine months ended September 30, 2018 by approximately 0.4%.

• Reduction of U.S. Federal Corporate Tax Rate: The Company originally estimated a provisional tax benefit of $3.4 million related to the revaluation of deferred tax assets and liabilities. During Q3 2018, the deferred tax assets/liabilities as of December 31, 2017 were adjusted to match the balances per the 2017 US corporate income tax return. The revised deferred balance was then adjusted from a 35% tax rate to a 21% tax rate. This resulted in a revised provisional tax benefit of approximately $3.6 million.  This adjustment favorably impacted the effective tax rate for the nine months ended September 30, 2018 by approximately 0.3%.

Absent the adjustments noted above, no subsequent adjustments have been made to the other provisional amounts recorded as of December 31, 2017, which continue to represent a provisional estimate of the impact of TCJA. The estimate of the impact of TCJA is based on certain assumptions and the Company's current interpretation, and may change, as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.

TCJA made broad and complex changes to the U.S. tax code, including a new tax law that may subject the Company to a tax on global intangible low-taxed income (“GILTI”) beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI.

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We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for 2018.

(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 September 30, 2018 and December 31, 2017.  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 September 30, 2018.

(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 September 30, 2018 and December 31, 2017, 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.

Management Fees

During the third quarter of 2018, Cinven sold its remaining shares of the Company’s common stock and all three members of the Company’s Board of Directors (the “Board”) affiliated with Cinven subsequently resigned. Cinven is no longer considered to be a related party subsequent to these events. Prior to these events, the Company paid fees for director services provided by Cinven employees that were members of the Company’s Board and any related committees. The director fees were paid directly to Cinven in accordance with the Company’s non-employee director compensation policy. During the three and nine months ended September 30, 2018, the Company incurred board of director fees and related travel fees to Cinven of less than $0.1 million and $0.1 million, respectively, in the Company’s condensed consolidated statement of operations. During the three and nine months ended September 30, 2017, the Company incurred board of director fees and related travel fees to Cinven of less than $0.1 million and $0.1 million, respectively, in the Company’s condensed consolidated statement of operations.

Service Agreements

Coherus BioSciences, Inc. (“Coherus”)

The chief executive officer of the Company was a member of Coherus’s board of directors until his resignation in the first quarter of 2018. Coherus is no longer considered a related party as of the first quarter of 2018. During the three months ended September 30, 2017, the Company recognized service revenue from Coherus of $1.4 million and during the nine months ended September 30, 2017, the Company recognized service revenue from Coherus of $6.5 million in the Company’s condensed consolidated statements of operations. In addition, the Company recognized Reimbursed out-of-pocket revenue with Coherus in the condensed consolidated statements of operations of $0.1 million during the three months ended September 30, 2017 and $1.1 million during the nine months ended September 30, 2017. As of December 31, 2017, the Company had Accounts receivable and unbilled, net from Coherus of $0.3 million recorded in the condensed consolidated balance sheets. As of December 31, 2017, the Company had, from Coherus, $1.5 million of Advanced billings and $1.0 million of Pre-funded study costs, in the condensed consolidated balance sheets.

Xenon Pharmaceuticals, Inc. (“Xenon”)

Certain executives and employees of the Company, including the chief executive officer, have held equity investments in Xenon, a clinical-stage biopharmaceutical company. During the second quarter of 2017, the chief executive officer sold his entire equity position held in Xenon. Xenon is no longer considered to be a related party subsequent to this sale. The Company recognized service revenue from Xenon of $0.6 million during the six months ended June 30, 2017 in the Company’s condensed consolidated statements of operations.

Cymabay Therapeutics, Inc. (“Cymabay”)

Cymabay is a clinical-stage biopharmaceutical company developing therapies to treat metabolic diseases with high unmet medical need, including serious rare and orphan disorders. During the first quarter of 2016, it was announced that a Medpace employee would join Cymabay’s board of directors. The Company and Cymabay entered into a MSA dated October 21, 2016. Subsequently, the Company and Cymabay have entered into several task orders for the Company to perform clinical trial related services. During the

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three and nine months ended September 30, 2018, the Company recognized total revenue from Cymabay of $4.1 million and $6.2 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from Cymabay of $0.2 million and $0.4 million, respectively, in the Company’s condensed consolidated statements of operations. As of September 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from Cymabay of $1.9 million and $0.1 million recorded in the condensed consolidated balance sheets.

LIB Therapeutics LLC (“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. During the three and nine months ended September 30, 2018, the Company recognized total revenue from LIB of $1.0 million and $2.8 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from LIB of $0.5 million and $1.1 million, respectively, in the Company’s condensed consolidated statements of operations. As of September 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from LIB of $0.4 million and $0.5 million recorded in the condensed consolidated balance sheets. In addition, as of December 31, 2017 the Company had Advanced billings from LIB of $0.2 million recorded 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. During the three and nine months ended September 30, 2018, the Company recognized total revenue from CinRx of less than $0.1 million and $0.2 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from CinRx of $0.1 million and $0.3 million, respectively, in the Company’s condensed consolidated statements of operations. In addition, as of September 30, 2018 the Company had Advanced billings from CinRx of $0.1 million recorded in the condensed consolidated balance sheets.

Purchase of Real Estate Properties

In December 2016, the Company entered into a purchase agreement for four parcels of real estate property that are closely situated to the Medpace campus in Cincinnati, Ohio, from AT Redevelopment Company, LLC, which is wholly-owned by the Company’s chief executive officer. The purchase price of the real estate property was $0.4 million as determined by an independent third party broker's opinion of value. The transaction closed on January 11, 2017.

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 the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. Lease expense recognized for each of the three months ended September 30, 2018 and 2017 was $0.5 million, respectively, and lease expense recognized for each of the nine months ended September 30, 2018 and 2017 was $1.6 million, respectively. The lease expense was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations.

Deemed Assets and Deemed Landlord Liabilities

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. In accordance with the accounting guidance related to leases, the Company was deemed in substance to be the owner of the property during the construction phase and at completion. Accordingly, the Company reflected the buildings and related liabilities as deemed assets from landlord building construction in Property and equipment, net, Other current liabilities, and Deemed landlord liability, less current portion, respectively, on the condensed consolidated balance sheets. 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 deemed assets are being fully depreciated, on a straight line basis, over the 15-year term of the lease. Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties. Accretion

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expense is being recorded over the term of the lease as a component of Interest expense, net in the Company’s condensed consolidated statements of operations. The Company paid $1.0 million and $0.9 million during the three months ended September 30, 2018 and 2017, respectively, and $2.9 million and $2.8 million during the nine months ended September 30, 2018 and 2017, respectively. The current and long-term portions of the Deemed landlord liability at September 30, 2018 were $2.0 million and $25.0 million, respectively. The current and long-term portions of the Deemed landlord liability at December 31, 2017 were $1.9 million and $26.6 million, respectively. The Company has recognized deemed assets, net of $15.1 million and $16.3 million at September 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets.

Travel Services

The Company incurs expenses for travel services for company executives provided by a private aviation charter company that is owned by the chief executive officer and the executive vice president of operations of the Company (“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 $0.3 million during the three months ended September 30, 2018 and 2017, respectively, and $1.0 million and $0.9 million during the nine months ended September 30, 2018 and 2017, 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.

(13) Entity Wide Disclosures

Revenue by Category

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

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Therapeutic Area
Oncology	$	48,940	$	135,795
Other		41,463		112,739
Cardiology		21,060		69,304
Metabolic		22,935		67,880
AVAI		22,097		58,963
Central Nervous System		13,827		40,105
Endocrine		5,636		19,046
Medical Devices		3,295		8,642
Total revenue	$	179,253	$	512,474

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2017 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, 2017. 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, 2017.

Forward-Looking Statements

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, including statements regarding our future results of operations and financial position, business strategy, product approvals and plans and our objectives for future operations, are forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” and similar expressions are intended to identify forward-looking statements. 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. 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 actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We caution you therefore against relying on these forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. For a further discussion of the risks relating to our business, see “Item 1A Risk Factors” of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Business Overview

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 focus on conducting clinical trials across all major therapeutic areas, with particular strength in Cardiology, Metabolic Disease, Oncology, Endocrinology, Central Nervous System (“CNS”), Antiviral and Anti-infective (“AVAI”), as well as therapeutic expertise in Medical Devices. Our global platform includes approximately 2,800 employees across 36 countries, providing our customers with broad access to diverse markets and patient populations as well as local regulatory expertise and market knowledge.

Change in Controlled Company Status

Prior to August 10, 2018, the Company met the definition of a “controlled company” as defined by Nasdaq rules. A “controlled company” is defined in Nasdaq Rule 5615(c) as a company of which more than 50 percent of the voting power for the election of directors is held by an individual, group or another company. Certain Nasdaq requirements do not apply to a “controlled company”, including requirements that: (i) a majority of its board of directors must be comprised of “independent” directors as defined in Nasdaq’s rules, and (ii) the compensation of officers and the nomination of directors be determined in accordance with specific rules, generally requiring determinations by committees comprised solely of independent directors or in meetings at which only the independent directors are present. On August 10, 2018, the Company’s previously largest shareholder, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a portion of its shares in a public offering, which resulted in the Company no longer meeting the definition of a “controlled company”.  

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How We Generate Revenue

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.

Revenue, which is distinct from billing and cash receipt, is recognized based on the satisfaction of the individual performance obligations identified in each contract. Substantially all of our customer contracts consist of a single performance obligation, as the promise to transfer the individual services defined in the contracts are not separately identifiable from other promises in the contract, and therefore not distinct.  Our performance obligations are generally satisfied over time and recognized as services are performed.  The progression of our contract performance obligations are measured primarily utilizing the input method of cost to cost.  Cancellation provisions in our contracts allow our customers to terminate a contract either immediately or according to advance notice terms specified within the applicable contract, which is typically 30 days. Contract cancellation may occur for various reasons, including, but not limited to, adverse patient reactions, lack of efficacy, or inadequate patient enrollment. Upon cancellation, we are entitled to fees for services rendered and reimbursable costs incurred through the date of termination, including payment for subsequent services necessary to conclude the study or close out the contract. These fees are typically discussed and agreed upon with the customer and are realized as revenue when we believe the amount can be estimated reliably and its realization is probable.  Changes in revenue from period to period are driven primarily by new business volume and task order execution activity, project cancellations, changes in estimated costs to complete performance obligations, and the mix of active studies during a given period that can vary based on therapeutic area and or study life cycle stage.

Costs and Expenses

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

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 service 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

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

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 and deemed assets from landlord building construction 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

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, which range in term from 17 months to 15 years. 

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Income Tax Provision

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.

Key Performance Metrics

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, Cancellations and Backlog

New business awards represent the value of anticipated future 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 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.

Cancellations arise in the normal course of business and are reflected when we receive written confirmation from the customer to cease work on a contractual agreement. The majority of our customers can terminate our contracts without cause upon 30 days’ notice. Similar to new business awards, the number and amount of cancellations can vary significantly period over period due to timing of customer correspondence and study-specific circumstances. Total cancellations in a period are offset against gross new business awards received in a period to determine net new business awards in our backlog calculation. On an Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”) basis, net new business awards were $227.6 million and $668.3 million for the three and nine months ended September 30, 2018, respectively. On an Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”) basis, net new business awards were $150.1 million and $112.1 million for the three months ended September 30, 2018 and 2017, respectively. On an ASC 605 basis, net new business awards were $434.2 million and $311.3 million for the nine months ended September 30, 2018 and 2017, respectively.

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. On an ASC 606 basis, as of September 30, 2018, our backlog was $1,024.5 million. On an ASC 605 basis, as of September 30, 2018, our backlog increased by $98.7 million, or 19.4%, to $608.7 million compared to $510.0 million as of September 30, 2017. Included within backlog on an ASC 605 basis as of September 30, 2018 was approximately $360 million to $370 million that we expect to convert to net service revenue over the next twelve months, with the remainder expected to convert to net service revenue thereafter.

On an ASC 605 basis, the effect of foreign currency adjustments on backlog was as follows: unfavorable foreign currency adjustments of $0.6 million for the three months ended September 30, 2018; favorable foreign currency adjustments of $0.3 million for the nine months ended September 30, 2018; favorable foreign currency adjustments of $1.5 million for the three months ended September 30, 2017; and favorable foreign currency adjustments of $2.6 million for the nine months ended September 30, 2017.

Backlog and net new business award metrics may not be reliable indicators of our future period revenue as they are subject to a variety of factors that may cause material fluctuations from period to period. These factors include, but are not limited to, changes in the scope of projects, cancellations, and duration and timing of services provided.

