William Blair 37 th Annual Growth Stock Conference June 13, Jesse J. Geiger CFO & COO, Laboratory Operations

Transcription

1 William Blair 37 th Annual Grwth Stck Cnference June 13, 2017 Jesse J. Geiger CFO & COO, Labratry Operatins

2 Frward Lking Statements & Nn-GAAP Financial Measures Frward-Lking Statements This presentatin cntains frward-lking statements within the meaning f the Private Securities Litigatin Refrm Act f All statements cntained in this presentatin that d nt relate t matters f histrical fact shuld be cnsidered frwardlking statements, including withut limitatin statements regarding ur anticipated financial results and effective tax rate used fr nn-gaap adjustment purpses. In this cntext, frward-lking statements ften address expected future business and financial perfrmance and financial cnditin, and ften cntain wrds such as expect, anticipate, intend, plan, believe, seek, see, will, wuld, target, similar expressins, and variatins r negatives f these wrds. These frward-lking statements are based n management s current expectatins. These statements are neither prmises nr guarantees, but invlve knwn and unknwn risks, uncertainties and ther imprtant factrs that may cause ur actual results, perfrmance r achievements t be materially different frm any future results, perfrmance r achievements expressed r implied by the frward-lking statements, including, but nt limited t, the fllwing: the ptential lss, delay r nnrenewal f ur cntracts, r the nn-payment by custmers fr services we have perfrmed; the failure t cnvert backlg t revenue at ur present r histrical cnversin rate; fluctuatin in ur results between fiscal quarters and years; decreased perating margins due t increased pricing pressure r ther pressures; failure t perfrm ur services in accrdance with cntractual requirements, gvernment regulatins and ethical cnsideratins; the impact f underpricing ur cntracts, verrunning ur cst estimates r failing t receive apprval fr r experiencing delays with dcumentatin f change rders; ur failure t successfully execute ur grwth strategies; the impact f a failure t retain key persnnel r recruit experienced persnnel; the risks assciated with ur infrmatin systems infrastructure; ur failure t manage ur grwth effectively; adverse results frm custmer r therapeutic area cncentratin; the risks assciated with ding business internatinally; the risks assciated with the Freign Crrupt Practices Act and ther anti-crruptin laws; future net lsses; the impact f incme tax rate fluctuatins n peratins, earnings and earnings per share; the risks assciated with ur intercmpany pricing plicies; ur failure t attract suitable investigatrs and patients t ur clinical trials; the liability risks assciated with ur research and develpment services; the risks related t ur Phase I clinical services; inadequate insurance cverage fr ur peratins and indemnificatin bligatins; fluctuatins in exchange rates; the risks related t ur relatinships with existing r ptential custmers wh are in cmpetitin with each ther; ur failure t successfully integrate ptential future acquisitins; ptential impairment f gdwill r ther intangible assets; ur limited ability t utilize ur net perating lss carryfrwards r ther tax attributes; the risks assciated with the use and dispsal f hazardus substances and waste; the failure f third parties t prvide us critical supprt services; ur limited ability t prtect ur intellectual prperty rights; the risks assciated with ptential future investments in ur custmers business r drugs; general ecnmic cnditins in the markets in which we perate, including financial market cnditins; the impact f a natural disaster r ther catastrphic event; negative utsurcing trends in the bipharmaceutical industry and a reductin in aggregate expenditures and research and develpment budgets; ur inability t cmpete effectively with ther CROs; the impact f healthcare refrm; the impact f recent cnslidatin in the bipharmaceutical industry; failure t cmply with federal, state and freign healthcare laws; the effect f current and prpsed laws and regulatins regarding the prtectin f persnal data; ur ptential invlvement in cstly intellectual prperty lawsuits; actins by regulatry authrities r custmers t limit the scpe f r withdraw an apprved drug, bilgic r medical device frm the market; failure t keep pace with rapid technlgical changes; the impact f industry-wide reputatinal harm t CROs; ur ability t fulfill ur debt bligatins; the risks assciated with incurring additinal debt r undertaking additinal debt bligatins; the effect f cvenant restrictins under ur debt agreements n ur ability t perate ur business; ur inability t generate sufficient cash t service all f ur indebtedness; fluctuatins in interest rates; and ur dependence n ur lenders, which may nt be able t fund brrwings under the credit cmmitments, and ur inability t brrw. These and ther imprtant factrs discussed under the captin Risk Factrs in ur Annual Reprt n Frm 10-K filed with the Securities and Exchange Cmmissin, r SEC, n February 28, 2017, and ur ther reprts filed with