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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30~~March 31, ~~2020~~2021

o☐ 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: 001-39212

PPD, Inc.

(Exact name of registrant as specified in its charter)


Delaware									45-3806427
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

929 North Front Street, Wilmington, North Carolina 28401
(Address of Principal Executive Offices) (Zip Code)

910-251-0081

Registrant's telephone number, including area code

————————————————

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PPD	The NASDAQ Stock Market LLC (Nasdaq Global Select Market)

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 x☒ No o☐

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 x☒ No o☐

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

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. o☐

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

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~~				Number of Shares Outstanding
Common Stock $0.01 par value		~~349,654,449 shares outstanding as of October 26, 2020~~				350,976,576 shares outstanding as of April 26, 2021

When we use the terms “PPD,” the “Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q, we mean PPD, Inc. and its subsidiaries on a consolidated basis, unless the context indicates otherwise.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ~~(the “Securities Act”)~~, and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the “Exchange Act”)~~. Such forward-looking statements reflect our current views with respect to, among other things, the following: our proposed merger with Thermo Fisher Scientific Inc. (“Thermo Fisher”), our current expectations and anticipated results of operations, ~~all~~our financial performance, the impact from the novel coronavirus disease (“COVID-19”) pandemic, the continued reliance of ~~which~~the biopharmaceutical industry on outsourcing to contract research organizations, the continued growth in research and development spending in the biopharmaceutical industry, estimated growth rates in addressable markets, and our ability to effectively recruit, train, develop and retain talented individuals. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such.

These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and other similar ~~expressions~~ ~~including forward-looking statements about the impact from the novel coronavirus disease (the “COVID-19 pandemic”)~~expressions. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at this time, including the impact from the COVID-19 pandemic. As you read this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements contained herein are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, actual results might differ materially from those expressed in the forward-looking statements. In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks listed below and those outlined under Part II, Item 1A, “Risk Factors,” ~~that~~included ~~might~~elsewhere ~~materially~~is ~~affect~~this ~~such~~Quarterly ~~forward~~Report on Form 10-~~looking~~Q, ~~statements~~as ~~include:~~well as Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020, as such factors may be further updated from time to time in our periodic filings with the Securities and Exchange Commission.

•Some of the ~~magnitude~~factors, ~~continued~~risks ~~duration,~~and ~~geographic~~uncertainties ~~reach~~that ~~and~~might ~~ongoing~~materially ~~impact~~affect on the ~~global~~forward-looking ~~economy~~statements ~~and~~contained ~~capital~~herein and ~~credit~~may ~~markets~~make ofan ~~the~~investment ~~COVID-19~~in ~~pandemic;~~our securities speculative or risky include, but are not limited to, the following:

•uncertainties ~~the~~associated ~~current~~with ~~and uncertain future impact from~~ the ~~COVID-19~~proposed ~~pandemic~~merger onwith ~~our~~Thermo ~~business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity~~Fisher;

• the ~~fragmented~~occurrence ~~and~~of ~~highly~~any ~~competitive~~event, ~~nature~~change ofor other circumstances that could give rise to the ~~drug~~termination ~~development~~of ~~services~~the ~~industry~~merger agreement;

•the ~~changes~~inability into ~~trends~~complete inthe proposed merger due to the ~~biopharmaceutical~~failure ~~industry~~to satisfy conditions to completion of the proposed merger, including ~~decreases~~that ina ~~research~~governmental ~~and~~entity ~~development~~may ~~spending~~prohibit, ~~and~~delay ~~outsourcing~~or refuse to grant approval for the consummation of the proposed merger;

•risks ~~our~~related ~~ability~~ to ~~keep~~disruption ~~pace~~of ~~with~~management’s ~~rapid~~attention ~~technological~~from ~~changes~~our ~~that~~ongoing ~~could~~business ~~make~~operations ~~our~~due ~~services~~to ~~less~~the ~~competitive~~proposed ~~or obsolete~~merger;

• the ~~United~~effect ~~States~~of ~~and~~the ~~international~~announcement ~~healthcare~~of ~~industry~~the isproposed ~~subject~~merger toon ~~political,~~our ~~economic~~relationships ~~and/or~~with ~~regulatory~~our ~~influences and changes~~customers, ~~such~~operating asresults ~~healthcare reform, all of which could adversely affect both our customers’~~ and ~~our~~business ~~businesses~~generally;

•the ~~any~~risk ~~failure~~that ofthe ~~our~~proposed ~~backlog~~merger towill ~~accurately~~not ~~predict~~be orconsummated ~~convert~~in ~~into~~a ~~future~~timely ~~revenue~~manner;

• the ~~fact~~costs ~~that~~of ~~our~~the ~~customers~~proposed ~~can~~merger ~~terminate,~~if ~~delay or reduce~~ the ~~scope~~proposed ofmerger ~~our~~is ~~contracts~~not ~~with them upon short notice or with no notice~~consummated;

•restrictions ~~the~~imposed ~~impact~~on ofour ~~industry,~~business ~~customer~~during ~~and~~the ~~therapeutic~~pendency ~~area~~of ~~concentration~~the proposed merger;

•potential ~~our~~litigation ~~ability~~instituted toagainst ~~accurately~~us ~~price~~or our ~~contracts~~directors ~~and~~challenging ~~manage~~the ~~our~~proposed ~~costs associated with performance of such contracts~~merger;

• any ~~failures~~failure inof our ~~information~~backlog ~~and~~to ~~communication~~accurately ~~systems,~~predict ~~including cybersecurity breaches, impacting us~~ or ~~our~~convert ~~customers,~~into ~~clinical~~future ~~trial participants or employees~~revenue;

•the ~~any~~fact ~~failure~~that toour ~~perform~~customers ~~services~~can interminate, ~~accordance~~delay or reduce the scope of our contracts with ~~contractual~~them ~~requirements,~~upon ~~regulatory~~short ~~standards~~notice ~~and~~or ~~ethical~~with ~~standards~~no notice;

•the ~~our~~impact ~~ability~~of ~~to recruit~~industry, ~~retain~~customer and ~~motivate~~therapeutic ~~key~~area ~~personnel, including the loss of any key executive who becomes seriously ill with COVID-19~~concentration;

•consolidation amongst our ~~ability to access clinical research sites~~customers, ~~attract~~and ~~suitable~~the ~~investigators~~potential orfor ~~enroll~~rationalization ~~a sufficient number~~ of ~~patients~~the ~~(including~~combined asdrug adevelopment ~~result~~pipeline, ofresulting ~~the~~in ~~COVID-19~~fewer ~~pandemic)~~products ~~for~~in ~~our customers’~~ clinical ~~trials~~development;

•our ~~any~~ability ~~failure~~to byaccurately usprice toour ~~comply~~contracts and manage our costs associated with ~~numerous~~performance ~~privacy~~of ~~laws~~such contracts;

•any ~~our~~failures ~~dependence~~in onour ~~third~~information ~~parties for critical goods~~ and ~~support~~communication ~~services~~systems, including acybersecurity ~~significant~~breaches, ~~impact~~impacting ~~from~~us ~~the~~or ~~COVID-19~~our ~~pandemic~~customers, onclinical ~~our~~trial ~~suppliers~~participants or employees;

• our dependence on our technology network, and the impact from upgrades to the network;

• any violation of laws, including laws governing the conduct of clinical trials or other biopharmaceutical research, and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010;

• competition between our existing and potential customers and the potential negative impact on our business;

• our management of business restructuring transactions and the integration of acquisitions;

•any ~~risks~~failure ~~related~~ to ~~the~~perform ~~drug development~~ services ~~industry that could result~~ in ~~potential~~accordance ~~liability~~with ~~that~~contractual ~~could affect our business~~requirements, ~~reputation~~regulatory standards and ~~financial~~ethical ~~condition~~standards;

• ~~any failure of~~ our ~~insurance~~ability to ~~cover~~access ~~the~~clinical ~~potential~~research ~~liabilities~~sites, ~~including~~attract ~~indemnification~~suitable ~~obligations,~~investigators ~~associated~~or ~~with~~enroll ~~the~~a ~~operation~~sufficient number of ~~our~~patients ~~business~~(including ~~and~~as ~~provision~~a result of ~~services~~the COVID-19 pandemic) for our customers’ clinical trials;

•any ~~our~~failure ~~use~~by ofus ~~biological~~to ~~and~~comply ~~hazardous~~with ~~materials,~~numerous ~~which~~privacy ~~could violate law or cause injury or death, resulting in liability~~laws;

•our ~~disruptions~~ability to ~~our~~keep ~~operations~~pace bywith ~~the~~rapid ~~occurrence~~technological ofchanges athat ~~natural~~could ~~disaster,~~make ~~pandemic~~our ~~(such~~services asless ~~the~~competitive ~~COVID-19 pandemic),~~ or ~~other catastrophic events~~obsolete;

•our ~~international~~ability orto ~~U.S. economic~~recruit, ~~currency,~~retain ~~political~~ and ~~other~~motivate ~~risks~~key personnel, ~~such~~including asthe ~~those~~loss ~~from~~of ~~the~~any key executive who becomes seriously ill with COVID-19 ~~pandemic~~;

•our ~~economic~~dependence ~~conditions~~on ~~and~~third ~~regulatory~~parties ~~changes~~for ~~relating~~critical togoods ~~the~~and ~~United~~support ~~Kingdom’s~~services, ~~exit~~including a significant impact from the ~~European~~COVID-19 ~~Union~~pandemic on our suppliers;

• any ~~inability~~violation toof ~~adequately~~laws, ~~protect~~including ~~our~~laws ~~intellectual~~governing ~~property~~the conduct of clinical trials or other biopharmaceutical research, and anti-corruption laws, such as the ~~security~~U.S. ofForeign ~~our~~Corrupt ~~systems~~Practices Act and the ~~data~~United ~~stored~~Kingdom ~~therein~~Bribery Act of 2010;

•competition ~~consolidation~~between ~~amongst~~ our ~~customers,~~existing and ~~the~~ potential ~~for~~customers ~~rationalization~~and of the ~~combined~~potential ~~drug~~negative ~~development~~impact ~~pipeline,~~on ~~resulting~~our ~~in fewer products in clinical development~~business;

•our ~~any~~management ~~patent~~of orbusiness ~~other~~restructuring ~~intellectual~~transactions ~~property~~and ~~litigation~~the weintegration ~~might~~of ~~be involved in~~acquisitions;

•risks ~~changes~~related into ~~tax~~the ~~laws,~~drug ~~such~~and asmedical ~~U.S.~~device ~~tax~~development ~~reform,~~services orindustry ~~interpretations~~that ofcould ~~existing~~result ~~tax~~in ~~laws~~potential liability that could affect our business, reputation and financial condition;

•any failure of our ~~investments~~insurance into ~~third~~cover ~~parties~~the potential liabilities, ~~which~~including ~~are~~indemnification ~~illiquid~~obligations, associated with the operation of our business and ~~subject~~provision of services and changes to ~~loss~~our insurance coverage;

•our ~~the~~use ~~substantial value~~ of ~~our~~biological ~~goodwill~~ and ~~intangible~~hazardous ~~assets~~materials, which wecould ~~might~~violate ~~not~~law ~~fully~~or ~~realize~~cause injury or death, resulting in ~~impairment losses~~liability;

•international ~~difficult~~or ~~and~~U.S. ~~volatile~~economic, ~~conditions~~currency, inpolitical ~~the capital~~ and ~~credit~~other ~~markets and in the overall economy~~risks, ~~including~~such as those ~~caused~~from by the COVID-19 pandemic;

•disruptions ~~risks related~~ to our ~~indebtedness~~operations by the occurrence of a natural disaster, pandemic (such as the COVID-19 pandemic), or other catastrophic events;

•the ~~risks~~current ~~related~~and touncertain ~~ownership~~future impact from the COVID-19 pandemic on our business, growth, reputation, prospects, financial condition, results of operations (including components of our ~~common~~financial ~~stock~~results), cash flows and liquidity;

•changes ~~the~~in ~~significant~~tax ~~influence~~laws, ~~certain~~such ~~stockholders~~as ~~have~~U.S. ~~over~~tax ~~us;~~reform, ~~and~~or interpretations of existing tax laws;

•economic ~~other~~conditions, ~~factors~~import/export ~~beyond~~implications ~~our~~and ~~control.~~regulatory changes relating to the United Kingdom’s exit from the European Union;

~~These~~•any ~~cautionary~~inability ~~statements should not be construed by you~~ to beadequately ~~exhaustive~~protect ~~and~~our ~~are~~intellectual ~~made~~property ~~only~~or ~~as of~~ the ~~date~~security ~~hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result~~ of ~~new information, future events or otherwise. For further discussion of the risks relating to~~ our ~~business,~~systems ~~see~~and ~~Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for~~ the ~~year~~data ~~ended~~stored ~~December 31, 2019.~~therein;

•our investments in third parties, which are illiquid and subject to loss;

•the substantial value of our goodwill and intangible assets, which we might not fully realize, resulting in impairment losses;

•difficult and volatile conditions in the capital and credit markets and in the overall economy, including those caused by the COVID-19 pandemic;

•the fragmented and highly competitive nature of the drug development services industry;

•changes in trends in the biopharmaceutical industry, including decreases in research and development spending and outsourcing;

•the potential adverse effect that the political, economic and/or regulatory influences and changes impacting the United States and international healthcare industry could have on both our customers’ and our businesses, including as a result of healthcare reform;

•any patent or other intellectual property litigation we might be involved in;

•risks related to our indebtedness;

•risks related to ownership of our common stock;

•the significant influence certain stockholders have over us; and

•other factors beyond our control.

These cautionary statements should not be construed by you to be exhaustive and are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PPD, INC.

FORM 10-Q

TABLE OF CONTENTS

Item		~~Page~~		Page
	~~PART I - FINANCIAL INFORMATION~~		PART I - FINANCIAL INFORMATION
1.	~~Financial Statements (unaudited)~~	5	Financial Statements (unaudited)	5
	Condensed Consolidated Statements of Operations for the three and nine months ended
			Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	5
	September 30, 2020 and 2019	5
			Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months
			March 31, 2021 and 2020	6
	ended September 30, 2020 and 2019	6
			Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	7
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	7
			Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	8
			Condensed Consolidated Statements of Stockholders’ Deficit and Redeemable Noncontrolling Interest
	Condensed Consolidated Statements of Stockholders’ Deficit and Redeemable Noncontrolling Interest
			for the three months ended March 31, 2021 and 2020	9
	for the three and nine months ended September 30, 2020 and 2019	9
			Notes to the Condensed Consolidated Financial Statements	10
	Notes to the Condensed Consolidated Financial Statements	11
2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
3.			Quantitative and Qualitative Disclosures About Market Risk	33
3.	Quantitative and Qualitative Disclosures About Market Risk	48
4.			Controls and Procedures	33
4.	Controls and Procedures	48
			PART II - OTHER INFORMATION
	PART II - OTHER INFORMATION
1.			Legal Proceedings	34
1.	Legal Proceedings	49
1A.			Risk Factors	34
1A.	Risk Factors	49
6.			Exhibits	36
2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
SIGNATURE				37
3.	Defaults Upon Senior Securities	53
4.	Mine Safety Disclosures	53
5.	Other Information	53
6.	Exhibits	53
SIGNATURE		54

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

	Three Months Ended September 30,							Nine Months Ended September 30,
			Three Months Ended March 31,
	2020				2019			2020			2019
			2021					2020
Revenue	$	~~1,233,802~~	$	1,378,380	$	~~1,023,864~~		$	31,~~317~~072,~~182~~462		$	~~2,984,133~~
Operating costs and expenses:
Direct costs, exclusive of depreciation and amortization	~~433,422~~		477,624		~~369,476~~			1414,~~222,700~~439			~~1,112,181~~
Reimbursed costs	~~335,866~~		380,837		~~241,804~~			~~810~~250,~~523~~850			~~688,696~~
Selling, general and administrative expenses	~~249,320~~		293,936		~~226,996~~			~~734~~247,~~712~~776			~~681,431~~
Depreciation and amortization	~~71,317~~		73,143		~~66,889~~			~~206~~66,~~395~~315			~~197,896~~
Long-lived asset impairment	~~1,414~~		1,584		—			~~1,414~~—			—
Total operating costs and expenses	~~1,091,339~~		1,227,124		~~905,165~~			2979,~~975,744~~380			~~2,680,204~~
Income from operations	~~142,463~~		151,256		~~118,699~~			~~341~~93,~~438~~082			~~303,929~~
Interest expense, net of interest income of $433 and $1,089 for the three
Interest expense, net of interest income of $465 and $1,270 for the three
months ended September 30, 2020 and 2019, respectively, and $1,996 and
months ended March 31, 2021 and 2020, respectively			(47,212)					(64,710)
$4,383 for the nine months ended September 30, 2020 and 2019, respectively	(49,882)				(85,754		)	(165,995		)	(229,147		)
Loss on extinguishment of debt			(10,677)					(50,065)
Loss on extinguishment of debt	—				—			(93,534		)	—
Loss on investments			(37,229)					(26,872)
(Loss) gain on investments	(53,100		)		(15,106		)	16,649			(22,716		)
Other income, net			9,004					29,294
Other (expense) income, net	(17,153		)		9,157			(14,097		)	(3,158		)
Income (loss) before provision for (benefit from) income taxes			65,142					(19,271)
Income before provision for income taxes	22,328				26,996			84,461			48,908
Provision for (benefit from) income taxes			15,053					(7,717)
Provision for income taxes	11,169				9,044			20,682			12,387
Income (loss) before equity in losses of unconsolidated affiliates			50,089					(11,554)
Income before equity in losses of unconsolidated affiliates	11,159				17,952			63,779			36,521
Equity in losses of unconsolidated affiliates, net of income taxes			(2,753)					(1,566)
Equity in losses of unconsolidated affiliates, net of income taxes	(2,057		)		(1,370		)	(5,686		)	(2,060		)
Net income (loss)			47,336					(13,120)
Net income	9,102				16,582			58,093			34,461
Net income attributable to noncontrolling interest			(1,455)					(2,718)
Net income attributable to noncontrolling interest	(1,587		)		(1,161		)	(4,499		)	(3,390		)
Net income (loss) attributable to PPD, Inc.			45,881					(15,838)
Net income attributable to PPD, Inc.	7,515				15,421			53,594			31,071
Recapitalization investment portfolio consideration			28,612					20,062
Recapitalization investment portfolio consideration	44,468				11,231			(6,529		)	16,830
Net income attributable to common stockholders of PPD, Inc.			$	74,493				$	4,224
Net income attributable to common stockholders of PPD, Inc.	$	51,983			$	26,652		$	47,065		$	47,901
Earnings per share attributable to common stockholders of PPD, Inc.:
Earnings per share attributable to common stockholders of PPD, Inc.:
Basic			$	0.21				$	0.01
Basic	$	0.15			$	0.10		$	0.14		$	0.17
Diluted			$	0.21				$	0.01
Diluted	$	0.15			$	0.09		$	0.14		$	0.17
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Basic			350,431					318,221
Basic	348,672				279,425			338,277			279,235
Diluted			357,662					322,424
Diluted	354,830				281,193			343,159			280,055

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)

	Three Months Ended September 30,							Nine Months Ended September 30,
			Three Months Ended March 31,
	2020				2019			2020			2019
			2021					2020
Net income	$	9,102			$	16,582		$	58,093		$	34,461
Net income (loss)			$	47,336				$	(13,120)
Other comprehensive income (loss), net of tax expense (benefit):
Foreign currency translation	~~45,602~~		(19,849)		~~(49,415~~		)	(787,~~192~~953)		)	~~(39,686~~		)
Defined benefit plan, net of income taxes of $28 and $26 for the
Defined benefit plan, net of income taxes of $44 and $30 for the
three months ended September 30, 2020 and 2019, respectively, and $85 and
three months ended March 31, 2021 and 2020, respectively			183					110
$88 for the nine months ended September 30, 2020 and 2019, respectively	138				120			380			390
Derivative instruments, net of income taxes of $12,109 and $(25,109) for the
Derivative instruments, net of income taxes of $297 and $(756) for the
three months ended March 31, 2021 and 2020, respectively			36,881					(77,705)
three months ended September 30, 2020 and 2019, respectively, and
Other comprehensive income (loss)			17,215					(165,548)
$(31,300) and $(2,063) for the nine months ended September 30, 2020
Comprehensive income (loss)			64,551					(178,668)
and 2019, respectively	503				(2,419		)	(96,992		)	(7,157		)
Comprehensive loss (income) attributable to noncontrolling interest			558					(2,705)
Other comprehensive income (loss)	46,243				(51,714		)	(103,804		)	(46,453		)
Comprehensive income (loss) attributable to PPD, Inc.			65,109					(181,373)
Comprehensive income (loss)	55,345				(35,132		)	(45,711		)	(11,992		)
Recapitalization investment portfolio consideration			28,612					20,062
Comprehensive income attributable to noncontrolling interest	(2,078		)		(999		)	(5,651		)	(4,080		)
Comprehensive income (loss) attributable to common stockholders of PPD, Inc.			$	93,721				$	(161,311)
Comprehensive income (loss) attributable to PPD, Inc.	53,267				(36,131		)	(51,362		)	(16,072		)
Recapitalization investment portfolio consideration	44,468				11,231			(6,529		)	16,830
Comprehensive income (loss) attributable to common stockholders of PPD, Inc.	$	97,735			$	(24,900	)	$	(57,891	)	$	758

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except par value)

Assets
			March 31, 2021					December 31, 2020
	September 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	~~803,090~~	$	826,425	$	~~345,187~~		$	767,999
Accounts receivable and unbilled services, net	~~1,460,374~~		1,835,088		~~1,326,614~~			1,609,718
Income taxes receivable	~~29,016~~		24,782		~~27,437~~			22,386
Prepaid expenses and other current assets	~~122,040~~		155,039		~~119,776~~			146,100
Total current assets	~~2,414,520~~		2,841,334		~~1,819,014~~			2,546,203
Property and equipment, net	~~474,006~~		502,852		~~458,845~~			496,474
Investments in unconsolidated affiliates	~~36,501~~		39,524		~~34,028~~			43,178
Investments	~~252,606~~		229,884		~~250,348~~			265,894
Goodwill, net	~~1,771,106~~		1,813,840		~~1,764,104~~			1,820,208
Intangible assets, net	~~770,161~~		707,623		~~892,091~~			748,404
Other assets	~~157,126~~		175,087		~~156,220~~			201,643
Operating lease right-of-use assets	~~165,508~~		157,854		~~181,596~~			171,839
Total assets	$	~~6,041,534~~	$	6,467,998	$	~~5,556,246~~		$	6,293,843
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	~~120,022~~	$	171,079	$	~~130,060~~		$	176,341
Accrued expenses:
Payables to investigators	~~384,004~~		465,861		~~322,231~~			404,654
Accrued employee compensation	~~328,469~~		260,037		~~263,834~~			331,156
Accrued interest	18,972				44,527
Other accrued expenses			221,693					195,779
Other accrued expenses	216,130				138,632
Income taxes payable			28,786					21,206
Income taxes payable	11,040				15,161
Unearned revenue			1,224,256					1,060,544
Unearned revenue	1,048,392				1,110,872
Current portion of operating lease liabilities			47,907					51,643
Current portion of operating lease liabilities	48,339				45,962
Current portion of long-term debt and finance lease obligations			35,000					36,238
Current portion of long-term debt and finance lease obligations	36,120				35,794
Total current liabilities			2,454,619					2,277,561
Total current liabilities	2,211,488				2,107,073
Accrued income taxes			21,693					18,658
Accrued income taxes	20,609				38,465
Deferred tax liabilities			50,816					54,535
Deferred tax liabilities	68,029				92,225
Recapitalization investment portfolio liability			163,311					191,923
Recapitalization investment portfolio liability	183,288				191,678
Long-term operating lease liabilities, less current portion			126,860					137,657
Long-term operating lease liabilities, less current portion	134,994				153,766
Long-term debt and finance lease obligations, less current portion			4,212,710					4,226,192
Long-term debt and finance lease obligations, less current portion	4,233,178				5,608,134
Other liabilities			43,734					98,908
Other liabilities	105,189				33,017
Total liabilities			7,073,743					7,005,434
Total liabilities	6,956,775				8,224,358
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 9)
Redeemable noncontrolling interest			34,371					34,929
Redeemable noncontrolling interest	35,687				30,036
Stockholders’ deficit:
Stockholders’ deficit:
Preferred stock - $0.01 par value; 100,000 shares authorized
Common stock - $0.01 par value; 2,000,000 and 2,080,000 shares authorized as of
None issued and outstanding			—					—
September 30, 2020 and December 31, 2019, respectively;
Common stock - $0.01 par value; 2,000,000 shares authorized
350,291 shares issued and 349,565 shares outstanding as of September 30, 2020, and
351,609 shares issued and 350,935 shares outstanding as of March 31, 2021 and
280,127 shares issued and 279,426 shares outstanding as of December 31, 2019	3,503				2,801
350,858 shares issued and 350,132 shares outstanding as of December 31, 2020			3,516					3,509
Treasury stock, at cost, 726 shares and 701 shares as of September 30, 2020 and
Treasury stock, at cost, 674 and 726 shares as of March 31, 2021 and
December 31, 2019, respectively	(13,268		)		(12,707		)
December 31, 2020, respectively			(12,461)					(13,268)
Additional paid-in-capital	~~1,806,607~~		1,833,774		~~1,983~~			1,819,892
Accumulated deficit	~~(2,345,062~~		(2,197,315)		~~(2,391,321~~		)	(2,271,808)
Accumulated other comprehensive loss	~~(402,708~~		(267,630)		~~(298,904~~		)	(284,845)
Total stockholders’ deficit	~~(950,928~~		(640,116)		~~(2,698,148~~		)	(746,520)
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit	$	~~6,041,534~~	$	6,467,998	$	~~5,556,246~~		$	6,293,843