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Exchange Rate Fluctuations

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:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
U.S. Dollars per Euro:		1.16		1.17		1.19		1.11

Results of Operations

Three Months Ended September 30, 2018 compared to Three Months Ended September 30, 2017

	As Reported under ASC 606			Adjustments			As Revised under ASC 605			As Reported under ASC 605
	Three Months Ended
	September 30,
(Amounts in thousands, except percentages)	2018			2018			2018			2017			Change			% Change
Revenue, net	$	179,253		$	(179,253	)	$	—		$	—		$	179,253			100.0	%
Service revenue, net		—			123,990			123,990			98,681			(98,681	)		(100.0	)%
Reimbursed out-of-pocket revenue		—			19,102			19,102			11,962			(11,962	)		(100.0	)%
Total revenue		179,253			(36,161	)		143,092			110,643			68,610			62.0	%
Direct service costs, excluding depreciation and amortization		62,520			—			62,520			53,144			9,376			17.6	%
Reimbursed out-of-pocket expenses		61,476			(42,374	)		19,102			11,962			49,514			413.9	%
Total direct costs		123,996			(42,374	)		81,622			65,106			58,890			90.5	%
Selling, general and administrative		18,606			—			18,606			16,606			2,000			12.0	%
Depreciation		2,343			—			2,343			2,237			106			4.7	%
Amortization		7,390			—			7,390			9,496			(2,106	)		(22.2	)%
Total operating expenses		152,335			(42,374	)		109,961			93,445			58,890			63.0	%
Income from operations		26,918			6,213			33,131			17,198			9,720
Miscellaneous income (expense), net		482			—			482			(145	)		627
Interest expense, net		(1,941	)		—			(1,941	)		(1,906	)		(35	)
Income before income taxes		25,459			6,213			31,672			15,147			10,312
Income tax provision		6,154			1,522			7,676			5,316			838
Net income	$	19,305		$	4,691		$	23,996		$	9,831		$	9,474

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Nine Months Ended September 30, 2018 compared to Nine Months Ended September 30, 2017

	As Reported under ASC 606			Adjustments			As Revised under ASC 605			As Reported under ASC 605
	Nine Months Ended
	September 30,
(Amounts in thousands, except percentages)	2018			2018			2018			2017			Change			% Change
Revenue, net	$	512,474		$	(512,474	)	$	—		$	—		$	512,474			100.0	%
Service revenue, net		—			350,210			350,210			287,014			(287,014	)		(100.0	)%
Reimbursed out-of-pocket revenue		—			53,163			53,163			36,456			(36,456	)		(100.0	)%
Total revenue		512,474			(109,101	)		403,373			323,470			189,004			58.4	%
Direct service costs, excluding depreciation and amortization		184,339			—			184,339			156,204			28,135			18.0	%
Reimbursed out-of-pocket expenses		173,587			(120,424	)		53,163			36,456			137,131			376.2	%
Total direct costs		357,926			(120,424	)		237,502			192,660			165,266			85.8	%
Selling, general and administrative		55,112			—			55,112			46,515			8,597			18.5	%
Depreciation		6,883			—			6,883			6,468			415			6.4	%
Amortization		22,171			—			22,171			28,406			(6,235	)		(21.9	)%
Total operating expenses		442,092			(120,424	)		321,668			274,049			168,043			61.3	%
Income from operations		70,382			11,323			81,705			49,421			20,961
Miscellaneous income (expense), net		807			—			807			(642	)		1,449
Interest expense, net		(6,558	)		—			(6,558	)		(5,508	)		(1,050	)
Income before income taxes		64,631			11,323			75,954			43,271			21,360
Income tax provision		14,207			2,686			16,893			15,440			(1,233	)
Net income	$	50,424		$	8,637		$	59,061		$	27,831		$	22,593

Total revenue

Total revenue increased by $68.6 million to $179.3 million for the three months ended September 30, 2018, from $110.6 million for the three months ended September 30, 2017. Total revenue increased by $189.0 million to $512.5 million for the nine months ended September 30, 2018, from $323.5 million for the nine months ended September 30, 2017. This was primarily driven by ASC 606 adoption, which resulted in an increase of $36.2 million for the three months ended September 30, 2018 and $109.1 million for the nine months ended September 30, 2018. The remaining increase for the three and nine months ended September 30, 2018 was primarily driven by growth within the Oncology, AVAI, and other uncategorized therapeutic areas.

Reimbursed out-of-pocket revenue decreased by $12.0 million to $0.0 million for the three months ended September 30, 2018, from $12.0 million for the three months ended September 30, 2017. Reimbursed out-of-pocket revenue decreased by $36.5 million to $0.0 million for the nine months ended September 30, 2018, from $36.5 million for the nine months ended September 30, 2017. This decrease was fully due to ASC 606 adoption.

Total direct costs

Total direct costs increased by $58.9 million, to $124.0 million for the three months ended September 30, 2018 from $65.1 million for the three months ended September 30, 2017. Total direct costs increased by $165.3 million, to $357.9 million for the nine months ended September 30, 2018 from $192.7 million for the nine months ended September 30, 2017. This was primarily driven by ASC 606 adoption, which resulted in an increase of $42.4 million for the three months ended September 30, 2018 and $120.4 million for the nine months ended September 30, 2018. The remaining increase was primarily attributed to higher reimbursed out-of-pocket expenses, higher personnel costs, lab related costs and contracted services 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 or closeout, increased $7.1 million and $16.7 million for the three and nine months ended September 30, 2018. The higher personnel costs portion increased by $5.4 million and $15.7 million for the three and nine months ended September 30, 2018, compared to the same period in the prior year. Lab related costs increased by $1.7 million and $6.5 million for the three and nine months ended September 30, 2018, compared to the same period in the prior year. Contracted service costs increased by $1.9 million and $4.3 million for the three and nine months ended September 30, 2018, compared to the same period in the prior year.

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Selling, general and administrative

Selling, general and administrative expenses increased by $2.0 million, to $18.6 million for the three months ended September 30, 2018 from $16.6 million for the three months ended September 30, 2017. Selling, general and administrative expenses increased by $8.6 million, to $55.1 million for the nine months ended September 30, 2018 from $46.5 million for the nine months ended September 30, 2017. This increase was primarily driven by higher personnel costs, bad debt expense, secondary offering costs, exit charges and personnel recruitment costs. The higher personnel costs portion increased by $1.6 million and $5.2 million for the three and nine months ended September 30, 2018, compared to the same period in the prior year. Bad debt expense increased by $1.1 million for the nine months ended September 30, 2018, compared to the same period in the prior year. Secondary offering costs increased by $0.5 million for the nine months ended September 30, 2018, compared to the same period in the prior year. Exit charges increased by $0.5 million for the nine months ended September 30, 2018, compared to the same period in the prior year. Personnel recruitment costs increased by $0.6 million and $1.1 million for the three and nine months ended September 30, 2018, compared to the same period in the prior year.

Depreciation and Amortization

Depreciation and amortization expense decreased by $2.0 million, to $9.7 million for the three months ended September 30, 2018 from $11.7 million for the three months ended September 30, 2017. Depreciation and amortization expense decreased by $5.8 million, to $29.1 million for the nine months ended September 30, 2018 from $34.9 million for the nine months ended September 30, 2017.  The decrease in depreciation and amortization was primarily related to the continued amortization of our definite lived intangible assets, which are amortized on an accelerated basis.

Miscellaneous income (expense), net

Miscellaneous income (expense), net increased by $0.6 million, to $0.5 million of income for the three months ended September 30, 2018 from $0.1 million of expense for the three months ended September 30, 2017. Miscellaneous income (expense), net increased by $1.4 million, to $0.8 million of income for the nine months ended September 30, 2018 from $0.6 million of expense for the nine months ended September 30, 2017. These changes were mainly attributable to foreign exchange gains or losses that arise in connection with the revaluation of short-term intercompany balances between our domestic and international subsidiaries, gains or losses from foreign currency transactions, such as those resulting 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.

Interest expense, net

Interest expense, net increased by $0.0 million to $1.9 million for the three months ended September 30, 2018 from $1.9 million for the three months ended September 30, 2017. Interest expense, net increased by $1.1 million to $6.6 million for the nine months ended September 30, 2018 from $5.5 million for the nine months ended September 30, 2017. The increase in interest expense, net was related to higher average outstanding balance under our Senior Secured Revolving Credit Facility (as defined below), as well as a higher effective interest rate as a result of the variable interest rate on the Senior Secured Credit Facilities (as described below).  

Income tax provision

Income tax provision increased by $0.8 million, to $6.2 million for the three months ended September 30, 2018 from $5.3 million for the three months ended September 30, 2017. Income tax provision decreased by $1.2 million, to $14.2 million for the nine months ended September 30, 2018 from $15.4 million for the nine months ended September 30, 2017.  The overall effective tax rate for the three months ended September 30, 2018 was 24.2%, compared to an overall effective tax rate of 35.1% for the three months ended September 30, 2017. The overall effective tax rate for the nine months ended September 30, 2018 was 22.0%, compared to an overall effective tax rate of 35.7% for the nine months ended September 30, 2017. The decrease in the effective tax rate for the three and nine months ended September 30, 2018 and the decrease in the income tax provision for the nine months ended September 30, 2018 was primarily due to the U.S. government enacted comprehensive tax legislation commonly referred to as “Tax Cuts and Jobs Act” (TCJA), which reduced the U.S. corporate income tax rate from 35% to 21% for the three and nine months ended September 30, 2018 compared to the same period in the prior year, coupled with the impact of state taxes and a favorable impact associated with uncertain tax positions and acquired tax attributes. The increase in the income tax provision for the three months ended September 30, 2018 was primarily due to an increase in pre-tax book income compared to the same period in the prior year.

Liquidity and Capital Resources

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 funds available for borrowing under our Senior Secured Revolving Credit Facility (as defined below). As of September 30, 2018, we had cash and cash equivalents of $22.3 million, including an immaterial amount of restricted cash. Approximately $9.6 million of cash and cash equivalents, none of which was restricted, was held by our foreign subsidiaries as of September 30, 2018. On December 8, 2016, the Company entered into a credit agreement (the “Senior Secured

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Credit Agreement”) consisting of a $165.0 million term loan (the “Senior Secured Term Loan Facility”) and a $150.0 million revolving credit facility (the “Senior Secured Revolving Credit Facility” and, together with the Senior Secured Term Loan Facility, the “Senior Secured Credit Facilities”). As of September 30, 2018, we had $149.8 million available for borrowing under our Senior Secured Revolving Credit Facility. Our expected primary cash needs on both a short and long-term basis are for investment in operational growth, capital expenditures, payment of debt, 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. 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.  The Company is still evaluating the impacts of the TCJA and how it will affect the Company’s current accounting position to indefinitely reinvest unremitted foreign earnings. While we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and available borrowings under existing and future credit facilities, we would likely incur taxes on these earnings if the need for repatriation due to liquidity purposes arises.

	Nine Months Ended
	September 30,
Cash Flows (Amounts in thousands)	2018			2017
Net cash provided by operating activities	$	117,142		$	68,733
Net cash used in investing activities		(12,761	)		(8,854	)
Net cash used in financing activities		(107,733	)		(74,594	)
Effect of exchange rates on cash, cash equivalents and restricted cash		(889	)		1,555
Decrease in cash, cash equivalents and restricted cash	$	(4,241	)	$	(13,160	)

Cash Flow from Operating Activities

Cash flows from operations are driven mainly by net income and net movement in accounts receivable and unbilled, net, advanced billings, pre-funded liabilities, accounts payable, accrued expenses, deferred taxes and deferred credits. Accounts receivable and unbilled, net, advanced billings and pre-funded liabilities 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.

Net cash flows provided by operating activities was $117.1 million for the nine months ended September 30, 2018 beginning with net income of $50.4 million. Adjustments to reconcile net income to net cash provided by operating activities were $34.1 million, primarily related to amortization of intangibles of $22.2 million, depreciation of $6.9 million, and deferred income tax provision of $7.3 million, offset by $7.5 million of amortization and adjustment of deferred credit. Changes in operating assets and liabilities provided $32.6 million in operating cash flows and was primarily driven by increased accrued expenses of $21.6 million and an increase in advanced billings of $28.3 million, offset by increased accounts receivable and unbilled, net of $12.8 million.

Net cash flows provided by operating activities was $68.7 million for the nine months ended September 30, 2017 beginning with net income of $27.8 million. Adjustments to reconcile net income to net cash provided by operating activities were $37.6 million, primarily related to amortization of intangibles of $28.4 million, depreciation of $6.5 million and stock based compensation expense of $3.2 million, offset by $0.4 million of benefit from deferred taxes. Changes in operating assets and liabilities provided $3.3 million in operating cash flows and was primarily driven by decreased accounts receivable and unbilled, net of $5.3 million and increased advanced billings of $2.4 million, offset by decreased accrued expenses of $4.8 million.  

Cash Flow from Investing Activities

Net cash used in investing activities was $12.8 million for the nine months ended September 30, 2018 primarily consisting of property and equipment expenditures.

Net cash used in investing activities was $8.9 million for the nine months ended September 30, 2017 primarily consisting of property and equipment expenditures and an acquisition of intangible assets.

Cash Flow from Financing Activities

Net cash used in financing activities was $107.7 million for the nine months ended September 30, 2018 primarily related to $70.0 million in principal payments on our Senior Secured Revolving Credit Facility and $38.2 million in principal payments on our Senior Secured Term Loan Facility.

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Net cash used in financing activities was $74.6 million for the nine months ended September 30, 2017 primarily related to $95.2 million in repurchases of common stock, $9.3 million in principal payments on our Senior Secured Term Loan Facility and $10.0 million in principal payments on our Senior Secured Revolving Credit Facility, offset by $40.0 million in proceeds from the Senior Secured Revolving Credit Facility.

Indebtedness

As of September 30, 2018, we had total indebtedness of $114.5 million, which was attributed to outstanding borrowings on the Senior Secured Credit Facilities. There were no outstanding borrowings under the Senior Secured Revolving Credit Facility as of September 30, 2018. As of September 30, 2018, we had $0.2 million in letters of credit outstanding related to certain operating lease obligations, which are secured by the Senior Secured Revolving Credit Facility. See Note 8 to our audited consolidated financial statements in our 2017 Annual Report on Form 10-K for details regarding our Senior Secured Credit Facilities.

Contractual Obligations and Commercial Commitments

We have various contractual obligations, which are recorded as liabilities in our condensed consolidated financial statements. Other items, such as operating lease obligations, are not recognized as liabilities in our condensed consolidated financial statements but are required to be disclosed. The following table summarizes future payments and interest related to indebtedness for the partial and full years subsequent to the quarter ended September 30, 2018.

There have been no material changes, except as follows, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

	Payments Due by Period
Contractual Obligations (In thousands)	Total		Remaining 2018		1-3 years		3-5 years		More than 5 years
Long-term debt obligations	$	114,469	$	-	$	15,469	$	99,000	$	-
Interest on long-term debt		13,809		1,166		9,123		3,520	-

Principal payments in the above table are based on the terms contained in our agreements. Interest payments are based on the interest rate in effect on September 30, 2018.

Off-Balance Sheet Arrangements

Off balance sheet arrangements refer to any transaction, agreement or other contractual arrangement to which an entity not consolidated under our entity structure exists, where we have an obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such an entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. We have no off balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, requires us to make a variety of decisions which affect reported amounts and related disclosures, including the selection of appropriate accounting principles and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgment based on our understanding and analysis of the relevant circumstances, including our historical experience and other assumptions. Actual results could differ from our estimates. We are committed to incorporating accounting principles, assumptions and estimates that promote the representational faithfulness, verifiability, neutrality and transparency of the accounting information included in the financial statements.