the SEC culd cause actual results t differ materially frm thse indicated by the frward-lking statements made in this presentatin. These factrs shuld nt be cnstrued as exhaustive and shuld be read in cnjunctin with the ther cautinary statements that are included in this release and in ur filings with the SEC. Any such frward-lking statements represent management s estimates as f the date f this presentatin. While we may elect t update such frward-lking statements at sme pint in the future, we disclaim any bligatin t d s, even if subsequent events cause ur views t change. These frward-lking statements shuld nt be relied upn as representing ur views as f any date subsequent t the date f this presentatin. Nn-GAAP Financial Measures Certain financial measures presented in this presentatin, such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Incme (including Adjusted Net Incme per diluted share) and Free Cash Flw, are nt recgnized under generally accepted accunting principles in the United States f America, r U.S. GAAP. Management uses EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Incme (including Adjusted Net Incme per diluted share) and Free Cash Flw r cmparable metrics as a measurement used in evaluating ur perating perfrmance n a cnsistent basis, as a cnsideratin t assess incentive cmpensatin fr ur emplyees, fr planning purpses, including the preparatin f ur internal annual perating budget, and t evaluate the perfrmance and effectiveness f ur peratinal strategies. We believe that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are useful t prvide additinal infrmatin t investrs abut certain material nn-cash and nn-recurring items. While we believe these financial measures are cmmnly used by investrs t evaluate ur perfrmance and that f ur cmpetitrs, because nt all cmpanies use identical calculatins, this presentatin f EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin may nt be cmparable t ther similarly titled measures f ther cmpanies and shuld nt be cnsidered as an alternative t perfrmance measures derived in accrdance with U.S. GAAP. EBITDA is calculated as net incme (lss) attributable t Medpace Hldings, Inc. befre incme tax expense, interest expense, net, depreciatin and amrtizatin with Adjusted EBITDA being further adjusted fr unusual and ther items. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Service revenue, net fr each perid. Our presentatin f EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin shuld nt be cnstrued as an inference that ur future results will be unaffected by unusual r nn-recurring items. We utilize Free Cash Flw as a measure f prfitability and an assessment f ur ability t generate cash. Free Cash Flw is a cmmnly utilized metric that cmpanies prvide t investrs, althugh the calculatin f Free Cash Flw may nt be cmparable t ther similarly titled metrics f ther cmpanies and shuld nt be cnsidered as an alternative t cash flw measures derived in accrdance with U.S. GAAP. We define Free Cash Flw as net cash prvided by perating activities, less capital expenditures and the principal prtin f payments related t campus leases classified fr accunting purpses as deemed landlrd liabilities. Adjusted Net Incme (including Adjusted Net Incme per diluted share) measures ur perating perfrmance by adjusting net incme (lss) attributable t Medpace Hldings, Inc. t include cash expenditures related t rental payments n leases classified fr accunting purpses as deemed landlrd liabilities, and exclude amrtizatin expense, certain stck based cmpensatin award nn-cash expenses, certain litigatin expenses, deferred financing fees and certain ther nn-recurring items. Management uses this measure t evaluate ur cre perating results as it excludes certain items whse fluctuatins frm perid-t-perid d nt necessarily crrespnd t changes in the cre peratins f the business, but includes certain items such as depreciatin, interest expense and tax expense, which are therwise excluded frm Adjusted EBITDA. We believe the presentatin f Adjusted Net Incme (including Adjusted Net Incme per diluted share) enhances ur investrs verall understanding f the financial perfrmance and cash flw f ur business. Yu shuld nt cnsider Adjusted Net Incme (including Adjusted Net Incme per diluted share) as an alternative t net incme (lss) attributable t Medpace Hldings Inc., determined in accrdance with U.S. GAAP, as an indicatr f perating perfrmance. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Incme (including Adjusted Net Incme per diluted share) and Free Cash Flw have imprtant limitatins as analytical tls and yu shuld nt cnsider them in islatin, r as a substitute fr, analysis f ur results as reprted under U.S. GAAP. See the cnslidated financial statements included elsewhere in this prspectus fr ur U.S. GAAP results. Additinally, fr recnciliatins f EBITDA, Adjusted EBITDA, Adjusted Net Incme (including Adjusted Net Incme per diluted share) and Free Cash Flw t ur clsest reprted U.S. GAAP measures, refer t the appendix f this presentatin. Physician Led Therapeutically Fcused