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Nine Months Ended September 30,
			Three Months Ended March 31,
	2020				2019
			2021					2020
Cash flows from operating activities:
Net income	$	58,093			$	34,461
Net income (loss)			$	47,336				$	(13,120)
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	~~206,395~~		73,143		~~197,896~~			66,315
Long-lived asset impairment	~~1,414~~		1,584		—			—
Stock-based compensation expense	~~16,099~~		7,500		~~11,701~~			5,272
Non-cash operating lease expense	34,625				33,465
Operating lease right-of-use asset expense			12,174					9,819
Amortization of debt issuance costs, modification costs and debt discounts	8,263				12,162
Loss on investments			37,229					26,872
Non-cash losses (gains) on interest rate swaps	942				(7,157		)
Deferred income tax (benefit) expense			(12,201)					8,790
(Gain) loss on investments	(16,649		)		22,716
Loss on extinguishment of debt			10,677					50,065
Deferred income tax expense (benefit)	5,770				(11,915		)
Other			7,965					12,839
Loss on extinguishment of debt	93,534				—
Change in operating assets and liabilities:
Amortization of costs to obtain a contract	7,973				8,533
Accounts receivable and unbilled services, net			(230,883)					(61,700)
Other	5,427				1,698
Prepaid expenses and other current assets			(5,508)					22,135
Change in operating assets and liabilities, net of effect of businesses acquired:
Other assets			16,475					(9,546)
Accounts receivable and unbilled services, net	(148,501		)		(46,932		)
Income taxes, net			8,533					(18,767)
Prepaid expenses and other current assets	26,908				(10,059		)
Accounts payable, accrued expenses and other liabilities			28,069					(48,119)
Other assets	(39,813		)		(15,328		)
Operating lease liabilities			(12,742)					(9,868)
Income taxes, net	(23,286		)		(7,606		)
Unearned revenue			158,802					(21,614)
Accounts payable, accrued expenses and other liabilities	116,503				12,546
Net cash provided by operating activities			148,153					19,373
Operating lease liabilities	(33,165		)		(31,639		)
Cash flows from investing activities:
Unearned revenue	(52,065		)		109,180
Purchases of property and equipment			(26,811)					(42,768)
Net cash provided by operating activities	268,467				313,722
Capital contributions paid for investments			(1,219)					(452)
Cash flows from investing activities:
Net cash used in investing activities			(28,030)					(43,220)
Purchases of property and equipment	(116,418		)		(89,398		)
Cash flows from financing activities:
Acquisition of businesses, net of cash and cash equivalents acquired	321				(74,242		)
Proceeds from New Term Loan			3,034,750					—
Capital contributions paid for investments	(5,382		)		(2,792		)
Redemption of 2015 Term Loan			(3,064,006)					—
Distributions received from investments	19,704				190
Borrowing on revolving credit facility			—					150,000
Investments in unconsolidated affiliates	(10,000		)		(30,000		)
Redemption of HoldCo Notes			—					(1,464,500)
Other	—				694
Payments on long-term debt and finance leases			(999)					(10,427)
Net cash used in investing activities	(111,775		)		(195,548		)
Payment of debt issuance costs			(23,018)					—
Cash flows from financing activities:
Net proceeds from initial public offering			—					1,774,941
Purchase of treasury stock	(626		)		(2,738		)
Recapitalization investment portfolio distribution			(12,819)					—
Proceeds from exercise of stock options	~~14,272~~		9,311		~~3,625~~			2,709
Borrowing on Revolving Credit Facility	150,000				—
Payments related to tax withholdings for stock-based compensation			(2,199)					—
Repayment of Revolving Credit Facility	(150,000		)		—
Purchase of treasury stock			—					(865)
Proceeds from issuance of senior notes	1,200,000				891,000
Net cash (used in) provided by financing activities			(58,980)					451,858
Redemption of HoldCo Notes	(1,464,500		)		—
Effect of exchange rate changes on cash and cash equivalents			(2,717)					(34,834)
Redemption of OpCo Notes	(1,160,865		)		—
Net increase in cash and cash equivalents			58,426					393,177
Payments on long-term debt and finance leases	(32,080		)		(28,974		)
Cash and cash equivalents, beginning of the period			767,999					345,187
Payment of debt issuance and debt modification costs	(18,525		)		(30,142		)
Cash and cash equivalents, end of the period			$	826,425				$	738,364
Payment of contingent consideration for acquisition of business	(4,338		)		—
Net proceeds from initial public offering	1,772,960				—
Return of capital and special dividend to stockholders	—				(1,086,000		)
Net cash provided by (used in) financing activities	306,298				(253,229		)
Effect of exchange rate changes on cash and cash equivalents	(5,087		)		(14,613		)
Net increase (decrease) in cash and cash equivalents	457,903				(149,668		)
Cash and cash equivalents, beginning of the period	345,187				553,066
Cash and cash equivalents, end of the period	$	803,090			$	403,398

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT AND REDEEMABLE NONCONTROLLING INTEREST

(unaudited)

(in thousands)

				~~PPD, Inc. Stockholders’ Deficit~~				PPD, Inc. Stockholders’ Deficit
				~~Common Stock~~				Common Stock	~~Treasury Stock~~											Treasury Stock
	~~Redeemable Noncontrolling Interest~~		Redeemable Noncontrolling Interest	~~Shares~~	~~Amount~~		~~Paid-in-Capital~~	Shares	~~Shares~~	Amount			~~Accumulated Other Comprehensive Loss~~		Paid-in-Capital		~~Accumulated Deficit~~			~~Total Stockholders’ Deficit~~Shares			Amount		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Deficit
Balance, June 30, 2020	$	33,609		349,312	$	3,493	$	1,787,645	726	$	(13,268	)	$	(448,951	)		$	(2,397,045	)	$	(1,068,126	)
Balance, December 31, 2020			$	34,929				350,858		$	3,509				$	1,819,892				726			$	(13,268)	$	(284,845)	$	(2,271,808)	$	(746,520)
Net income	~~1,587~~		1,455	—	—		—	—	—	—			—		—		~~7,515~~			~~7,515~~—			—		—		45,881		45,881
Other comprehensive income	491			—	—		—		—	—			46,243				—			46,243
Other comprehensive (loss) income			(2,013)					—		—					—					—			—		17,215		—		17,215
Vesting of restricted stock	—			2	—		—		—	—			—				—			—
Issuance of common stock			—					751		7					6,382					(52)			807		—		—		7,196
Issuance of common stock for stock option exercises	—			977	10		13,553		—	—			—				—			13,563
Stock-based compensation expense			—					—		—					7,500					—			—		—		—		7,500
Stock-based compensation expense	—			—	—		5,409		—	—			—				—			5,409
Recapitalization investment portfolio consideration			—					—		—					—					—			—		—		28,612		28,612
Recapitalization investment portfolio consideration	—			—	—		—		—	—			—				44,468			44,468
Balance, March 31, 2021			$	34,371				351,609		$	3,516				$	1,833,774				674			$	(12,461)	$	(267,630)	$	(2,197,315)	$	(640,116)
Balance, September 30, 2020	$	35,687		350,291	$	3,503	$	1,806,607	726	$	(13,268	)	$	(402,708	)		$	(2,345,062	)	$	(950,928	)
Balance, December 31, 2019			$	30,036				280,127		$	2,801				$	1,983				701			$	(12,707)	$	(298,904)	$	(2,391,321)	$	(2,698,148)
Balance, December 31, 2019	$	30,036		280,127	$	2,801	$	1,983	701	$	(12,707	)	$	(298,904	)		$	(2,391,321	)	$	(2,698,148	)
Net income (loss)			2,718					—		—					—					—			—		—		(15,838)		(15,838)
Net income	4,499			—	—		—		—	—			—				53,594			53,594
Other comprehensive loss			(13)					—		—					—					—			—		(165,548)		—		(165,548)
Other comprehensive income (loss)	1,152			—	—		—		—	—			(103,804		)		—			(103,804		)
Issuance of common stock			—					69,183		692					1,774,977					—			—		—		—		1,775,669
Vesting of restricted stock	—			7	—		—		—	—			—				—			—
Repurchases of common stock			—					—		—					—					25			(561)		—		—		(561)
Issuance of common stock for stock option exercises	—			1,157	12		16,255		—	—			—				—			16,267
Stock-based compensation expense			—					—		—					5,272					—			—		—		—		5,272
Repurchases of common stock	—			—	—		—		25	(561		)	—				—			(561		)
Recapitalization investment portfolio consideration			—					—		—					—					—			—		—		20,062		20,062
Stock-based compensation expense	—			—	—		16,099		—	—			—				—			16,099
Other			—					—		—					—					—			—		—		(806)		(806)
Recapitalization investment portfolio consideration	—			—	—		—		—	—			—				(6,529		)	(6,529		)
Balance, March 31, 2020			$	32,741				349,310		$	3,493				$	1,782,232				726			$	(13,268)	$	(464,452)	$	(2,387,903)	$	(1,079,898)
Issuance of common stock for initial public offering	—			69,000	690		1,772,270		—	—			—				—			1,772,960
Other	—			—	—		—		—	—			—				(806		)	(806		)
Balance, September 30, 2020	$	35,687		350,291	$	3,503	$	1,806,607	726	$	(13,268	)	$	(402,708	)		$	(2,345,062	)	$	(950,928	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT AND REDEEMABLE NONCONTROLLING INTEREST

(unaudited)

(in thousands)

				PPD, Inc. Stockholders’ Deficit
				Common Stock						Treasury Stock
	Redeemable Noncontrolling Interest			Shares	Amount		Paid-in-Capital			Shares	Amount			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Deficit
Balance, June 30, 2019	$	27,973		279,781	$	2,797	$	964		628	$	(11,162	)	$	(307,630	)	$	(2,271,841	)	$	(2,586,872	)
Net income	1,161			—	—		—			—	—			—			15,421			15,421
Other comprehensive loss	(162		)	—	—		—			—	—			(51,714		)	—			(51,714		)
Vesting of restricted stock	—			5	—		—			—	—			—			—			—
Issuance of common stock for stock option exercises	—			10	—		177			—	—			—			—			177
Repurchases of common stock	—			—	—		—			11	(206		)	—			—			(206		)
Stock-based compensation expense	—			—	—		3,178			—	—			—			—			3,178
Recapitalization investment portfolio consideration	—			—	—		—			—	—			—			11,231			11,231
Issuance of common stock for acquisition	—			268	4		4,997			—	—			—			—			5,001
Other	—			—	—		—			—	—			—			(95		)	(95		)
Balance, September 30, 2019	$	28,972		280,064	$	2,801	$	9,316		639	$	(11,368	)	$	(359,344	)	$	(2,245,284	)	$	(2,603,879	)
Balance, December 31, 2018	$	24,892		279,545	$	2,795	$	41,685		515	$	(8,933	)	$	(312,891	)	$	(1,245,077	)	$	(1,522,421	)
Net income	3,390			—	—		—			—	—			—			31,071			31,071
Other comprehensive income (loss)	690			—	—		—			—	—			(46,453		)	—			(46,453		)
Vesting of restricted stock	—			11	—		—			—	—			—			—			—
Issuance of common stock for stock option exercises	—			240	2		3,623			—	—			—			—			3,625
Repurchases of common stock	—			—	—		—			124	(2,435		)	—			—			(2,435		)
Stock-based compensation expense	—			—	—		11,701			—	—			—			—			11,701
Recapitalization investment portfolio consideration	—			—	—		—			—	—			—			16,830			16,830
Issuance of common stock for acquisition	—			268	4		4,997			—	—			—			—			5,001
Modification of stock option awards	—			—	—		(14,703		)	—	—			—			—			(14,703		)
Return of capital and special dividend	—			—	—		(37,987		)	—	—			—			(1,048,013		)	(1,086,000		)
Other	—			—	—		—			—	—			—			(95		)	(95		)
Balance, September 30, 2019	$	28,972		280,064	$	2,801	$	9,316		639	$	(11,368	)	$	(359,344	)	$	(2,245,284	)	$	(2,603,879	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

PPD, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

Description of Business

PPD, Inc. (together with its subsidiaries “PPD” or the “Company”) is a holding company incorporated in Delaware. References to the “Company” throughout these condensed consolidated financial statements refer to PPD, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. The Company is a leading provider of drug development services to the biopharmaceutical industry, focused on helping the Company’s customers bring their ~~new~~ medicines and other treatments to patients around the world. The Company has been in the drug development services business for ~~more~~35 ~~than 30~~ years, providing a comprehensive suite of clinical development and laboratory services to pharmaceutical, biotechnology, medical device, government organizations and other industry participants. The Company has deep experience across a broad range of rapidly growing areas of drug development and engages with customers through a variety of commercial models, including both full-service and functional service partnerships and other offerings tailored to address the specific needs of the Company’s customers. The Company has two reportable segments, Clinical Development Services (“Clinical Development Services”) and Laboratory Services (“Laboratory Services”).

Unaudited Interim Financial Information and the Use of Estimates

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies it follows for annual financial reporting and are disclosed in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, ~~2019, as superseded by, and solely to the extent set forth in, the Company’s first Current Report on Form 8-K filed on May 21,~~ 2020 (the “~~May~~ 2020 Form 810-K”). There have been no significant changes to the Company’s significant accounting policies during the first ~~nine~~three months of ~~2020, except for a change in how the Company’s Chief Operating Decision Maker (“CODM”) assesses segment performance~~2021. ~~See Note 14, “Segments,” for additional information.~~

The preparation of financial statements in conformity with U.S. 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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company monitors estimates and assumptions on a continuous basis and updates these estimates and assumptions as facts and circumstances change and new information is obtained, including facts and circumstances related to the novel coronavirus disease (~~the~~ “COVID-19 ~~pandemic~~”) pandemic. Actual results could differ from those estimates and assumptions due to, among other things, the impacts caused by the COVID-19 pandemic.

In the opinion of the Company’s management, these condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 are not necessarily indicative of the results to be expected for the full twelve-month period ending December 31, ~~2020~~2021 or any other future period. Therefore, 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 notes thereto included in ~~its~~the ~~May~~ 2020 Form 810-K. The information as of December 31, ~~2019~~2020 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the ~~May~~ 2020 Form 810-K.

Principles of Consolidation

The condensed consolidated financial statements include the accounts and operations of the Company. All intercompany balances and transactions have been eliminated in consolidation. Amounts pertaining to the redeemable noncontrolling ownership interest held by a third-party in the operating results and financial position of the Company’s indirect majority-owned subsidiary are included as a noncontrolling interest.

Initial Public Offering

On February 6, 2020, the Company’s common stock began trading on The Nasdaq Global Select Market under the symbol “PPD.” On February 10, 2020, the Company completed its initial public offering (“IPO”) of its common stock at a price to the public of $27.00 per share. The Company issued and sold 69.0 million shares of common stock in the IPO, including 9.0 million shares of common stock issued pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company raised net proceeds of $1,773.0 million through the IPO, after deducting underwriting discounts and other offering expenses totaling $90.0 million. During the nine months ended September 30, 2020, the Company expensed $4.0 million of costs related to the IPO.

The Company used a portion of the net proceeds from the IPO to (i) redeem $550.0 million in aggregate principal amount of unsecured 7.625%/8.375% Senior PIK Toggle Notes due 2022 (the “Initial HoldCo Notes”), plus accrued and unpaid interest thereon and $5.5 million of redemption premium and (ii) redeem $900.0 million in aggregate principal amount of unsecured 7.75%/8.50% Senior PIK Toggle Notes due 2022 (the “Additional HoldCo Notes” and, together with the Initial HoldCo Notes, the “HoldCo Notes”), plus accrued and unpaid interest thereon and $9.0 million of redemption premium. The redemption of the HoldCo Notes resulted in a loss on extinguishment of debt of $50.1 million. See Note 6, “Long-term Debt and Finance Lease Obligations,” for additional information regarding the redemption.

In connection with the IPO, the Company’s board of directors adopted and stockholders approved the PPD, Inc. 2020 Omnibus Incentive Plan (“2020 Incentive Plan”) to implement a new market-based long-term incentive program to align the Company’s executive and management compensation packages with similarly situated public companies. Any awards previously granted under the Eagle Holding Company I 2017 Incentive Plan (the “Eagle I Plan”) remain subject to the terms of the Eagle I Plan and the applicable award agreements. During the nine months ended September 30, 2020, 1,211,869 awards, including time-based stock options, restricted stock units and performance stock units, with an aggregate fair value of $27.6 million, were granted under the 2020 Incentive Plan. The fair value of the awards issued under the 2020 Incentive Plan is determined in the same manner as described in the May 2020 Form 8-K, with the exception of the Company’s publicly traded stock value being used as the fair value of the Company’s common stock. As of September 30, 2020, there were 37,859,068 shares of common stock available for issuance under the 2020 Incentive Plan. No awards were issued under the Eagle I Plan during 2020 and no additional awards will be granted under the Eagle I Plan in the future. See Note 4, “Stock-based Compensation,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K for additional information. Additionally, in connection with the IPO, the Company’s Amended and Restated Certificate of Incorporation, among other things, provides that the Company’s authorized capital consists of 2.0 billion shares of common stock, par value $0.01 per share and 100.0 million shares of preferred stock, par value $0.01 per share.

During the first quarter of 2020, the Company terminated its cash-based long-term incentive plan (the “LTIP”) and accelerated the remaining expense for future service under the plan. The LTIP was terminated to align the long-term compensation package of a certain set of employees to the interests of the Company’s stockholders and that offered by similarly situated public companies. These employees started receiving stock-based awards under the 2020 Incentive Plan beginning in May 2020. During the nine months ended September 30, 2020, the Company recorded compensation expense of $22.2 million for the acceleration of expense under the LTIP. The compensation expense was recorded as a component of direct costs and selling, general and administrative (“SG&A”) expenses on the condensed consolidated statement of operations.

Secondary Public Offering

In September 2020, the Company completed an underwritten secondary public offering of 43.7 million shares of common stock sold primarily by the Company’s private equity sponsors (the “Selling Stockholders”), including 5.7 million shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company did not offer any common stock in this transaction and did not receive any proceeds from the sale of the shares of common stock by the Selling Stockholders. The Company incurred costs of $1.9 million in relation to the secondary public offering for the three and nine months ended September 30, 2020 and such costs are recorded as a component of SG&A expenses on the condensed consolidated statement of operations.

Investment Activity

During the third quarter of 2020, the Company made an additional investment of $10.0 million in Science 37, Inc. (“Science 37”), a clinical trial company whose virtual model focuses on improving patient access and enrollment and accelerating clinical development. The Company’s total investment in Science 37 as of September 30, 2020 was $25.3 million. The investment in Science 37 is accounted for under the equity method of accounting and is classified as investments in unconsolidated affiliates on the condensed consolidated balance sheets. See Note 7, “Investments,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K for additional information on the Company’s investments.

Recently Adopted Accounting Standard

In August 2018, the Financial Accounting Standards Board issued an accounting standards update to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This new guidance was issued to align the accounting for costs incurred to implement a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. With the adoption of this standard, implementation costs incurred in a cloud computing arrangement that is a service contract are capitalized and presented in the financial statements similar to prepaid expenses related to service contracts. Additionally, expenses associated with capitalized implementation costs are recorded in the same financial statement line item as the fees associated with the hosting element of a cloud computing arrangement. The Company adopted this accounting standards update on January 1, 2020 using the prospective method. The adoption of this accounting standards update did not have a material impact to the Company’s condensed consolidated financial statements.

2. Revenue

Performance Obligations

Revenue recognized from performance obligations partially satisfied in prior periods was $2832.41 million and $8223.96 million for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020,~~2021 ~~respectively,~~ and ~~$35.1 million and $80.4 million for the three and nine months ended September 30~~2020, ~~2019,~~ respectively. These cumulative catch-up adjustments primarily ~~related~~relate to ~~(i)~~ contract modifications executed in the ~~current~~relevant period, which resulted in changes to the transaction price, ~~(ii)~~and to a lesser extent, changes in transaction price related to variable consideration and ~~(iii)~~ changes in estimates such as estimated total costs.

As of ~~September~~March 3031, ~~2020~~2021, the aggregate amounts of transaction price allocated to unsatisfied performance obligations with an original contract term of greater than one year was $78.02 billion. The Company expects to recognize 36% to 42% of the transaction price allocated to unsatisfied performance obligations over the next 12 months as services are rendered, with the remainder recognized thereafter during the remaining contract term. The Company does not include the value of the transaction price allocated to unsatisfied performance obligations for contracts that have an original contract term of less than one year, or for contracts which are determined to be short-term based on certain termination for convenience provisions or where the right to invoice practical expedient has been applied.

Accounts Receivable and Unbilled Services, net and Unearned Revenue

The Company’s accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:

(in thousands)	~~September 30, 2020~~			~~December~~March 31, ~~2019~~2021			December 31, 2020
Accounts receivable	$	~~792,784~~		$	~~726~~907,~~111~~648		$	735,568
Unbilled services	~~675,525~~			~~609~~935,~~674~~399			882,078
Total accounts receivable and unbilled services	~~1,468,309~~			1,~~335~~843,~~785~~047			1,617,646
Allowance for doubtful accounts	~~(7,935~~		)	(97,~~171~~959)		)	(7,928)
Total accounts receivable and unbilled services, net	$	~~1,460,374~~		$	1,~~326~~835,~~614~~088		$	1,609,718

The Company’s unearned revenue consisted of the following amounts on the dates set forth below:

(in thousands)

~~September 30, 2020~~

~~December~~March 31, ~~2019~~2021

December 31, 2020

Unearned revenue

~~1,048,392~~

1,~~110~~224,~~872~~256

1,060,544

As of ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020, contract assets of $~~160~~180.64 million and $~~178~~171.82 million, respectively, were included in unbilled services. The changes in the Company’s contract assets and unearned revenue resulted from the timing difference between the Company’s satisfaction of performance obligations under its contracts, achievement of billing milestones and customer payments. Additionally, during the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, the Company recognized revenue of $~~815~~480.4 6 million and $~~653~~478.8 6 million, respectively, from the balance of unearned revenue outstanding as of ~~January~~the 1,beginning ~~2020~~of ~~and~~each ~~January~~respective ~~1, 2019, respectively~~year. Impairments of accounts receivable, unbilled services and contract assets were insignificant during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020.

Customer Concentration

Concentrations of credit risk with respect to accounts receivable and unbilled services, net, are limited due to the Company’s large number of customers. As of ~~September~~March 3031, ~~2020~~2021, no one customer accounted for ~~approximately~~greater 11than 10% of accounts receivable and unbilled services, net. As of December 31, ~~2019~~2020, ~~two~~one ~~customers~~customer ~~each individually~~ accounted for approximately 1112% of accounts receivable and unbilled services, net. No one customer accounted for greater than 10% of revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 ~~and~~or ~~2019~~2020.

3. ~~Stockholders’~~Goodwill ~~Deficit~~ and ~~Redeemable~~Intangible ~~Noncontrolling~~Assets, ~~Interest~~ Net

Common Stock

The following is a summary of the Company’s authorized, issued and outstanding shares of common stock as of the periods set forth below:

(in thousands)	September 30, 2020	December 31, 2019
Shares authorized	2,000,000	2,080,000
Shares issued	350,291	280,127
Shares outstanding:
Voting	349,565	276,052
Non-voting	—	3,374
Total shares outstanding	349,565	279,426

Voting, Dividend, and Liquidation Rights of Common Stock

Each share of common stock is entitled to one vote on all matters to be voted on by the stockholders of the Company holding common stock, including the election of directors. Additionally, the holders of common stock are entitled to dividends on a pro rata basis at such time and in such amounts, if and when declared by the Company’s board of directors and are entitled to participate on a pro rata basis in all distributions that may be legally made to the Company’s stockholders in connection with a voluntary or involuntary liquidation, dissolution or winding up of the Company. With the completion of the IPO in the first quarter of 2020, all non-voting shares of common stock were converted to voting shares of common stock.

Stock Split

In January 2020, the Company filed its Amended and Restated Certificate of Incorporation prior to the IPO which, among other things, effected a 1.8-for-1 stock split of its common stock and increased the authorized number of shares of its common stock to 2.08 billion, which was subsequently reduced to 2.0 billion in connection with the Company’s Amended and Restated Certificate of Incorporation filed in February 2020 as part of the IPO. All references to share and per share amounts in the Company’s condensed consolidated financial statements for periods prior to the stock split were retrospectively revised to reflect the stock split and increase in authorized shares for all periods presented.

Preferred Stock

In connection with the Company’s Amended and Restated Certificate of Incorporation filed in February 2020, the Company authorized 100.0 million shares of preferred stock. No shares of preferred stock were issued or outstanding as of September 30, 2020.

Redeemable Noncontrolling Interest

The Company owns 60% of its consolidated subsidiary PPD-SNBL K.K. (“PPD-SNBL”). The 40% ownership interest in PPD-SNBL held by Shin Nippon Biomedical Laboratories Ltd. (“SNBL”) is classified as a redeemable noncontrolling interest on the condensed consolidated balance sheets due to certain put options under which SNBL may require the Company to purchase SNBL’s remaining ownership interest at fair value upon the occurrence of certain events described in the PPD-SNBL shareholders agreement. As of September 30, 2020 and December 31, 2019, no such events had occurred. See Note 12, “Related Party Transactions,” for additional information.

4. Business Combinations

The Company accounted for its business combinations below under the acquisition method of accounting and measured at fair value, the identifiable assets acquired and liabilities assumed at the date of acquisition. For each business combination, the Company recorded assets and liabilities representing working capital at their historical costs, which approximate fair value given the short-term nature of the assets and liabilities. The methods used to estimate the fair value of definite-lived intangible assets are consistent with those described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K.

Acquisition of Synarc

On September 3, 2019, the Company acquired 100% of the issued and outstanding equity of Synarc, Inc. (“Synarc”), the global site network business of Bioclinica, Inc., expanding its global footprint into China and Latin America and expanding its central nervous system offering in the United States. The purchase price was $48.6 million and was paid with cash on hand.

The accounting for the acquisition is complete. The Company recorded measurement period adjustments including (i) an increase in the purchase price of $3.4 million, (ii) a net decrease in assets of $11.1 million and (iii) a net decrease in liabilities of $2.2 million, resulting in an increase of goodwill of $12.3 million. The goodwill recognized of $13.4 million was primarily the result of anticipated growth through the development of new customers, additional services to existing customers and the assembled workforce. The goodwill was assigned to a reporting unit within the Company’s Clinical Development Services segment. The Company is not able to deduct goodwill for U.S. income tax purposes.