There have been no significant changes in the critical accounting policies and estimates as previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, except for the below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018.  Revenue on contracts is recognized,  when or as we satisfy the contract performance obligations by transferring control of the services provided to the customer, at the amount that reflects the consideration to which we expect to be entitled in exchange for transferring those services.  Our performance obligations are generally satisfied over time and recognized as work progresses.

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Contract Assumptions

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs.  We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred while performing our contracted obligations.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, labor productivity, the complexity of the study, the participating geographic locations and the Company’s historical experience.  To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer.  If our customers do not agree to pricing changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met.  These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct.  Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress.  Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress.  These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

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Effect of Recent Accounting Pronouncements

Refer to Note 2 of the Condensed Consolidated Financial Statements for management’s discussion of the effect of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2018.

Changes in Internal Control over Financial Reporting

During the nine months ended September 30, 2018, we implemented material changes to our revenue recognition processes in response to the adoption of ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” that became effective January 1, 2018. These included the development of new policies based on the five-step model provided in the new revenue standard, new training, ongoing contract review requirements, and gathering of information provided for disclosures. The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls over financial reporting. Other than these changes, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are party to legal proceedings incidental to our business. While the outcome of these matters could differ from management’s expectations, we do not believe that the resolution of these matters is reasonably likely to have a material adverse effect to our financial statements.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. There have been no significant changes from the risk factors previously disclosed in our Annual Report, except with respect to the recent change in our status as a “controlled company” as defined by Rule 5615(c) of the Nasdaq rules.

On August 10, 2018, the Company’s previously largest shareholder, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a portion of its shares in a public offering, which resulted in the termination of the voting agreement that required Cinven to vote for the election of Dr. August J. Troendle, our CEO and founder, to our Board and for Dr. Troendle to vote for Cinven’s representatives to our Board. Because the voting agreement has terminated, no shareholder or group of shareholders holds 50 percent or more of the voting power of the Company. As a result of this development, the Company no longer meets the definition of a “controlled company” and the following is added to our “Risk Factors” disclosure:

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Although we are no longer a “controlled company” within the meaning of the Nasdaq rules, during the phase-in period we may continue to rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

After the completion of the Company’s initial public offering, we were a “controlled company” within the meaning of the corporate governance standards of Nasdaq because a group of shareholders was deemed to hold more than 50 percent of the voting power of the Company in connection with a voting agreement entered into by Dr. August J. Troendle, our CEO and founder, and funds affiliated with Cinven Capital Management (V) General Partner Limited (“Cinven”). The voting agreement required Cinven to vote for the election of Dr. Troendle to our Board and for Dr. Troendle to vote for Cinven’s representatives to our Board. Upon completion of Cinven’s August 10, 2018 secondary offering of our shares of common stock, this voting agreement terminated and we ceased to be a controlled company under the Nasdaq listing requirements. As of September 30, 2018 neither Cinven nor any of its affiliates owns any shares of our common stock.

Under Nasdaq rules, a “controlled company” may elect not to comply with certain corporate governance requirements, including the requirements that:

• the board be composed of a majority of “independent directors,” as defined under the rules of Nasdaq;

• the board establish a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

• director nominations be made, or recommended to the full board, by independent directors or by a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Now that we are no longer a “controlled company” we are required to comply with these requirements within one year of when we ceased to be a “controlled company.” Our Board is comprised of a majority of independent directors and our compensation committee is comprised solely of independent directors. However, we currently do not have a nominating and corporate governance committee.

We may have difficulties complying with the Nasdaq requirements described above. While we intend to comply with the Nasdaq rules, there can be no assurance that we will be able to comply with such rules before the end of the phase-in period for compliance. During the phase-in period Medpace shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq corporate governance requirements. In addition, we may not be able to attract and retain the number of independent directors needed to comply with Nasdaq rules during the phase-in period.

Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds

Recent Sales of Unregistered Securities

Date	Equity Plan	Number of Stock Options Exercised		Exercise Price		Approximate Aggregate Purchase Price
July 3, 2018	2014 Equity Incentive Plan		4,946	$	14.41	$	71,300
July 9, 2018	2014 Equity Incentive Plan		5,703		14.41		82,200
July 30, 2018	2014 Equity Incentive Plan		6,390		16.20		103,500
July 30, 2018	2014 Equity Incentive Plan		2,500		14.41		36,000
August 2, 2018	2014 Equity Incentive Plan		1,540		14.41		22,200
August 6, 2018	2014 Equity Incentive Plan		2,000		14.41		28,800
August 8, 2018	2014 Equity Incentive Plan		1,200		14.41		17,300
August 10, 2018	2014 Equity Incentive Plan		800		14.41		11,500
August 21, 2018	2014 Equity Incentive Plan		1,200		14.41		17,300
August 24, 2018	2014 Equity Incentive Plan		5,000		14.41		72,100
August 28, 2018	2014 Equity Incentive Plan		750		14.41		10,800
September 6, 2018	2014 Equity Incentive Plan		900		18.23		16,400
September 7, 2018	2014 Equity Incentive Plan		2,357		14.41		34,000
September 14, 2018	2014 Equity Incentive Plan		300		18.23		5,500
September 18, 2018	2014 Equity Incentive Plan		556		14.41		8,000
September 24, 2018	2014 Equity Incentive Plan		3,703		14.41		53,400
September 24, 2018	2014 Equity Incentive Plan		2,778		16.20		45,000
Total			42,623			$	635,300

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All of the forgoing transactions were to employees of the Company and are exempt from registration pursuant to Rule 701 promulgated under the Securities Act of 1933, as amended as transactions pursuant to benefit plans and contracts relating to compensation.

Use of Proceeds from Registered Securities

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

As previously described, on August 10, 2018, we ceased to be a “controlled company” within the meaning of the rules of the Nasdaq. Nasdaq rules require that immediately upon ceasing to be a controlled company, at least one member of the nominating and corporate governance committee (if applicable) and the compensation committee be independent.  Within 90 days of ceasing to be a controlled company, a majority of the compensation committee must be independent, and within 12 months of ceasing to be a controlled company, all members of the compensation committee must be independent. As of August 10, 2018, all of the members of the Company’s compensation committee were independent. The Company does not have a nominating or corporate governance committee.

Item 6. Exhibits

The exhibits in the accompanying Exhibit Index preceding the signature page are filed or furnished as a part of this report and are incorporated herein by reference.

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EXHIBIT INDEX

Exhibit Number	Exhibit Description	Filed/ Furnished Herewith
#10.1	Non-Employee Director Compensation Policy revised effective October 25, 2018	*
31.1	Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer	*
31.2	Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer	*
32.1	Section 1350 Certification of Chief Executive Officer	**
32.2	Section 1350 Certification of Chief Financial Officer	**
101.INS	XBRL Instance Document	*
101.SCH	XBRL Taxonomy Extension Schema Document	*
101.CAL	XBRL Taxonomy Calculation Linkbase Document	*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE	XBRL Taxonomy Extension Presentation	*

* Filed herewith.

** Furnished herewith.

# Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MEDPACE HOLDINGS, INC.

/s/ Jesse J. Geiger

Jesse J. Geiger

Chief Financial Officer and Chief Operating Officer, Laboratory Operations

(Authorized Officer and Principal Financial Officer)

Date: October 30, 2018

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EX-10.1

Exhibit 10.1

Medpace Holdings, Inc.

Non-Employee Director Compensation Policy

(Revised as of October 25, 2018)

Non-employee members of the board of directors (the “Board”) of Medpace Holdings, Inc. (the “Company”) shall be eligible to receive cash and equity compensation as set forth in this Non-Employee Director Compensation Policy (this “Policy”). The cash and equity compensation described in this Policy shall be paid or be made, as applicable, automatically and without further action of the Board (subject to Section 1(c)(ii)), to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company (each, a “Non-Employee Director”) who may be eligible to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity compensation by written notice to the Company. This Policy became effective after the effectiveness of the Company’s initial public offering (the date of such effectiveness, the “Effective Date”) and has been revised as of October 25, 2018.  This Policy shall remain in effect until it is revised or rescinded by further action of the Board. This Policy may be amended, modified or terminated by the Board at any time in its sole discretion. The terms and conditions of this Policy shall supersede any prior cash and/or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors and between any subsidiary of the Company and any of its non-employee directors. No Non-Employee Director shall have any rights hereunder, except with respect to non-qualified stock options or restricted stock units granted pursuant to this Policy.  

1.  Annual Retainers. Non-Employee Directors shall be granted the retainers described below.  

(a) Annual Retainers. Each Non-Employee Director shall receive an annual retainer with a value of $40,000 for service on the Board.  

(b) Additional Annual Retainers. In addition, a Non-Employee Director shall receive the following annual retainers:  

(i) Audit Committee. A Non-Employee Director serving as Chairperson of the Audit Committee shall receive an additional annual retainer with a value of $20,000 for such service. A Non-Employee Director serving as a member of the Audit Committee (other than the Chairperson) shall receive an additional annual retainer with a value of $7,500 for such service.  

(ii) Compensation Committee. A Non-Employee Director serving as a member of the Compensation Committee shall receive an additional annual retainer with a value of $7,500 for such service.

(c) Payment of Retainers.  

(i) Timing. The annual retainers described in Sections 1(a) and 1(b) shall be earned on a quarterly basis based on a calendarquarter and shall be paid by the Company in arrears not later than the fifteenth day following the end of each calendar quarter.  

(ii) Form. The annual retainers shall be paid in the form of cash; provided that the Board may, in its discretion, permit a Non-Employee Director to elect to receive any portion of the annual retainer in the form of shares of common stock of the Company (“Common Stock”) in lieu of cash. If such an election is permitted by the Board and made by a Non-Employee Director, the number of shares of Common Stock to be paid shall be determined by dividing the portion of the annual retainer payable in the form of Common Stock by the Fair Market Value (as defined in the Company’s 2016 Incentive Award Plan or any other applicable Company equity plan then maintained by the Company (such plan, as may be amended from time to time, the “Equity Plan”)) per share of Common Stock on the date the retainer is payable. Shares issued in lieu of cash shall be fully vested and unrestricted shares of Common Stock. Any election by a Non-Employee Director to receive a portion of the annual retainer in shares of Common Stock must be made prior to the applicable payment date for such portion of the annual retainer and pursuant to an election form to be provided by the Company. An election must comply with all rules established from time to time by the Board, including the Company’s Insider Trading Compliance Policy. A Non-Employee Director may not make an election pursuant to this Section 1(c)(ii) during a Company blackout period or when the Non-Employee Director is otherwise in possession of material non-public information.  

(iii) Termination of Service. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable positions described in Section 1(b), for an entire calendar quarter, such Non-Employee Director shall receive a prorated portion of the retainer(s) otherwise payable to such Non-Employee Director for such calendar quarter pursuant to Sections 1(a) and 1(b), with such prorated portion determined by multiplying such otherwise payable retainer(s) by a fraction, the numerator of which is the number of days during which the Non-Employee Director serves as a Non-Employee Director or in the applicable positions described in Section 1(b) during the applicable calendar quarter and the denominator of which is the number of days in the applicable calendar quarter.  

2.Equity Compensation. Non-Employee Directors shall be granted the equity awards described below.  

(a) Annual Awards. Each Non-Employee Director who (i) serves on the Board as of the date of any annual meeting of the Company’s stockholders (an “Annual Meeting”) after the Effective Date and (ii) will continue to serve as a Non-Employee Director immediately following such Annual Meeting shall be automatically granted, on the date of such Annual Meeting, an option to purchase the number of shares of Common Stock (at a per-share exercise price equal to the closing price per share of the Common Stock on the date of such annual meeting (or on the last preceding trading day if the date of the annual meeting is not a trading day)) that has an aggregate fair value on the date of grant of $90,000 (calculated in accordance with FASB Accounting Codification Topic 718 (“ASC 718”) using the same formula and assumptions as the Company utilized for the purpose of valuing outstanding options in its then-most recently prepared audited annual financial statement). The awards described in this Section 2(a) shall be referred to as the “Annual Awards.” For the avoidance of doubt, a Non-Employee Director elected for the first time to the Board at an Annual Meeting shall receive only an Annual Award in connection with such election, and shall not receive any Initial Award on the date of such Annual Meeting as well.  

(b) Initial Awards. Except as otherwise determined by the Board, each Non-Employee Director who is initially elected or appointed to the Board after the Effective Date on any date other than the date of an Annual Meeting shall be automatically granted, on the date of such Non-Employee Director’s initial election or appointment (such Non-Employee Director’s “Start Date”), an award of an option to purchase shares of Common Stock (at a per-share exercise price equal to the closing price of the Common Stock on the date of such initial election or appointment (or on the last preceding trading day if the date of the initial election or appointment is not a trading day)) that has an aggregate fair value on such Non-Employee Director’s Start Date equal to the product of (i) $90,000 (calculated in accordance with ASC 718 using the same formula and assumptions as the Company utilized for the purpose of valuing outstanding options in its  then most recently prepared audited annual financial statement) and (ii) a fraction, the numerator of which is (x) 365 minus (y) the number of days in the period beginning on the date of the Annual Meeting immediately preceding such Non-Employee Director’s Start Date (or, if no such Annual Meeting has occurred, the Effective Date) and ending on such Non-Employee Director’s Start Date and the denominator of which is 365. The awards described in this Section 2(b) shall be referred to as “Initial Awards.” Notwithstanding the foregoing, the Board in its sole discretion may determine that the Initial Award for any Non-Employee Director be granted in the form of restricted stock units with equivalent value on the date of grant. For the avoidance of doubt, no Non-Employee Director shall be granted more than one Initial Award.  

(c) Termination of Employment of Employee Directors. Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Award pursuant to Section 2(b) above, but to the extent that they are otherwise eligible, will be eligible to receive, after termination from service with the Company and any parent or subsidiary of the Company, Annual Awards as described in Section 2(a) above.  