3 The Medpace Way: Scientifically-Driven, Full-Service CRO Disciplined and Integrated Full-Service Operating Mdel Diversified Custmer Base Tp ten custmers represented 37% f FY2016 revenue Strng track recrd f serving ur cre custmer base f small and mid-sized bipharma cmpanies, which we believe represents an attractive grwth pprtunity Partner f Chice fr Bipharmaceutical Custmers Established reputatin as a partner f chice t ur cre custmer segment based n ur differentiated apprach, which yields timely and efficient trial executin Glbal Platfrm with Scalable Infrastructure Scale t cmpete fr glbal trials prvided by ~2,500 emplyees in 35 cuntries with centralized peratins and integrated technlgy Impressive Organic Grwth Track Recrd with Rbust Margins Amng the highest rganic revenue grwth stries in the CRO sectr net service revenue and Adjusted EBITDA CAGRs f 15% and 10%, respectively, frm , with an average Adjusted EBITDA margin f 32.3% (1) Highly Regarded, Experienced, and Cmmitted Management Team Full-service apprach (avids functinal r partial utsurcing services) delivers timely, efficient, and high-quality results fr ur custmers, enabling us t maintain rbust margins High-Science Apprach with Deep Therapeutic Expertise Our therapeutic expertise encmpasses areas that are amng the largest, mst cmplex, and fastest grwing in pharmaceutical develpment, and ur therapeutic leads are embedded int every aspect f a clinical trial prcess Leadership cntinuity with funder-led management team cmprised f industry veterans with brad experience ($ in millins) $400 $350 $300 $250 $200 $150 $100 (1) See appendix t this presentatin fr a definitin and recnciliatin f EBITDA and Adjusted EBITDA t net incme (lss). $50 - Rbust Histrical Net Service Revenue Grwth $244 $290 $320 $ Adjusted EBITDA 35.0% 31.8% 31.6% 30.6% Margin (1) 3 Physician-Led Therapeutically-Fcused

4 High-Science Apprach with Deep Therapeutic Expertise Entry int, and grwth within, target areas hinges n team and training built arund highly-qualified physician leads with strng clinical, scientific, and regulatry expertise Therapeutic leads are embedded int every aspect f the prject t psitin clinical trials fr success Demnstrated durable success acrss multiple therapeutic areas 1Q17 Revenue by Therapeutic Area CNS 6% Device 6% Endcrine 8% Other 20% Cardivascular 11% (1) Onclgy 22% AVAI 13% Metablic 14% 1Q17 Revenue:$93.8 millin 4,176 Industry Snapsht R&D Pipeline Currently in Develpment by Therapeutic Area Cre therapeutic expertise cvers the therapeutic areas where the majrity f all drugs are currently in develpment Ttal: 18,218 Medpace Cre Areas 2,513 2,221 1,999 1, Anti-cancer Neurlgical Antiinfective Alimentary / Metablic Musculskeletal Cardivascular Immunlgical Respiratry Dermatlgy Sensry Bld and Cltting Surce: Citeline Pharma R&D Annual Review 2016 as f January (1) Other primarily includes Nephrlgy, Rheumatlgy, Musculskeletal, Dermatlgy, Gastrenterlgy, and Ophthalmlgy therapeutic areas. Geniturinary Hrmnal Antiparasitic 4 Physician-Led Therapeutically-Fcused