The Company acquired the following definite-lived intangible assets with the acquisition of Synarc:

	Acquired Intangible Assets(in thousands)		Weighted-Average Amortization Period (in years)
Customer relationships	$	2,000	15
Know-how/processes	1,800		8
Investigator network	1,900		8
Trade names	1,400		10
Total	$	7,100	10

The following table summarizes the consideration and the fair values of identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):

Purchase price	$	48,635
Identifiable assets acquired:
Cash and cash equivalents	$	6,003
Accounts receivable and unbilled services	18,819
Prepaid expenses and other current assets	1,590
Property and equipment	19,273
Intangible assets	7,100
Other assets	928
Operating lease right-of-use assets	1,609
Total identifiable assets acquired	55,322
Liabilities assumed:
Accounts payable	(2,117		)
Other accrued expenses	(4,026		)
Unearned revenue	(7,210		)
Long-term debt and finance lease obligations	(38		)
Deferred tax liabilities	(4,736		)
Other liabilities	(330		)
Operating lease liabilities	(1,609		)
Total liabilities assumed	(20,066		)
Separately identifiable net assets acquired	35,256
Goodwill	13,379
Total net assets	$	48,635

Acquisition of Medimix

On July 1, 2019, the Company acquired 100% of the issued and outstanding equity of Medimix International (“Medimix”), a global technology company providing real-world evidence insights and information to the pharmaceutical, diagnostic and medical device industries. The acquisition enhanced the Company’s ability to leverage data to provide real-world evidence and insights for customers. The purchase price was $36.8 million, which consisted of $27.5 million of cash, $5.0 million of common stock of the Company and $4.3 million of estimated contingent consideration.

Based on the fair values of identifiable assets acquired and liabilities assumed at the acquisition date, the consideration paid was allocated as follows: (i) $13.5 million to definite-lived intangible assets, (ii) $20.5 million to goodwill and (iii) $2.8 million to other net assets primarily related to net working capital.

As of December 31, 2019, the Company recorded a contingent consideration liability of $9.5 million to be paid based on Medimix meeting certain performance targets through December 31, 2019. The contingent consideration was paid to the seller in July 2020.

The accounting for the acquisition is complete and measurement period adjustments recorded were not material. The goodwill recognized was primarily the result of anticipated growth through the development of new customers, additional services to existing customers and the assembled workforce. The goodwill was assigned to a reporting unit within the Company’s Clinical Development Services segment. The majority of goodwill is tax deductible for U.S. income tax purposes.

The Company acquired the following definite-lived intangible assets with the acquisition of Medimix:

	Acquired Intangible Assets (in thousands)		Weighted-Average Amortization Period (in years)
Customer relationships	$	7,500	13
Trade names	900		10
Technology/intellectual property	5,100		8
Total	$	13,500	11

Acquisition Costs

Acquisition costs for the three and nine months ended September 30, 2019 were $1.5 million and $7.1 million, respectively. There were no acquisition costs for the three and nine months ended September 30, 2020. These costs are expensed as incurred and are included on the condensed consolidated statements of operations as a component of SG&A expenses.

5. Goodwill and Intangible Assets, Net

Goodwill, Net

(in thousands)	Total			Clinical Development Services			Laboratory Services
Balance at December 31, 2019:
Goodwill	$	1,890,815		$	1,664,201		$	226,614
Accumulated impairment losses	(126,711		)	(99,432		)	(27,279		)
Goodwill, net	1,764,104			1,564,769			199,335
Activity:
Translation adjustments	(5,312		)	(5,312		)	—
Measurement period adjustments for prior acquisition	12,314			12,314			—
Balance at September 30, 2020:
Goodwill	1,897,817			1,671,203			226,614
Accumulated impairment losses	(126,711		)	(99,432		)	(27,279		)
Goodwill, net	$	1,771,106		$	1,571,771		$	199,335

The changes in the carrying amount of goodwill by segment consisted of the following on the dates set forth below:


(in thousands)	Total		Clinical Development Services		Laboratory Services
Balance at December 31, 2020:
Goodwill	$	1,946,919	$	1,720,305	$	226,614
Accumulated impairment losses	(126,711)		(99,432)		(27,279)
Goodwill, net	1,820,208		1,620,873		199,335
Activity:
Translation adjustments	(6,368)		(6,368)		—



Balance at March 31, 2021:
Goodwill	1,940,551		1,713,937		226,614
Accumulated impairment losses	(126,711)		(99,432)		(27,279)
Goodwill, net	$	1,813,840	$	1,614,505	$	199,335

Intangible Assets, Net

	September 30, 2020							December 31, 2019
(in thousands)	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	883,459	$	(455,943	)	$	427,516	$	884,788	$	(415,427	)	$	469,361
Trade names	370,716		(151,655		)	219,061		372,210		(139,141		)	233,069
Backlog	177,294		(176,464		)	830		177,599		(175,571		)	2,028
Investigator/payer network	236,617		(203,866		)	32,751		236,082		(185,478		)	50,604
Technology/intellectual property	8,600		(4,022		)	4,578		8,600		(3,319		)	5,281
Know-how/processes	585,633		(500,208		)	85,425		586,971		(455,223		)	131,748
Total	$	2,262,319	$	(1,492,158	)	$	770,161	$	2,266,250	$	(1,374,159	)	$	892,091

The Company’s definite-lived intangible assets were composed of the following on the dates set forth below:

Amortization expense was $39.5 million and $118.6 million for the three and nine months ended September 30, 2020, respectively, and $40.1 million and $121.1 million for the three and nine months ended September 30, 2019, respectively. Translation adjustments of approximately $2.6 million were recorded during the nine months ended September 30, 2020, resulting in a decrease to the carrying amount of the Company’s definite-lived intangible assets, net. The Company does not have any indefinite-lived intangible assets other than goodwill.


	March 31, 2021						December 31, 2020
(in thousands)	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Customer relationships	$	899,315	$	(490,603)	$	408,712	$	902,302	$	(479,341)	$	422,961
Trade names	377,571		(162,983)		214,588		378,764		(159,131)		219,633
Backlog	181,077		(180,823)		254		181,762		(181,196)		566
Investigator/payer network	242,505		(221,205)		21,300		245,683		(217,963)		27,720
Technology/intellectual property	8,600		(4,491)		4,109		8,600		(4,256)		4,344
Know-how/processes	597,426		(538,766)		58,660		598,922		(525,742)		73,180
Total	$	2,306,494	$	(1,598,871)	$	707,623	$	2,316,033	$	(1,567,629)	$	748,404

17Amortization expense was $38.6 million and $39.7 million for the three months ended March 31, 2021 and 2020, respectively.

64. Long-term Debt and Finance Lease Obligations

Long-term debt and finance lease obligations consisted of the following as set forth on the dates below:

(dollars in thousands)	~~Maturity Date~~	~~Effective Rate~~	~~Stated~~Maturity ~~Rate~~Date	~~September 30, 2020~~			~~December~~Effective ~~31, 2019~~Rate			Stated Rate	March 31, 2021		December 31, 2020
Term Loan	August 2022	3.71%	3.50%	$	3,072,112		$	3,096,429
New Term Loan			January 2028				2.94%			2.75%	$	3,050,000	$	—
2025 Notes	~~June 2025~~	~~4.97%~~	~~4.63%~~June 2025	~~500,000~~			—4.97%			4.63%	500,000		500,000
2028 Notes	~~June 2028~~	~~5.24%~~	~~5.00%~~June 2028	~~700,000~~			—5.24%			5.00%	700,000		700,000
OpCo Notes(1)	—	6.61%	6.38%	—			1,125,000
2015 Term Loan (1)			August 2022				3.71%			3.50%	—		3,064,006
Initial HoldCo Notes(1)	—	8.92%	7.63%	—			550,000
Finance lease obligations			Various				Various			Various	51,368		25,734
Additional HoldCo Notes(1)	—	8.90%	7.75%	—			900,000
											4,301,368		4,289,740
Other debt(1)	—	1.13%	1.13%	—			5,707
Unamortized debt discount											(14,814)		(4,198)
Finance lease obligations	Various	Various	Various	26,635			28,726
Unamortized debt issuance costs											(38,844)		(23,112)
				4,298,747			5,705,862
Current portion of long-term debt and finance lease obligations											(35,000)		(36,238)
Unamortized debt discount				(4,822		)	(13,956		)
Long-term debt and finance lease obligations, less current portion											$	4,212,710	$	4,226,192
Unamortized debt issuance costs				(24,627		)	(47,978		)
Current portion of long-term debt and finance lease obligations				(36,120		)	(35,794		)
Long-term debt and finance lease obligations, less current portion				$	4,233,178		$	5,608,134

(1) ~~Effective~~Maturity date, effective rate and stated rate are as of December 31, ~~2019~~2020 for the extinguished ~~OpCo~~term ~~Notes, Initial HoldCo Notes, Additional HoldCo Notes and Other debt~~loan.

~~Revolving~~Extinguished 2015 Credit ~~Facility~~ Agreement

~~The~~On ~~Company~~August ~~has~~18, a2015, ~~revolving~~Jaguar ~~credit~~Holding ~~facility~~Company ~~(the~~II ~~“Revolving~~and ~~Credit~~Pharmaceutical ~~Facility”)~~Product ~~available~~Development, ~~for~~LLC ~~use~~entered ~~under~~into ~~the~~a credit agreement ~~dated as of August 18, 2015, as amended~~ (the “2015 Credit Agreement”), ~~with~~as aamended, ~~total~~consisting ~~committed credit~~ of a $~~300~~2.0575 billion ~~million.~~senior Insecured ~~March~~term ~~2020,~~loan (the ~~Company~~“2015 ~~borrowed~~Term ~~$150.0~~Loan”) ~~million~~issued ~~from~~at ~~the~~99.5% ~~Revolving~~of ~~Credit~~face ~~Facility~~value, asor a ~~precautionary~~discount ~~measure~~of in0.5%, ~~order to further strengthen the Company’s cash position~~ and ~~to preserve financial flexibility due to the uncertainty in the global markets as~~ a ~~result of the COVID-19 pandemic~~$300.0 million Insenior ~~June~~secured ~~2020,~~revolving ~~the~~credit ~~Company~~facility ~~repaid~~ (the ~~outstanding~~“2015 ~~balance of the~~ Revolving Credit Facility”). ~~using~~In ~~cash~~May onand ~~hand.~~November ~~From~~of ~~time to time~~2016, the Company isamended ~~required~~the to2015 ~~have~~Credit ~~letters~~Agreement ~~of credit issued on its behalf~~ to ~~provide~~increase ~~credit~~the ~~support~~borrowings ~~for~~of ~~guarantees,~~the ~~contractual~~2015 ~~commitments~~Term ~~and~~Loan ~~insurance~~by ~~policies~~$660. ~~As of September~~0 ~~30,~~million ~~2020~~in ~~and~~total. ~~December~~Borrowings ~~31,~~under ~~2019,~~ the ~~Company~~2015 ~~had~~Term ~~letters~~Loan ofbore ~~credit~~interest ~~outstanding~~at ~~with~~a anvariable ~~aggregate~~rate ~~value~~based ofon ~~$1.6~~the ~~million,~~London ~~which~~Inter-bank ~~reduced~~Offered ~~available~~Rate ~~borrowings~~(“LIBOR”) ~~under~~for ~~the~~a ~~Revolving~~specific ~~Credit~~interest ~~Facility~~period byplus ~~such~~an ~~amount.~~applicable ~~As of September 30~~margin, ~~2020,~~subject ~~the~~to ~~Company~~a ~~had~~Eurocurrency ~~available~~rate ~~credit~~floor ~~under the Revolving Credit Facility~~ of ~~$298~~1.~~4 million~~00%. The ~~Company~~2015 ~~did~~Term ~~not~~Loan ~~have~~was ~~any~~scheduled ~~borrowings~~to ~~outstanding~~mature ~~under~~on August 18, 2022 and the 2015 Revolving Credit Facility aswas ofscheduled ~~September 30,~~to ~~2020~~mature ~~and~~on ~~December~~May 3115, ~~2019~~2022.

~~Issuance~~On January 13, 2021, the Company extinguished the 2015 Term Loan in accordance with the provisions governing the 2015 Credit Agreement for $3,064.0 million with the proceeds received from the Company’s New Term Loan (as defined below), together with cash on hand. At the same time, the Company also extinguished its then existing 2015 Revolving Credit Facility. The total loss on extinguishment of debt associated with the ~~2025~~extinguishments ~~Notes~~of the 2015 Term Loan and the ~~2028~~2015 ~~Notes~~Revolving Credit Facility was $10.7 million. As a result, the obligations of the Company under the 2015 Credit Agreement were discharged on that date.

On June 5, 2020, the Company’s indirect wholly-owned subsidiaries, Jaguar Holding Company II and PPD Development, L.P., issued and sold in a private placement $1,200.0 million of unsecured senior notes consisting of (i) $500.0 million aggregate principal amount of 4.625% senior notes due 2025 (the “2025 Notes”) and (ii) $700.0 million aggregate principal amount of 5.0% senior notes due 2028 (the “2028 Notes” and, together with the 2025 Notes, the “New Notes”), in each case, under an indenture dated as of June 5, 2020 (the “Indenture”). The 2025 Notes mature on June 15, 2025 and the 2028 Notes mature on June 15, 2028. Interest on the New Notes is payable semi-annually on June 15 and December 15 of each year. The New Notes do not have registration rights. Debt issuance costs of $18.6 million, consisting primarily of underwriters fees and professional fees, were capitalized in connection with the issuance of the New Notes. The net proceeds from the New Notes were used to redeem all outstanding $1,125.0 million aggregate principal amount of unsecured 6.375% senior notes (the “OpCo Notes”), as well as to pay for the redemption premium and accrued interest on the OpCo Notes and debt issuance costs associated with the New Notes.12

~~The~~New ~~Company~~Credit may redeem, at its option, some or all of the 2025 Notes prior to June 15, 2022, or the 2028 Notes prior to June 15, 2023, at a price equal to 100% of the principal amount of the 2025 Notes and 2028 Notes, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. Alternatively, within the same time frames, the Company may redeem up to 40% of the original principal amount of the 2025 Notes or the 2028 Notes, as applicable, with the proceeds of certain equity offerings at a redemption price of 104.625%, in the case of the 2025 Notes, and 105.000%, in the case of the 2028 Notes, of the principal amount of the 2025 Notes or the 2028 Notes, plus accrued and unpaid interest, if any, to the redemption date.Agreement

18On January 13, 2021, the Company and its indirect wholly-owned subsidiary, PPD Development, L.P. (the “Co-Borrower”) entered into and closed a new (i) $3,050.0 million aggregate principal amount senior secured first-lien term loan facility (the “New Term Loan”) issued at 99.5% of face value, or a discount of 0.5%, maturing in January 2028 and (ii) $600.0 million committed principal amount senior secured first-lien revolving credit facility (the “New Revolving Credit Facility” and, together with the New Term Loan, the “Bank Facilities”) maturing in January 2026 under the credit agreement dated as of January 13, 2021 (the “New Credit Agreement”). Debt issuance costs of $23.0 million, consisting primarily of arrangement fees and professional fees, were deferred in connection with the New Term Loan. Additionally, debt issuance costs of $1.1 million related to professional fees were deferred in connection with the New Revolving Credit Facility.

OnThe orproceeds ~~after~~from ~~June~~borrowings ~~15,~~under ~~2022, in~~ the ~~case~~New ofTerm ~~the 2025 Notes~~Loan, ~~and~~together ~~June~~with ~~15,~~cash ~~2023,~~on ~~in the case of the 2028 Notes~~hand, ~~the~~were ~~Company~~used ~~may~~to ~~redeem some or all of such notes at the redemption prices listed below~~ (~~expressed~~i) asrefinance ain ~~percentage~~full of the principal amount), ~~plus~~outstanding and accrued and unpaid interest, iffees ~~any,~~and toother ~~the~~amounts ~~redemption~~then ~~date,~~due ifand ~~redeemed~~owing ~~during~~under the ~~12-month~~2015 ~~period~~Term ~~commencing~~Loan onand ~~June~~(ii) 15pay offees ~~the~~and ~~years~~expenses ~~set~~relating ~~forth~~to ~~below~~the New Credit Agreement.

2025 Notes
Period	Redemption Price
2022	102.313	%
2023	101.156	%
2024 and thereafter	100.000	%

Borrowings under the New Term Loan bear interest, initially, at a rate equal to, at the option of the Company, either (a) Adjusted LIBOR (as defined in the New Credit Agreement) plus a margin of 2.25% with an “Adjusted LIBOR floor” of 0.50% or (b) Base Rate (as defined in the New Credit Agreement) plus a margin of 1.25%, with a “Base Rate floor” of 1.50%. Loans under the New Revolving Credit Facility bear interest, initially, at a rate equal to, at the option of the Company either (a) Adjusted LIBOR plus a margin of 2.00% with an “Adjusted LIBOR floor” of 0.00% or (b) Base Rate plus a margin of 1.00% with a “Base Rate floor” of 1.00%. Pricing on each of the Bank Facilities includes a 25 basis point step-down to the respective interest rate margins upon the achievement and maintenance of a total net leverage ratio of 3.75:1.00 or lower or upon the public announcement that the Company’s corporate credit rating from each of Moody’s and S&P is equal to or better than Ba2 or BB, respectively. Interest on the New Term Loan was based on Adjusted LIBOR as of March 31, 2021.

2028 Notes
Period	Redemption Price
2023	102.500	%
2024	101.250	%
2025 and thereafter	100.000	%

In addition to paying interest on outstanding principal under the New Term Loan and New Revolving Credit Facility, the Company is required to pay a commitment fee, payable quarterly in arrears, of 0.50% per annum on the average daily unused portion of the New Revolving Credit Facility, with step-downs to (i) 0.375% and (ii) 0.25% per annum on such portion upon achievement of a total net leverage ratio equal to or less than (i) 4.75x and (ii) 3.75x, respectively, and an additional 0.125% per annum upon the public announcement that the Company’s corporate credit rating from each of Moody’s and S&P is equal to or better than Ba2 or BB, respectively. The commitment fee shall, however, in no event be less than 0.25% per annum. The commitment fee will initially be set at 0.375% per annum until the date the Company delivers the applicable financial statements for the quarter ending June 30, 2021. The borrowers must also pay customary letter of credit fees.

~~Upon~~The ~~the~~borrowers ~~occurrence~~are ofrequired, ~~specific~~subject ~~kinds~~to ofcertain ~~changes~~exceptions, ofto ~~control~~pay ~~events,~~outstanding ~~the~~loans ~~holders~~under of the New ~~Notes~~Term ~~will~~Loan, ~~have~~(i) ~~the~~commencing ~~right~~with tothe ~~cause~~fiscal ~~the~~year ~~Company~~ending toDecember ~~repurchase~~31, ~~some~~2022, orwith ~~all~~50% of ~~the~~excess ~~New~~cash ~~Notes~~flow, atwith ~~101%~~step-downs ofupon ~~face~~achievement ~~amount,~~of ~~plus~~certain ~~accrued~~first ~~and~~lien ~~unpaid~~net ~~interest~~leverage ratios, if(ii) ~~any,~~with to100% of the ~~repurchase~~net ~~date.~~cash ~~Additionally,~~proceeds ifof all non-ordinary course asset sales by the Company orand its restricted subsidiaries, ~~sells~~with ~~assets,~~step-downs ~~under~~upon achievement of certain ~~circumstances,~~first lien net leverage ratios and subject to the Company’s ~~will~~reinvestment beright ~~required~~and to(iii) ~~make~~with an100% ~~offer~~of tothe ~~purchase~~net acash ~~specified~~proceeds ~~amount~~of issuances of ~~New~~debt ~~Notes~~obligations ~~equal~~of tothe Company and its restricted subsidiaries, other than permitted debt. The borrowers may also voluntarily repay outstanding loans under the ~~net~~New ~~proceeds~~Term ofLoan ~~such~~and ~~sale~~the New Revolving Credit Facility at anany ~~offer~~time ~~price~~without premium or penalty, except in ~~cash~~connection atwith, or resulting in, any repricing event. In addition, the ~~amount~~borrowers ~~equal~~may elect to ~~100%~~permanently terminate or reduce all or a portion of the ~~principal~~revolving ~~amount~~credit ofcommitments and the ~~New~~letter ~~Notes~~of tocredit besub-limit ~~redeemed,~~under ~~plus~~the ~~accrued~~New ~~and~~Revolving ~~unpaid~~Credit ~~interest,~~Facility ifat any, totime ~~the~~without ~~repurchase~~premium ~~date~~or penalty.

The ~~New~~borrowers ~~Notes~~ are ~~unsecured~~required ~~obligations and (i) rank senior in right of payment~~ to ~~all~~repay ofinstallments on the ~~Company’s~~New ~~existing~~Term ~~and~~Loan ~~future subordinated indebtedness, (ii) rank equally~~ in ~~right~~quarterly ofprincipal ~~payment~~amounts ~~with~~equal ~~all of the Company’s existing and future senior indebtedness, (iii) are effectively subordinated~~ to ~~any~~0.25% of the ~~Company’s~~original ~~existing~~principal ~~and~~amount ~~future~~of ~~secured debt, to~~ the ~~extent~~New ofTerm ~~the~~Loan ~~value~~borrowed ofon the ~~assets~~closing ~~securing~~date ~~such~~on ~~debt and (iv) are structurally subordinated to all of~~ the ~~existing~~last ~~and~~business ~~future~~day ~~liabilities~~ of each ~~of the Company’s subsidiaries that do not guarantee the New Notes. The New Notes contain customary covenants including~~June, ~~but not limited to~~September, ~~restrictions~~December ~~on the Company~~ and ~~its~~March ~~restricted subsidiaries’ ability to incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions in respect~~ of, oreach ~~repurchase or redeem~~year, ~~capital stock; make loans and investments; sell or otherwise dispose of assets; incur liens; enter into transactions~~ with ~~affiliates; enter into agreements restricting~~ the ~~Company’s~~balance ~~subsidiaries’~~payable ~~ability~~on toJanuary ~~pay dividends; and consolidate~~13, ~~merge~~2028. orThe ~~sell~~entire ~~all~~principal oramount ~~substantially all~~ of ~~their~~revolving ~~assets.~~loans ~~Additionally,~~outstanding ~~the~~(if ~~Indenture~~any) ~~for~~under the New ~~Notes~~Revolving ~~includes~~Credit ~~certain~~Facility ~~customary~~are ~~events~~due ofand ~~default~~payable ~~which may require acceleration of payment. Such events of default include nonpayment of principal or interest, failure to pay final judgments~~ in ~~excess~~full ofat amaturity ~~specified~~on ~~threshold,~~January ~~failure of a guarantee to remain in effect~~13, ~~bankruptcy and insolvency events and cross acceleration~~2026, ~~the~~on ~~occurrence of~~ which ~~could~~day ~~result in~~ the ~~principal~~revolving ofcredit ~~and~~commitments ~~accrued~~thereunder ~~interest~~will ~~on the New Notes to become or be declared due and payable immediately~~terminate.

~~Redemption~~All obligations under the New Credit Agreement are unconditionally guaranteed on a senior basis by, subject to certain exceptions, each existing and subsequently acquired or organized wholly owned restricted subsidiary of ~~OpCo~~the ~~Notes~~Company organized in the United States and certain other non-U.S. subsidiaries. The obligations of the borrowers under the New Credit Agreement and the guarantees are secured, subject to certain exceptions and excluded assets, by (i) the equity securities of the Co-Borrower and each guarantor, and of each direct, restricted subsidiary of the Company, the Co-Borrower and of each subsidiary guarantor and (ii) security interests in, and mortgages on, substantially all personal property and material owned real property of the Company and each subsidiary guarantor.

On June 5, 2020, the Company redeemed all its outstanding OpCo Notes in accordance with the provisions governing the OpCo Notes indenture for $1,160.9 million, including a redemption premium of $35.9 million. As such, the obligations of the Company under the OpCo Notes indenture were discharged on that date. Also as part of the redemption, the Company wrote off unamortized debt issuance costs related to the OpCo Notes of $7.6 million, and combined with the applicable redemption premium, resulted in a total loss on extinguishment of debt of $43.5 million. The Company redeemed the OpCo Notes with the proceeds received from the Company’s New Notes. See Note 10, “Long-term Debt and Finance Lease Obligations,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K for additional information on the OpCo Notes.13

19The New Credit Agreement includes negative covenants limiting the ability of the Company and its restricted subsidiaries to incur indebtedness and liens, sell assets and make restricted payments, including dividends and investments, subject to certain exceptions. In addition, the New Credit Agreement also contains other customary affirmative and negative covenants and customary events of default (with customary grace periods, as applicable). Additionally, certain negative covenants are subject to customary investment grade fall-away provisions if the Company has a public corporate credit/family ratings that is investment grade from Moody’s and S&P (so long as there is no ongoing event of default) and will be reinstated if the ratings condition is no longer met. If an event of default occurs the administrative agent shall, at the request of, or may, with the consent of the required lenders, (i) terminate lenders’ commitments under the New Credit Agreement, (ii) declare any outstanding loans under the New Credit Agreement to be immediately due and payable, (iii) require that the Company cash collateralize the letters of credit (“L/C”) obligations and (iv) exercise on behalf of itself, the L/C issuers and the lenders all rights and remedies available to it, the L/C issuers and the lenders under the loan documents or applicable law.

~~Redemption~~From time to time, the Company is required to have L/C issued on its behalf to provide credit support for guarantees, contractual commitments and insurance policies. As of ~~HoldCo~~March 31, ~~Notes~~2021 and December 31, 2020, the Company had L/C outstanding with an aggregate value of $1.6 million, which reduced available borrowings under the New Revolving Credit Facility and 2015 Revolving Credit Facility by such amount. As of March 31, 2021, the Company had available credit under the New Revolving Credit Facility of $598.4 million. The Company did not have any borrowings outstanding under the New Revolving Credit Facility as of or at any time during the three-month period ended March 31, 2021.

On February 18, 2020, the Company redeemed all of its outstanding HoldCo Notes in accordance with the provisions governing the HoldCo Notes indentures for $1,464.5 million, including a redemption premium of $14.5 million. As such, the obligations of the Company under the HoldCo Notes and such indentures were discharged on that date. Also as part of the redemption, the Company wrote off the unamortized debt discount and deferred debt issuance costs related to the HoldCo Notes of $35.6 million. The Company redeemed the HoldCo Notes with a portion of the net proceeds received from the Company’s IPO. See Note 10, “Long-term Debt and Finance Lease Obligations,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K for additional information on the HoldCo Notes.