(d) Vesting of Awards Granted to Non-Employee Directors. Each Annual Award and Initial Award shall vest and become exercisable on the earlier of (x) the day immediately preceding the date of the first Annual Meeting following the date of grant and (y) the first anniversary of the date of grant, subject to the Non-Employee Director continuing in service through the applicable vesting date. No portion of an Annual Award or Initial Award that is unvested or unexercisable at the time of a Non-Employee Director’s termination of service on the Board shall become vested and exercisable thereafter. All of a Non-Employee Director’s Annual Awards and Initial Awards shall vest in full immediately prior to the occurrence of a Change in Control (as defined in the Equity Plan), to the extent outstanding at such time.  

3.General. The annual retainers (whether provided in the form of cash or equity) and equity awards described herein shall be granted under and shall be subject to the terms and provisions, including the limitations on the numbers of shares, of the Equity Plan. The equity awards described in Section 2 shall be granted subject to the execution and delivery of award agreements, including attached exhibits, in forms to be approved by the Board. All applicable terms of the Equity Plan apply to this Policy as if fully set forth herein, and all retainers and equity grants hereunder are subject in all respects to the terms of the Equity Plan. All numbers of shares determined hereunder shall be rounded down to the nearest whole share and subject to adjustment as provided in the Equity Plan.  

* * * * *  

EX-31.1

Exhibit 31.1

I, Dr. August J. Troendle, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Medpace Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 30, 2018

/s/ August J. Troendle

Dr. August J. Troendle

President, Chief Executive Officer and Chairman of the Board of Directors

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, Jesse J. Geiger, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Medpace Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 30, 2018

/s/ Jesse J. Geiger

Jesse J. Geiger

Chief Financial Officer and Chief Operating Officer, Laboratory Operations

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medpace Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. August J. Troendle, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: October 30, 2018

By:	/s/ August J. Troendle
	Dr. August J. Troendle
	President, Chief Executive Officer and Chairman of the Board of Directors
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medpace Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jesse J. Geiger, Chief Financial Officer and Chief Operating Officer, Laboratory Operations of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: October 30, 2018

By:	/s/ Jesse J. Geiger
	Jesse J. Geiger
	Chief Financial Officer and Chief Operating Officer, Laboratory Operations
	(Principal Financial Officer)

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 26, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	MEDP
Entity Registrant Name	Medpace Holdings, Inc.
Entity Central Index Key	0001668397
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Extended Transition Period	true
Entity Common Stock, Shares Outstanding		35,605,064

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 22,244	$ 26,485
Restricted cash	7	7
Accounts receivable and unbilled, net (includes $2.4 million and $1.0 million with related parties at September 30, 2018 and December 31, 2017, respectively)	108,285	83,079
Prepaid expenses and other current assets	22,549	20,400
Total current assets	153,085	129,971
Property and equipment, net	52,030	48,739
Goodwill	660,981	660,981
Intangible assets, net	76,569	98,740
Deferred income taxes	446	6,343
Other assets	6,732	5,943
Total assets	949,843	950,717
Current liabilities:
Accounts payable	13,602	16,674
Accrued expenses	80,328	23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0	57,406
Advanced billings (includes $0.2 million and $1.7 million with related parties at September 30, 2018 and December 31, 2017, respectively)	133,403	73,756
Current portion of long-term debt	0	16,500
Other current liabilities	4,794	4,697
Total current liabilities	232,127	192,706
Long-term debt, net, less current portion	113,689	205,111
Deemed landlord liability, less current portion	25,035	26,602
Deferred income tax liability	2,636	560
Deferred credit	3,953	11,468
Other long-term liabilities	11,014	10,740
Total liabilities	388,454	447,187
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 September 30, 2018 and December 31, 2017, respectively	0	0
Common stock - $0.01 par-value; 250,000,000 shares authorized at September 30, 2018 and December 31, 2017, respectively; 35,587,848 and 35,466,510 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	356	355
Treasury stock - 200,000 shares at September 30, 2018 and December 31, 2017	(6,030)	(6,030)
Additional paid-in capital	636,536	630,341
Accumulated deficit	(67,294)	(120,402)
Accumulated other comprehensive loss	(2,179)	(734)
Total shareholders’ equity	561,389	503,530
Total liabilities and shareholders’ equity	$ 949,843	$ 950,717

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Accounts receivable, unbilled services with related parties	$ 2.4	$ 1.0
Pre-funded study costs with related parties		1.0
Advanced billings with related parties	$ 0.2	$ 1.7
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock shares authorized	250,000,000	250,000,000
Common stock shares issued	35,587,848	35,466,510
Common stock shares outstanding	35,587,848	35,466,510
Treasury stock shares	200,000	200,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue:
Total revenue	$ 179,253	$ 110,643	$ 512,474	$ 323,470
Operating expenses:
Direct service costs, excluding depreciation and amortization	62,520	53,144	184,339	156,204
Reimbursed out-of-pocket expenses	61,476	11,962	173,587	36,456
Total direct costs	123,996	65,106	357,926	192,660
Selling, general and administrative	18,606	16,606	55,112	46,515
Depreciation	2,343	2,237	6,883	6,468
Amortization	7,390	9,496	22,171	28,406
Total operating expenses	152,335	93,445	442,092	274,049
Income from operations	26,918	17,198	70,382	49,421
Other expense, net:
Miscellaneous income (expense), net	482	(145)	807	(642)
Interest expense, net	(1,941)	(1,906)	(6,558)	(5,508)
Total other expense, net	(1,459)	(2,051)	(5,751)	(6,150)
Income before income taxes	25,459	15,147	64,631	43,271
Income tax provision	6,154	5,316	14,207	15,440
Net income	$ 19,305	$ 9,831	$ 50,424	$ 27,831
Net income per share attributable to common shareholders:
Basic	$ 0.54	$ 0.25	$ 1.41	$ 0.70
Diluted	$ 0.52	$ 0.25	$ 1.36	$ 0.69
Weighted average common shares outstanding:
Basic	35,569	38,579	35,525	39,803
Diluted	37,125	39,329	36,795	40,537
Revenue Net
Revenue:
Total revenue	$ 179,253	$ 0	$ 512,474	$ 0
Direct Service Revenue
Revenue:
Total revenue	0	98,681	0	287,014
Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	$ 0	$ 11,962	$ 0	$ 36,456

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenue Net
Revenue with related parties	$ 5.1		$ 9.2
Direct Service Revenue
Revenue with related parties		2.0		8.9
Reimbursed Out of Pocket Revenue
Revenue with related parties		$ 0.2		$ 1.3

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 19,305	$ 9,831	$ 50,424	$ 27,831
Other comprehensive income
Foreign currency translation adjustments, net of taxes	(64)	765	(1,445)	2,479
Comprehensive income	$ 19,241	$ 10,596	$ 48,979	$ 30,310

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 50,424	$ 27,831
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	6,883	6,468
Amortization	22,171	28,406
Stock-based compensation expense	4,386	3,215
Amortization of debt issuance costs and discount	471	498
Deferred income tax provision (benefit)	7,260	(420)
Amortization and adjustment of deferred credit	(7,515)	0
Other	487	(615)
Changes in assets and liabilities:
Accounts receivable and unbilled, net	(12,845)	5,340
Prepaid expenses and other current assets	(2,542)	(1,271)
Accounts payable	(1,323)	(467)
Accrued expenses	21,613	(4,840)
Pre-funded study costs	0	1,149
Advanced billings	28,277	2,381
Other assets and liabilities, net	(605)	1,058
Net cash provided by operating activities	117,142	68,733
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures	(12,575)	(8,329)
Acquisition of intangibles	0	(569)
Other	(186)	44
Net cash used in investing activities	(12,761)	(8,854)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercises	1,810	1,187
Repurchases of common stock	0	(95,260)
Payment of debt	(38,156)	(9,281)
Proceeds from revolving loan	0	40,000
Payments on revolving loan	(70,000)	(10,000)
Payment of deemed landlord liability	(1,387)	(1,240)
Net cash used in financing activities	(107,733)	(74,594)
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(889)	1,555
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(4,241)	(13,160)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period	26,492	37,407
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period	$ 22,251	$ 24,247

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Basis of Presentation

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

(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, coordinated central laboratory, project management, regulatory affairs, clinical monitoring, data management and analysis, pharmacovigilance new drug application submissions, and post-marketing clinical support. The Company also provides bio-analytical 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, 2017.

Secondary Offerings

During the three and nine months ended September 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 10,399,997 and 16,399,997 shares, respectively, of the Company’s common stock as part of multiple secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.3 million and $0.7 million, respectively, during the three and nine months ended September 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of August 27, 2018, Cinven does not beneficially own any shares of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Note 3 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2017. Significant changes to our accounting policies as a result of adopting Accounting Standards Codification Topic 606 (“ASC 606”) are discussed below:

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On September 30, 2018, we had approximately $1,047.1 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (“ASC 606”) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	179,253	$	(179,253	)	$	-
Service revenue, net		-		123,990			123,990
Reimbursed out-of-pocket revenue		-		19,102			19,102
Total revenue		179,253		(36,161	)		143,092
Operating expenses:
Direct service costs, excluding depreciation and amortization		62,520		-			62,520
Reimbursed out-of-pocket expenses		61,476		(42,374	)		19,102
Total direct costs		123,996		(42,374	)		81,622
Total operating expenses		152,335		(42,374	)		109,961
Income from operations		26,918		6,213			33,131
Income before income taxes		25,459		6,213			31,672
Income tax provision		6,154		1,522			7,676
Net income	$	19,305	$	4,691		$	23,996
Net income per share attributable to common shareholders:
Basic	$	0.54	$	0.13		$	0.67
Diluted	$	0.52	$	0.12		$	0.64
Weighted average common shares outstanding:
Basic		35,569		-			35,569
Diluted		37,125		-			37,125
	Nine Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	512,474	$	(512,474	)	$	-
Service revenue, net		-		350,210			350,210
Reimbursed out-of-pocket revenue		-		53,163			53,163
Total revenue		512,474		(109,101	)		403,373
Operating expenses:
Direct service costs, excluding depreciation and amortization		184,339		-			184,339
Reimbursed out-of-pocket expenses		173,587		(120,424	)		53,163
Total direct costs		357,926		(120,424	)		237,502
Total operating expenses		442,092		(120,424	)		321,668
Income from operations		70,382		11,323			81,705
Income before income taxes		64,631		11,323			75,954
Income tax provision		14,207		2,686			16,893
Net income	$	50,424	$	8,637		$	59,061
Net income per share attributable to common shareholders:
Basic	$	1.41	$	0.25		$	1.66
Diluted	$	1.36	$	0.24		$	1.60
Weighted average common shares outstanding:
Basic		35,525		-			35,525
Diluted		36,795		-			36,795

ASSETS	As of September 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		108,285			(14,113	)		94,172
Total current assets		153,085			(14,113	)		138,972
Total assets	$	949,843		$	(14,113	)	$	935,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		80,328			(49,739	)		30,589
Pre-funded study costs		-			61,136			61,136
Advanced billings		133,403			(33,446	)		99,957
Other current liabilities		4,794			2,686			7,480
Total current liabilities		232,127			(19,363	)		212,764
Deferred income tax liability		2,636			(703	)		1,933
Total liabilities		388,454			(20,066	)		368,388
Shareholders’ equity:
Accumulated deficit		(67,294	)		5,953			(61,341	)
Total shareholders’ equity		561,389			5,953			567,342
Total liabilities and shareholders’ equity	$	949,843		$	(14,113	)	$	935,730

CASH FLOWS FROM OPERATING ACTIVITIES:	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		50,424			8,637			59,061
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(12,845	)		1,238			(11,607	)
Accrued expenses		21,613			(14,393	)		7,220
Pre-funded study costs		-			3,732			3,732
Advanced billings		28,277			(1,900	)		26,377
Other assets and liabilities, net		(605	)		2,686			2,081
Net cash provided by operating activities		117,142			-			117,142

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). The guidance in ASC 842 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13) (“ASC 840”). ASC 842 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASC 842 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

ASC 842 allows by policy election, an entity to choose its transition approach.  Entities must adopt ASC 842 on a either a modified retrospective basis to each prior reporting period presented or through an optional alternative method referred to as the “Comparatives Under ASC 840 Approach” which allows entities to apply the new requirements to only those leases that exist as of January 1, 2019.  The Company has elected to adopt ASC 842 utilizing the Comparatives Under ASC 840 Approach.  As such, ASC 842 will be applied on a prospective basis as of January 1, 2019 and any cumulative catch up adjustment for differences between ASC 842 and ASC 840 will be recorded upon adoption.

ASC 842 also allows for the election of certain practical expedients that are meant to ease the burden of transitioning to ASC 842 while still achieving compliance.  The Company will elect the “package of three” practical expedient allowing the Company to carry forward decisions made and documented under current US GAAP, rather than reassessing all of the Company’s contracts to determine whether they are or contain leases and how they would be classified under ASC 842.  The Company has decided not to elect the hindsight practical expedient, which if elected would require the Company to reassess the lease term and assessment of impairment for all of the Company’s leases using the facts and circumstances known up to the adoption date of the standard.  

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

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Net Income Per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Net Income Per Share

(3) 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. Restricted Stock Awards (“RSAs”) 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 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 under the treasury stock method. The treasury stock method 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 nine months ended September 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,569		38,579		35,525		39,803
RSAs		141		62		144		60
Total weighted-average shares		35,710		38,641		35,669		39,863
Earnings per common share—Basic
Net income	$	19,305	$	9,831	$	50,424	$	27,831
Less: Undistributed earnings allocated to RSAs		76		16		204		42
Net income available to common shareholders—Basic	$	19,229	$	9,815	$	50,220	$	27,789
Net income per common share—Basic	$	0.54	$	0.25	$	1.41	$	0.70
Basic weighted-average common shares outstanding		35,569		38,579		35,525		39,803
Effect of diluted shares		1,556		750		1,270		734
Diluted weighted-average shares outstanding		37,125		39,329		36,795		40,537
Net income per common share—Diluted	$	0.52	$	0.25	$	1.36	$	0.69

During the three and nine months ended September 30, 2018, the Company had 13,420 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 nine months ended September 30, 2017, the Company had 27,500 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.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

(4) 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.

The Company does not have any recurring fair value measurements as of September 30, 2018. There were no transfers between Level 1, Level 2 or Level 3 during the three and nine months ended September 30, 2018 or 2017.