5 Diversified Custmer Base Fcus n custmers utilizing a full-service utsurcing mdel (mre prevalent utside tp 20 pharma) These custmers ften d nt have required develpment expertise and infrastructure in-huse These custmers represent an attractive R&D grwth segment Custmer Diversificatin N single custmer represented mre than 10% f revenue; tp ten custmers accunted fr 34% f 1Q17 net service revenue Attractive Custmer Mix (1)(2) Lw Custmer Cncentratin (1) Large Pharma 15% Tp 5 21% Mid-sized Bipharma 19% Small Bipharma 66% All Other 66% Rest f Tp 10 13% Tp 10 Custmers: 34% f 1Q17 Revenue (1) As a percent f 1Q17 net service revenue. (2) See appendix t this presentatin fr definitins f large pharmaceutical, mid-sized bipharmaceutical and small bipharmaceutical cmpanies. 5 Physician-Led Therapeutically-Fcused

6 Attractive Cre Addressable Market Addressable Phase I-IV Clinical Develpment Spend $50 billin Cre Addressable Market (3) $23 billin Large Pharmaceutical CRO Addressable Market (1)(3) $16 billin Medpace Cre Market Small- and Mid-sized Bipharmaceutical (2) CRO Addressable Market (2)(3) $7 billin Estimated Medpace Small and Mid-Sized Bipharmaceutical Market Share (4) Rest f Market 95% Medpace 5% Surce: Cmpany estimates based n industry surces, including analyst and ther industry reprts, and management s knwledge. Nte: Addressable market excludes: Nn-addressable dev. spend and nn-phase I-IV + lab spend (1) Large pharma as classified by Evaluate Ltd in EvaluatePharma Wrld Preview 2016 Outlk t 2022, an industry reprt. (2) Mid-sized pharmaceutical cmpanies represent pharmaceutical cmpanies with at least $250 millin in sales in the year ended December 31, 2015, based n publicly available data and management s knwledge, that are nt classified as a tp 20 pharmaceutical cmpany by Evaluate Ltd in EvaluatePharma Wrld Preview 2016 Outlk t 2022, an industry reprt. Small- and mid-sized bitechnlgy cmpanies represent bitechnlgy cmpanies that have less than $250 millin in sales in the year ended December 31, 2015, based n publicly available data and management s knwledge. (3) Assumes 70% and 40% utsurcing percentage f addressable market fr small-and mid-sized bipharmaceutical cmpanies and large pharmaceutical cmpanies, respectively. (4) Medpace market share based ff f FY2016 service revenue f small and mid-sized bipharma custmers. 6 Physician-Led Therapeutically-Fcused

7 Small and Mid-Sized Bipharmaceutical Fcus Risks Rewards Funding challenges culd result in uncertain timing f award decisins and ultimately revenue Ptential bad debt expsure Attractive pprtunity fr cntinued grwth Cre custmer segment firmly at the frefrnt f medical innvatin High custmer turnver; frequently ne prduct cmpanies Generally higher margin full-service business mdel Custmer cnslidatin/acquisitin Diversified mix f custmers Value ur input and ur reputatin fr therapeutic expertise Remain fcused n serving ur cre small and mid-sized custmers which represents a segment f the market where we see rbust pprtunities 7 Physician-Led Therapeutically-Fcused

8 Glbal Platfrm with Scalable Infrastructure Overview Clinical Operatins Emplyee Breakdwn by Gegraphy (1) Glbal, full-service CRO with requisite scale t supprt large, multi-natinal studies Asia/Pacific 4% Suth America and Africa 1% Operatins in 35 cuntries, 30 ffices in 25 cuntries Eurpe 36% Nrth America 59% (1) As f March 31, Physician-Led Therapeutically-Fcused