Other Debt

During the first nine months of 2020, the Company repaid its working capital loan with SNBL which was classified as “other debt.” See Note 12, “Related Party Transactions,” for additional details on the Company’s transactions with SNBL.

Debt Covenants and Default Provisions

Other than the customary covenants and default provisions related to the New ~~Notes~~Credit Agreement, there were no changes to the debt covenants or default provisions related to the Company’s other outstanding debt ~~under its Credit Agreement~~ or other obligations during the first ~~nine~~three months of ~~2020~~2021. ~~In June 2020, the Company repaid the outstanding balance of the Revolving Credit Facility and therefore ceased to be subject to the net secured leverage ratio test, as defined in the Credit Agreement.~~ The Company was in compliance with all covenants for all long-term debt arrangements as of ~~September~~March 3031, ~~2020~~2021 and December 31, ~~2019~~2020. For additional information on the Company’s debt arrangements, debt covenants and default provisions, see Note 109, “Long-term Debt and Finance Lease Obligations,” of the Company’s audited consolidated financial statements included in the ~~May~~ 2020 Form 810-K.

New Finance Lease Agreement

In January 2021, the Company entered into a new lease agreement for its existing laboratory facilities in Virginia. The new lease agreement replaced the prior operating lease agreements for certain existing facilities, consolidated multiple operating leases into one new lease agreement and extended the term of the lease for the facilities. The new finance lease totaling $26.3 million was recorded as a component of property and equipment, net, and current and long-term debt and finance lease obligations on the condensed consolidated balance sheets.

Scheduled Maturities of Long-term Debt and Finance Lease Obligations

As of ~~September~~March 3031, ~~2020~~2021, the scheduled maturities of long-term debt and settlement of finance lease obligations for the remainder of ~~2020~~2021, each of the next five years and thereafter were as follows (in thousands):

Year	~~Amount~~		Amount
2020 (remaining three months)	$	8,969
2021 (remaining nine months)			$	26,236
2021	36,156
2022			34,339
2022	3,035,578
2023			34,417
2023	3,690
2024			34,332
2024	3,530
2025			534,421
2025	503,530
2026			34,835
Thereafter	~~707,294~~		3,602,788
Total	$	~~4,298,747~~	$	4,301,368

75. Income Taxes

~~On March 27, 2020, the U.S. government passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in response to the COVID-19 pandemic.~~ The ~~CARES~~Company’s ~~Act~~effective ~~provides~~income ~~wide-ranging~~tax ~~economic~~rate ~~relief,~~was ~~including significant changes to U~~23.S.1% ~~business~~and ~~tax provisions~~40.0% ~~These~~for ~~changes include, in summary, (i) modifications to limitations on~~ the ~~deductibility~~three ofmonths ~~net~~ended ~~operating losses~~March 31, ~~(ii)~~2021 ~~modifications~~and ~~to limitations on the deductibility of business interest~~2020, ~~(iii) alternative minimum tax credit acceleration and (iv) the expensing of qualified improvement property~~respectively. The ~~most significant impact to the~~ Company’s ~~from~~provision ~~the~~for ~~CARES~~income ~~Act~~taxes ~~relates to the modification to limitations on the deductibility of business interest and the expensing of qualified improvement property. The Company has accounted~~ for the ~~impact~~three ofmonths ~~the CARES Act on tax years prior to 2020 within the period~~ ended March 31, ~~2020~~2021 ~~and~~was ~~accounted~~primarily ~~for~~due ~~the~~to ~~impact on~~ the ~~current~~estimated tax ~~year~~effect inon ~~its~~the ~~annual~~Company’s ~~effective~~ pre-tax ~~rate~~income. ~~and~~The ~~provision~~Company’s ~~for~~benefit from income taxes for the three ~~and nine~~ months ended ~~September 30~~March 31, 2020. ~~The~~was ~~Company~~primarily isdue ~~continuing~~ to ~~assess~~ the ~~income~~estimated tax ~~impact~~effect ofon the ~~CARES~~Company’s ~~Act~~pre-tax loss and ~~other~~the ~~legislative~~impact ~~changes~~of ~~enacted~~certain ~~and~~favorable ~~being~~discrete ~~considered~~items, bypartially ~~governments~~offset ~~around~~by the ~~world~~tax inimpact ~~response~~of tocertain ~~the COVID~~non-19deductible ~~pandemic~~compensation costs.

2014

~~The~~As ~~Company’s~~of ~~effective~~March 31, ~~income~~2021 ~~tax rate was 50.0%~~ and ~~33.5%~~December 31, ~~for~~2020, the ~~three~~Company’s ~~months~~total ~~ended~~unrecognized ~~September 30,~~tax ~~2020~~benefits ~~and~~were ~~2019,~~$23.9 ~~respectively,~~million and 24$21.~~5% and 25.~~3% ~~for the nine months ended September 30~~million, ~~2020 and 2019,~~ respectively. ~~The~~Included ~~Company’s~~in ~~provision~~the ~~for~~balance ~~income~~of ~~taxes~~unrecognized ~~for~~tax ~~the~~benefits ~~three~~as ~~months~~of ~~ended~~March 31, ~~September~~2021 and December 3031, 2020, ~~was~~were ~~primarily~~$17.3 ~~due~~million toand ~~the~~$14.9 ~~estimated~~million, ~~tax~~respectively, onnet of the ~~Company’s~~federal ~~distribution~~benefit offor ~~pre-tax~~state ~~income~~taxes ~~among~~that, ~~domestic~~if ~~and~~recognized, ~~foreign~~would ~~jurisdictions~~reduce ~~and~~ the ~~impacts~~Company’s ofeffective a tax rate. ~~change~~In inaddition, the ~~United~~Company ~~Kingdom.~~believes ~~The~~that ~~Company’s~~it ~~provision~~is ~~for~~reasonably ~~income~~possible ~~taxes~~that ~~for~~ the ~~nine~~total ~~months~~amount ~~ended~~of ~~September 30,~~unrecognized ~~2020~~tax ~~was~~benefits ~~primarily~~could ~~due~~decrease toby ~~the~~up ~~estimated~~to ~~tax~~$3.4 ~~effect~~million onwithin the ~~Company’s~~next ~~pre-tax~~12 ~~income.~~months ~~The~~due ~~Company’s~~to ~~provision for income taxes for~~ the ~~three~~filing ~~and~~of ~~nine~~amended ~~months ended September 30~~returns, ~~2019~~settlement ~~was~~of ~~primarily~~audits ~~due~~and to the ~~estimated~~expiration ~~tax~~of ~~effect on~~ the ~~Company’s~~statutes ~~pre-tax~~of ~~income~~limitations.

AsThe ofCompany ~~September 30,~~has ~~2020~~analyzed ~~and~~its ~~December 31,~~filing ~~2019,~~positions ~~the~~in ~~Company’s~~all ~~total~~significant ~~unrecognized~~federal, ~~tax~~state ~~benefits were $21.4 million~~ and ~~$39.7~~foreign ~~million,~~jurisdictions ~~respectively.~~where ~~The~~it ~~decrease~~is required to ~~the~~file ~~Company’s~~income ~~unrecognized~~ tax ~~benefits during the nine months ended September 30~~returns, ~~2020,~~as ~~was~~well ~~primarily~~as ~~the~~open ~~result~~tax ofyears ain ~~$13~~these jurisdictions.0 ~~million~~The ~~release~~significant asjurisdictions awith ~~result~~periods ofsubject ~~the~~to ~~application~~examination ofwhere the ~~provisions~~Company ofdoes ~~the~~business ~~CARES~~are ~~Act. Included in~~ the ~~balance~~2017 ofthrough ~~unrecognized~~2020 tax ~~benefits~~years asfor ofthe ~~September 30,~~United ~~2020~~States and ~~December 31,~~the ~~2019,~~United ~~were $14~~Kingdom.6 ~~million~~Various ~~and $28~~U.~~8 million~~S., ~~respectively,~~foreign ~~net~~and ~~of the federal benefit for~~ state ~~taxes,~~income ~~that~~tax ifreturns ~~recognized,~~are ~~would~~under ~~reduce~~examination ~~the~~by ~~Company’s~~taxing ~~effective tax rate~~authorities. InThe ~~addition, the~~ Company ~~believes~~does ~~that~~not itbelieve ~~is reasonably possible~~ that the ~~total~~outcome ~~amount~~ of ~~unrecognized~~any ~~tax~~examination ~~benefits~~will ~~could~~have ~~decrease~~a bymaterial animpact ~~amount~~on upits toresults ~~$6.4~~of ~~million~~operations, ~~within~~financial ~~the~~condition ~~next 12 months due to the settlement of audits~~ and/or ~~the~~cash ~~expiration of the statutes of limitations~~flows.

The Company has analyzed its filing positions in all significant federal, state and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions6. Derivative ~~The~~Instruments ~~significant jurisdictions with periods subject to examination are the 2017 through 2019 tax years for the United States~~ and ~~the~~Hedging 2017 through 2019 tax years for the United Kingdom. Various foreign and state income tax returns are under examination by taxing authorities. The Company does not believe that the outcome of any examination or inquiry will have a material impact on its results of operations, financial condition or cash flows.Activities

8The Company had variable rate borrowings under its 2015 Term Loan and now has variable rate borrowings under its New Term Loan, and as a result, was and is exposed to interest rate fluctuations on these borrowings. ~~Derivative~~ ~~Instruments~~From time to time, the Company enters into interest rate swaps to mitigate the risk in fluctuations in interest rates. For hedges that qualify, the Company accounts for these interest rate swaps as qualifying cash flow hedges because their purpose is to hedge the Company’s exposure to increases in interest rates on its variable rate borrowings and ~~Hedging~~as ~~Activities~~the interest rate swaps effectively convert variable rate borrowings to fixed rate borrowings based on the fixed interest rate for the interest rate swaps plus the applicable margin on the 2015 Term Loan or New Term Loan, as applicable. For those designated interest rate swaps accounted for as cash flow hedges, the Company recognizes in accumulated other comprehensive loss (“AOCL”) or accumulated other comprehensive income (“AOCI”), net of tax, any changes in the fair value, representing unrealized gains or losses, of its interest rate swaps. The Company assesses effectiveness at inception and on an ongoing quarterly basis. The Company may also enter into interest rate swap agreements that are not designated as cash flow hedges for accounting purposes. Changes in the fair value of interest rate swaps not designated as cash flow hedges are reported in the statements of operations as part of other income, net. The Company does not use derivative financial instruments for speculative or trading purposes and does not offset the fair value amounts of its derivatives. Current market conditions, including dislocation in the financial markets and volatility in interest rates, may affect the performance of the Company’s hedging relationships for cash flow hedges, which could cause the hedges to no longer be effective.

The ~~Company~~following ~~has~~table ~~variable~~summarizes ~~rate borrowings under its senior secured term loan outstanding under~~ the ~~Credit~~material ~~Agreement~~terms ~~(the~~of ~~“Term Loan”), and as a result, is exposed to interest rate fluctuations on these borrowings. From time to time,~~ the ~~Company enters into~~ interest rate swaps tooutstanding ~~mitigate the risk in fluctuations in interest rates. For hedges that qualify, the Company accounts for these interest rate swaps~~ as ~~qualifying~~of cash flow hedges because their purpose is to hedge the Company’s exposure to increases in interest rates on its variable rate borrowings and as the interest rate swaps effectively convert variable rate borrowings under the Term Loan to fixed rate borrowings based on the fixed interest rate for the interest rate swaps plus the applicable margin on the Term Loan. For those interest rate swaps accounted for as cash flow hedgesMarch 31, ~~the~~2021 ~~Company recognizes in accumulated other comprehensive loss~~ (~~“AOCL”)~~dollars ~~or accumulated other comprehensive income (“AOCI”), net of tax, any changes~~ in the fair value, representing unrealized gains or losses, of its interest rate swaps. The Company assesses effectiveness at inception and on an ongoing quarterly basis. The Company may also enter into interest rate swap agreements that are not designated as cash flow hedges for accounting purposes. Changes in the fair value of interest rate swaps not designated as cash flow hedges are reported in the statements of operations as part of other (expensethousands) ~~income, net. The Company does not use derivative financial instruments for speculative or trading purposes and does not offset the fair value amounts of its derivatives.~~ :

In February 2020, the Company considered refinancing certain portions of its outstanding debt with new variable rate debt and, in anticipation thereof, the Company entered into three new variable to fixed interest rate swaps with multiple counterparties to hedge future interest rate exposure. At the inception date, the interest rate swaps were designated as cash flow hedges and accounted for in accordance with the aforementioned accounting policy. In February and March 2020, due to, among other factors, difficult and volatile conditions in the credit markets caused by the COVID-19 pandemic, the Company did not enter into the new variable rate debt structure. Therefore, in March 2020, the Company entered into a fixed to variable interest rate swap which reduced the amount of variable rate debt being hedged.


Swap #	Terms	Notional Amount		Fixed Interest Rate	Maturity Date	Designated/Undesignated
1	Variable to fixed	$	1,500,000	1.19%	March 31, 2025	Designated
2	Variable to fixed	1,428,000		1.22%	March 31, 2025	Designated
3	Variable to fixed	72,000		1.22%	March 31, 2025	Undesignated
4	Variable to fixed	500,000		1.17%	March 31, 2025	Undesignated
5	Fixed to variable	500,000		0.52%	March 31, 2025	Undesignated

~~The~~During ~~following~~the ~~table~~three ~~summarizes~~months ended March 31, 2021 and 2020, the ~~material~~Company ~~terms~~recorded a gain of $1.0 million and a loss of $1.7 million, respectively, in other income, net, from the settlement and change in the fair value of the undesignated interest rate swaps. ~~outstanding~~The asCompany expects to reclassify current unrealized losses of ~~September~~$32.3 30million within the next 12 months from AOCL to interest expense, ~~2020~~net, ~~(dollars~~on inthe ~~thousands):~~condensed consolidated statements of operations as interest payments are made on the New Term Loan.

Swap #	Terms	Notional Amount		Fixed Interest Rate	Maturity Date
1	Variable to fixed	$	1,500,000	1.19%	March 31, 2025
2	Variable to fixed	1,500,000		1.22%	March 31, 2025
3	Variable to fixed	500,000		1.17%	March 31, 2025
4	Fixed to variable	500,000		0.52%	March 31, 2025

The Company recognized the following amounts of pre-tax gain (loss) as a component of other comprehensive income (“OCI”) or other comprehensive loss (“OCL”) during the three months ended March 31, 2021 and 2020:


(in thousands)	Pre-Tax Gain (Loss) Recognized in OCI or OCL
Derivatives in Cash Flow Hedging Relationships	Three Months Ended March 31,
	2021		2020
Interest rate swaps	$	40,866	$	(106,390)

The Company did not designate the fixed to variable swap as a cash flow hedge for accounting purposes. Simultaneously upon entering into the fixed to variable swap, the Company discontinued cash flow hedge accounting on a variable to fixed swap with the same notional amount and began recording the change in fair value directly in earnings. The unrealized losses recorded in AOCL at the date of discontinuance will be reclassified into (i) interest expense, net, or (ii) other (expense) income, net, for any portion of the originally forecasted transactions deemed not probable to occur, through the original maturity date of the interest rate swap. Going forward, the Company expects the change in fair value of the two undesignated swaps to mostly offset in earnings as the swaps economically offset each other. During the three and nine months ended September 30, 2020, the Company recorded a gain of $0.4 million and a loss of $1.5 million, respectively, in other (expense) income, net, from the settlement and change in the fair value of the undesignated interest rate swaps. Current market conditions, including dislocation in the financial markets and volatility in interest rates due to the COVID-19 pandemic, may affect the performance of the Company’s hedging relationships for cash flow hedges, which could cause the hedges to no longer be effective.15

The ~~Company~~following ~~expects~~table toprovides ~~reclassify~~the ~~current~~location ~~unrealized losses~~ of ~~$31.2 million within~~ the ~~next~~pre-tax 12(loss) ~~months~~gain reclassified from AOCL tointo ~~interest expense, net, on~~ the condensed consolidated statements of operations asfor ~~interest payments are made on~~ the ~~Term~~periods ~~Loan.~~ indicated below:

The Company recognized the following amounts of pre-tax loss as a component of AOCL during the three and nine months ended September 30, 2020 and 2019:


		Pre-Tax (Loss) Gain Reclassified from AOCL into Statements of Operations
(in thousands)	Location of (Loss) Gain Reclassified from AOCL into Statements of Operations	Three Months Ended March 31,
		2021		2020
Interest rate swaps	Interest expense, net	$	(8,124)	$	3,051
Interest rate swaps	Other income, net	—		(6,627)

(in thousands)	Pre-Tax Loss Recognized in AOCL
Derivatives in Cash Flow Hedging Relationships	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019
Interest rate swaps	$	(4,364	)	$	—	$	(142,709	)	$	—

The following table provides the location of the pre-tax (loss) gain reclassified from AOCL into the condensed consolidated statements of operations during the three and nine months ended September 30, 2020 and 2019:

		Pre-Tax (Loss) Gain Reclassified from AOCL into Statements of Operations
(in thousands)	Location of (Loss) Gain Reclassified from AOCL into Statements of Operations	Three Months Ended September 30,					Nine Months Ended September 30,
		2020			2019		2020			2019
Interest rate swaps	Interest expense, net	$	(5,001	)	$	3,175	$	(4,513	)	$	9,220
Interest rate swaps	Other (expense) income, net	(163		)	—		(9,904		)	—

The fair value of derivative instruments consisted of the following balances as set forth on the dates below:

		September 30, 2020					December 31, 2019
							March 31, 2021						December 31, 2020
(in thousands)	~~Balance sheet location~~	~~Assets~~		Balance sheet location	~~Liabilities~~		Assets		~~Liabilities~~		Liabilities		Assets		Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	~~Other accrued expenses~~	$	—	Other accrued expenses	$	~~31,591~~	$	—	$	—	$	31,212	$	—	$	32,188
Interest rate swaps	~~Other liabilities~~	—		Other liabilities	~~83,523~~		—		—		23,899		—		74,286
Derivatives not designated as hedging instruments:
Interest rate swaps	~~Prepaid expenses and other current assets~~	~~1,810~~		Prepaid expenses and other current assets	—		—1,869		—		—		1,901		—
Interest rate swaps	~~Other assets~~	~~2,636~~		Other assets	—		—		—		—		1,667		—
Interest rate swaps	~~Other accrued expenses~~	—		Other accrued expenses	~~5,088~~		—		—		5,928		—		5,184
Interest rate swaps	~~Other liabilities~~	—		Other liabilities	~~13,479~~		—		—		10,030		—		11,893
		$	~~4,446~~		$	~~133,681~~	$	—1,869	$	—	$	71,069	$	3,568	$	123,551

22The Company considers the fair value of the interest rate swap assets and liabilities to be a Level 2 classification within the fair value hierarchy. See Note 8, “Fair Value Measurements,” for additional information.

~~The~~7. Commitments ~~Company considers the fair value of the interest rate swap assets~~ and ~~liabilities to be a Level 2 classification within the fair value hierarchy. See Note 10, “Fair Value Measurements,” for additional information.~~Contingencies

9The Company records liabilities for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability can be reasonably estimated. ~~Commitments~~ The Company reviews claims and ~~Contingencies~~legal proceedings on a continuous basis and records or adjusts liabilities recorded for such matters based on updated facts and circumstances including settlements or offers to settle, judicial rulings, advice of counsel or other information pertinent to a particular matter. Legal costs associated with contingencies are charged to expense as incurred.

~~The~~In the ordinary course of business, the Company ~~records~~periodically ~~and~~becomes ~~discloses~~involved in a ~~liability~~variety ~~for~~of pending and threatened ~~litigation~~proceedings ~~matters~~and ~~when~~claims, anincluding ~~adverse~~investigations, ~~outcome~~disputes, islitigations ~~probable~~ and ~~the~~regulatory ~~amount~~matters. ofThese ~~the~~actions ~~potential~~may ~~liability~~be isthreatened ~~reasonably~~or ~~estimable.~~commenced ~~The~~by ~~Company~~various ~~reviews~~parties, ~~claims~~including ~~and~~customers, ~~legal~~current ~~proceedings~~or onformer aemployees, ~~continuous~~vendors, ~~basis~~government ~~and~~agencies, ~~records~~including tax authorities, or ~~adjusts~~others. ~~liabilities~~Based ~~recorded~~on ~~for~~the ~~such~~latest ~~matters~~information ~~based~~available, onthe ~~updated~~Company ~~facts~~does ~~and~~not ~~circumstances~~expect ~~including~~that ~~settlements~~any pending or ~~offers~~threatened ~~to settle~~proceeding, ~~judicial~~claim ~~rulings~~or investigation, ~~advice~~dispute, oflitigation ~~counsel~~or regulatory matter, either individually or ~~other~~in ~~pertinent~~the ~~matters.~~aggregate, ~~Legal~~will ~~costs~~have ~~associated~~a ~~with~~material ~~contingencies~~adverse ~~are~~effect ~~charged~~on tothe ~~expense~~business, asfinancial ~~incurred.~~position, results of operations and/or cash flows of the Company.

~~The Company is involved in a variety of pending and threatened legal and tax proceedings, claims and litigation that arise from time to time in the ordinary course of business~~8. Fair ~~These~~Value actions may be threatened or commenced by various parties, including customers, current or former employees, vendors, government agencies or others. Based on the latest information available, the Company does not expect any pending or threatened legal or tax proceeding, claim or litigation, either individually or in the aggregate, will have a material adverse effect on the business, financial position, results of operations or cash flows of the Company.Measurements

10. Fair Value Measurements

The Company records certain assets and liabilities at fair value on a recurring and nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that gives highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest level to unobservable inputs. The inputs used to measure fair value are classified into the following fair value hierarchy:

• Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement date.

• Level 2 - Observable inputs other than quoted prices in Level 1, including (i) quoted prices for similar assets and liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and (iii) observable inputs for the assets or liabilities other than quoted market prices.

• Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. This includes assets and liabilities determined using pricing models, discounted cash flow methodologies or similar techniques reflecting the Company’s own assumptions.16

•Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. This includes assets and liabilities determined using pricing models, discounted cash flow methodologies or similar techniques reflecting the Company’s own assumptions.

Recurring Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):

As of September 30, 2020	Level 1				Level 2		Level 3		Total
As of March 31, 2021			Level 1				Level 2				Level 3		Total
Assets
Investments	$	~~2,179~~	$	1,191	$	—	$	~~250,427~~—	$	~~252,606~~	$	228,693	$	229,884
Derivative instruments	—		—		~~4,446~~		—1,869		~~4,446~~		—		1,869
Total assets	$	~~2,179~~	$	1,191	$	~~4,446~~	$	~~250~~1,~~427~~869	$	~~257,052~~	$	228,693	$	231,753
Liabilities
Derivative instruments	$	—	$	—	$	~~133,681~~	$	—71,069	$	~~133,681~~	$	—	$	71,069
Recapitalization investment portfolio liability	—		—		—		~~198,207~~—		~~198,207~~		163,311		163,311
Total liabilities	$	—	$	—	$	~~133,681~~	$	~~198~~71,~~207~~069	$	~~331,888~~	$	163,311	$	234,380


As of December 31, 2020	Level 1		Level 2		Level 3		Total
Assets
Investments	$	1,307	$	—	$	264,587	$	265,894
Derivative instruments	—		3,568		—		3,568
Total assets	$	1,307	$	3,568	$	264,587	$	269,462

Liabilities

Derivative Instruments	$	—	$	123,551	$	—	$	123,551
Recapitalization investment portfolio liability	—		—		204,742		204,742
Total liabilities	$	—	$	123,551	$	204,742	$	328,293

As of December 31, 2019	Level 1		Level 2		Level 3		Total
Assets
Investments	$	1,895	$	—	$	248,453	$	250,348
Total assets	$	1,895	$	—	$	248,453	$	250,348
Liabilities
Contingent consideration	$	—	$	—	$	9,489	$	9,489
Recapitalization investment portfolio liability	—		—		191,678		191,678
Total liabilities	$	—	$	—	$	201,167	$	201,167

Fair Value Investments

The following table summarizes the Company’s quantitative information about the fair value measurements of Auven Therapeutics Holdings, L.P. (“Auven”) and venBio Global Strategic Fund, L.P. aton the dates ~~indicated~~set forth below (dollars in thousands):

Quantitative Information About Level 3 Fair Value Measurements for September 30, 2020

Quantitative Information About Level 3 Fair Value Measurements for March 31, 2021

Description

~~Fair Value~~

~~Valuation Technique~~

~~Unobservable~~Fair ~~Input~~Value

~~Range of Rates~~

Valuation Technique

Unobservable Input

Range of Rates

Fair value option investments

~~$241,203~~

~~Market evaluation/pricing models~~

~~Discount for lack of marketability~~$215,865

~~17.5% - 32.5%~~

Market evaluation/pricing models

Discount for lack of marketability

20.0% - 32.5%

~~Recent acquisition transactions~~

~~Discount for lack of control~~

~~20.0% - 35.0%~~

Recent acquisition transactions

Discount for lack of control

20.0% - 35.0%

Quantitative Information About Level 3 Fair Value Measurements for December 31, 2019

Quantitative Information About Level 3 Fair Value Measurements for December 31, 2020

Description

~~Fair Value~~

~~Valuation Technique~~

~~Unobservable~~Fair ~~Input~~Value

~~Range of Rates~~

Valuation Technique

Unobservable Input

Range of Rates

Fair value option investments

~~$243,067~~

~~Market evaluation/pricing models~~

~~Discount for lack of marketability~~$253,801

~~10.0% - 30.0%~~

Market evaluation/pricing models

Discount for lack of marketability

12.5% - 32.5%

~~Recent acquisition transactions~~

~~Discount for lack of control~~

~~20.0% - 35.0%~~

Recent acquisition transactions

Discount for lack of control

20.0% - 35.0%

See Note 76, “Investments,” of the Company’s audited consolidated financial statements included in the ~~May~~ 2020 Form 810-K for additional information on the Company’s investments.