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Contract Assets and Contract Liabilities

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Contract Assets and Contract Liabilities

(5) 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
	September 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	60,275		$	55,599		$	-	$	55,599
Unbilled receivables		49,072			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,062	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	108,285		$	95,954		$	12,875	$	83,079

Unbilled receivables increased from $41.0 million at January 1, 2018, which includes adjustments of $12.9 million related to the adoption of ASC 606, to $49.1 million at September 30, 2018. The increase is primarily driven by revenue recognized on certain contracts in advance of customer invoicing.

Contract Liabilities

Advanced billings represents 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
	September 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	133,403	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

Advanced billings increased from $105.3 million at January 1, 2018, which includes adjustments of $31.5 million related to the adoption of ASC 606, to $133.4 million at September 30, 2018. The increase is primarily driven by billing and/or collection activity in the nine months ended September 30, 2018 in advance of revenue being earned for delivery of service obligations.

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Intangible Assets, Net

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets, Net

(6) Intangible Assets, Net

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

	As of
	September 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(106,142	)		(92,661	)
Developed technologies		(49,028	)		(40,856	)
Other		(2,507	)		(1,989	)
Total accumulated amortization		(230,307	)		(208,136	)
Total finite-lived intangible assets, net		44,923			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	76,569		$	98,740

As of September 30, 2018, 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 2018	$	7,390
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	44,923

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Accrued Expenses

9 Months Ended

Sep. 30, 2018

Payables And Accruals [Abstract]

Accrued Expenses

(7) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	September 30,		December 31,
	2018		2017
Employee compensation and benefits	$	25,696	$	19,707
Project related reimbursable expenses		49,739		-
Other		4,893		3,966
Total accrued expenses	$	80,328	$	23,673

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Debt

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Debt

(8) Debt

Debt consisted of the following (in thousands):

	As of
	September 30,			December 31,
	2018			2017
Revolving credit facility	$	-		$	70,000
Term loan		114,469			152,625
Less unamortized discount		(307	)		(399	)
Less unamortized term loan debt issuance costs		(473	)		(615	)
Less current portion of long-term debt		-			(16,500	)
Long-term debt, net, less current portion	$	113,689		$	205,111

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	-
2019		-
2020		15,469
2021		99,000
Total	$	114,469

The estimated fair value of the Company’s debt based on Level 2 inputs using the market approach, which is primarily based on rates at which the debt is traded among financial institutions, approximates the carrying value as of September 30, 2018 and December 31, 2017.

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Shareholder's Equity and Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Shareholder's Equity and Stock-Based Compensation

(9) Shareholder’s Equity and Stock-Based Compensation

The Company granted 722,200 awards to employees under the 2016 Incentive Award Plan, during the nine months ended September 30, 2018, consisting of 443,000 stock option awards and 279,200 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 33,801 stock option awards to non-employee directors under the 2016 Incentive Award Plan, during the nine months ended September 30, 2018. These awards will 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 Company granted 933,550 awards to employees under the 2016 Incentive Award Plan, during the nine months ended September 30, 2017, consisting of 777,550 stock option awards, 118,000 restricted stock awards (“RSA”) and 38,000 restricted stock units (“RSU”), all vesting after four years. The Company granted an additional 41,346 stock option awards, vesting after one year, to non-employee directors under the 2016 Incentive Award Plan during the nine months ended September 30, 2017.    

Award Activity

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

	Nine Months Ended September 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		476,801		$	33.77
Exercised		(121,338	)	$	14.92
Forfeited/Expired		(212,217	)	$	23.55
Outstanding - end of period		2,926,114		$	22.89
Exercisable - end of period		1,119,216		$	15.91

The following table sets forth the Company’s RSA/RSU activity:

	Nine Months Ended
	September 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		279,200
Vested		-
Forfeited		(16,000	)
Outstanding and unvested - end of period		446,829
Cumulative vested shares - end of period		1,884,287

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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total direct costs	$	875	$	389	$	2,619	$	1,504
Selling, general and administrative		557		592		1,767		1,711
Total stock-based compensation expense	$	1,432	$	981	$	4,386	$	3,215

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

(10) Income Taxes

The Company’s effective income tax rate was 24.2% and 35.1% for the three months ended September 30, 2018 and 2017, respectively. The Company’s effective income tax rate was 22.0% and 35.7% for the nine months ended September 30, 2018 and 2017, respectively. The Company’s effective income tax rate for the three and nine months ended September 30, 2018 varied from the U.S. statutory rate of 21% primarily due to the impact of state taxes and the benefit of uncertain tax positions coupled with a favorable tax impact associated with previously acquired tax attributes.

The Company recognized the income tax effects of the “Tax Cuts and Jobs Act” (TCJA) in its audited consolidated financial statements on our 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides Securities and Exchange Commission staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the TCJA was signed into law. The guidance also provides for a measurement period of up to one year from the enactment date for the Company to complete the accounting for the U.S. tax law changes. As such, the Company’s 2017 financial results reflected the provisional estimate of the income tax effects of the TCJA. For the three months ended September 30, 2018, the Company revised the following provisional estimates for the amounts recorded as of December 31, 2017:

• Transition tax on unpatriated foreign earnings: The Company originally estimated a transition tax expense of $0.6 million; however, based on new guidance issued by Department of Treasury and the Internal Revenue Service, the revised provisional transition tax liability is $0.4 million. This adjustment favorably impacted the effective tax rate for the nine months ended September 30, 2018 by approximately 0.4%.

• Reduction of U.S. Federal Corporate Tax Rate: The Company originally estimated a provisional tax benefit of $3.4 million related to the revaluation of deferred tax assets and liabilities. During Q3 2018, the deferred tax assets/liabilities as of December 31, 2017 were adjusted to match the balances per the 2017 US corporate income tax return. The revised deferred balance was then adjusted from a 35% tax rate to a 21% tax rate. This resulted in a revised provisional tax benefit of approximately $3.6 million.  This adjustment favorably impacted the effective tax rate for the nine months ended September 30, 2018 by approximately 0.3%.

Absent the adjustments noted above, no subsequent adjustments have been made to the other provisional amounts recorded as of December 31, 2017, which continue to represent a provisional estimate of the impact of TCJA. The estimate of the impact of TCJA is based on certain assumptions and the Company's current interpretation, and may change, as the Company receives additional clarification and implementation guidance and as the interpretation of the TCJA evolves over time.

TCJA made broad and complex changes to the U.S. tax code, including a new tax law that may subject the Company to a tax on global intangible low-taxed income (“GILTI”) beginning in 2018. GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. We have not yet determined our policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the GILTI provisions in future periods or use the period cost method. We have, however, included an estimate of the current GILTI impact in our tax provision for 2018.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

(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 September 30, 2018 and December 31, 2017.  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 September 30, 2018.

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Related Party Transactions

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

(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 September 30, 2018 and December 31, 2017, 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.

Management Fees

During the third quarter of 2018, Cinven sold its remaining shares of the Company’s common stock and all three members of the Company’s Board of Directors (the “Board”) affiliated with Cinven subsequently resigned. Cinven is no longer considered to be a related party subsequent to these events. Prior to these events, the Company paid fees for director services provided by Cinven employees that were members of the Company’s Board and any related committees. The director fees were paid directly to Cinven in accordance with the Company’s non-employee director compensation policy. During the three and nine months ended September 30, 2018, the Company incurred board of director fees and related travel fees to Cinven of less than $0.1 million and $0.1 million, respectively, in the Company’s condensed consolidated statement of operations. During the three and nine months ended September 30, 2017, the Company incurred board of director fees and related travel fees to Cinven of less than $0.1 million and $0.1 million, respectively, in the Company’s condensed consolidated statement of operations.

Service Agreements

Coherus BioSciences, Inc. (“Coherus”)

The chief executive officer of the Company was a member of Coherus’s board of directors until his resignation in the first quarter of 2018. Coherus is no longer considered a related party as of the first quarter of 2018. During the three months ended September 30, 2017, the Company recognized service revenue from Coherus of $1.4 million and during the nine months ended September 30, 2017, the Company recognized service revenue from Coherus of $6.5 million in the Company’s condensed consolidated statements of operations. In addition, the Company recognized Reimbursed out-of-pocket revenue with Coherus in the condensed consolidated statements of operations of $0.1 million during the three months ended September 30, 2017 and $1.1 million during the nine months ended September 30, 2017. As of December 31, 2017, the Company had Accounts receivable and unbilled, net from Coherus of $0.3 million recorded in the condensed consolidated balance sheets. As of December 31, 2017, the Company had, from Coherus, $1.5 million of Advanced billings and $1.0 million of Pre-funded study costs, in the condensed consolidated balance sheets.

Xenon Pharmaceuticals, Inc. (“Xenon”)

Certain executives and employees of the Company, including the chief executive officer, have held equity investments in Xenon, a clinical-stage biopharmaceutical company. During the second quarter of 2017, the chief executive officer sold his entire equity position held in Xenon. Xenon is no longer considered to be a related party subsequent to this sale. The Company recognized service revenue from Xenon of $0.6 million during the six months ended June 30, 2017 in the Company’s condensed consolidated statements of operations.

Cymabay Therapeutics, Inc. (“Cymabay”)

Cymabay is a clinical-stage biopharmaceutical company developing therapies to treat metabolic diseases with high unmet medical need, including serious rare and orphan disorders. During the first quarter of 2016, it was announced that a Medpace employee would join Cymabay’s board of directors. The Company and Cymabay entered into a MSA dated October 21, 2016. Subsequently, the Company and Cymabay have entered into several task orders for the Company to perform clinical trial related services. During the three and nine months ended September 30, 2018, the Company recognized total revenue from Cymabay of $4.1 million and $6.2 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from Cymabay of $0.2 million and $0.4 million, respectively, in the Company’s condensed consolidated statements of operations. As of September 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from Cymabay of $1.9 million and $0.1 million recorded in the condensed consolidated balance sheets.

LIB Therapeutics LLC (“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. During the three and nine months ended September 30, 2018, the Company recognized total revenue from LIB of $1.0 million and $2.8 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from LIB of $0.5 million and $1.1 million, respectively, in the Company’s condensed consolidated statements of operations. As of September 30, 2018 and December 31, 2017, respectively, the Company had Accounts receivable and unbilled, net from LIB of $0.4 million and $0.5 million recorded in the condensed consolidated balance sheets. In addition, as of December 31, 2017 the Company had Advanced billings from LIB of $0.2 million recorded 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. During the three and nine months ended September 30, 2018, the Company recognized total revenue from CinRx of less than $0.1 million and $0.2 million, respectively, and for the three and nine months ended September 30, 2017, the Company recognized service revenue from CinRx of $0.1 million and $0.3 million, respectively, in the Company’s condensed consolidated statements of operations. In addition, as of September 30, 2018 the Company had Advanced billings from CinRx of $0.1 million recorded in the condensed consolidated balance sheets.

Purchase of Real Estate Properties

In December 2016, the Company entered into a purchase agreement for four parcels of real estate property that are closely situated to the Medpace campus in Cincinnati, Ohio, from AT Redevelopment Company, LLC, which is wholly-owned by the Company’s chief executive officer. The purchase price of the real estate property was $0.4 million as determined by an independent third party broker's opinion of value. The transaction closed on January 11, 2017.

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 the corporate headquarters allows for adjustments to the rental rate annually for increases in the consumer price index. Lease expense recognized for each of the three months ended September 30, 2018 and 2017 was $0.5 million, respectively, and lease expense recognized for each of the nine months ended September 30, 2018 and 2017 was $1.6 million, respectively. The lease expense was allocated between Total direct costs and Selling, general and administrative in the condensed consolidated statements of operations.

Deemed Assets and Deemed Landlord Liabilities

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. In accordance with the accounting guidance related to leases, the Company was deemed in substance to be the owner of the property during the construction phase and at completion. Accordingly, the Company reflected the buildings and related liabilities as deemed assets from landlord building construction in Property and equipment, net, Other current liabilities, and Deemed landlord liability, less current portion, respectively, on the condensed consolidated balance sheets. 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 deemed assets are being fully depreciated, on a straight line basis, over the 15-year term of the lease. Deemed landlord liabilities are recorded at their net present value when the Company enters into qualifying leases and are reduced as the Company makes periodic lease payments on the properties. Accretion expense is being recorded over the term of the lease as a component of Interest expense, net in the Company’s condensed consolidated statements of operations. The Company paid $1.0 million and $0.9 million during the three months ended September 30, 2018 and 2017, respectively, and $2.9 million and $2.8 million during the nine months ended September 30, 2018 and 2017, respectively. The current and long-term portions of the Deemed landlord liability at September 30, 2018 were $2.0 million and $25.0 million, respectively. The current and long-term portions of the Deemed landlord liability at December 31, 2017 were $1.9 million and $26.6 million, respectively. The Company has recognized deemed assets, net of $15.1 million and $16.3 million at September 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets.

Travel Services

The Company incurs expenses for travel services for company executives provided by a private aviation charter company that is owned by the chief executive officer and the executive vice president of operations of the Company (“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 $0.3 million during the three months ended September 30, 2018 and 2017, respectively, and $1.0 million and $0.9 million during the nine months ended September 30, 2018 and 2017, 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.

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Entity Wide Disclosures

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Entity Wide Disclosures

(13) Entity Wide Disclosures

Revenue by Category

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

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Therapeutic Area
Oncology	$	48,940	$	135,795
Other		41,463		112,739
Cardiology		21,060		69,304
Metabolic		22,935		67,880
AVAI		22,097		58,963
Central Nervous System		13,827		40,105
Endocrine		5,636		19,046
Medical Devices		3,295		8,642
Total revenue	$	179,253	$	512,474

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Unaudited Interim Financial Information

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, 2017.

Secondary Offerings

Secondary Offerings

During the three and nine months ended September 30, 2018, Cinven Capital Management (V) General Partner Limited (“Cinven”), sold a total of 10,399,997 and 16,399,997 shares, respectively, of the Company’s common stock as part of multiple secondary offerings (the “Offerings”). The Company incurred professional fees in connection with the Offerings of approximately $0.3 million and $0.7 million, respectively, during the three and nine months ended September 30, 2018. The fees are included within operating expenses in the accompanying consolidated statement of operations. As of August 27, 2018, Cinven does not beneficially own any shares of the Company’s outstanding common stock. The Company did not sell any shares in or receive any proceeds from the Offerings.