9 Backlg & New Award Trend 2.x Net Bk-t-Bill Backlg Cnversin Rate 1.5x 1.x 0.93x 1.24x 1.11x 1.21x 1.21x 1.15x 1.05x 1.00x 18.9% 20.4% 20.3% 20.4% 20.7% 20.4% 19.9% 19.4%.5x.x 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q Net New Business Awards $106.4 $111.7 $109.1 $101.4 $99.7 $95.5 $93.9 $71.5 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Ending Backlg and Est. NTM Backlg Cnversin $400.6 $421.4 $429.7 $448.1 $465.7 $480.4 $483.9 $483.8 $263 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 (A) ($ in millins) 9 Physician Led Therapeutically Fcused Represents ending backlg Represents estimated midpint f NTM cnversin (A) A. Amunt f backlg estimated t cnvert t revenue in the next twelve mnths as f March 31, 2017.

10 Key Financial Trends ($ in millins) ($ in millins) Service Revenue, net Adjusted EBITDA (A) $76.8 $81.6 $85.7 $87.8 $92.6 $94.8 $95.4 $93.8 $24.9 $26.1 $26.8 $25.8 $30.7 $29.5 $27.5 $ % 31.9% 31.3% 29.3% 33.1% 31.1% 28.8% 28.0% Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 ($ in millins) Adjusted Net Incme (A) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Represents percent f Service Revenue, net Adjusted Net Incme per diluted share (A) $10.3 $11.1 $8.2 $11.6 $14.7 $15.1 $14.3 $14.1 $0.33 $0.35 $0.26 $0.35 $0.45 $0.40 $0.35 $ Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 A. See the appendix fr the nn-gaap recnciliatin f the Adjusted EBITDA, Adjusted Net Incme and Adjusted Net Incme per diluted share calculatins. 10 Physician Led Therapeutically Fcused

11 Rbust Margins with Demnstrated Cnsistency Cnsistently prduced attractive Adjusted EBITDA margins since funding: Key drivers are business mix and rganically grwn, full-service mdel (avids functinal r partial utsurcing services) Maintained average Adjusted EBITDA margins in excess f 30% while: Investing in new target therapeutic areas Launching bth the central labratry and bianalytical labratry services Investing in Phase I clinical capabilities Investing in gegraphic expansin Cnsistently shwn rbust margins, while significantly scaling the business and expanding glbally Adjusted EBITDA Margin Average: ~34% (1) 60% 50% 40% 30% 32% 37% 38% 28% 38% 35% 28% 31% 43% 36% 36% 28% 35% 32% 32% 31% 20% 10% (1) See appendix t this presentatin fr a definitin and recnciliatin f EBITDA and Adjusted EBITDA t net incme (lss). 11 Physician-Led Therapeutically-Fcused

12 Attractive Free Cash Flw Prfile ($ in millins) $ % 120% $150 74% 77% 68% 80% $75 $85 $94 $92 $69 $101 $113 $78 $77 40% $0 Net Debt / Adj. EBITDA Capital Expenditures % f Net Service Revenue (1) (2) (3) Adjusted EBITDA Free Cash Flw FCF Cnversin 1.7x 4.9x 3.7x 1.1x $4.6 $5.3 $6.5 $ % 1.8% 2.0% 3.6% 0% (1) See appendix t this presentatin fr a definitin and recnciliatin f EBITDA and Adjusted EBITDA t net incme (lss). (2) See appendix t this presentatin fr a definitin and recnciliatin f Free Cash Flw. (3) FCF Cnversin equals Free Cash Flw divided by Adjusted EBITDA. 12 Physician-Led Therapeutically-Fcused