Changes in fair value of the Company’s investments measured on a recurring basis using significant unobservable inputs (Level 3) for the respective periods were as follows:

(in thousands)	~~2020~~			~~2019~~2021			2020
Balance as of January 1,	$	~~248,453~~		$	~~256~~264,~~124~~587		$	248,453
Recognized fair value gain (loss)	16,296			(14,757		)
Recognized fair value losses				(37,113)			(27,323)
Cash distributions received	~~(19,704~~		)	~~(190~~—		)	(93)
Capital contributions paid	~~5,382~~			21,~~792~~219			545
Balance as of September 30,	$	250,427		$	243,969
Balance as of March 31,				$	228,693		$	221,582

Included within the Company’s investments are limited partner interests in Auven, an investment partnership organized for the purpose of identifying, acquiring and investing in a diversified portfolio of novel therapeutic product candidates. As of March 31, 2021 and 2020, the Company owned 32.7% of the outstanding limited partnership interests. For the three months ended March 31, 2021 and 2020, the total net investment loss, which includes realized and unrealized gains/losses, net of expenses and investment income, for Auven was $183.4 million and $134.6 million, respectively.

Recapitalization Investment Portfolio Liability

Changes in fair value of the recapitalization investment portfolio liability measured on a recurring basis using significant unobservable inputs (Level 3) for the respective periods were as follows:

(in thousands)	~~2020~~		~~2019~~2021			2020
Balance as of January 1,	$	~~191,678~~	$	~~198~~204,~~524~~742		$	191,678
Recapitalization investment portfolio consideration change in value	~~6,529~~		(1628,~~830~~612)		)	(20,062)
Balance as of September 30,	$	198,207	$	181,694
Cash distributions paid			(12,819)			—
Balance as of March 31,			$	163,311		$	171,616

The recapitalization investment portfolio liability balance includes a current liability of $14.9 million which is recorded as part of other accrued expenses on the accompanying condensed consolidated balance sheets.

Contingent Consideration

During the third quarter of 2020, the Company paid the contingent consideration liability of $9.5 million due to the seller in connection with its 2019 acquisition of Medimix. See Note 4, “Business Combinations,” for additional information on the Medimix acquisition.

Fair Value of Financial Instruments

The Company estimated the fair value of its financial instruments using available market information. The estimate of fair value has been determined based on the fair value hierarchy for U.S. GAAP. The carrying amounts for cash and cash equivalents, accounts receivable and unbilled services, net, accounts payable and unearned revenue approximate their fair values due to the short-term nature of these financial instruments. The following table presents information about the carrying value and estimated fair value of the Company’s financial instruments on the dates set forth below:

	September 30, 2020				December 31, 2019
			March 31, 2021								December 31, 2020
(in thousands)	~~Carrying Amount~~		~~Estimated~~Carrying ~~Fair Value~~Amount		~~Carrying Amount~~		Estimated Fair Value		~~Estimated Fair Value~~		Carrying Amount		Estimated Fair Value
Assets:
New Term Loan			$	3,050,000			$	3,034,750			$	—	$	—
Cash and cash equivalents	$	803,090	$	803,090	$	345,187			$	345,187
2025 Notes			500,000				518,750				500,000		527,645
Liabilities:
2028 Notes			700,000				726,250				700,000		754,257
Term Loan	3,072,112		3,067,503		3,096,429				3,111,911
2015 Term Loan			—				—				3,064,006		3,067,652
2025 Notes	500,000		516,240		—				—
2028 Notes	700,000		730,422		—				—
OpCo Notes	—		—		1,125,000				1,164,566
Initial HoldCo Notes	—		—		550,000				559,873
Additional HoldCo Notes	—		—		900,000				915,120
Other debt	—		—		5,707				5,707

~~Cash~~The ~~and~~estimated ~~Cash~~fair ~~Equivalents~~value -of ~~The~~the ~~carrying~~New ~~amount~~Term ~~approximates~~Loan, ~~fair~~2025 ~~value~~Notes ~~due~~and to2028 ~~the~~Notes ~~short-term~~is ~~maturity~~based ofon ~~these~~recently reported market transactions and prices for identical or similar financial instruments ~~(less~~obtained ~~than~~from ~~three~~a ~~months)~~third-party pricing source. The Company considers the fair value of ~~cash~~the New Term Loan, 2025 Notes and ~~cash~~the ~~equivalents~~2028 Notes to be awithin the Level 12 classification ~~within~~of the fair value hierarchy. The estimated fair value of the Company’s previously outstanding 2015 Term Loan was determined in the same manner as the New Term Loan.

Term Loan - The estimated fair value of the Term Loan is based on recently reported market transactions and prices for identical or similar financial instruments obtained from a third-party pricing source9. Accumulated ~~The~~Other ~~Company~~Comprehensive ~~considers the fair value of the Term Loan to be a Level 2 classification within the fair value hierarchy.~~Loss

~~2025~~The ~~Notes,~~balances ~~2028~~of ~~Notes~~AOCL, ~~OpCo~~net ~~Notes and HoldCo Notes - The estimated fair values~~ of ~~the~~tax, ~~2025~~were ~~Notes~~as ~~and~~follows ~~the 2028 Notes are based on recently reported market transactions and prices~~ for ~~identical or similar financial instruments obtained from a third-party pricing source. The Company considers~~ the ~~fair~~three ~~values~~months ofended ~~the~~March 31, ~~2025~~2021 ~~Notes~~ and 2028 Notes to be a Level 2 classification within the fair value hierarchy. The estimated fair values of the Company’s previously outstanding OpCo Notes and HoldCo Notes were determined in the same manner as the 2025 Notes and 2028 Notes.2020:

Other Debt - The carrying amount of the previously outstanding other debt approximated fair value due to the nature of the obligation.


(in thousands)	Foreign Currency Translation		Derivative Instruments		Defined Benefit Plan		Accumulated Other Comprehensive Loss
Balance as of December 31, 2020	$	(201,426)	$	(79,922)	$	(3,497)	$	(284,845)
(OCL) or OCI before reclassifications	(19,849)		30,765		—		10,916
Amounts reclassified from AOCL	—		6,116		183		6,299
Net (OCL) or OCI	(19,849)		36,881		183		17,215
Balance as of March 31, 2021	$	(221,275)	$	(43,041)	$	(3,314)	$	(267,630)

11. Accumulated Other Comprehensive Loss


(in thousands)	Foreign Currency Translation		Derivative Instruments		Defined Benefit Plan		Accumulated Other Comprehensive Loss
Balance as of December 31, 2019	$	(306,452)	$	8,566	$	(1,018)	$	(298,904)
OCL before reclassifications	(87,953)		(80,408)		(22)		(168,383)
Amounts reclassified from AOCI or AOCL	—		2,703		132		2,835
Net (OCL) or OCI	(87,953)		(77,705)		110		(165,548)
Balance as of March 31, 2020	$	(394,405)	$	(69,139)	$	(908)	$	(464,452)

~~The balances of AOCL, net of tax, were as follows for the three and nine months ended September 30, 2020 and 2019:~~18

(in thousands)	ForeignCurrencyTranslation			DerivativeInstruments			Defined Benefit Plan			Accumulated Other Comprehensive Loss
Balance as of June 30, 2020	$	(359,246	)	$	(88,929	)	$	(776	)	$	(448,951	)
OCI or (OCL) before reclassifications	45,602			(3,073		)	—			42,529
Amounts reclassified from AOCL	—			3,576			138			3,714
Net OCI	45,602			503			138			46,243
Balance as of September 30, 2020	$	(313,644	)	$	(88,426	)	$	(638	)	$	(402,708	)

The following table presents the significant reclassifications to the condensed consolidated statements of operations out of AOCL or AOCI and the line item affected on the condensed consolidated statements of operations for the respective periods were as follows:


(in thousands)	Three Months Ended March 31,
Details about AOCL or AOCI Components	2021		2020		Affected line item in statements of operations
(Losses) gains on derivative instruments:
Interest rate swaps	$	(8,124)	$	3,051	Interest expense, net
Interest rate swaps	—		(6,627)		Other income, net
Income tax benefit	2,008		873		Provision for income taxes
Total net of income tax	$	(6,116)	$	(2,703)

Defined benefit plan:
Amortization of actuarial loss	$	(227)	$	(162)	Other income, net
Income tax benefit	44		30		Provision for income taxes
Total net of income tax	$	(183)	$	(132)

(in thousands)	ForeignCurrencyTranslation			DerivativeInstruments			Defined Benefit Plan			Accumulated Other Comprehensive Loss
Balance as of December 31, 2019	$	(306,452	)	$	8,566		$	(1,018	)	$	(298,904	)
OCL before reclassifications	(7,192		)	(107,546		)	(22		)	(114,760		)
Amounts reclassified from AOCI or AOCL	—			10,554			402			10,956
Net (OCL) or OCI	(7,192		)	(96,992		)	380			(103,804		)
Balance as of September 30, 2020	$	(313,644	)	$	(88,426	)	$	(638	)	$	(402,708	)

10. Related Party Transactions

(in thousands)	ForeignCurrencyTranslation			DerivativeInstruments			Defined Benefit Plan		Accumulated Other Comprehensive Loss
Balance as of June 30, 2019	$	(321,547	)	$	13,351		$	566	$	(307,630	)
OCL before reclassifications	(49,415		)	—			—		(49,415		)
Amounts reclassified from AOCI	—			(2,419		)	120		(2,299		)
Net (OCL) or OCI	(49,415		)	(2,419		)	120		(51,714		)
Balance as of September 30, 2019	$	(370,962	)	$	10,932		$	686	$	(359,344	)

Majority Sponsors Transactions

(in thousands)	ForeignCurrencyTranslation			DerivativeInstruments			Defined Benefit Plan		Accumulated Other Comprehensive Loss
Balance as of December 31, 2018	$	(331,276	)	$	18,089		$	296	$	(312,891	)
(OCL) or OCI before reclassifications	(39,686		)	—			26		(39,660		)
Amounts reclassified from AOCI	—			(7,157		)	364		(6,793		)
Net (OCL) or OCI	(39,686		)	(7,157		)	390		(46,453		)
Balance as of September 30, 2019	$	(370,962	)	$	10,932		$	686	$	(359,344	)

The Company’s majority sponsors include the Carlyle Group Inc. (“Carlyle”) and Hellman & Friedman LLC (“H&F”). Affiliates of Carlyle had investments in the New Term Loan totaling $88.1 million as of March 31, 2021 and investments in the 2015 Term Loan totaling $12.6 million as of December 31, 2020. The amounts paid to the relevant affiliates for those loans for the respective periods were as follows:


	Three Months Ended March 31,
(in thousands)	2021		2020
Interest paid	$	534	$	824
Principal paid	12,623		204

(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
Details about AOCL or AOCI Components	2020			2019			2020			2019			Affected line item in statements of operations
(Losses) gains on derivative instruments:
Interest rate swaps	$	(5,001	)	$	3,175		$	(4,513	)	$	9,220		Interest expense, net
Interest rate swaps	(163		)	—			(9,904		)	—			Other (expense) income, net
Income tax benefit (expense)	1,588			(756		)	3,863			(2,063		)	Provision for income taxes
Total net of income tax	$	(3,576	)	$	2,419		$	(10,554	)	$	7,157
Defined benefit plan:
Amortization of actuarial loss	$	(166	)	$	(146	)	$	(487	)	$	(452	)	Other (expense) income, net
Income tax benefit	28			26			85			88			Provision for income taxes
Total net of income tax	$	(138	)	$	(120	)	$	(402	)	$	(364	)

Recapitalization investment portfolio distributions made to affiliates of Carlyle and affiliates of H&F during the three months ended March 31, 2021 were $11.8 million. There were no such payments made during the three months ended March 31, 2020. See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Company’s audited consolidated financial statements included in the 2020 Form 10-K for additional information related to the recapitalization investment portfolio liability.

12. Related Party Transactions

Majority Sponsor Transactions

The Company was party to consulting services agreements with affiliates of The Carlyle Group Inc. (“Carlyle”) and affiliates of Hellman & Friedman LLC (“H&F” and, together with Carlyle, the “Majority Sponsors”) under which the Company paid the Majority Sponsors a fee for consulting services provided to the Company as well as reimbursements for out-of-pocket expenses incurred in conjunction with such services. The consulting services agreements terminated pursuant to their terms upon completion of the Company’s IPO on February 10, 2020. The Company incurred consulting and out-of-pocket expenses for services rendered under the consulting agreement of $0.9 million for the three months ended September 30, 2019, and $0.4 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively. These expenses are recorded as a component of SG&A expenses on the condensed consolidated statements of operations.

Affiliates of one of the Majority Sponsors had investments in the Term Loan totaling $12.7 million and $78.0 million, respectively, as of September 30, 2020 and December 31, 2019. The amounts paid to the relevant affiliates for the Term Loan for the respective periods were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Interest paid	$	114	$	1,002	$	1,511	$	3,023
Principal paid	33		210		408		633

SNBL Transactions

~~Both~~The ~~the~~ Company ~~and~~owns ~~SNBL~~60% ~~have~~of ~~service~~its ~~agreements~~consolidated tosubsidiary ~~provide~~PPD-SNBL ~~administrative~~K.K. ~~and~~(“PPD-SNBL”). ~~support~~The ~~services~~40% toownership ~~PPD-SNBL,~~interest ~~both~~held ofby ~~which~~Shin ~~will~~Nippon ~~remain~~Biomedical inLaboratories ~~effect~~Ltd. as(“SNBL”) ~~long~~is classified as ~~the~~a ~~PPD-SNBL~~redeemable ~~shareholders~~noncontrolling ~~agreement~~interest ~~remains~~on inthe ~~effect.~~condensed ~~The~~consolidated ~~Company~~balance ~~and~~sheets ~~SNBL~~due ~~also~~to ~~have~~certain aput ~~collaboration~~options, ~~agreement~~one ~~under~~of which ~~the~~is ~~parties~~triggered ~~may~~by ~~collaborate~~a onchange ~~various~~in ~~drug~~control ~~development~~of ~~services.~~the ~~This~~Company, ~~collaboration~~under ~~agreement~~which ~~will~~SNBL ~~remain~~may inrequire ~~effect~~the asCompany ~~long~~to aspurchase SNBL’s ~~owns~~remaining ownership interest at ~~least~~fair ~~20%~~value upon the occurrence of certain events described in the PPD-SNBL shareholders agreement. As of March 31, 2021, no such events had occurred.

~~For~~Both the ~~three~~Company ~~months~~and ~~ended~~SNBL ~~September 30,~~have ~~2020~~service agreements to provide administrative and ~~2019~~support services to PPD-SNBL, both of which will remain in effect as long as the PPD-SNBL shareholders agreement remains in effect. The Company ~~incurred~~and ~~expenses~~SNBL ~~for~~also ~~services~~have ~~rendered~~a collaboration agreement under which the parties may collaborate on various drug development services. This collaboration agreement ofwill ~~$0.2~~remain ~~million~~in ~~and~~effect ~~$0.3~~as ~~million,~~long ~~respectively~~as SNBL owns at least 20% of PPD-SNBL. For the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, the Company incurred expenses for services rendered under the services agreement of $0.83 million ~~and $0~~.9 ~~million, respectively.~~ The expenses are recorded as a component of selling, general and administrative (“SG&A”) expenses on the condensed consolidated statements of operations. ~~As of September 30~~Additionally, ~~2020~~as ~~and~~of ~~December~~March 31, ~~2019~~2021, the Company owed SNBL $0.3 million for services rendered under the services agreement. ~~Additionally,~~ asNo ofsuch ~~December 31,~~amount ~~2019,~~was ~~PPD-SNBL~~ owed ~~SNBL $5.7 million related~~ to aSNBL ~~working~~as ~~capital loan. During the first nine months~~ of ~~2020~~December 31, ~~the Company repaid the balance of this working capital loan~~2020. ~~This loan was previously classified as long-term debt on the condensed consolidated balance sheets and as “other debt” in Note 6, “Long-term Debt and Finance Lease Obligations.”~~

2719

1311. Earnings Per Share

The following table provides a reconciliation of the numerator and denominator of the basic and diluted earnings per share (“EPS”) computations for the periods set forth below:

	Three Months Ended September 30,						Nine Months Ended September 30,
				Three Months Ended March 31,
(in thousands, except per share data)	~~2020~~			~~2019~~2021			~~2020~~		2020		~~2019~~
Numerator:
Net income	$	9,102		$	16,582		$	58,093			$	34,461
Net income (loss)				$	47,336				$	(13,120)
Net income attributable to noncontrolling interest	~~(1,587~~		)	(1,~~161~~455)		)	~~(4,499~~		(2,718)		~~(3,390~~		)
Recapitalization investment portfolio consideration	~~44,468~~			1128,~~231~~612			~~(6,529~~		)20,062		~~16,830~~
Net income attributable to common stockholders of PPD, Inc.	$	~~51,983~~		$	2674,~~652~~493		$	~~47,065~~	$	4,224	$	~~47,901~~
Denominator:
Basic weighted-average common shares outstanding	~~348,672~~			~~279~~350,~~425~~431			~~338,277~~		318,221		~~279,235~~
Effect of dilutive stock options and restricted stock units	6,158			1,768			4,882				820
Effect of dilutive stock options and share awards				7,231					4,203
Diluted weighted-average common shares outstanding	~~354,830~~			~~281~~357,~~193~~662			~~343,159~~		322,424		~~280,055~~
Earnings per share:
Basic	$	~~0.15~~		$	0.1021		$	~~0.14~~	$	0.01	$	~~0.17~~
Diluted	$	~~0.15~~		$	0.0921		$	~~0.14~~	$	0.01	$	~~0.17~~

See Note 34, “Stockholders’ Deficit and Redeemable Noncontrolling Interest,” ~~for~~and ~~additional~~Note ~~information~~1, ~~related~~“Basis toof ~~shares~~Presentation and ~~Note~~Summary 2,of ~~“Recapitalization~~Significant ~~Transaction~~Accounting Policies,” of the Company’s audited consolidated financial statements included in the ~~May~~ 2020 Form 810-K for additional information related to shares and the recapitalization investment portfolio consideration.

~~Potential~~The ~~common~~Company does not include potentially dilutive shares ~~outstanding~~in ~~that~~the ~~are~~calculation ~~considered~~of ~~anti~~diluted weighted-~~dilutive~~average ~~are~~number ~~excluded~~of ~~from~~common shares outstanding in cases where the ~~computation~~inclusion of ~~diluted~~such ~~EPS~~additional shares would be anti-dilutive. Potential common shares related to time-based and vested performance-based stock options and ~~other~~unvested ~~awards~~restricted ~~under~~stock ~~share-based~~units ~~compensation programs~~ may be determined to be anti-dilutive based on the application of the treasury stock method and are also anti-dilutive in periods when ~~the~~there ~~Company~~is ~~incurs~~ a net loss attributable to common stockholders of PPD, Inc.

The number of potential common shares outstanding that were considered anti-dilutive using the treasury stock method and therefore excluded from the computation of diluted EPS, weighted for the portion of the period they were outstanding, ~~are~~for the respective periods were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

~~2020~~

~~2019~~

2021

~~2020~~

~~2019~~

2020

Anti-dilutive equity awards

~~320~~

~~311~~

1,809

~~469~~

~~537~~

—

14At March 31, 2021, unvested (i) performance-based options, (ii) performance stock units and (iii) liquidity/realization options totaling 5. ~~Segments~~ 3 million potential shares were outstanding but excluded from the calculation of diluted EPS, as these shares are contingently issuable based on the Company’s actual or expected achievement of performance factors or certain market conditions.

~~The Company is managed through two reportable segments, Clinical Development Services and Laboratory Services~~12. The Company determines reportable segments using the management approach. The management approach is based on how the Company’s CODM organizes the segments for purposes of assessing performance and making operating decisions. The Clinical Development Services segment provides a wide range of services to its customers including early development/Phase I, patient recruitment and enrollment, investigator site management, Phase II-IV clinical trial management, medical communications and various peri- and post-approval services. The Laboratory Services segment provides comprehensive laboratory services to its customers including bioanalytical, vaccine sciences, good manufacturing practice, central lab and biomarker testing. Both segments provide services to pharmaceutical, biotechnology, medical device, government organizations and other industry participants. Segments

28The Company is managed through two reportable segments, Clinical Development Services and Laboratory Services. The Company determines reportable segments using the management approach. The management approach is based on how the Company’s chief operating decision maker (“CODM”) organizes the segments for purposes of assessing performance and making operating decisions. The Clinical Development Services segment provides a wide range of services to its customers including early development/Phase I, patient recruitment and enrollment, investigator site management, Phase II-IV clinical trial management, medical communications and various peri- and post-approval services. The Laboratory Services segment provides comprehensive services to its customers including bioanalytical, vaccine sciences, good manufacturing practice, central lab and biomarker testing. Both segments provide services to pharmaceutical, biotechnology, medical device, government organizations and other industry participants.

The Company’s CODM assesses segment performance and makes resource allocation decisions based on segment revenues and segment operating income. ~~During~~The ~~the~~CODM ~~first~~reviews ~~quarter of 2020,~~ the ~~CODM~~Company’s ~~began~~assets ~~assessing performance and making resource allocation decisions based~~ on ~~total~~a ~~segment~~consolidated ~~revenue,~~basis ~~including direct, third-party pass-through~~ and ~~out-of-pocket~~does ~~revenue and segment operating income, including reimbursed costs. Previously, certain revenue amounts were~~ not ~~allocated~~assess toperformance ~~segments,~~or ~~whereas~~make ~~following~~operating ~~the~~decisions ~~change,~~based ~~all~~on ~~revenue and reimbursed costs are allocated to the respective~~ segment. ~~As a result, the Company has updated its segment presentation and all prior period information has been recast to reflect the change in the measurement of segment performance measures~~assets.

Segment operating income is segment revenue less segment direct costs, segment reimbursed costs and segment SG&A expenses. Segment operating income excludes certain unallocated direct costs and SG&A expenses, depreciation and amortization and other nonrecurring expenses or income consistent with the information reviewed by the CODM. The CODM reviews the Company’s assets on a consolidated basis and does not assess performance or make operating decisions based on segment assets. 20

Information on reportable segment revenue and segment operating income, including a reconciliation of segment operating income to consolidated income from operations, for the respective periods were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

~~2020~~

~~2019~~2021

~~2020~~

2020

~~2019~~

Segment revenue:

Clinical Development Services

~~1,008,639~~

~~846~~1,~~068~~117,370

~~2,694,775~~

870,886

~~2,488,773~~

Laboratory Services

~~225,163~~

~~177~~261,~~796~~010

~~622,407~~

201,576

~~495,360~~

Total segment revenue

~~1,233,802~~

1,~~023~~378,~~864~~380

~~3,317,182~~

1,072,462

~~2,984,133~~

Segment direct costs:

Clinical Development Services

~~330,281~~

~~287~~356,~~538~~049

~~922,737~~

309,078

~~871,753~~

Laboratory Services

~~102,355~~

79118,~~445~~069

~~279,154~~

87,051

~~227,171~~

Total segment direct costs

~~432,636~~

~~366~~474,~~983~~118

~~1,201,891~~

396,129

~~1,098,924~~

Segment reimbursed costs:

Clinical Development Services

~~309,117~~

~~220~~349,~~873~~682

~~730,872~~

223,529

~~633,466~~

Laboratory Services

~~26,749~~

2031,~~931~~155

~~79,651~~

27,321

~~55,230~~

Total segment reimbursed costs

~~335,866~~

~~241~~380,~~804~~837

~~810,523~~

250,850

~~688,696~~

Segment SG&A expenses:

Clinical Development Services

~~137,984~~

~~130~~173,~~576~~484

~~415,334~~

141,832

~~391,551~~

Laboratory Services

~~23,283~~

1927,~~648~~362

~~66,929~~

21,783

~~58,551~~

Total segment SG&A expenses

~~161,267~~

~~150~~200,~~224~~846

~~482,263~~

163,615

~~450,102~~

Segment operating income:

Clinical Development Services

~~231,257~~

~~207~~238,~~081~~155

~~625,832~~

196,447

~~592,003~~

Laboratory Services

~~72,776~~

5784,~~772~~424

~~196,673~~

65,421

~~154,408~~

Total segment operating income

~~304,033~~

~~264~~322,~~853~~579

~~822,505~~

261,868

~~746,411~~

Operating costs and expenses not allocated to segments:

Direct costs

~~786~~

23,~~493~~506

~~20,809~~

18,310

~~13,257~~

SG&A expenses

~~88,053~~

7693,~~772~~090

~~252,449~~

84,161

~~231,329~~

Depreciation and amortization

~~71,317~~

6673,~~889~~143

~~206,395~~

66,315

~~197,896~~

Long-lived asset impairment

~~1,414~~

—1,584

~~1,414~~

—

Income from operations

~~142,463~~

~~118~~151,~~699~~256

~~341,438~~

93,082

~~303,929~~

2913. Entity-wide Information by Geographic Location

~~15. Entity~~The table below presents certain entity-wide ~~Information~~information about the Company’s operations by ~~Geographic~~geographic ~~Location~~location. The Company allocates revenues to geographic locations based on where the services are performed. Total revenues by geographic location for the respective periods were as follows:

The table below presents certain entity-wide information about the Company’s operations by geographic location. The Company allocates revenues to geographic locations based on where the services are performed. Revenues by geographic location are as follows:


	Three Months Ended March 31,
(in thousands)	2021		2020
Revenue:
North America	$	821,212	$	558,239
Latin America	42,376		44,910
Europe, Middle East and Africa	382,959		354,451
Asia-Pacific	131,833		114,862
Revenue	$	1,378,380	$	1,072,462

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Revenue:
North America	$	737,234	$	541,841	$	1,869,533	$	1,568,767
Latin America	39,589		35,184		130,210		113,777
Europe, Middle East and Africa	331,996		334,924		965,606		992,095
Asia-Pacific	124,983		111,915		351,833		309,494
Revenue	$	1,233,802	$	1,023,864	$	3,317,182	$	2,984,133

1614. Other ~~(Expense)~~ Income, Net

The components of other ~~(expense)~~ income, net, for the respective periods were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
				Three Months Ended March 31,
(in thousands)	~~2020~~			~~2019~~2021			~~2020~~		2020		~~2019~~
Other (expense) income, net:
Foreign currency (losses) gains, net	$	(17,509	)	$	10,700		$	(3,055	)		$	(1,435	)
Foreign currency gains, net				$	8,033				$	37,652
Interest rate swap gains (losses)	~~209~~			—1,003			~~(11,398~~		(8,338)		—
Other income	~~365~~			~~684~~145			~~954~~		165		~~2,584~~
Other expense	~~(218~~		)	(~~2,227~~177)		)	~~(598~~		(185)		~~(4,307~~		)
Total other (expense) income, net	$	(17,153	)	$	9,157		$	(14,097	)		$	(3,158	)
Total other income, net				$	9,004				$	29,294

3015. Subsequent Events

On April 15, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Thermo Fisher Scientific Inc., a Delaware corporation (“Thermo Fisher”) and Powder Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Thermo Fisher (“Merger Sub”) pursuant to which the Company will be, subject to the terms and conditions of the Merger Agreement, merged with and into Merger Sub, with PPD continuing as the surviving corporation and a wholly owned subsidiary of Thermo Fisher. Under, and subject to, the terms of the Merger Agreement, the Company’s stockholders will have the right to receive $47.50 per share in cash, without interest and less applicable withholding tax, for each share of Company common stock upon the closing of the proposed merger. The board of directors of the Company have unanimously approved the Merger Agreement and the transactions contemplated thereby and stockholders holding in aggregate approximately 60% of the issued and outstanding shares of the Company’s common stock duly executed and delivered to Thermo Fisher a written consent, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligation of the parties to complete the proposed merger is subject to customary closing conditions, including, among others, the receipt of applicable regulatory approvals, and is expected to be completed by the end of 2021.