Revenue Recognition

Revenue Recognition

We generally enter into contracts with customers to provide services ranging in duration from a few months to several years. The contract terms generally provide for payments based on a fixed-fee or unit-of-service arrangement. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018. Revenue on contracts is recognized when or as we satisfy the contract performance obligations, at the amount that reflects our cumulative progress toward delivery of the performance obligation. This progress assessment is applied to the amount of consideration to which we expect to be paid for delivery of the performance obligation. Our performance obligations are generally satisfied over time and related revenue is recognized as services are provided to meet these obligations.

Contract Assumptions

An arrangement is accounted for as a contract within the scope of ASC 606 when the Company and its customers approve the contract, are committed to perform their respective obligations, each party can identify its rights regarding the goods or services to be transferred, commercial substance is present, and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.  

For our services to meet this criteria, contracts generally need to be written, pending regulatory hurdles required to commence work must be cleared, the study protocol must be completed, the customer must have adequate funding or reasonable path to funding to execute the contracted portion of the study, and the study must be actively moving forward. Once these criteria have been met, it is deemed that the Company and its customers are committed to perform their respective obligations. Depending on the timing of when these criteria are met, revenue recognition may vary significantly on a period over period basis.      

Accounting for contracts performed over a period of time involves the use of various assumptions to estimate total contract revenue and costs. We estimate expected costs to complete a contract and recognize contracted revenue over the life of the contract as those costs are incurred.

Cost estimates are based on a detailed project budget and are developed based on many variables, including, but not limited to, the scope of the work, the complexity of the study, the participating geographic locations and the Company’s historical experience. To assist with the estimation of costs expected at completion over the life of a project, regular contract reviews are performed in which performance to date is compared to the most current estimate to complete assumptions. The reviews include an assessment of costs incurred to date compared to expectations based on budget assumptions and other circumstances specific to the project. The total estimated costs necessary to complete is updated and any revisions to the existing cost estimate results in cumulative adjustments to the amount of revenue recognized in the period in which the revisions are identified. In the case of cost estimates related to activities legally contracted as reimbursable in nature, including but not limited to investigator fee activity, these estimates also influence our assumed contract value and assumed remaining performance obligations. Because of the uncertainties inherent in estimating the costs necessary to fulfill contractual obligations, it is possible that estimates may change in the near term, resulting in a material change in revenue reported.

Contracts generally provide for pricing modifications upon scope of work changes. We recognize revenue, at an amount to which we expect to be entitled, related to work performed in connection with scope changes when the underlying services are performed and a binding contractual commitment has been established with the customer. If our customers do not agree to contract changes upon changes in our scope of work, we could be exposed to cost overruns and reduced contract profitability. Costs are not deferred in anticipation of contracts being awarded or amendments being finalized, but are expensed as incurred.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. These contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract. Final settlement amounts are agreed to with the customer based on remaining work to be performed. These amounts are included in revenue when we believe the amount can be estimated reliably and its realization is probable.  In evaluating the probability of recognition, we consider the contractual basis for the settlement amount and the objective evidence available to support the amount.

Certain contracts contain volume rebate arrangements with our customers that provide for rebates if certain specified spending thresholds are met. These obligations are considered as a reduction in revenue when it appears probable that the arrangement thresholds will be met, which can be at contract inception.

We occasionally enter into incentive fee arrangements with customers that provide for additional compensation if certain defined contractual milestones or performance thresholds are met. These additional fees are included in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee and when achievement of the incentive milestone is deemed probable.  These estimates are based on anticipated performance, our best judgement at the time or ultimately, upon achievement of the threshold or milestone.

We record revenue net of any tax assessments by governmental authorities that are imposed and concurrent with specific revenue generating transactions.

Performance Obligations

Substantially all of our contracts consist of a single performance obligation, as the promise to transfer the individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. Revenue recognition is determined by assessing the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. The measures utilized to assess progress on the satisfaction of performance are specific to the performance obligation identified in the contract.  

For the majority of our contract performance obligations, we utilize the input method of cost to cost to measure progress, as the Company has determined that it is the most consistent measure of progress among contract tasks and represents the most faithful depiction of the transfer of services over the contract life. Under this method, the Company determines cost incurred to date for the services it provides compared to the total estimated costs at completion.  

For certain other contractual performance obligations, the Company has determined that an output method is the best measure of progress. These relate to certain unitized contracts, and the Company recognizes revenue in the period in which the unit is delivered compared to total contracted units.

On September 30, 2018, we had approximately $1,047.1 million of performance obligations remaining to be performed for active projects.  

Costs and Expenses

Costs and Expenses

Total direct costs

The Company incurs costs associated with service delivery including direct labor and related employee benefits, laboratory supplies, and other expenses. These costs are recorded in Direct service costs, excluding depreciation and amortization as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

In addition, the Company incurs expenses on behalf of its customers for various project expenditures including, but not limited to, investigator site payments, travel, meetings, printing, and shipping and handling fees that are reimbursed by our customers at cost.  These costs are included in Reimburseable out-of-pocket expenses as a component of Total direct costs in the accompanying condensed consolidated statements of operations.

Total direct costs are expensed as incurred and are not deferred in anticipation of contracts being awarded or finalization of changes in scope.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09 ‘‘Revenue from Contracts with Customers,’’ (“ASC 606”) to clarify the principles of recognizing revenue and create common revenue recognition guidance between US GAAP and International Financial Reporting Standards. The new standard became effective for the Company in the first quarter 2018.

Under ASC 606, the majority of the Company’s contracts will have a single performance obligation that is satisfied over time, with revenue recognized based on overall project progress measured as of the financial statement date. This represents a change in the Company’s previous revenue accounting methodology, Accounting Standards Codification Topic 605, Revenue Recognition (“ASC 605”), as a majority of contracts were accounted for under the multiple element arrangement guidance.  Under the previous revenue recognition accounting methodology, certain revenue related to reimbursable expenses was presented either as a separate line item within Reimbursable out-of-pocket revenue or net of related expenses within Service revenue, net in the condensed consolidated statements of operations.  As a result of having a single performance obligation, the Company accounts for all revenue related to reimbursable expenses on a gross basis within a single revenue line item.  Measurement of progress on contracts with customers will generally be based on the input measurement of cost incurred relative to the total expected costs to satisfy the performance obligation.  

The Company elected to utilize the modified retrospective implementation method for its transition to ASC 606 as of January 1, 2018 (the “Implementation Date”).  Under this implementation method, the Company recognized the cumulative effect of initially applying the ASC 606 revenue recognition guidance to contracts that were not completed at the Implementation Date.  At the Implementation Date, the Company elected to reflect the aggregate effect of all contract modifications that occurred before January 1, 2018 in determining the satisfied and unsatisfied performance obligations and determination of the transaction price.

The cumulative effect adjustment was recorded as a reduction to the opening balance of Accumulated deficit in the condensed consolidated balance sheets in the amount of $2.7 million, with offsetting amounts of $12.9 million to Accounts receivable and unbilled, net, $(0.7) million to Deferred income taxes, $35.4 million to Accrued expenses, $(57.4) million to Pre-funded study costs and $31.5 million to Advanced billings, respectively. The amounts recorded to Accounts receivable and unbilled, net, Deferred income taxes, Accrued expenses, Pre-funded study costs, and Advanced billings reflect differences between revenue recognized and billings to customers by project as well as costs incurred but not settled as of the Implementation Date. The above disclosed cumulative effect adjustments have been revised from the amounts previously disclosed in our interim financial statements filed on Form 10-Q for the quarterly period ended March 31, 2018 to correct certain immaterial misstatements. The effects of these misstatements were immaterial to our results of operations.

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	179,253	$	(179,253	)	$	-
Service revenue, net		-		123,990			123,990
Reimbursed out-of-pocket revenue		-		19,102			19,102
Total revenue		179,253		(36,161	)		143,092
Operating expenses:
Direct service costs, excluding depreciation and amortization		62,520		-			62,520
Reimbursed out-of-pocket expenses		61,476		(42,374	)		19,102
Total direct costs		123,996		(42,374	)		81,622
Total operating expenses		152,335		(42,374	)		109,961
Income from operations		26,918		6,213			33,131
Income before income taxes		25,459		6,213			31,672
Income tax provision		6,154		1,522			7,676
Net income	$	19,305	$	4,691		$	23,996
Net income per share attributable to common shareholders:
Basic	$	0.54	$	0.13		$	0.67
Diluted	$	0.52	$	0.12		$	0.64
Weighted average common shares outstanding:
Basic		35,569		-			35,569
Diluted		37,125		-			37,125
	Nine Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	512,474	$	(512,474	)	$	-
Service revenue, net		-		350,210			350,210
Reimbursed out-of-pocket revenue		-		53,163			53,163
Total revenue		512,474		(109,101	)		403,373
Operating expenses:
Direct service costs, excluding depreciation and amortization		184,339		-			184,339
Reimbursed out-of-pocket expenses		173,587		(120,424	)		53,163
Total direct costs		357,926		(120,424	)		237,502
Total operating expenses		442,092		(120,424	)		321,668
Income from operations		70,382		11,323			81,705
Income before income taxes		64,631		11,323			75,954
Income tax provision		14,207		2,686			16,893
Net income	$	50,424	$	8,637		$	59,061
Net income per share attributable to common shareholders:
Basic	$	1.41	$	0.25		$	1.66
Diluted	$	1.36	$	0.24		$	1.60
Weighted average common shares outstanding:
Basic		35,525		-			35,525
Diluted		36,795		-			36,795

ASSETS	As of September 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		108,285			(14,113	)		94,172
Total current assets		153,085			(14,113	)		138,972
Total assets	$	949,843		$	(14,113	)	$	935,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		80,328			(49,739	)		30,589
Pre-funded study costs		-			61,136			61,136
Advanced billings		133,403			(33,446	)		99,957
Other current liabilities		4,794			2,686			7,480
Total current liabilities		232,127			(19,363	)		212,764
Deferred income tax liability		2,636			(703	)		1,933
Total liabilities		388,454			(20,066	)		368,388
Shareholders’ equity:
Accumulated deficit		(67,294	)		5,953			(61,341	)
Total shareholders’ equity		561,389			5,953			567,342
Total liabilities and shareholders’ equity	$	949,843		$	(14,113	)	$	935,730

CASH FLOWS FROM OPERATING ACTIVITIES:	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		50,424			8,637			59,061
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(12,845	)		1,238			(11,607	)
Accrued expenses		21,613			(14,393	)		7,220
Pre-funded study costs		-			3,732			3,732
Advanced billings		28,277			(1,900	)		26,377
Other assets and liabilities, net		(605	)		2,686			2,081
Net cash provided by operating activities		117,142			-			117,142

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). The guidance in ASC 842 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13) (“ASC 840”). ASC 842 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASC 842 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

ASC 842 allows by policy election, an entity to choose its transition approach.  Entities must adopt ASC 842 on a either a modified retrospective basis to each prior reporting period presented or through an optional alternative method referred to as the “Comparatives Under ASC 840 Approach” which allows entities to apply the new requirements to only those leases that exist as of January 1, 2019.  The Company has elected to adopt ASC 842 utilizing the Comparatives Under ASC 840 Approach.  As such, ASC 842 will be applied on a prospective basis as of January 1, 2019 and any cumulative catch up adjustment for differences between ASC 842 and ASC 840 will be recorded upon adoption.

ASC 842 also allows for the election of certain practical expedients that are meant to ease the burden of transitioning to ASC 842 while still achieving compliance.  The Company will elect the “package of three” practical expedient allowing the Company to carry forward decisions made and documented under current US GAAP, rather than reassessing all of the Company’s contracts to determine whether they are or contain leases and how they would be classified under ASC 842.  The Company has decided not to elect the hindsight practical expedient, which if elected would require the Company to reassess the lease term and assessment of impairment for all of the Company’s leases using the facts and circumstances known up to the adoption date of the standard.  

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows for an entity to elect to reclassify the income tax effects on items within accumulated other comprehensive income resulting from U.S. tax reform to retained earnings. The guidance may be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized and is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company is currently evaluating the effect this standard will have on its condensed consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Impact of Adoption of Accounting Standards

In connection with the implementation of ASC 606 on the modified retrospective method, we are presenting additional information to assist with the comparability of select line items of the current and prior period year to date reporting in our condensed consolidated balance sheets and condensed consolidated statements of operations.  Below we have presented the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606 as compared with the guidance that was in effect before the change (ASC 605).