13 Cnfidence in Future Grwth Small and Mid-Sized Bipharma cntinues t be a grwing and innvative segment f the market We have a gd reputatin in this segment as a leader in drug develpment Our full-service therapeutic-led apprach psitins us well t add value t ur custmers prgrams We are executing well n active prjects and have gd relatinships with ur custmers 5 RFP vlumes and cmpetitive win rates remain stable 6 We believe a number f pending prgrams have gd science and will likely secure funding and mve frward at sme pint 13 Physician-Led Therapeutically-Fcused

14 Appendix

15 Adjusted EBITDA Recnciliatin (S in millins) Net incme (lss) (GAAP) $ 24.8 $ (15.6) $ (8.7) $ 13.4 Incme tax prvisin (benefit) 14.3 (5.7) Interest expense, net Depreciatin Amrtizatin EBITDA (nn-gaap) $ 87.7 $ 73.3 $ 88.9 $ 99.5 Adjustments t EBITDA: Crprate campus lease payments (A) (3.6) (3.7) (3.7) (3.7) Stck cmpensatin expense: liability awards mark-t-market and CEO award (B) Litigatin matters (C) (3.1) - Other transactin expenses (D) Lss n extinguishment f debt (E) Impairment f gdwill (F) Private equity transactin related cst (G) Adjusted EBITDA - (nn-gaap) $ 85.4 $ 92.2 $ $ Adjusted EBITDA margin (nn-gaap) 35.0% 31.8% 31.6% 30.6% A. Represents cash rental payments n tw crprate headquarter buildings that are accunted fr as deemed assets and subject t depreciatin expense ver the life f the lease. Payments made fr these leases are accunted fr with a principal prtin and an interest prtin, cnsistent with deemed landlrd liability accunting. These adjustments fr purpses f arriving at Adjusted EBITDA have the effect f presenting these leases cnsistently with all ther ffice lease rentals that we have glbally. B. Represents perid end mark-t-market fair value adjustments assciated with liability classified awards and the impact f a ne-time stck based cmpensatin award t ur chief executive fficer. Future stck based awards activity is expected t be classified as equity fr accunting purpses and will nt be subject t perid ending fair value adjustments. C. Represents nn-recurring csts and recvery related t a custmer bad debt and nn-recurring expenses related t the settlement f an emplyment related matter. D. Represents advisry csts and ther fees related t the August 2016 ffering. E. Represents a lss n extinguishment f lng-term debt in cnnectin with the repayment and extinguishment f ur bligatins under the previus Senir Secured Credit Facilities during the furth quarter f F. Represents an impairment f gdwill n the Clinics reprting unit that was recrded in the furth quarter f 2015 G. Represents attrney fees, advisry fees and ther prfessinal service fees incurred in cnnectin with the Cinven transactin. Nte: Numbers may nt sum due t runding 15 Physician-Led Therapeutically-Fcused

16 Free Cash Flw Recnciliatin (S in millins) Operating Cash Flw (GAAP) $ 98.1 $ 75.3 $ 85.9 $ 91.7 Less: CAPEX (4.6) (5.3) (6.5) (13.5) Less: Campus Lease (A) - (1.4) (1.3) (1.5) Free Cash Flw (nn-gaap) $ 93.6 $ 68.6 $ 78.1 $ 76.7 Adjusted EBITDA - (nn-gaap) $ 85.4 $ 92.2 $ $ Free Cash Flw Cnversin % (nn-gaap) (B) 109.6% 74.4% 77.2% 67.6% A. Represents principal prtin f Crprate Campus Lease payment. B. Free Cash Flw Cnversin % is equal t Free Cash Flw divided by Adjusted EBITDA. Nte: Numbers may nt sum due t runding 16 Physician-Led Therapeutically-Fcused