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 related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2019, as superseded by, and solely to the extent set forth in, our first Current Report on Form 8-K filed on May 21,~~ 2020 (~~the~~our “~~May~~ 2020 Form 810-K”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, ~~including the impact from the COVID-19 pandemic and other factors~~ set forth in other sections of this Quarterly Report on Form 10-Q, as well as the risk factors set forth in our ~~Annual~~2020 ~~Report on~~ Form 10-K ~~for the year ended December 31, 2019~~. For important information regarding these forward-looking statements, please see “Special Note Regarding Forward-Looking Statements.,” located elsewhere in this Quarterly Report on Form 10-Q.

Company Overview

We are a leading provider of drug development services to the biopharmaceutical industry, focused on helping our customers bring their ~~new~~ medicines and other treatments to patients around the world. We have been in the drug development services business for ~~more~~35 ~~than 30~~ years, providing a comprehensive suite of clinical development and laboratory services to pharmaceutical, biotechnology, medical device, and government organizations, ~~and~~as well as other industry participants. We have deep experience across a broad range of rapidly growing areas of the drug development industry and engage with our customers through a variety of commercial models, including both full-service and functional service partnerships and other offerings tailored to address the specific needs of our customers. ~~Our~~We ~~company~~have ~~is currently organized and managed around~~ two reportable segments, Clinical Development Services and Laboratory Services. ~~See~~For ~~Part~~a I,description ~~Item~~of ~~1, “Business,” in~~ our ~~Annual~~service ~~Report~~offerings onwithin ~~Form~~our ~~10-K~~segments, ~~for~~see ~~the~~Part ~~year~~I, ~~ended~~Item ~~December 31~~1, ~~2019~~“Business,” ~~as superseded by, and only to the extent set forth~~ in our ~~May~~ 2020 Form 810-K~~, for additional information on our Clinical Development Services and Laboratory Services segments~~.

~~Our~~Merger purpose and mission are to improve health by helping our customers deliver life-changing therapies. We pursue our purpose and mission through our clinical development and laboratory services and our strategy to bend the cost and time curve of drug development and optimize value for our customers. Our customers benefit from accelerated time to market because it results in lengthened periods of market exclusivity, and our real-world evidence solutions support the superior efficacy and value of their novel therapies. We believe our medical, scientific and drug development expertise, along with our innovative technologies and knowledge of global regulatory requirements, help our customers accelerate the development of safe and effective therapeutics and maximize returns on their research and development (“R&D”) investments.Transaction

~~Initial~~On ~~Public~~April ~~Offering~~15, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among us, Thermo Fisher Scientific Inc., a Delaware corporation (“Thermo Fisher”) and Powder Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Thermo Fisher (“Merger Sub”) pursuant to which we will be, subject to the terms and conditions of the Merger Agreement, merged with and into Merger Sub, with PPD continuing as the surviving corporation and a wholly owned subsidiary of Thermo Fisher. Under, and subject to, the terms of the Merger Agreement, our stockholders will have the right to receive $47.50 per share in cash, without interest and less any applicable withholding tax, for each share of our common stock upon the closing of the proposed merger. Our board of directors have unanimously approved the Merger Agreement and the transactions contemplated thereby and stockholders holding in aggregate approximately 60% of the issued and outstanding shares of our common stock duly executed and delivered to Thermo Fisher a written consent, adopting and approving the Merger Agreement and the transactions contemplated thereby. The obligation of the parties to complete the proposed merger is subject to customary closing conditions, including, among others, the receipt of applicable regulatory approvals, and is expected to be completed by the end of 2021.

OnNew ~~February 6,~~Credit 2020, our common stock began trading on The Nasdaq Global Select Market under the symbol “PPD”. On February 10, 2020, we completed our initial public offering (“IPO”) of our common stock at a price to the public of $27.00 per share. We issued and sold 69.0 million shares of common stock in the IPO, including 9.0 million shares of common stock issued pursuant to the full exercise of the underwriters’ option to purchase additional shares. We raised net proceeds of $1,773.0 million through the IPO, after deducting underwriting discounts and other offering expenses totaling $90.0 million. Agreement

WeOn ~~used~~January a13, ~~portion~~2021, oftogether ~~the~~with ~~net~~our ~~proceeds~~indirect ~~from~~wholly-owned subsidiary, PPD Development, L.P.(the ~~IPO~~“Co-Borrower”), towe entered into and closed a new (i) ~~redeem~~ $~~550~~3,050.0 million in aggregate principal amount ofsenior ~~unsecured~~secured 7first-lien term loan facility issued at 99.~~625~~5%/8 of face value, or a discount of 0.~~375~~5%, ~~Senior~~maturing ~~PIK~~in ~~Toggle~~January ~~Notes~~2028 (the “~~Initial~~New ~~HoldCo~~Term ~~Notes~~Loan”), ~~plus~~and ~~accrued~~(ii) ~~and~~$600.0 ~~unpaid~~million ~~interest~~committed ~~thereon~~principal ~~and~~amount ~~$5.5~~senior ~~million~~secured offirst-lien ~~redemption~~revolving ~~premium~~credit ~~and~~facility maturing in January 2026 (iithe “New Revolving Credit Facility”), ~~redeem~~under ~~$900.0~~our ~~million~~new incredit ~~aggregate~~agreement ~~principal~~dated ~~amount~~as of ~~unsecured~~January 713, 2021 (the “New Credit Agreement”).~~75%/8~~ The proceeds from the New Term Loan were used to extinguish our previously outstanding $3,064.~~50%~~0 million ~~Senior~~senior ~~PIK~~secured ~~Toggle~~term ~~Notes~~loan entered into on August 18, 2015 (the “~~Additional~~2015 ~~HoldCo~~Term ~~Notes~~Loan”) ~~and,~~under ~~together~~the ~~with~~credit ~~the~~agreement ~~Initial~~dated ~~HoldCo~~as ~~Notes~~of the same date, as amended (the “~~HoldCo~~2015 ~~Notes~~Credit Agreement”),. ~~plus~~At ~~accrued~~the ~~and~~same ~~unpaid~~time, ~~interest~~we ~~thereon~~also ~~and~~extinguished our previously outstanding $9300.0 million ofsenior ~~redemption~~secured ~~premium.~~revolving ~~The~~credit ~~redemption~~facility of (the ~~HoldCo~~“2015 ~~Notes~~Revolving ~~resulted~~Credit inFacility”). aThe total loss on extinguishment of debt associated with the extinguishments of the 2015 Term Loan and 2015 Revolving Credit Facility was $5010.1 7 million.

~~Issuance of New Notes and Redemption of OpCo Notes~~23

On June 5, 2020, we issued $1,200.0 million of unsecured senior notes consisting of (i) $500.0 million aggregate principal amount of 4.625% senior notes due 2025 (the “2025 Notes”) and (ii) $700.0 million aggregate principal amount of 5.0% senior notes due 2028 (the “2028 Notes” and, together with the 2025 Notes, the “New Notes”). We used the proceeds from the issuance of the New Notes to redeem $1,125.0 million in aggregate principal amount of unsecured 6.375% senior notes (the “OpCo Notes”), plus accrued and unpaid interest thereon and a $35.9 million redemption premium. The redemption of the OpCo Notes resulted in a total loss on extinguishment of debt of $43.5 million.

Secondary Public Offering

In September 2020, we completed an underwritten secondary public offering of 43.7 million shares of common stock, including 5.7 million shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares, sold primarily by our private equity sponsors (the “Selling Stockholders”). We did not offer any common stock in this transaction and did not receive any proceeds from the sale of the shares of common stock by the Selling Stockholders. We incurred costs of $1.9 million in relation to the secondary public offering for the three and nine months ended September 30, 2020.

COVID-19 Pandemic

In March 2020, the World Health Organization declared COVID-19 a global pandemic ~~that~~which ~~has~~ resulted in travel and business disruption and volatile conditions in the capital and credit markets and overall economy. Globally, governments ~~have~~ implemented travel bans, stay at home or total lock-down mandates and other social distancing measures to combat the spread of COVID-19, which remained, to a greater or lesser extent, through the first quarter of 2021. In response to the global pandemic, we ~~have~~ created and continue to maintain a pandemic response committee of company leaders, including our chief medical officer, to help manage our response. toOur ~~the~~company ~~pandemic~~has been and continues to be focused on (i) the health and safety of our employees and the patients we recruit/enroll and (ii) business continuity, preserving the integrity of the work we do for our customers, ~~including~~such as providing support for vaccines and anti-viral therapies for COVID-19. ToIn ~~implement~~addition, ~~social~~to ~~distancing~~maximize ~~measures~~employee safety and ~~maximize~~ work productivity, we have ~~enacted~~continued ~~several~~with social distancing measures, including limiting the amount of personnel in our facilities, with remote-capable employees throughout our company working remotely, ~~and introduced~~ COVID-19 testing for employees in critical patient -facing and laboratory roles and supporting employees in obtaining COVID-19 vaccinations. We have also ~~significantly~~continued ~~limited~~to ~~domestic~~significantly ~~and~~limit ~~international~~the travel of our employees.

ToDuring ~~date,~~ the ~~COVID-19~~first ~~pandemic~~quarter ~~has~~of ~~impacted~~2021, ~~our~~the ~~business~~pandemic ~~across~~primarily ~~both~~impacted our Clinical Development Services ~~and~~segment. ~~Laboratory~~While ~~Services~~we ~~segments.~~experienced ~~The~~improvements ~~impacts~~in ~~include~~operating metrics during the first quarter of 2021, the impact continued to limit the ability of our employees to visit certain hospitals and other clinical research sites to conduct monitoring and other ~~critical~~activities ~~site visits~~ and patient recruitment and enrollment activities. asOur ~~part~~Laboratory ofServices ~~services~~segment ~~offered~~continued ~~within~~to ~~our~~operate ~~Clinical~~at ~~Development~~full ~~Services~~capacity ~~segment~~during the first quarter of 2021. Where necessary, aswe ~~well~~continue asto atake ~~temporary~~measures ~~shutdown~~to ofmitigate ~~our~~the ~~Phase~~impact Iof ~~clinics~~the ~~beginning~~pandemic inacross ~~March~~our ~~2020~~business. ~~Furthermore~~Such mitigation activities include, webut ~~have~~are ~~had~~not ~~customers~~limited ~~delay~~to, (i) winning new ~~studies~~awards ~~and/or~~for ~~pause~~services ~~ongoing~~to ~~studies~~help our customers treat or ~~certain~~combat ~~activities~~the ~~thereof,~~spread ~~such~~of asCOVID-19 ~~patient~~with ~~recruitment,~~anti-viral ~~patient~~therapies ~~enrollment~~and vaccines across both of our segments, ~~site~~(ii) ~~visits~~the continued adoption of digital and virtual strategies, including remote site monitoring, ~~impacting~~and ~~our~~(iii) ~~Clinical~~certain ~~Development~~limited ~~Services~~cost ~~segment.~~mitigation ~~Additionally~~strategies, atincluding ~~the~~reducing ~~onset~~travel ofand ~~the~~related ~~pandemic,~~expenses. ~~our~~We ~~Laboratory~~may ~~Services~~also ~~segment~~implement ~~experienced~~other ~~limited~~cost ~~reductions~~mitigation or reduction measures in ~~central~~the ~~lab~~future ~~services~~depending ~~due~~on tothe ~~delays~~progression inof ~~clinical~~the ~~trial~~pandemic ~~activity~~and ~~that~~the ~~impacted~~resulting ~~sample~~impacts ~~volumes~~to our business.

~~Beginning~~We inare ~~the~~closely ~~second~~monitoring ~~quarter~~the ofchanging ~~2020,~~landscape aswith ~~travel~~respect ~~restrictions~~to ~~were~~the ~~lifted~~pandemic and ~~phased~~taking ~~reopenings~~actions ~~began~~to inmanage ~~jurisdictions in which we operate, we reopened a limited number of~~ our ~~offices~~business and ~~also~~support ~~allowed~~our ~~business-critical travel to occur~~employees, ~~including~~customers ~~employee~~and ~~visits~~the topatients ~~hospitals~~we ~~and~~recruit/enroll. ~~other~~Depending ~~clinical~~on ~~research~~the ~~sites~~future duration, asseverity ~~well~~and asimpacts ~~the activation~~ of ~~new~~the ~~sites.~~pandemic, Wewe ~~also~~may ~~began~~have ato ~~phased~~shut ~~reopening~~down ofone or all of our Phase I clinics, ~~with~~and ~~such~~also ~~phased~~shut ~~reopenings~~down ~~resulting~~one inor ~~reduced~~more ~~domiciling~~ of ~~patients~~our ~~for~~laboratories, ~~clinical~~other ~~trials~~clinics asor ~~compared~~offices todue ~~pre-pandemic levels. Due~~ to patient safety, ~~measures~~government werestrictions, ~~implemented~~illness ~~shortly~~or ~~following~~other ~~the~~impacts ~~onset~~in ofconnection with the COVID-19 pandemic,. ~~our~~We ~~laboratory~~will ~~facilities~~continue ~~have continued~~ to ~~operate~~evaluate atthe ~~near~~nature ~~full~~and ~~capacity~~extent ~~during~~of the ~~pandemic.~~impact ~~While~~to weour ~~saw~~business, ~~improvements~~results ~~over~~of ~~the~~operations, ~~course~~financial ofcondition ~~the~~and ~~second~~liquidity. ~~and~~For ~~third~~further ~~quarters~~discussion of ~~2020~~the inrisks ~~relation~~related to ~~fewer~~our ~~customers~~business ~~delaying new or ongoing studies, steady improvements in site-based activities~~ and the ~~return of pre~~COVID-19 pandemic, ~~testing~~see ~~volumes~~Part atII, ~~our~~Item ~~central labs~~1A, ~~these~~“Risk ~~delays~~Factors,” ~~have~~included ~~impacted~~elsewhere ~~and~~in ~~will~~this ~~continue~~Quarterly toReport ~~impact~~on ~~the~~Form ~~timing~~10-Q and ~~extent~~Part toI, ~~which~~Item ~~backlog~~1A, ~~has~~“Risk ~~and~~Factors,” ~~will~~included ~~convert~~in toour ~~revenue~~2020 Form 10-K.

In response to the COVID-19 pandemic, we have taken measures to mitigate the impact of the aforementioned factors across both of our segments. Such mitigation activities include, but are not limited to, (i) winning new awards for services to help our customers treat or combat the spread of COVID-19 with anti-viral therapies and vaccines, which includes more than 125 COVID-19 related awards as of September 30, 2020 across both of our segments, (ii) the continued adoption of digital and virtual strategies and (iii) cost reduction strategies, including reducing travel and related expenses, limiting increases in employee headcount in certain non-billable areas, voluntary and limited temporary involuntary employee furloughs and reduced working hours. We may also implement other cost mitigation or reduction measures in the future depending on the progression of the COVID-19 pandemic and the resulting impacts to our business.

We do not yet know nor can we predict the full extent of the impact the COVID-19 pandemic will have on our business, financial condition, results of operations or the global economy as a whole, as the ultimate impact of the pandemic is highly uncertain and subject to change. While the COVID-19 pandemic has impacted our business and results of operations, we have been able to partially offset the financial impact due to the mitigation activities discussed above. However, the operational and financial impacts from COVID-19 could significantly increase in the future due to the magnitude, continued duration, geographic reach, ongoing impact on the global economy and capital and credit markets, and current travel and other restrictions relating to the pandemic. In addition, we might not be able to mitigate future impacts as we have done to date.

Furthermore, federal, state and local governments have implemented, and may implement in the future, economic and other stimulus measures to support individuals and businesses impacted by the COVID-19 pandemic, and while we have utilized such measures where applicable, there can be no assurance that such measures will benefit us or otherwise offset any or all of the financial impacts from the COVID-19 pandemic. To date, such measures have not been material to our results of operations.

If the pandemic continues for an extended period or worsens, such as a second global wave, governments’ actions to contain the spread of COVID-19 are ineffective and/or there is a significant delay in the development or distribution of an effective vaccine, these factors could result in a material negative impact on our business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity. Such impacts could include, but are not limited to, additional customer delays or cancellations of awarded services, reductions in R&D drug development pipelines which could result in lower growth to our industry, additional costs related to restructuring activities, non-cash impairments of goodwill and other long-lived assets, decreases in the value of our investments, loss of hedge accounting and restrictions on our ability to obtain additional financing, if needed, or refinancing of our senior secured credit facilities.

We are closely monitoring the changing landscape with respect to the COVID-19 pandemic and taking actions to manage our business and support our employees, patients and customers. We will continue to evaluate the nature and extent of the impact to our business, results of operations, financial condition and liquidity. For further discussion of the risks related to our business and the COVID-19 pandemic, see Part II, Item 1A, “Risk Factors,” included elsewhere in this Quarterly Report on Form 10-Q.

Sources of Revenue

Revenue is comprised of direct, third-party pass-through and out-of-pocket revenue from providing services to our customers. Direct revenue represents revenue associated with the direct services provided under our contracts. Third-party pass-through and out-of-pocket revenue (collectively, “indirect revenue”) represents the reimbursement by customers of third-party pass-through and out-of-pocket costs incurred by us under our contracts.

We record the reimbursement of indirect revenue and the related costs incurred as revenue and reimbursed costs, respectively, on the condensed consolidated statements of operations. These reimbursed costs are included as revenue as we (i) are the principal in the relationship, (ii) are primarily responsible for the services provided by third parties and (iii) significantly integrate the services of the third parties with our own services in delivering a combined output to the customer.

We assess our revenue based on our primary business segments, Clinical Development Services and Laboratory Services. Our Clinical Development Services segment represented 81.81% and ~~82.6% of revenue for the three months ended September 30, 2020 and 2019, respectively, and~~ 81.2% ~~and~~of ~~83.4%~~total ofsegment revenue for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, respectively, with the remainder generated from ~~our~~ Laboratory Services ~~segment~~.

We have a diverse customer mix, with no one customer accounting for more than 10% of our revenue for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020. Our top 10 customers accounted for approximately 5549.68% and 4648.07% of our revenue for the three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019, respectively, and 52.3% and 45.2% for the nine months ended September 30,~~ 2020 ~~and 2019~~, respectively. Based on the diversity of our customer base, we do not believe we have significant customer concentration risk. We do not have any significant product revenues.

Operating Costs and Expenses

Our operating costs and expenses primarily consist of direct costs, reimbursed costs, selling, general and administrative (“SG&A”) expenses and depreciation and amortization.

Direct Costs

Direct costs represent costs for providing services to customers. Direct costs primarily include labor-related costs, such as compensation and benefits for employees providing services, an allocation of facility and information technology costs, supply costs, costs for certain media-related services for patient recruitment, stock-based compensation expense, other overhead costs and offsetting research and development (“R&D”) incentive credits. Direct costs typically increase or decrease with changes in revenue and may fluctuate significantly from period to period as a percentage of revenue due to staff labor utilization, project labor mix, the type of services, changes to the timing of work performed and project inefficiencies, among other factors.

Reimbursed Costs

Reimbursed costs include third-party pass-through and out-of-pocket costs which are generally reimbursable by our customers at cost. Third-party pass-through and out-of-pocket costs include, but are not limited to, payments to investigators, payments for the use of third-party technology, shipping costs and travel costs related to the performance of services~~, among others~~. Third-party pass-through and out-of-pocket costs are incurred across both of our reportable segments.

Because services associated with reimbursed costs are generally provided by us without profit or mark-up and fluctuate from period to period without being important to our underlying performance over the full term of a contract, these costs do not have a significant impact on our income from operations. While fluctuations from period to period are not meaningful over the full term of a contract, actual and estimated reimbursed costs can impact revenue recognized, consolidated income from operations and segment operating income throughout the duration of a contract.

Selling, General and Administrative Expenses

SG&A expenses represent costs of business development, administrative and support functions. SG&A expenses primarily include compensation and benefits for employees, costs related to employees performing administrative tasks, stock-based compensation expense, sales, marketing and promotional expenses, employee recruiting and relocation expenses, employee training costs, travel costs, an allocation of facility and information technology costs and other overhead costs.

Depreciation and Amortization

Depreciation and amortization represents the costs charged for our property and equipment and intangible assets. We record depreciation and amortization on property and equipment using the straight-line method, based on the estimated useful lives of the respective assets. We depreciate leasehold improvements over the shorter of the lease term or the estimated useful lives of the improvements. We amortize software developed or obtained for internal use over the estimated useful life of the software or term of the licensing agreement. Amortization expense primarily comes from acquired definite-lived intangible assets. We amortize definite-lived intangible assets using either the straight-line method or sum-of-the-years digits method over the estimated useful lives of the assets.

How We Assess the Performance of Our Business

We manage and assess our business based on segment performance and allocate resources utilizing segment revenues and segment operating income. We also assess the performance of our reported consolidated business using a number of metrics including backlog and net authorizations. ~~Historically,~~We weprimarily ~~have~~assess ~~assessed~~ backlog and net authorizations on (i) a basis which ~~excluded~~excludes indirect revenues and the impact of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) on direct revenue (“Historical Basis”). ~~Starting in the first quarter of 2020, we also began to assess backlog~~ and ~~net~~(ii) ~~authorizations on~~ an ASC 606 total direct and indirect revenue basis (“ASC 606 Basis”). Our discussion of backlog and net authorizations below is applicable to both of the aforementioned backlog and net authorization metrics.

Our backlog represents anticipated revenue for work not yet completed or performed (i) under signed contracts, letters of intent and, in some cases, awards that are supported by other forms of written communication and (ii) where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the services within six months. Backlog and backlog conversion (defined as quarterly revenue for the period divided by opening backlog for that period) vary from period to period depending upon new authorizations, contract modifications, cancellations and the amount of revenue recognized under existing contracts. We adjust backlog for foreign currency fluctuations and exclude from backlog revenue that has been recognized as revenue in our statements of operations.

Although an increase in backlog will generally result in an increase in future revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in revenue during a particular period. The timing and extent to which backlog will result in revenue depends on many factors, including the timing of commencement of work, the rate at which we perform services, scope changes, cancellations, delays, receipt of regulatory approvals and the nature, duration, size, complexity and phase of the studies. Our contracts generally have terms ranging from several months to several years. In addition, delayed projects remain in backlog unless they are canceled. 25

34Although an increase in backlog will generally result in an increase in future revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in revenue during a particular period. The timing and extent to which backlog will result in revenue depends on many factors, including the timing of commencement of work, the rate at which we perform services, scope changes, cancellations, delays, receipt of regulatory approvals and the nature, duration, size, complexity and phase of the studies. Our contracts generally have terms ranging from several months to several years. In addition, delayed projects remain in backlog unless they are canceled. As a result of these and other factors, including those from the impact of the COVID-19 pandemic, our backlog might not be a reliable indicator of future revenue and we might not realize all or any part of the revenue from the authorizations in backlog as of any point in time. Once work begins, we recognize revenue over the life of the contract as we perform services under such contract.

AsWe ~~noted~~add ~~elsewhere~~new inauthorizations ~~this~~to ~~Quarterly~~backlog ~~Report~~based on ~~Form 10-Q, due to~~ the ~~COVID-19~~aforementioned ~~pandemic,~~criteria wefor ~~have~~backlog. ~~had~~Net ~~customers~~authorizations ~~delay~~represent new ~~studies~~business ~~and/or~~awards, ~~pause~~net ~~ongoing~~of ~~studies~~award or ~~certain~~contract ~~activities thereof~~modifications, ~~such~~contract ~~as patient recruitment~~cancellations, ~~patient~~foreign ~~enrollment,~~currency ~~site~~fluctuations ~~visits~~ and ~~site~~other ~~monitoring~~adjustments. ~~These~~New ~~delays~~authorizations ~~have~~vary ~~impacted~~from ~~and~~period ~~will~~to ~~continue~~period todepending ~~impact~~on ~~the~~numerous ~~timing~~factors, ~~and~~including ~~extent~~customer toauthorization ~~which~~volume, ~~backlog~~sales ~~has~~performance and ~~will~~overall ~~convert~~health toof ~~revenue.~~the Webiopharmaceutical ~~have~~industry, ~~not~~among ~~adjusted~~others. ~~backlog~~New toauthorizations ~~remove~~have ~~the~~varied ~~backlog~~and ~~associated~~will ~~with~~continue ~~these~~to ~~studies~~vary assignificantly ~~our~~from ~~customers~~quarter ~~for~~to ~~these~~quarter ~~studies~~and ~~have~~from ~~not~~year ~~canceled~~to oryear. ~~notified~~In usaddition ~~of their intent~~ to ~~cancel~~net ~~these~~authorizations, ~~studies~~we ~~and~~also ~~because~~assess wenet ~~cannot~~book-to-bill, ~~estimate~~which represents the ~~length~~amount of ~~delay.~~net Asauthorizations afor ~~result~~the ofperiod ~~these~~divided ~~and~~by ~~other~~revenue ~~factors,~~recognized ~~our~~in ~~backlog~~that ~~might~~period. ~~not~~We behave aincluded ~~reliable~~new ~~indicator~~business ofawards ~~future~~associated ~~revenue~~with ~~and~~COVID-19 wein ~~might~~our ~~not~~net ~~realize~~authorizations ~~all~~and orbacklog. ~~any~~The ~~part~~dynamics of ~~the~~such ~~revenue~~awards differ from ~~the~~those ~~authorizations in backlog as~~ of ~~any~~more ~~point~~traditional instudies ~~time.~~and ~~Once~~therefore ~~work begins,~~ we ~~recognize~~have ~~revenue~~adjusted ~~over~~ the ~~life~~amount of ~~the contract as we perform services under~~ such ~~contract. We have included~~ new business awards ~~associated~~included ~~with COVID-19~~ in ~~our~~ net authorizations and backlog.