	Three Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	179,253	$	(179,253	)	$	-
Service revenue, net		-		123,990			123,990
Reimbursed out-of-pocket revenue		-		19,102			19,102
Total revenue		179,253		(36,161	)		143,092
Operating expenses:
Direct service costs, excluding depreciation and amortization		62,520		-			62,520
Reimbursed out-of-pocket expenses		61,476		(42,374	)		19,102
Total direct costs		123,996		(42,374	)		81,622
Total operating expenses		152,335		(42,374	)		109,961
Income from operations		26,918		6,213			33,131
Income before income taxes		25,459		6,213			31,672
Income tax provision		6,154		1,522			7,676
Net income	$	19,305	$	4,691		$	23,996
Net income per share attributable to common shareholders:
Basic	$	0.54	$	0.13		$	0.67
Diluted	$	0.52	$	0.12		$	0.64
Weighted average common shares outstanding:
Basic		35,569		-			35,569
Diluted		37,125		-			37,125
	Nine Months Ended September 30, 2018
	As Reported		Adjustments			As Revised under ASC 605
Revenue:
Revenue, net	$	512,474	$	(512,474	)	$	-
Service revenue, net		-		350,210			350,210
Reimbursed out-of-pocket revenue		-		53,163			53,163
Total revenue		512,474		(109,101	)		403,373
Operating expenses:
Direct service costs, excluding depreciation and amortization		184,339		-			184,339
Reimbursed out-of-pocket expenses		173,587		(120,424	)		53,163
Total direct costs		357,926		(120,424	)		237,502
Total operating expenses		442,092		(120,424	)		321,668
Income from operations		70,382		11,323			81,705
Income before income taxes		64,631		11,323			75,954
Income tax provision		14,207		2,686			16,893
Net income	$	50,424	$	8,637		$	59,061
Net income per share attributable to common shareholders:
Basic	$	1.41	$	0.25		$	1.66
Diluted	$	1.36	$	0.24		$	1.60
Weighted average common shares outstanding:
Basic		35,525		-			35,525
Diluted		36,795		-			36,795

ASSETS	As of September 30, 2018
Current assets:	As Reported			Adjustments			As Revised under ASC 605
Accounts receivable and unbilled, net		108,285			(14,113	)		94,172
Total current assets		153,085			(14,113	)		138,972
Total assets	$	949,843		$	(14,113	)	$	935,730
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses		80,328			(49,739	)		30,589
Pre-funded study costs		-			61,136			61,136
Advanced billings		133,403			(33,446	)		99,957
Other current liabilities		4,794			2,686			7,480
Total current liabilities		232,127			(19,363	)		212,764
Deferred income tax liability		2,636			(703	)		1,933
Total liabilities		388,454			(20,066	)		368,388
Shareholders’ equity:
Accumulated deficit		(67,294	)		5,953			(61,341	)
Total shareholders’ equity		561,389			5,953			567,342
Total liabilities and shareholders’ equity	$	949,843		$	(14,113	)	$	935,730

CASH FLOWS FROM OPERATING ACTIVITIES:	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Revised under ASC 605
Net income		50,424			8,637			59,061
Changes in assets and liabilities:
Accounts receivable and unbilled, net		(12,845	)		1,238			(11,607	)
Accrued expenses		21,613			(14,393	)		7,220
Pre-funded study costs		-			3,732			3,732
Advanced billings		28,277			(1,900	)		26,377
Other assets and liabilities, net		(605	)		2,686			2,081
Net cash provided by operating activities		117,142			-			117,142

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Schedule of Reconciliation of Denominators and Additional Shares that are Excluded from the Calculation of EPS

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2018 and 2017 (in thousands, except for earnings per share): 

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Weighted-average shares:
Common shares outstanding		35,569		38,579		35,525		39,803
RSAs		141		62		144		60
Total weighted-average shares		35,710		38,641		35,669		39,863
Earnings per common share—Basic
Net income	$	19,305	$	9,831	$	50,424	$	27,831
Less: Undistributed earnings allocated to RSAs		76		16		204		42
Net income available to common shareholders—Basic	$	19,229	$	9,815	$	50,220	$	27,789
Net income per common share—Basic	$	0.54	$	0.25	$	1.41	$	0.70
Basic weighted-average common shares outstanding		35,569		38,579		35,525		39,803
Effect of diluted shares		1,556		750		1,270		734
Diluted weighted-average shares outstanding		37,125		39,329		36,795		40,537
Net income per common share—Diluted	$	0.52	$	0.25	$	1.36	$	0.69

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Contract Assets and Contract Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Company's Contract Asset and Contract Liability

Accounts receivable and unbilled, net consisted of the following (in thousands):

	As of
	September 30,			January 1,					December 31,
	2018			2018			Adjustments		2017
Accounts receivable	$	60,275		$	55,599		$	-	$	55,599
Unbilled receivables		49,072			41,028			12,875		28,153
Less: allowance for doubtful accounts		(1,062	)		(673	)		-		(673	)
Total accounts receivable and unbilled, net	$	108,285		$	95,954		$	12,875	$	83,079

Advanced billings consisted of the following (in thousands):

	As of
	September 30,		January 1,					December 31,
	2018		2018		Adjustments			2017
Advanced billings	$	133,403	$	105,304	$	31,548		$	73,756
Pre-funded study costs	$	-	$	-	$	(57,406	)	$	57,406

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Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets, Net

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

	As of
	September 30,			December 31,
	2018			2017
Intangible assets:
Finite-lived intangible assets:
Carrying amount:
Backlog	$	72,630		$	72,630
Customer relationships		145,051			145,051
Developed technologies		54,475			54,475
Other		3,074			3,074
Total finite-lived intangible assets		275,230			275,230
Accumulated amortization:
Backlog		(72,630	)		(72,630	)
Customer relationships		(106,142	)		(92,661	)
Developed technologies		(49,028	)		(40,856	)
Other		(2,507	)		(1,989	)
Total accumulated amortization		(230,307	)		(208,136	)
Total finite-lived intangible assets, net		44,923			67,094
Trade name (indefinite-lived)		31,646			31,646
Total intangible assets, net	$	76,569		$	98,740

Schedule of Estimated Amortization Expense of Intangible Assets

As of September 30, 2018, 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 2018	$	7,390
2019		14,829
2020		7,876
2021		5,114
2022		3,353
Later years		6,361
	$	44,923

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Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2018

Payables And Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	As of
	September 30,		December 31,
	2018		2017
Employee compensation and benefits	$	25,696	$	19,707
Project related reimbursable expenses		49,739		-
Other		4,893		3,966
Total accrued expenses	$	80,328	$	23,673

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Debt (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of Debt

Debt consisted of the following (in thousands):

	As of
	September 30,			December 31,
	2018			2017
Revolving credit facility	$	-		$	70,000
Term loan		114,469			152,625
Less unamortized discount		(307	)		(399	)
Less unamortized term loan debt issuance costs		(473	)		(615	)
Less current portion of long-term debt		-			(16,500	)
Long-term debt, net, less current portion	$	113,689		$	205,111

Schedule of Principal Payments on Debt Due

Principal payments on debt are due as follows (in thousands):

2018 (remaining)	$	-
2019		-
2020		15,469
2021		99,000
Total	$	114,469

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Shareholder's Equity and Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Schedule of Stock Option Activity

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

	Nine Months Ended September 30, 2018
				WeightedAverage
	Stock Options			Exercise Price
Outstanding - beginning of period		2,782,868		$	20.73
Granted		476,801		$	33.77
Exercised		(121,338	)	$	14.92
Forfeited/Expired		(212,217	)	$	23.55
Outstanding - end of period		2,926,114		$	22.89
Exercisable - end of period		1,119,216		$	15.91

Schedule of RSA/RSU Activity

The following table sets forth the Company’s RSA/RSU activity:

	Nine Months Ended
	September 30, 2018
	Shares/Units
Outstanding and unvested - beginning of period		183,629
Granted		279,200
Vested		-
Forfeited		(16,000	)
Outstanding and unvested - end of period		446,829
Cumulative vested shares - end of period		1,884,287

Summary of Stock-Based Compensation Expense Recognized in Statements of Operations Related to All Outstanding Stock Based Compensation Awards

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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total direct costs	$	875	$	389	$	2,619	$	1,504
Selling, general and administrative		557		592		1,767		1,711
Total stock-based compensation expense	$	1,432	$	981	$	4,386	$	3,215

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Entity Wide Disclosures (Tables)

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Summary of Revenue by Major Source

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

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Therapeutic Area
Oncology	$	48,940	$	135,795
Other		41,463		112,739
Cardiology		21,060		69,304
Metabolic		22,935		67,880
AVAI		22,097		58,963
Central Nervous System		13,827		40,105
Endocrine		5,636		19,046
Medical Devices		3,295		8,642
Total revenue	$	179,253	$	512,474

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Basis of Presentation - Additional Information (Details) - Secondary Offering - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Cinven
Basis Of Presentation [Line Items]
Shares issued and sold	10,399,997	16,399,997
Operating Expenses
Basis Of Presentation [Line Items]
Professional fees	$ 0.3	$ 0.7

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Summary Of Significant Accounting Policies [Line Items]
Performance obligations remaining to be performed	$ 1,047,100
Accumulated deficit	(67,294)		$ (120,402)
Accounts receivable and unbilled, net	108,285		83,079
Deferred income tax liability	2,636		560
Accrued expenses	80,328		23,673
Pre-funded study costs	0		57,406
Advanced billings	133,403		$ 73,756
ASC 606
Summary Of Significant Accounting Policies [Line Items]
Accounts receivable and unbilled, net		$ 95,954
Pre-funded study costs		0
Advanced billings		105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Summary Of Significant Accounting Policies [Line Items]
Accumulated deficit	5,953	2,700
Accounts receivable and unbilled, net	(14,113)	12,875
Deferred income tax liability	(703)	(700)
Accrued expenses	(49,739)	35,400
Pre-funded study costs	61,136	(57,406)
Advanced billings	$ (33,446)	$ 31,548

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Summary of Significant Accounting Policies - Summary of Impact of Adoption of Accounting Standards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Jan. 01, 2018	Dec. 31, 2017
Revenue:
Total revenue	$ 179,253	$ 110,643	$ 512,474	$ 323,470
Operating expenses:
Direct service costs, excluding depreciation and amortization	62,520	53,144	184,339	156,204
Reimbursed out-of-pocket expenses	61,476	11,962	173,587	36,456
Total direct costs	123,996	65,106	357,926	192,660
Total operating expenses	152,335	93,445	442,092	274,049
Income from operations	26,918	17,198	70,382	49,421
Income before income taxes	25,459	15,147	64,631	43,271
Income tax provision	6,154	5,316	14,207	15,440
Net income	$ 19,305	$ 9,831	$ 50,424	$ 27,831
Net income per share attributable to common shareholders:
Basic	$ 0.54	$ 0.25	$ 1.41	$ 0.70
Diluted	$ 0.52	$ 0.25	$ 1.36	$ 0.69
Weighted average common shares outstanding:
Basic	35,569	38,579	35,525	39,803
Diluted	37,125	39,329	36,795	40,537
Current assets:
Accounts receivable and unbilled, net	$ 108,285		$ 108,285			$ 83,079
Total current assets	153,085		153,085			129,971
Total assets	949,843		949,843			950,717
Current liabilities:
Accrued expenses	80,328		80,328			23,673
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0		0			57,406
Advanced billings	133,403		133,403			73,756
Other current liabilities	4,794		4,794			4,697
Total current liabilities	232,127		232,127			192,706
Deferred income tax liability	2,636		2,636			560
Total liabilities	388,454		388,454			447,187
Shareholders’ equity:
Accumulated deficit	(67,294)		(67,294)			(120,402)
Total shareholders’ equity	561,389		561,389			503,530
Total liabilities and shareholders’ equity	949,843		949,843			$ 950,717
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			50,424	$ 27,831
Changes in assets and liabilities:
Accounts receivable and unbilled, net			(12,845)	5,340
Accrued expenses			21,613	(4,840)
Pre-funded study costs			0	1,149
Advanced billings			28,277	2,381
Other assets and liabilities, net			(605)	1,058
Net cash provided by operating activities			117,142	68,733
Revenue Net
Revenue:
Total revenue	179,253	$ 0	512,474	0
Direct Service Revenue
Revenue:
Total revenue	0	98,681	0	287,014
Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	0	$ 11,962	0	$ 36,456
ASC 606
Current assets:
Accounts receivable and unbilled, net					$ 95,954
Current liabilities:
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)					0
Advanced billings					105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Revenue:
Total revenue	(36,161)		(109,101)
Operating expenses:
Direct service costs, excluding depreciation and amortization	0		0
Reimbursed out-of-pocket expenses	(42,374)		(120,424)
Total direct costs	(42,374)		(120,424)
Total operating expenses	(42,374)		(120,424)
Income from operations	6,213		11,323
Income before income taxes	6,213		11,323
Income tax provision	1,522		2,686
Net income	$ 4,691		$ 8,637
Net income per share attributable to common shareholders:
Basic	$ 0.13		$ 0.25
Diluted	$ 0.12		$ 0.24
Weighted average common shares outstanding:
Basic	0		0
Diluted	0		0
Current assets:
Accounts receivable and unbilled, net	$ (14,113)		$ (14,113)		12,875
Total current assets	(14,113)		(14,113)
Total assets	(14,113)		(14,113)
Current liabilities:
Accrued expenses	(49,739)		(49,739)		35,400
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	61,136		61,136		(57,406)
Advanced billings	(33,446)		(33,446)		31,548
Other current liabilities	2,686		2,686
Total current liabilities	(19,363)		(19,363)
Deferred income tax liability	(703)		(703)		(700)
Total liabilities	(20,066)		(20,066)
Shareholders’ equity:
Accumulated deficit	5,953		5,953		$ 2,700
Total shareholders’ equity	5,953		5,953
Total liabilities and shareholders’ equity	(14,113)		(14,113)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			8,637
Changes in assets and liabilities:
Accounts receivable and unbilled, net			1,238
Accrued expenses			(14,393)
Pre-funded study costs			3,732
Advanced billings			(1,900)
Other assets and liabilities, net			2,686
Net cash provided by operating activities			0
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Revenue Net
Revenue:
Total revenue	(179,253)		(512,474)
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Direct Service Revenue
Revenue:
Total revenue	123,990		350,210
ASC 606 | Impact of Adoption of ASC 606 - Adjustments | Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	19,102		53,163
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605
Revenue:
Total revenue	143,092		403,373
Operating expenses:
Direct service costs, excluding depreciation and amortization	62,520		184,339
Reimbursed out-of-pocket expenses	19,102		53,163
Total direct costs	81,622		237,502
Total operating expenses	109,961		321,668
Income from operations	33,131		81,705
Income before income taxes	31,672		75,954
Income tax provision	7,676		16,893
Net income	$ 23,996		$ 59,061
Net income per share attributable to common shareholders:
Basic	$ 0.67		$ 1.66
Diluted	$ 0.64		$ 1.60
Weighted average common shares outstanding:
Basic	35,569		35,525
Diluted	37,125		36,795
Current assets:
Accounts receivable and unbilled, net	$ 94,172		$ 94,172
Total current assets	138,972		138,972
Total assets	935,730		935,730
Current liabilities:
Accrued expenses	30,589		30,589
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	61,136		61,136
Advanced billings	99,957		99,957
Other current liabilities	7,480		7,480
Total current liabilities	212,764		212,764
Deferred income tax liability	1,933		1,933
Total liabilities	368,388		368,388
Shareholders’ equity:
Accumulated deficit	(61,341)		(61,341)
Total shareholders’ equity	567,342		567,342
Total liabilities and shareholders’ equity	935,730		935,730
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			59,061
Changes in assets and liabilities:
Accounts receivable and unbilled, net			(11,607)
Accrued expenses			7,220
Pre-funded study costs			3,732
Advanced billings			26,377
Other assets and liabilities, net			2,081
Net cash provided by operating activities			117,142
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Revenue Net
Revenue:
Total revenue	0		0
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Direct Service Revenue
Revenue:
Total revenue	123,990		350,210
ASC 606 | Impact of Adoption of ASC 606 - As Revised under ASC 605 | Reimbursed Out of Pocket Revenue
Revenue:
Total revenue	$ 19,102		$ 53,163