17 Adjusted EBITDA Recnciliatin Trends (S in millins) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Net incme (lss) as reprted (GAAP) $ 0.1 $ (0.1) $ (8.6) $ 3.4 $ 5.0 $ 5.0 $ ( - ) 8.4 Incme tax prvisin Interest expense, net Depreciatin Amrtizatin EBITDA (nn-gaap) $ 26.4 $ 24.6 $ 13.7 $ 26.4 $ 28.6 $ 26.8 $ 17.7 $ 27.2 Adjustments t EBITDA: Crprate campus lease payments (A) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) Stck cmpensatin expense: liability awards mark-t-market and CEO award (B) (0.2) Litigatin matters (C) (0.4) (2.7) Other transactin expenses (D) Lss n extinguishment f debt (E) Impairment f gdwill (F) Adjusted EBITDA (nn-gaap) $ 24.9 $ 26.1 $ 26.8 $ 25.8 $ 30.7 $ 29.5 $ 27.5 $ 26.2 A. Represents cash rental payments n tw crprate headquarter buildings that are accunted fr as deemed assets and subject t depreciatin expense ver the life f the lease. Payments made fr these leases are accunted fr with a principal prtin and an interest prtin, cnsistent with deemed landlrd liability accunting. These adjustments fr purpses f arriving at Adjusted EBITDA have the effect f presenting these leases cnsistently with all ther ffice lease rentals that we have glbally. B. Represents perid end mark-t-market fair value adjustments assciated with liability classified awards and the impact f a ne-time stck based cmpensatin award t ur chief executive fficer. Future stck based awards activity is expected t be classified as equity fr accunting purpses and will nt be subject t perid ending fair value adjustments. C. Represents net recveries related t a custmer bad debt and the settlement f an emplyment related matter. The expenses related t these items were cnsidered nn-recurring and were added back in prir quarters. D. Represents advisry csts and ther fees related t the August 2016 ffering. E. Represents a lss n extinguishment f lng-term debt in cnnectin with the repayment and extinguishment f ur bligatins under the previus Senir Secured Credit Facilities during the furth quarter f F. Represents an impairment f gdwill n the Clinics reprting unit that was recrded in the furth quarter f Nte: Numbers may nt sum due t runding 17 Physician Led Therapeutically Fcused

18 Adjusted Net Incme Recnciliatin Trends ($ in millins, expect per share amunts) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Net incme (lss) as reprted (GAAP) $ 0.1 $ (0.1) $ (8.6) $ 3.4 $ 5.0 $ $ ( - ) Amrtizatin Stck based cmpensatin expense: liability awards mark-t-market and CEO award (A) (0.2) Crprate campus lease payments-principal prtin (B) (0.3) (0.4) (0.3) (0.3) (0.4) (0.4) (0.4) (0.4) Litigatin matters (C) (0.4) (2.8) Deferred financing fees (D) Impairment f gdwill (E) Other transactin expenses (F) Lss n extinguishment f debt (G) Incme tax effect f adjustments (H) (6.6) (7.2) (10.7) (5.2) (6.3) (6.5) (9.2) (3.6) Adjusted Net Incme (nn-gaap) $ 10.3 $ 11.1 $ 8.2 $ 11.6 $ 14.7 $ 15.1 $ 14.3 $ 14.1 Net Incme (lss) per diluted share (GAAP) $ - $( - ) $ (0.27) $ 0.11 $ 0.15 $ 0.13 $( - ) $ 0.20 Adjusted Net Incme per diluted share (nn-gaap) $ 0.33 $ 0.35 $ 0.26 $ 0.35 $ 0.45 $ 0.40 $ 0.35 $ 0.34 Diluted weighted average cmmn shares utstanding (GAAP) Adjusted diluted weighted average cmmn shares utstanding (nn-gaap) (I) A. Represents perid end mark-t-market fair value adjustments assciated with liability classified awards and the impact f a ne-time stck based cmpensatin award t ur chief executive fficer. Future stck based awards activity is expected t be classified as equity fr accunting purpses and will nt be subject t perid ending fair value adjustments. B. Represents cash rental payments n tw crprate headquarter buildings that are accunted fr as deemed assets and subject t depreciatin expense ver the life f the lease. Payments made fr these leases are accunted fr with a principal prtin and an interest prtin, cnsistent with deemed landlrd liability accunting. These adjustments fr purpses f arriving at Adjusted Net Incme have the effect f presenting these leases cnsistently with all ther ffice lease rentals that we have glbally. C. Represents net recveries related t a custmer bad debt and the settlement f an emplyment related matter. The expenses related t these items were cnsidered nn-recurring and were added back in prir quarters. D. Represents amrtizatin f the discunt and issuance csts deferred n the cnslidated balance sheet assciated with the issuance f the Senir Secured Credit Facility. E. Represents an impairment f gdwill n the Clinics reprting unit that was recrded in the furth quarter f F. Represents advisry csts and ther fees related t the August 2016 ffering. G. Represents a lss n extinguishment f lng-term debt in cnnectin with the repayment and extinguishment f ur bligatins under the previus Senir Secured Credit Facilities during the furth quarter f H. Represents the tax effect f the ttal adjustments at an estimated effective tax rate f 39%. I. Fr GAAP purpses, in a perid where a net lss is recrded there is n dilutin t weighted average cmmn shares utstanding. When cnsidering Adjusted Net Incme, hwever, dilutin wuld be applicable and is cnsidered fr purpses f determining Adjusted Net Incme per diluted share. Nte: Numbers may nt sum due t runding 18 Physician Led Therapeutically Fcused