We add new authorizations to backlog based on the aforementioned criteria for backlog. Net authorizations represent new business awards, net of award or contract modifications, contract cancellations, foreign currency fluctuations and other adjustments. New authorizations vary from period to period depending on numerous factors, including customer authorization volume, sales performance and overall health of the biopharmaceutical industry, among others. New authorizations have varied and will continue to vary significantly from quarter to quarter and from year to year. In addition to net authorizations, we also assess net book-to-bill, which represents the amount of net authorizations for the period divided by revenue recognized in that period.

Net Authorizations and Backlog

The following table provides selected information related to our backlog and net authorizations as of and for the three months ended ~~September~~March 3031:

	~~Historical Basis~~			Historical Basis			~~ASC 606 Basis~~							ASC 606 Basis
(dollars in millions)	~~2020~~			~~2019~~2021			~~2020~~		2020		~~2019~~			2021			2020
Net authorizations	$	~~1,200.3~~		$	~~900~~1,481.26		$	~~1,764.5~~	$	1,063.6	$	~~1,158.7~~		$	2,193.9		$	1,417.2
Backlog	~~7,890.4~~			68,~~805~~682.75			~~11,720.1~~		7,312.2		~~9,896.6~~			13,053.2			10,620.1
Backlog conversion	~~11.8~~		%	1112.84		%	~~11.0~~		%11.6		~~10.5~~%		%	11.3		%	10.4		%
Net book-to-bill	~~1.35x~~			1.~~14x~~46x			~~1.43x~~		1.30x		~~1.13x~~			1.59x			1.32x

The increase in net authorizations and backlog in ~~2020~~2021 for the metrics above as compared to the same period in the prior year was primarily due to a higher number of, ~~and win rate on,~~ competitive decisions (which represents the total dollar amount of new business on which we bid), and new business awards related to the COVID-19 pandemic, partially offset by cancellations and ~~favorable~~unfavorable net foreign currency fluctuations~~, partially offset by higher cancellations~~.

~~Acquisitions~~Foreign Currency

OnA ~~September 3,~~large ~~2019,~~portion weof ~~acquired~~our ~~100%~~revenues ofand ~~the~~expenses ~~issued~~are ~~and~~denominated ~~outstanding~~in ~~equity~~foreign ofcurrencies ~~Synarc,~~and ~~Inc.~~our ~~(“Synarc”),~~condensed ~~the~~consolidated ~~global~~financial ~~site~~statements ~~network~~are ofreported ~~Bioclinica,~~in ~~Inc~~United States dollars. As such, ~~expanding~~changes ~~our~~in ~~global~~foreign ~~footprint~~currency ~~into~~exchange ~~China~~rates ~~and~~can ~~Latin~~significantly ~~America~~affect our results of operations. The revenue and ~~expanding~~expenses of our ~~central~~foreign ~~nervous~~operations ~~system~~are ~~offering~~generally denominated in ~~the~~local currencies and translated into United States. ~~Additionally,~~dollars onfor ~~July 1,~~financial ~~2019,~~reporting wepurposes. ~~acquired~~Therefore, ~~100%~~exchange ofrate ~~the~~fluctuations ~~issued~~will ~~and~~affect ~~outstanding~~the ~~equity~~translation of ~~Medimix~~foreign ~~International~~results ~~(“Medimix”),~~into aUnited ~~global~~States ~~technology~~dollars ~~company~~for ~~that~~purposes ~~provides~~of ~~real-world~~reporting ~~evidence~~consolidated ~~insights~~results ~~and~~of ~~information~~operations. toWe ~~the~~believe ~~pharmaceutical,~~that ~~diagnostic~~reporting ~~and~~results ~~medical~~of ~~device~~operations ~~industries.~~that ~~See~~disclose ~~Note~~the 4,effects ~~“Business~~of ~~Combinations,”~~foreign tocurrency ~~our~~rate ~~condensed~~fluctuations ~~consolidated~~on certain financial ~~statements~~results, ~~included~~where ~~elsewhere~~meaningful, incan ~~this~~facilitate ~~Quarterly~~analysis ~~Report~~of onperiod ~~Form~~to ~~10-Q~~period ~~for additional information~~comparisons.

Incremental Public Company Expenses

As a new public company, we have and will incur additional expenses on an ongoing basis that we did not incur as a private company. Those costs include additional director and officer liability insurance expenses, as well as third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal, investor and public relations expenses and additional stock-based compensation expense as we align our long-term incentive plan with other comparable public company plans. These costs are expected to generally be SG&A expenses.

Results of Operations

We have included the results of operations of acquired companies in our condensed consolidated results of operations from the date of their respective acquisitions, which impacts the comparability of our results of operations when comparing results for the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2019. We have noted in the discussion below, to the extent meaningful and quantifiable, the impact on the comparability of our condensed consolidated results of operations to prior year results due to the inclusion of acquired companies when comparing the three and nine months ended September 30, 2020 to the three and nine months ended September 30, 2019.

During the first quarter of 2020, our Chief Operating Decision Maker began assessing performance and making resource allocation decisions based on total segment revenue, including direct and indirect revenue, and segment operating income, including reimbursed costs. Previously, certain revenue amounts were not allocated to segments, whereas following the change, all revenue and reimbursed costs are allocated to the respective segment. As a result, we have updated our segment presentation and all prior period information has been recast to reflect the change in the measurement of segment performance measures.

Three Months Ended September 30, 2020 versus Three Months Ended September 30, 2019

Consolidated Results of Operations

Revenue	Three Months Ended September 30,
(dollars in thousands)	2020		2019		Change
Revenue	$	1,233,802	$	1,023,864	$	209,938	20.5	%

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

Revenue increased $209.9 million, or 20.5%, to $1,233.8 million for the three months ended September 30, 2020 as compared to the same period in 2019. Revenue increased (i) 19.4% from organic volume growth across our business due to higher opening backlog at the beginning of the period as compared to the prior year and overall growth in new business awards during 2020, including awards and associated revenue for COVID-19 work, (ii) 0.4% from inorganic growth due to our acquisition of Synarc and (iii) 0.7% from the favorable impact from foreign currency exchange rates.

Direct Costs	Three Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Direct costs, exclusive of depreciation and amortization	$	433,422		$	369,476		$	63,946	17.3	%
% of revenue	35.1		%	36.1		%

Direct costs increased $63.9 million to $433.4 million for the three months ended September 30, 2020 as compared to the same period in 2019. The increase in direct costs was primarily due to (i) a $54.4 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases, (ii) a $9.0 million increase in laboratory supply costs from the growth in revenue, (iii) a $4.3 million increase from the acquisition of Synarc and (iv) a 0.3% increase from the unfavorable impact from foreign currency exchange rates. The increase in direct costs was partially offset by a reduction in certain project delivery costs. As a percentage of revenue, direct costs decreased to 35.1% for the three months ended September 30, 2020 as compared to 36.1% in the same period in 2019 primarily due to the factors identified above.

Reimbursed Costs	Three Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Reimbursed costs	$	335,866		$	241,804		$	94,062	38.9	%
% of revenue	27.2		%	23.6		%

Reimbursed costs increased $94.1 million to $335.9 million for the three months ended September 30, 2020 as compared to the same period in 2019. Reimbursed costs increased primarily due to the increase in revenue, including growth related to certain awards of work for COVID-19 which have significant reimbursed costs and a 1.5% increase from the unfavorable impact of foreign currency exchange rates. The increase in reimbursed costs was also impacted by the general timing of costs incurred across our portfolio of work, which will vary over the course of clinical trials due to (i) the timing of the work performed, (ii) scope changes and (iii) the complexity and phase of the study, among other factors. As a percentage of revenue, reimbursed costs increased to 27.2% for the three months ended September 30, 2020 as compared to 23.6% in the same period in 2019 primarily due to the factors identified above.

Selling, General and Administrative Expenses	Three Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Selling, general and administrative expenses	$	249,320		$	226,996		$	22,324	9.8	%
% of revenue	20.2		%	22.2		%

SG&A expenses increased $22.3 million to $249.3 million for the three months ended September 30, 2020 as compared to the same period in 2019. The increase in SG&A expenses was primarily due to (i) a $19.7 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases, (ii) a $2.1 million increase from the acquisition of Synarc and (iii) a 0.4% increase from the unfavorable impact from foreign currency exchange rates. The increase in SG&A expenses was partially offset by lower travel and associated expenses as a result of COVID-19 related cost reduction measures. As a percentage of revenue, SG&A expenses decreased to 20.2% for the three months ended September 30, 2020 as compared to 22.2% in the same period in 2019 primarily due to the factors identified above as well as our efforts to effectively leverage our SG&A function.

Interest Expense, Net	Three Months Ended September 30,
(in thousands)	2020		2019
Interest expense, net	$	49,882	$	85,754

Interest expense, net, was $49.9 million for the three months ended September 30, 2020 as compared to $85.8 million in the same period in 2019. The decrease in interest expense was primarily related to the redemption of our HoldCo Notes, the lower interest rate on our New Notes as compared to the redeemed OpCo Notes and a decrease in the interest rate on our term loan under our senior secured credit facilities, partially offset by the impact from unfavorable interest rate swaps.

Loss on Investments	Three Months Ended September 30,
(in thousands)	2020			2019
Loss on investments	$	(53,100	)	$	(15,106	)

Loss on investments was $53.1 million for the three months ended September 30, 2020 as compared to a loss of $15.1 million in the same period in 2019. The losses for both periods were primarily a result of changes in the fair values of the net asset values of our investments, partially offset by changes to the discounts on certain investments during the current year and prior year. The decrease in net asset value for the three months ended September 30, 2020 reflects primarily a decrease in the trading stock price of one of the underlying investments of a limited partnership during the quarter.

The gains or losses from our investments will likely continue to fluctuate from period to period primarily based on the changes in fair value of the underlying investments of the limited partnerships, including the volatility of trading stock prices of any underlying publicly traded investments within the partnerships, and changes in the discounts applied to such investments for our lack of control and lack of marketability, where applicable.

Other (Expense) Income, Net	Three Months Ended September 30,
(in thousands)	2020			2019
Other (expense) income, net	$	(17,153	)	$	9,157

Other expense, net, was $17.2 million for the three months ended September 30, 2020 as compared to other income, net, of $9.2 million in the same period in 2019. Foreign exchange rate movement resulted in transaction and re-measurement losses of $17.5 million for the three months ended September 30, 2020 and transaction and re-measurement gains of $10.7 million in the same period in 2019.

Provision for Income Taxes	Three Months Ended September 30,
(dollars in thousands)	2020			2019
Provision for income taxes	$	11,169		$	9,044
Effective income tax rate	50.0		%	33.5		%

Our provision for income taxes was $11.2 million, resulting in an effective income tax rate of 50.0%, for the three months ended September 30, 2020 as compared to a provision of $9.0 million, or an effective income tax rate of 33.5%, in the same period in 2019. Our provision for income taxes for the three months ended September 30, 2020 was primarily due to the estimated tax on our distribution of pre-tax income among our domestic and foreign jurisdictions and the impacts of a tax rate change in the United Kingdom. Our provision for income taxes for the three months ended September 30, 2019 was primarily due to the estimated tax effect on our pre-tax income.

Segment Results of Operations

Clinical Development Services and Laboratory Services segment revenue, segment direct costs, segment reimbursed costs, segment SG&A expenses and segment operating income for the three months ended September 30, 2020 and 2019 are detailed below.

Clinical Development Services

	Three Months Ended September 30,
(dollars in thousands)	2020		2019		Change
Segment revenue	$	1,008,639	$	846,068	$	162,571	19.2	%
Segment direct costs	330,281		287,538		42,743		14.9
Segment reimbursed costs	309,117		220,873		88,244		40.0
Segment SG&A expenses	137,984		130,576		7,408		5.7
Segment operating income	$	231,257	$	207,081	$	24,176	11.7

Segment Revenue

Clinical Development Services’ revenue was $1,008.6 million for the three months ended September 30, 2020, an increase of $162.6 million as compared to the same period in 2019. Revenue increased (i) 18.0% from organic volume primarily from our Phase II-IV clinical trial management services as a result of higher opening backlog at the beginning of the period as compared to the prior year and overall growth in new business awards during 2020, including awards and associated revenue for COVID-19 work, (ii) 0.7% from the favorable impact from foreign currency exchange rates and (iii) 0.5% from inorganic growth due to the acquisition of Synarc. The higher opening backlog was primarily due to increased net authorizations for our Phase II-IV clinical trial management services in 2020 as compared to 2019.

Segment Direct Costs

Clinical Development Services’ direct costs were $330.3 million for the three months ended September 30, 2020, an increase of $42.7 million as compared to the same period in 2019. The increase in direct costs was primarily due to (i) a $42.9 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases, (ii) a $4.3 million increase from the acquisition of Synarc and (iii) a 0.2% increase from the unfavorable impact from foreign currency exchange rates. The increase in direct costs was partially offset by a reduction in certain project delivery costs.

Segment Reimbursed Costs

Clinical Development Services’ reimbursed costs were $309.1 million for the three months ended September 30, 2020, an increase of $88.2 million as compared to the same period in 2019. Reimbursed costs increased primarily due to the increase in revenue, including growth related to certain awards of work for COVID-19 which have significant reimbursed costs and a 1.5% increase from the unfavorable impact from foreign currency exchange rates. The increase in reimbursed costs was also impacted by the general timing of costs incurred across our portfolio of work, which will vary over the course of clinical trials due to (i) the timing of the work performed, (ii) scope changes and (iii) the complexity and phase of the study, among other factors.

Segment SG&A Expenses

Clinical Development Services’ SG&A expenses were $138.0 million for the three months ended September 30, 2020, an increase of $7.4 million as compared to the same period in 2019. The increase in SG&A expenses was primarily due to (i) compensation increases, (ii) the impact of the acquisition of Synarc and (iii) a 0.5% increase from the unfavorable impact from foreign currency exchange rates. The increase in SG&A expenses was partially offset by lower travel and associated expenses as a result of COVID-19 related cost reduction measures.

Laboratory Services

	Three Months Ended September 30,
(dollars in thousands)	2020		2019		Change
Segment revenue	$	225,163	$	177,796	$	47,367	26.6	%
Segment direct costs	102,355		79,445		22,910		28.8
Segment reimbursed costs	26,749		20,931		5,818		27.8
Segment SG&A expenses	23,283		19,648		3,635		18.5
Segment operating income	$	72,776	$	57,772	$	15,004	26.0

Segment Revenue

Laboratory Services’ revenue was $225.2 million for the three months ended September 30, 2020, an increase of $47.4 million as compared to the same period in 2019. Revenue increased from organic volume growth across the majority of our laboratory services in part due to higher opening backlog at the beginning of the period as compared to the prior year and overall growth in new business awards during 2020, including awards and associated revenue for COVID-19 work. The higher opening backlog was primarily due to increased net authorizations across all of our lab businesses in 2020 as compared to 2019.

Segment Direct Costs

Laboratory Services’ direct costs were $102.4 million for the three months ended September 30, 2020, an increase of $22.9 million as compared to the same period in 2019. The increase in direct costs was primarily due to (i) a $13.4 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases and (ii) a $9.0 million increase in laboratory supply costs associated with the growth in revenue.

Segment Reimbursed Costs

Laboratory Services’ reimbursed costs were $26.7 million for the three months ended September 30, 2020, an increase of $5.8 million as compared to the same period in 2019. Reimbursed costs increased primarily due to the increase in revenue, as well as higher shipping costs and the general timing of costs incurred across our portfolio of work.

Segment SG&A Expenses

Laboratory Services’ SG&A expenses were $23.3 million for the three months ended September 30, 2020, an increase of $3.6 million as compared to the same period in 2019. The increase in SG&A expenses was primarily due to a $3.6 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases.

Nine Months Ended September 30, 2020 versus Nine Months Ended September 30, 2019

Consolidated Results of Operations

Revenue	~~Nine Months Ended September 30,~~		Three Months Ended March 31,
(dollars in thousands)	~~2020~~		~~2019~~2021		~~Change~~		2020				Change
Revenue	$	~~3,317,182~~	$	21,~~984~~378,~~133~~380	$	~~333,049~~	$	1,072,462	~~11.2~~	%	$	305,918	28.5	%

Revenue increased $333.0 million, or 11.2%, to $3,317.2 million for the nine months ended September 30, 2020 as compared to the same period in 2019. Revenue increased 10.3% from organic volume growth across our business due to higher opening backlog at the beginning of the year as compared to the prior year and overall growth in new business awards during 2020, including awards and associated revenue for COVID-19 work. Additionally, revenue increased 1.0% from inorganic growth primarily due to our acquisitions of Synarc and Medimix (the “2019 Acquisitions”). 26

Direct Costs	Nine Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Direct costs, exclusive of depreciation and amortization	$	1,222,700		$	1,112,181		$	110,519	9.9	%
% of revenue	36.9		%	37.3		%

Revenue increased $305.9 million, or 28.5%, to $1,378.4 million for the three months ended March 31, 2021 as compared to the same period in 2020. Revenue increased (i) 26.5% from organic volume growth across our business due to higher opening backlog at the beginning of the period as compared to the prior year, (ii) from awards and associated revenue for certain COVID-19 work which has a higher mix of indirect revenue and (iii) 2.0% from the favorable impact from foreign currency exchange rates.

Direct costs increased $110.5 million to $1,222.7 million for the nine months ended September 30, 2020 as compared to the same period in 2019. The increase in direct costs was due to (i) a $98.1 million increase from growth in employee headcount to support current growth in revenue as well as compensation increases, (ii) an $8.5 million increase in compensation costs related to the acceleration of remaining expenses under the terminated cash-based long-term incentive plan (“LTIP”), (iii) a $21.5 million increase from the impact of the 2019 Acquisitions and (iv) a $17.9 million increase in laboratory supply costs from the growth in revenue. The increase in direct costs was partially offset by (i) a decrease in certain project delivery costs, including media-related costs for patient recruitment services, (ii) the impacts of limited voluntary and involuntary temporary furloughs of certain employees as a result of COVID-19 related cost reduction measures and (iii) a 0.8% decrease from the favorable impact from foreign currency exchange rates. As a percentage of revenue, direct costs decreased to 36.9% for the nine months ended September 30, 2020 as compared to 37.3% in the same period in 2019 primarily due to the factors identified above.


Direct Costs	Three Months Ended March 31,
(dollars in thousands)	2021			2020			Change
Direct costs, exclusive of depreciation and amortization	$	477,624		$	414,439		$	63,185	15.2	%
% of revenue	34.7		%	38.6		%

Reimbursed Costs	Nine Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Reimbursed costs	$	810,523		$	688,696		$	121,827	17.7	%
% of revenue	24.4		%	23.1		%

Direct costs increased $63.2 million to $477.6 million for the three months ended March 31, 2021 as compared to the same period in 2020. The increase in direct costs was primarily due to (i) a $32.5 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases, (ii) a $14.1 million increase in laboratory supply costs in connection with the growth in revenue, (iii) an increase in contract labor and certain project delivery costs and (iv) a 2.1% increase from the unfavorable impact from foreign currency exchange rates. As a percentage of revenue, direct costs decreased to 34.7% for the three months ended March 31, 2021 as compared to 38.6% in the same period in 2020 primarily due to the increase in indirect revenue included as part of revenue which does not have a corresponding impact on direct costs.

Reimbursed costs increased $121.8 million to $810.5 million for the nine months ended September 30, 2020 as compared to the same period in 2019. Reimbursed costs increased primarily due to the increase in revenue, including growth related to certain awards of work for COVID-19 which have significant reimbursed costs. The increase in reimbursed costs was also impacted by the general timing of costs incurred across our portfolio of work, which will vary over the course of clinical trials due to (i) the timing of the work performed, (ii) scope changes and (iii) the complexity and phase of the study, among other factors. The increase in reimbursed costs was partially offset by a 0.4% decrease from the favorable impact from foreign currency exchange rates. As a percentage of revenue, reimbursed costs increased to 24.4% for the nine months ended September 30, 2020 as compared to 23.1% in the same period in 2019 primarily due to the factors identified above.


Reimbursed Costs	Three Months Ended March 31,
(dollars in thousands)	2021			2020			Change
Reimbursed costs	$	380,837		$	250,850		$	129,987	51.8	%
% of revenue	27.6		%	23.4		%

Selling, General and Administrative Expenses	Nine Months Ended September 30,
(dollars in thousands)	2020			2019			Change
Selling, general and administrative expenses	$	734,712		$	681,431		$	53,281	7.8	%
% of revenue	22.1		%	22.8		%

Reimbursed costs increased $130.0 million to $380.8 million for the three months ended March 31, 2021 as compared to the same period in 2020. Reimbursed costs increased primarily due to the increase in revenue, including growth related to certain awards of work for COVID-19 which have significant reimbursed costs, partially offset by lower travel costs, and a 4.7% increase from the unfavorable impact from foreign currency exchange rates. The increase in reimbursed costs was also impacted by the general timing of costs incurred across our portfolio of work, which vary over the course of clinical trials due to (i) the timing of the work performed, (ii) scope changes and (iii) the complexity and phase of the study, among other factors. As a percentage of revenue, reimbursed costs increased to 27.6% for the three months ended March 31, 2021 as compared to 23.4% in the same period in 2020 primarily due to the factors identified above as well as the increase in indirect revenue included as part of revenue which has a corresponding impact on reimbursed costs.


Selling, General and Administrative Expenses	Three Months Ended March 31,
(dollars in thousands)	2021			2020			Change
Selling, general and administrative expenses	$	293,936		$	247,776		$	46,160	18.6	%
% of revenue	21.3		%	23.1		%

SG&A expenses increased $5346.32 million to $~~734~~293.79 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to the same period in ~~2019~~2020. The increase in SG&A expenses was primarily due to (i) a $5137.0 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases, (ii) a $~~10.~~5 ~~million increase from the impact of the 2019 Acquisitions, (iii) an $8~~.12 million increase in technology costs primarily related to software licensing and ~~cloud services and~~ (iviii) a $31.~~0 million~~9% increase infrom ~~compensation costs related to~~ the ~~acceleration~~unfavorable ofimpact ~~remaining~~from ~~expense~~foreign ~~under~~currency ~~the~~exchange ~~terminated cash-based LTIP~~rates. The increase in SG&A expenses was partially offset by lower travel and associated expenses ~~as a result of COVID-19 related cost reduction measures and a 0~~.6% ~~decrease from the favorable impact from foreign currency exchange rates.~~ As a percentage of revenue, SG&A expenses decreased to 2221.13% for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to 2223.81% in the same period in ~~2019~~2020 primarily due to (i) lower travel and associated expenses, (ii) the ~~factors~~increase ~~identified~~in ~~above~~indirect asrevenue ~~well~~included as part of revenue which does not have a corresponding impact on SG&A expenses and (iii) our efforts to effectively leverage our SG&A function as revenue increases.

Interest Expense, Net	Nine Months Ended September 30,
Depreciation and Amortization			Three Months Ended March 31,
(in thousands)	~~2020~~		~~2019~~2021		2020
Interest expense, net	$	165,995	$	229,147
Depreciation and amortization			$	73,143	$	66,315

Interest expense, net, was $166.0 million for the nine months ended September 30, 2020 as compared to $229.1 million in the same period in 2019. The decrease in interest expense was primarily related to the redemption of our HoldCo Notes, the lower interest rate on our New Notes as compared to the redeemed OpCo Notes and a decrease in the interest rate on our term loan under our senior secured credit facilities, partially offset by the impact from unfavorable interest rate swaps. 27

Loss on Extinguishment of Debt	Nine Months Ended September 30,
(in thousands)	2020			2019
Loss on extinguishment of debt	$	(93,534	)	$	—

Depreciation and amortization was $73.1 million for the three months ended March 31, 2021 as compared to $66.3 million in the same period in 2020. The increase in depreciation and amortization expense primarily relates to the impact from our laboratory facility expansions and new purchased and internally developed software, partially offset by a decrease due to the timing of amortization of certain definite-lived intangible assets.

Loss on extinguishment of debt was $93.5 million for the nine months ended September 30, 2020. The loss resulted from the early extinguishment of our HoldCo and OpCo Notes and consisted of redemption premiums of $50.4 million and the write off of our unamortized debt discount and deferred debt issuance costs of $43.1 million. There was no loss on extinguishment of debt for the nine months ended September 30, 2019.


Interest Expense, Net	Three Months Ended March 31,
(in thousands)	2021		2020
Interest expense, net	$	47,212	$	64,710

Gain (Loss) on Investments	Nine Months Ended September 30,
(in thousands)	2020		2019
Gain (loss) on investments	$	16,649	$	(22,716	)

Interest expense, net, was $47.2 million for the three months ended March 31, 2021 as compared to $64.7 million in the same period in 2020. The decrease in interest expense was primarily due to (i) a $15.4 million reduction as a result of the redemption of our unsecured Senior PIK Toggle Notes (the “HoldCo Notes”) as part of our initial public offering (“IPO”) during the first quarter of 2020, (ii) an $11.1 million reduction related to a decrease in the variable interest rate on our New Term Loan as compared to our extinguished 2015 Term Loan and (iii) the impact from the lower interest rate on our unsecured senior notes that were refinanced during the second quarter of 2020, partially offset by an increase of $11.2 million from the unfavorable net impact of our interest rate swaps.

Gain on investments was $16.6 million for the nine months ended September 30, 2020 as compared to a loss of $22.7 million in the same period in 2019. The gain and loss for the current year and prior year, respectively, was primarily a result of changes in the fair values of the net asset values of our investments, partially offset by changes to the discounts on certain investments for the current year and prior year.