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Net Income Per Share - Schedule of Reconciliation of Denominators and Additional Shares that are Excluded from the Calculation of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Weighted-average shares:
Basic weighted-average common shares outstanding	35,569	38,579	35,525	39,803
Total weighted-average shares	35,710	38,641	35,669	39,863
Earnings per common share—Basic
Net income	$ 19,305	$ 9,831	$ 50,424	$ 27,831
Net income available to common shareholders—Basic	$ 19,229	$ 9,815	$ 50,220	$ 27,789
Net income per common share—Basic	$ 0.54	$ 0.25	$ 1.41	$ 0.70
Basic weighted-average common shares outstanding	35,569	38,579	35,525	39,803
Effect of diluted shares	1,556	750	1,270	734
Diluted weighted-average shares outstanding	37,125	39,329	36,795	40,537
Net income per common share—Diluted	$ 0.52	$ 0.25	$ 1.36	$ 0.69
RSAs
Weighted-average shares:
Basic weighted-average common shares outstanding	141	62	144	60
Earnings per common share—Basic
Less: Undistributed earnings allocated to RSAs	$ 76	$ 16	$ 204	$ 42
Basic weighted-average common shares outstanding	141	62	144	60
Common Stock
Weighted-average shares:
Basic weighted-average common shares outstanding	35,569	38,579	35,525	39,803
Earnings per common share—Basic
Basic weighted-average common shares outstanding	35,569	38,579	35,525	39,803

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Net Income Per Share - Additional Information (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted EPS	13,420	27,500	13,420	27,500

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Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Fair Value Disclosures [Abstract]
Fair value measurements transfers between level 1, level 2, or level 3	$ 0	$ 0	$ 0	$ 0

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Contract Assets and Contract Liabilities - Summary of Accounts Receivable and Unbilled, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Accounts receivable	$ 60,275		$ 55,599
Unbilled receivables	49,072		28,153
Less: allowance for doubtful accounts	(1,062)		(673)
Total accounts receivable and unbilled, net	108,285		$ 83,079
ASC 606
Contract With Customer Asset And Liability [Line Items]
Accounts receivable		$ 55,599
Unbilled receivables		41,028
Less: allowance for doubtful accounts		(673)
Total accounts receivable and unbilled, net		95,954
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		12,875
Total accounts receivable and unbilled, net	$ (14,113)	$ 12,875

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Contract Assets and Contract Liabilities - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables	$ 49,072		$ 28,153
Advanced billings	133,403		$ 73,756
ASC 606
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		$ 41,028
Advanced billings		105,304
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Unbilled receivables		12,875
Advanced billings	$ (33,446)	$ 31,548

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Contract Assets and Contract Liabilities - Summary of Advanced Bllings (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Contract With Customer Asset And Liability [Line Items]
Advanced billings	$ 133,403		$ 73,756
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	0		$ 57,406
ASC 606
Contract With Customer Asset And Liability [Line Items]
Advanced billings		$ 105,304
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)		0
ASC 606 | Impact of Adoption of ASC 606 - Adjustments
Contract With Customer Asset And Liability [Line Items]
Advanced billings	(33,446)	31,548
Pre-funded study costs (includes $1.0 million with related parties at December 31, 2017)	$ 61,136	$ (57,406)

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Intangible Assets, Net - Schedule of Intangible Assets, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Finite-lived intangible assets:
Total finite-lived intangible assets	$ 275,230	$ 275,230
Accumulated amortization:
Total accumulated amortization	(230,307)	(208,136)
Total finite-lived intangible assets, net	44,923	67,094
Trade name (indefinite-lived)	31,646	31,646
Total intangible assets, net	76,569	98,740
Backlog
Finite-lived intangible assets:
Total finite-lived intangible assets	72,630	72,630
Accumulated amortization:
Total accumulated amortization	(72,630)	(72,630)
Customer Relationships
Finite-lived intangible assets:
Total finite-lived intangible assets	145,051	145,051
Accumulated amortization:
Total accumulated amortization	(106,142)	(92,661)
Developed Technologies
Finite-lived intangible assets:
Total finite-lived intangible assets	54,475	54,475
Accumulated amortization:
Total accumulated amortization	(49,028)	(40,856)
Other
Finite-lived intangible assets:
Total finite-lived intangible assets	3,074	3,074
Accumulated amortization:
Total accumulated amortization	$ (2,507)	$ (1,989)

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Intangible Assets, Net - Schedule of Estimated Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2018	$ 7,390
2019	14,829
2020	7,876
2021	5,114
2022	3,353
Later years	6,361
Total finite-lived intangible assets, net	$ 44,923	$ 67,094

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Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accrued Liabilities And Other Liabilities [Abstract]
Employee compensation and benefits	$ 25,696	$ 19,707
Project related reimbursable expenses	49,739	0
Other	4,893	3,966
Total accrued expenses	$ 80,328	$ 23,673

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Debt	$ 114,469
Less unamortized discount	(307)	$ (399)
Less unamortized term loan debt issuance costs	(473)	(615)
Less current portion of long-term debt	0	(16,500)
Long-term debt, net, less current portion	113,689	205,111
Revolving credit facility
Debt Instrument [Line Items]
Debt		70,000
Term loan
Debt Instrument [Line Items]
Debt	$ 114,469	$ 152,625

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Debt - Schedule of Principal Payments on Debt Due (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Debt Disclosure [Abstract]
2018 (remaining)	$ 0
2019	0
2020	15,469
2021	99,000
Total	$ 114,469

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Shareholder's Equity and Stock-Based Compensation - Additional Information (Details) - shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	476,801
2016 Incentive Award Plan | Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Awards granted	722,200	933,550
2016 Incentive Award Plan | Non-employee Directors
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	33,801
2016 Incentive Award Plan | Vesting After One Year | Non-employee Directors
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted		41,346
Award vesting period		1 year
2016 Incentive Award Plan | Stock Options | Vesting After Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	443,000	777,550
Award vesting period	4 years	4 years
2016 Incentive Award Plan | Restricted Stock Units (RSU) | Vesting After Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting period	4 years	4 years
Shares granted	279,200	38,000
2016 Incentive Award Plan | Restricted Stock Awards(RSA) | Vesting After Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting period		4 years
Shares granted		118,000

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Shareholder's Equity and Stock-Based Compensation - Schedule of Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Equity [Abstract]
Number of Stock Options, Outstanding - beginning of period | shares	2,782,868
Number of Stock Options, Granted | shares	476,801
Number of Stock Options, Exercised | shares	(121,338)
Number of Stock Options, Forfeited/Expired | shares	(212,217)
Number of Stock Options, Outstanding - end of period | shares	2,926,114
Number of Stock Options, Exercisable - end of period | shares	1,119,216
Weighted Average Exercise Price, Outstanding - beginning of Period | $ / shares	$ 20.73
Weighted Average Exercise Price, Granted | $ / shares	33.77
Weighted Average Exercise Price, Exercised | $ / shares	14.92
Weighted Average Exercise Price, Forfeited/Expired | $ / shares	23.55
Weighted Average Exercise Price, Outstanding - end of period | $ / shares	22.89
Weighted Average Exercise Price, Exercisable - end of period | $ / shares	$ 15.91

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Shareholder's Equity and Stock-Based Compensation - Schedule of RSA/RSU Activity (Details) - RSA/RSU	9 Months Ended
	Sep. 30, 2018 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding and unvested - beginning of period	183,629
Granted	279,200
Vested	0
Forfeited	(16,000)
Outstanding and unvested - end of period	446,829
Cumulative vested shares - end of period	1,884,287

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Shareholder's Equity and Stock-Based Compensation - Summary of Stock-Based Compensation Expense Recognized in Statements of Operations Related to All Outstanding Stock Based Compensation Awards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 1,432	$ 981	$ 4,386	$ 3,215
Total Direct Costs
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	875	389	2,619	1,504
Selling, General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 557	$ 592	$ 1,767	$ 1,711

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Income Taxes - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Effective income tax rate	24.20%	35.10%	22.00%	35.70%
U.S. statutory rate	21.00%		21.00%		35.00%
Transition tax expense					$ 0.6
Provisional transition tax liability	$ 0.4		$ 0.4
Impact on effective tax rate			0.40%
Provisional tax benefit			$ 3.6		$ 3.4
Impact on effective tax rate from adjusted of deferred tax rate			0.30%

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Related Party Transactions - Additional Information (Details)		3 Months Ended		6 Months Ended	9 Months Ended
	Jan. 11, 2017 USD ($)	Sep. 30, 2018 USD ($) Director	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) RenewalOption Agreement Building	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 Parcel
Related Party Transaction [Line Items]
Accounts receivable and unbilled, net		$ 2,400,000			$ 2,400,000		$ 1,000,000
Advanced billings		200,000			200,000		1,700,000
Pre-funded study costs with related parties							1,000,000
Deemed landlord liability, long-term portions		$ 25,035,000			25,035,000		26,602,000
Cinven
Related Party Transaction [Line Items]
Directors and travel fees to related party					100,000	$ 100,000
Members of board of directors resigned as result of remaining shares of common stock sold | Director		3
Cinven | Maximum
Related Party Transaction [Line Items]
Directors and travel fees to related party		$ 100,000	$ 100,000
Employee Loans | Prepaid Expenses and Other Current Assets and Other Assets
Related Party Transaction [Line Items]
Employee advances receivables		200,000			200,000		200,000
Service Agreements | Coherus Bio Sciences Inc
Related Party Transaction [Line Items]
Revenue with related parties			1,400,000			6,500,000
Reimbursed out-of-pocket revenue with related parties			100,000			1,100,000
Accounts receivable and unbilled, net							300,000
Advanced billings							1,500,000
Pre-funded study costs with related parties							1,000,000
Service Agreements | Xenon
Related Party Transaction [Line Items]
Revenue with related parties				$ 600,000
Service Agreements | Cymabay
Related Party Transaction [Line Items]
Revenue with related parties			200,000			400,000
Accounts receivable and unbilled, net		1,900,000			1,900,000		100,000
Service Agreements | Cymabay | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		4,100,000			6,200,000
Service Agreements | LIB
Related Party Transaction [Line Items]
Revenue with related parties			500,000			1,100,000
Accounts receivable and unbilled, net		400,000			400,000		500,000
Advanced billings							200,000
Service Agreements | LIB | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		1,000,000			2,800,000
Service Agreements | CinRx Pharma and Subsidiaries
Related Party Transaction [Line Items]
Revenue with related parties			100,000			300,000
Advanced billings		100,000			100,000
Service Agreements | CinRx Pharma and Subsidiaries | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties					$ 200,000
Service Agreements | CinRx Pharma and Subsidiaries | Maximum | Revenue, Net
Related Party Transaction [Line Items]
Revenue with related parties		$ 100,000
Purchase of Real Estate Properties | Chief Executive Officer
Related Party Transaction [Line Items]
Number of parcel in real estate property | Parcel								4
Purchase price of real estate property	$ 400,000
Transaction closed date	Jan. 11, 2017
Leased Real Estate | Chief Executive Officer
Related Party Transaction [Line Items]
Term of lease		12 years			12 years
Lease expiration period					2022-11
Number of lease renewal, 10-year option | RenewalOption					1
Lease term upon renewal		10 years			10 years
Lease expense recognized		$ 500,000	500,000		$ 1,600,000	1,600,000
Leased Real Estate | Chief Executive Officer And Immediate Family
Related Party Transaction [Line Items]
Number of lease renewal, 10-year option | RenewalOption					1
Number of lease agreements | Agreement					2
Number of buildings | Building					2
Lease occupancy year					2012
Lease expiration year					2027
Lease term upon renewal					10 years
Term of lease					15 years
Related party capital lease payments		1,000,000	900,000		$ 2,900,000	2,800,000
Deemed landlord liability, current		2,000,000			2,000,000		1,900,000
Deemed landlord liability, long-term portions		25,000,000			25,000,000		26,600,000
Leased Real Estate | Property and Equipment, Net | Chief Executive Officer And Immediate Family | Building
Related Party Transaction [Line Items]
Deemed assets, net		15,100,000			15,100,000		$ 16,300,000
Travel Services | Chief Executive Officer
Related Party Transaction [Line Items]
Travel expenses with related party		$ 400,000	$ 300,000		$ 1,000,000	$ 900,000

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Entity Wide Disclosures - Summary of Revenue by Major Source (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation Of Revenue [Line Items]
Total revenue	$ 179,253	$ 110,643	$ 512,474	$ 323,470
Oncology
Disaggregation Of Revenue [Line Items]
Total revenue	48,940		135,795
Other
Disaggregation Of Revenue [Line Items]
Total revenue	41,463		112,739
Cardiology
Disaggregation Of Revenue [Line Items]
Total revenue	21,060		69,304
Metabolic
Disaggregation Of Revenue [Line Items]
Total revenue	22,935		67,880
AVAI
Disaggregation Of Revenue [Line Items]
Total revenue	22,097		58,963
Central Nervous System
Disaggregation Of Revenue [Line Items]
Total revenue	13,827		40,105
Endocrine
Disaggregation Of Revenue [Line Items]
Total revenue	5,636		19,046
Medical Devices
Disaggregation Of Revenue [Line Items]
Total revenue	3,295		8,642
Revenue Net
Disaggregation Of Revenue [Line Items]
Total revenue	$ 179,253	$ 0	$ 512,474	$ 0