19 Glssary 1) Adjusted EBITDA is defined as EBITDA, adjusted t exclude nn-cash liability-based stck awards, mark-t-market adjustments and CEO 2015 award nly, private equity transactin-related cst, crprate campus lease payments, nn-recurring litigatin matters, gdwill impairment charges, and advisry csts and ther fees related t ur initial public ffering. 2) Backlg represents anticipated future net service revenue frm net new business awards that have nt cmmenced r are currently in prcess but nt cmplete. 3) Backlg cnversin is defined as net service revenue fr the quarter divided by beginning backlg. Year-end and half-year backlg cnversin figures represent the average histrical backlg cnversin fr all quarters in the relevant year-end and half-year perids. 4) Free Cash Flw is defined as net cash prvided by perating activities, less capital expenditures and the principal prtin f payments related t campus leases classified fr accunting purpses as deemed landlrd liabilities. 5) Large pharmaceutical cmpanies represent the tp 20 pharmaceutical cmpanies by wrldwide prescriptin drug sales in the year ended December 31, 2015 as classified by Evaluate Ltd in EvaluatePharma Wrld Preview 2016 Outlk t 2022, an industry reprt. 6) Mid-sized bipharmaceutical cmpanies represent bipharmaceutical cmpanies with at least $250 millin in sales in the year ended December 31, 2015, based n publicly available data and management s knwledge, that are nt classified as a tp 20 pharmaceutical cmpany by Evaluate Ltd in EvaluatePharma Wrld Preview 2016 Outlk t 2022, an industry reprt. 7) Net bk-t-bill is defined as net new business awards divided by net service revenue fr a given perid. 8) Net new business awards are new business awards net f award mdificatins and cancellatins that had previusly been recgnized in backlg during the perid. New business awards represent the value f anticipated future net service revenue that has been awarded during the perid that is recgnized in backlg. This value is recgnized upn the signing f a cntract r receipt f a written pre-cntract cnfirmatin frm a custmer that cnfirms an agreement in principle n budget and scpe. New business awards als include cntract amendments, r changes in scpe, where the custmer has prvided written authrizatin fr changes in budget and scpe r has apprved us t perfrm additinal wrk as f the measurement date. Awards may nt be recgnized as backlg after cnsideratin f a number f factrs, including whether (i) the relevant net service revenue is expected nly after a pending regulatry hurdle, which might result in cancellatin f the study, (ii) the custmer funding needed fr cmmencement f the study is nt believed t have been secured r (iii) study timelines are uncertain r nt well defined. In additin, study amunts that extend beynd a three-year timeline are nt included in backlg. 9) Small bipharmaceutical cmpanies represent bipharmaceutical cmpanies that have less than $250 millin in sales in the year ended December 31, 2015, based n publicly available data and management s knwledge. 19 Physician-Led Therapeutically-Fcused