Loss on Extinguishment of Debt	Three Months Ended March 31,
(in thousands)	2021		2020
Loss on extinguishment of debt	$	(10,677)	$	(50,065)

~~The~~Loss ~~gains~~on orextinguishment ~~losses~~of ~~from~~debt ~~our~~was ~~investments~~$10.7 ~~will~~million ~~likely~~for ~~continue~~the tothree ~~fluctuate~~months ~~from~~ended ~~period~~March 31, to2021 ~~period~~as ~~primarily~~compared ~~based~~to on$50.1 million in the ~~changes~~same period in ~~fair~~2020. ~~value~~The ofloss in the ~~underlying~~current ~~investments~~period ofresulted from the ~~limited~~write ~~partnerships,~~off ~~including~~of ~~the~~our ~~volatility~~previously ofrecorded ~~stock~~unamortized ~~prices~~debt ofdiscount ~~any~~and ~~underlying~~deferred ~~publicly~~debt ~~traded~~issuance ~~investments~~costs ~~within~~related to the ~~partnerships,~~extinguishments of our 2015 Term Loan and ~~changes~~2015 Revolving Credit Facility. The loss in the ~~discounts~~prior ~~applied~~period toresulted ~~such~~from ~~investments~~the ~~for~~early extinguishment of our ~~lack~~HoldCo Notes and consisted of ~~control~~a redemption premium of $14.5 million and ~~lack~~the write off of ~~marketability,~~our ~~where~~previously ~~applicable~~recorded unamortized debt discount and deferred debt issuance costs of $35.6 million.

Other Expense, Net	Nine Months Ended September 30,
Loss on Investments				Three Months Ended March 31,
(in thousands)	~~2020~~			~~2019~~2021			2020
Other expense, net	$	(14,097	)	$	(3,158	)
Loss on investments				$	(37,229)		$	(26,872)

~~Other~~Loss ~~expense,~~on ~~net,~~investments was $1437.12 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to ~~other~~a ~~expense,~~loss ~~net,~~ of $326.29 million in the same period in ~~2019~~2020. ~~Foreign~~The ~~exchange~~losses ~~rate~~for ~~movement~~both ~~resulted~~periods inwere ~~transaction~~primarily ~~and~~a ~~re-measurement~~result ~~losses~~ of ~~$3.1~~changes ~~million~~in ~~for~~ the ~~nine~~fair ~~months~~values ~~ended~~of ~~September 30,~~the ~~2020~~net ~~and~~asset ~~transaction~~values ~~and re-measurement losses~~ of ~~$1.4~~our ~~million~~investments, inwhich during the ~~same~~three ~~period~~months inended ~~2019.~~March ~~Undesignated~~31, ~~interest~~2021, ~~rate~~included ~~swap~~decreases ~~activity resulted~~ in ~~losses of $11.4 million for~~ the ~~nine~~publicly ~~months~~traded ~~ended~~stock ~~September 30,~~prices ~~2020~~of ~~and~~certain nounderlying ~~losses~~holdings orwithin ~~gains~~our ~~for~~investments ~~the~~in ~~nine~~limited ~~months ended September 30, 2019~~partnerships.

41The gains or losses from our investments will likely continue to fluctuate from period to period primarily based on the changes in fair value of the underlying holdings of the limited partnerships, including the volatility of stock prices underlying publicly traded investments within the partnerships, and changes in the discounts applied to such investments for our lack of control and lack of marketability, where applicable.

Provision for Income Taxes	Nine Months Ended September 30,
Other Income, Net				Three Months Ended March 31,
(dollars in thousands)	2020			2019
(in thousands)				2021			2020
Provision for income taxes	$	20,682		$	12,387
Other income, net				$	9,004		$	29,294
Effective income tax rate	24.5		%	25.3		%

~~Our~~Other ~~provision for~~ income, ~~taxes~~net, was $209.70 million, ~~resulting in an effective income tax rate of 24.5%,~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to ~~a provision of~~ $1229.43 million, orin anthe ~~effective~~same ~~income~~period ~~tax~~in ~~rate of 25~~2020.~~3%,~~ inForeign ~~the~~exchange ~~same~~rate ~~period~~movement resulted in ~~2019.~~transaction ~~Our~~and ~~provision~~re-measurement ~~for~~gains ~~income~~of ~~taxes~~$8.0 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 ~~was~~and ~~primarily~~$37.7 ~~due~~million toin the ~~estimated~~same ~~tax~~period ~~effect~~in on2020. ~~our~~Interest ~~pre-tax~~rate ~~income.~~swap ~~Our~~hedging ~~provision~~activity ~~for~~resulted ~~income~~in ~~taxes~~gains of $1.0 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2021 ~~was~~and ~~primarily~~losses ~~due~~of to$8.3 ~~the~~million ~~estimated~~in ~~tax~~the ~~effect~~same onperiod ~~our~~in ~~pre-tax income~~2020.


Provision for (Benefit from) Income Taxes	Three Months Ended March 31,
(dollars in thousands)	2021			2020
Provision for (benefit from) income taxes	$	15,053		$	(7,717)
Effective income tax rate	23.1		%	40.0		%

Our provision for income taxes was $15.1 million, resulting in an effective income tax rate of 23.1%, for the three months ended March 31, 2021 as compared to a benefit of $7.7 million, or an effective income tax rate of 40.0%, for the same period in 2020. Our provision for income taxes for the three months ended March 31, 2021 was primarily due to the estimated tax effect on our pre-tax income. Our benefit from income taxes for the three months ended March 31, 2020 was primarily due to the estimated tax effect on our pre-tax loss and the impact of certain favorable discrete items, partially offset by the tax impact of certain non-deductible compensation costs.

Segment Results of Operations

Clinical Development Services and Laboratory Services segment ~~revenue,~~results ~~segment direct costs, segment reimbursed costs, segment SG&A expenses and segment operating income~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020 are detailed below.

Clinical Development Services


Clinical Development Services	Three Months Ended March 31,
(dollars in thousands)	2021		2020		Change
Segment revenue	$	1,117,370	$	870,886	$	246,484	28.3	%
Segment direct costs	356,049		309,078		46,971		15.2
Segment reimbursed costs	349,682		223,529		126,153		56.4
Segment SG&A expenses	173,484		141,832		31,652		22.3
Segment operating income	$	238,155	$	196,447	$	41,708	21.2

	Nine Months Ended September 30,
(dollars in thousands)	2020		2019		Change
Segment revenue	$	2,694,775	$	2,488,773	$	206,002	8.3	%
Segment direct costs	922,737		871,753		50,984		5.8
Segment reimbursed costs	730,872		633,466		97,406		15.4
Segment SG&A expenses	415,334		391,551		23,783		6.1
Segment operating income	$	625,832	$	592,003	$	33,829	5.7

Segment Revenue

Clinical Development Services’ revenue was $21,~~694~~117.84 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $~~206~~246.05 million as compared to the same period in ~~2019~~2020. Revenue increased 7(i) 26.31% from organic volume ~~growth~~ primarily from our Phase II-IV clinical trial management services as a result of higher opening backlog at the beginning of the ~~year~~period as compared to the prior year, ~~and~~(ii) ~~overall~~from ~~growth in new business~~ awards ~~during 2020, including awards~~ and associated revenue for certain COVID-19 work ~~and 1.2%~~which ~~from~~has ~~inorganic~~a ~~growth~~higher ~~due~~mix toof ~~the~~indirect ~~2019 Acquisitions. The increase in~~ revenue ~~was~~and ~~partially offset by a 0~~(iii) 2.2% ~~decrease~~ from the ~~unfavorable~~favorable impact from foreign currency exchange rates. The higher opening backlog was primarily due to increased net authorizations for our Phase II-IV clinical trial management services in 2020 as compared to 2019.

Segment Direct Costs

Clinical Development Services’ direct costs were $~~922~~356.~~7 million~~0 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $5147.0 million as compared to the same period in ~~2019~~2020. The increase in direct costs was primarily due to (i) a $5931.1 9 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases, ~~and~~(ii) aan ~~$21.5 million~~ increase ~~from the impact of the 2019 Acquisitions. The increase~~ in ~~direct~~contract ~~costs~~labor ~~was~~and ~~partially offset by (i) a decrease in~~ certain project delivery costs, ~~including media-related costs for patient recruitment services, (ii) the impacts of limited voluntary~~ and ~~involuntary temporary furloughs of certain employees as a result of COVID-19 related cost reduction measures and~~ (iii) a 12.03% ~~decrease~~increase from the ~~favorable~~unfavorable impact from foreign currency exchange rates.

Segment Reimbursed Costs

Clinical Development Services’ reimbursed costs were $~~730~~349.97 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $97126.42 million as compared to the same period in ~~2019~~2020. Reimbursed costs increased primarily due to the increase in revenue, including growth related to certain awards of work for COVID-19 which have significant reimbursed costs, partially offset by lower travel costs, and a 4.8% increase from the unfavorable impact from foreign currency exchange rates. The increase in reimbursed costs was also impacted by the general timing of costs incurred across our portfolio of work, which ~~will~~ vary over the course of clinical trials due to (i) the timing of the work performed, (ii) scope changes and (iii) the complexity and phase of the study, among other factors. ~~The increase in reimbursed costs was partially offset by a 0.4% decrease from the favorable impact from foreign currency exchange rates.~~

Segment SG&A Expenses

Clinical Development Services’ SG&A expenses were $~~415~~173.35 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $2331.87 million as compared to the same period in ~~2019~~2020. The increase in SG&A expenses was primarily due to (i) a $2535.0 8 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases and (ii) a ~~$10~~2.53% ~~million~~ increase from the unfavorable impact offrom ~~the~~foreign ~~2019~~currency ~~Acquisitions~~exchange rates. The increase in SG&A expenses was partially offset by lower travel and associated expenses ~~as a result of COVID-19 related cost reduction measures and a 0~~.~~8% decrease from the favorable impact from foreign currency exchange rates.~~

~~Laboratory Services~~29

	Nine Months Ended September 30,
Laboratory Services			Three Months Ended March 31,
(dollars in thousands)	~~2020~~		~~2019~~2021		~~Change~~		2020				Change
Segment revenue	$	~~622,407~~	$	~~495~~261,~~360~~010	$	~~127,047~~	$	201,576	~~25.6~~	%	$	59,434	29.5	%
Segment direct costs	~~279,154~~		~~227~~118,~~171~~069		~~51,983~~		87,051		~~22.9~~		31,018		35.6
Segment reimbursed costs	~~79,651~~		5531,~~230~~155		~~24,421~~		27,321		~~44.2~~		3,834		14.0
Segment SG&A expenses	~~66,929~~		5827,~~551~~362		~~8,378~~		21,783		~~14.3~~		5,579		25.6
Segment operating income	$	~~196,673~~	$	~~154~~84,~~408~~424	$	~~42,265~~	$	65,421	~~27.4~~		$	19,003	29.0

Segment Revenue

Laboratory Services’ revenue was $~~622~~261.40 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $~~127~~59.04 million as compared to the same period in ~~2019~~2020. Revenue increased from organic volume growth across ~~all~~the majority of our laboratory services in part due to higher opening backlog at the beginning of the ~~year~~period as compared to the prior year ~~and overall growth in new business awards during 2020~~, including awards and associated revenue for COVID-19 work. The higher opening backlog was primarily due to increased net authorizations across all of our ~~labs~~lab businesses in 2020 as compared to 2019.

Segment Direct Costs

Laboratory Services’ direct costs were $~~279~~118.21 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $5231.0 million as compared to the same period in ~~2019~~2020. The increase in direct costs was primarily due to (i) a $3213.89 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases and (ii) a $1714.91 million increase in laboratory supply costs ~~associated~~in connection with the growth in revenue.

Segment Reimbursed Costs

Laboratory Services’ reimbursed costs were $7931.72 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $243.48 million as compared to the same period in ~~2019~~2020. Reimbursed costs increased primarily due to (i) the increase in revenue, as(ii) ~~well as higher shipping costs and~~ the general timing of costs incurred across our portfolio of work and (iii) a 3.2% increase from the unfavorable impact from foreign currency exchange rates.

Segment SG&A Expenses

Laboratory Services’ SG&A expenses were $6627.94 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, an increase of $85.46 million as compared to the same period in ~~2019~~2020. The increase in SG&A expenses was primarily due to a $95.20 million increase from growth in employee headcount to support current and anticipated growth in revenue, as well as compensation increases.

Liquidity and Capital Resources

Overview

We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. We have historically funded our operations with cash flows from operations. ~~and~~We have historically used long-term debt and cash on hand to fund acquisitions and make special cash dividends or distributions to our stockholders. Our expected primary cash uses on a short-term and long-term basis are for repayment of debt, interest payments, working capital, capital expenditures, geographic or service offering expansion, acquisitions, investments and other general corporate purposes. We do not expect to declare any dividends on our common stock in the foreseeable future. We hold our cash balances in the United States and numerous locations throughout the rest of the world. As of March 31, 2021, we had $826.4 million of cash and cash equivalents of which $379.2 million was held by our foreign subsidiaries.

~~While~~In weJanuary ~~have~~2021, ~~not~~we ~~seen~~successfully completed a ~~significant~~refinancing ~~impact~~of to our ~~liquidity~~variable ~~and~~rate ~~capital~~long-term ~~resources~~debt asthat awas ~~result~~outstanding ofunder ~~the~~our ~~COVID-19~~2015 ~~pandemic~~Credit ~~to date~~Agreement, weas ~~continue~~well toas ~~monitor~~increasing ~~and assess~~ the ~~impact~~size ~~and~~of ~~have~~our ~~already~~revolving ~~taken~~credit ~~certain~~facility ~~measures~~from ~~to preserve those resources. For example, in June 2020, we issued~~ $~~1,200~~300.0 million ~~of New Notes, and used the proceeds~~ to ~~redeem our previously outstanding OpCo Notes~~$600.0 ~~We expect this transaction to lower our interest expense and cash paid for interest in the future~~million. ~~Additionally,~~Also in ~~March~~January ~~2020~~2021, we ~~borrowed~~entered ~~$150.0~~into ~~million under our revolving credit facility as~~ a ~~precautionary~~new ~~measure~~finance inlease ~~order~~agreement tofor ~~further strengthen~~ our ~~cash~~existing ~~position~~laboratory ~~and~~facilities ~~to preserve financial flexibility due to the uncertainty~~ in ~~the global markets as a result of the COVID-19 pandemic~~Virginia. InThe ~~June~~new ~~2020,~~lease weagreement ~~repaid~~replaced the ~~$150.0~~prior ~~million~~operating ~~borrowed~~lease ~~under~~agreements ~~the~~for ~~revolving~~certain ~~credit~~existing ~~facility~~facilities, ~~using~~consolidated ~~cash~~multiple onoperating ~~hand.~~leases Ininto ~~addition,~~one wenew ~~may~~lease ~~implement~~agreement ~~future measures to preserve or increase cash on-hand~~ and ~~create~~extended ~~financial~~the ~~flexibility. For example, we may look to obtain additional financing or engage in refinancing our variable rate long-~~term ~~debt~~of ~~outstanding~~the ~~under~~lease ~~our~~for ~~senior~~the ~~secured credit~~ facilities. ~~However,~~See ~~due~~Note to4, ~~the ongoing impact of the COVID~~“Long-19term ~~pandemic~~Debt ~~on the capital~~ and ~~credit~~Finance ~~markets~~Lease Obligations,” ~~we might not be able~~ to ~~successfully~~our ~~obtain~~condensed ~~additional~~consolidated ~~financing~~financial orstatements ~~refinancing~~included ofelsewhere ~~our~~in ~~senior~~this ~~secured~~Quarterly ~~credit~~Report ~~facilities~~ on ~~reasonable~~Form ~~terms~~10-Q ~~and~~for ~~within~~additional ~~a reasonable time period acceptable to us, or at all~~information.

~~The following table presents key measures of our liquidity on the dates set forth below:~~30

(in thousands)	September 30, 2020		December 31, 2019
Cash and cash equivalents:
Cash held in the United States	$	523,257	$	135,917
Cash held in foreign locations	279,833		209,270
Total	$	803,090	$	345,187
Revolving Credit Facility availability (net of letters of credit)	$	298,370	$	298,370

Contractual and Other Obligations

AsWe ahave ~~result of our recapitalization in 2017, we~~ incurred ~~certain~~contractual ~~future~~and other obligations ~~associated~~in ~~with potential additional recapitalization consideration. We do not expect~~ the ~~payment~~ordinary course of ~~the~~running ~~recapitalization investment portfolio liability to impact~~ our ~~future~~business ~~liquidity~~and ~~or capital resources~~ as ~~the~~a ~~right~~result ~~for the pre-closing holders to receive any such payment depends upon receipt~~ of ~~future cash proceeds from~~ the ~~applicable~~recapitalization ~~portion~~ of ~~the~~our ~~investment~~company ~~portfolio. We have classified~~ in ~~long-term~~2017. ~~liabilities~~Excluding the ~~portion~~obligations ~~of the investment portfolio~~ we ~~estimate~~have toor bewill ~~payable~~incur ~~beyond~~in the ~~next~~ordinary 12course ~~months, net~~ of ~~taxes~~running ~~and~~our ~~other expenses~~business, toour ~~the~~primary ~~pre~~short-~~closing~~term ~~holders.~~and ~~Future~~long-term ~~payments~~obligations ~~will~~include be(i) ~~required~~payments toon beour ~~made,~~long-term ifdebt and ~~when~~related interest, ~~cash~~(ii) ~~proceeds~~payments ~~are~~on ~~received~~our ~~and~~operating ~~are payable under the recapitalization transaction merger agreement. During the three~~ and ~~nine~~finance ~~months ended September 30~~leases, ~~2020~~(iii) ~~and~~future ~~2019,~~capital wecalls ~~did~~on ~~not~~our ~~make~~investments, ~~any~~(iv) ~~cash~~purchase ~~distributions~~obligations ~~related~~and tocommitments ~~the recapitalization investment portfolio liability. The Company expects to make a cash distribution~~ related to ~~the~~planned ~~recapitalization~~capital ~~investment~~expenditures ~~portfolio~~and ~~liability~~(v) ofobligations ~~approximately $14.9 million during the fourth quarter of 2020. The expected cash distribution has been recorded~~ as a ~~component~~result of ~~other accrued expenses on~~ the ~~condensed~~recapitalization ~~consolidated balance sheet included elsewhere in this Quarterly Report on Form 10-Q. See Note 2, “Recapitalization Transaction,”~~ of our ~~audited~~company ~~consolidated financial statements included~~ in ~~our May 2020 Form 8-K for additional information~~2017.

WeAs ~~expect~~required tounder ~~continue~~the ~~funding~~recapitalization ~~our~~transaction ~~operations~~merger ~~from existing cash~~agreement, ~~cash~~during ~~flows~~the ~~from~~three ~~operations~~months ~~and~~ended March 31, ~~if necessary or appropriate~~2021, ~~borrowings~~we ~~under~~made ~~our~~cash ~~revolving~~distributions ~~credit~~of ~~facility,~~approximately ~~which is currently undrawn~~$12.8 Wemillion ~~believe~~for ~~that~~the ~~these~~payment ~~sources~~ of ~~liquidity~~a ~~will~~portion beof ~~sufficient to fund our operations and service our debt and interest for~~ the ~~foreseeable~~recapitalization ~~future,~~investment asportfolio ~~well~~liability ~~as address impacts~~ from the ~~COVID-19 pandemic. From time to time, we evaluate potential acquisitions, investments and other growth and strategic opportunities that might require use of existing~~ cash, ~~borrowings~~proceeds ~~under~~received ~~our~~from ~~revolving~~the ~~credit~~recapitalization ~~facility~~investment ~~or additional long-term financing~~portfolio. WeNo ~~may~~distributions ~~seek~~for tothe ~~take~~recapitalization ~~advantage~~investment ofportfolio ~~market~~liability ~~opportunities~~were tomade ~~refinance~~during ~~existing~~the ~~variable~~three ~~rate~~months ~~debt~~ended ~~instruments with new debt instruments at interest rates~~March 31, ~~maturities and terms we deem attractive~~2020. WeAs ~~may~~of ~~also~~March 31, ~~from time to time at our sole discretion~~2021, ~~purchase,~~the ~~redeem~~recapitalization orinvestment ~~retire~~portfolio ~~our~~liability ~~existing~~was ~~debt~~$163.3 ~~instruments, through tender offers, in privately negotiated or open market transactions, or otherwise~~million.

44Other than (i) the extinguishments of our 2015 Term Loan and 2015 Revolving Credit Facility, (ii) entering into our New Credit Agreement and (iii) our new finance lease agreement for one of our laboratory facilities as discussed elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes, outside of the ordinary course of business, to our contractual and other obligations as previously disclosed in our 2020 Form 10-K. See our 2020 Form 10-K for additional discussion of our material cash requirements.

We expect to continue funding our operations and contractual and other obligations from existing cash, cash flows from operations and, if necessary or appropriate, borrowings under our New Revolving Credit Facility, which remains undrawn. Based on current conditions, we believe that these sources of liquidity will be sufficient to fund our operations and meet our contractual obligations and other requirements in the short and long-term. From time to time, we evaluate potential acquisitions, investments and other growth and strategic opportunities that might require use of existing cash, borrowings under our New Revolving Credit Facility or additional long-term financing. While we believe we have sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity could be affected by factors described above ~~related to the COVID-19 pandemic~~ and in Part II, Item 1A, “Risk Factors,” included elsewhere in this Quarterly Report on Form 10-Q, as well as ~~factors described~~ under “Indemnification and Insurance,” within Part I, Item 1, “Business,;” Part I, Item 1A, “Risk Factors;” “Critical Accounting Policies and Estimates,” within Part II, Item 7, “~~Contractual Obligations and Commercial Commitments,” “Critical Accounting Policies and Estimates” and “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,;” and Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” ~~of our Annual Report on Form 10-K for the year ended December 31, 2019, as superseded by, and solely to the extent set forth~~ in, our ~~May~~ 2020 Form 810-K.

Indebtedness

On June 5, 2020, Jaguar Holding Company II and PPD Development, L.P. (collectively, the “Issuers”), issued in a private placement the 2025 Notes and 2028 Notes. The 2025 Notes mature on June 15, 2025, and the 2028 Notes mature on June 15, 2028. Interest on the New Notes is payable semi-annually on June 15 and December 15 of each year. The Issuers can redeem the New Notes, at their option, in whole at any time or in part from time to time, upon notice, at the various redemption prices (expressed as a percentage of principal amount) or a “make-whole” premium, plus accrued and unpaid interest, if any, to the redemption date. The New Notes do not have registration rights. See Note 6, “Long-term Debt and Finance Lease Obligations,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on the New Notes.

As of September 30, 2020 and December 31, 2019, we had total long-term debt and finance lease obligations outstanding of approximately $4,298.7 million and $5,705.9 million, respectively. Other than the customary covenants and default provisions related to the issuance of the New Notes, there were no changes to the debt covenants or default provisions related to our outstanding debt under the credit agreement governing our senior secured credit facilities (the “Credit Agreement”) or other obligations during the first nine months of 2020. In June 2020, we repaid in full the outstanding balance of our revolving credit facility and therefore we were not subject to a net secured leverage ratio test, as defined in the Credit Agreement, as of September 30, 2020. We were in compliance with all covenants for all long-term debt arrangements as of September 30, 2020 and December 31, 2019. See Note 6, “Long-term Debt and Finance Lease Obligations,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our long-term debt and finance lease obligations.

Cash Flows

Cash flows from operating activities

~~Nine Months Ended September 30,~~

Three Months Ended March 31,

(in thousands)

~~2020~~

~~2019~~2021

2020

Net cash provided by operating activities

~~268,467~~

~~313~~148,~~722~~153

19,373

The ~~decrease~~increase in operating cash flows of $45128.38 million was due to a $~~163~~110.62 million ~~decrease~~increase in cash from the changes in operating assets and liabilities, ~~partially~~and ~~offset by~~ a $~~118~~18.36 million increase in net income and non-cash reconciling items. The change in operating assets and liabilities was primarily due to period over period fluctuations in the timing of collections and payments, with the ~~use~~change ofin cash ~~for~~from (i) net accounts receivable (defined as the sum of period-end balances of accounts receivable and unbilled services net of unearned revenue), (ii) accounts payable, accrued expenses and other liabilities, (iii) other assets and (iv) income taxes being ~~unfavorable~~favorable and the ~~source~~change ofin cash ~~from~~for (i) prepaid expenses and other current assets ~~and accounts payable, accrued expenses and other liabilities~~ being ~~favorable~~unfavorable.

The net increase in net income (loss) and non-cash reconciling items was primarily due to (i) the overall growth of the business, (ii) ~~our~~an ~~gain~~increase in the loss on investments, (iii) an increase in deferred income tax benefit and (iv) a decrease in the loss on the extinguishment of debt, ~~related~~all toin the ~~redemption~~current ofyear ~~the~~as ~~HoldCo~~compared ~~and~~to ~~OpCo~~the ~~Notes~~same ~~and~~period ~~(iv)~~in ~~deferred~~the ~~income~~prior ~~tax expense~~year.

The change in ~~the use of~~ cash for net accounts receivable of $~~262~~11.82 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 was largely due to the growth in revenue during the first ~~nine~~three months of ~~2020~~2021, as well as the timing in the receipt of collections and contractual billings under our contracts. Other changes to cash flows from operating activities include a $1666.6 1 million decrease in cash paid for interest and a $1015.3 7 million net increase in cash paid for income taxes during the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to the same period in ~~2019~~2020. Cash paid for interest decreased primarily due to a(i) ~~lower~~the ~~interest~~redemption ~~rate~~of onour onHoldCo ~~our~~Notes ~~term~~in ~~loan~~the first quarter of 2020, (ii) the timing of cash paid for interest associated with our unsecured senior notes and (iii) a decrease in the ~~nine~~variable ~~months~~interest ~~ended~~rate ~~September 30,~~for ~~2020,~~interest aspaid ~~well~~on our New Term Loan as ~~the~~compared ~~redemption~~to ofour ~~the~~extinguished ~~HoldCo~~2015 ~~Notes~~Term ~~and~~Loan. ~~OpCo~~The ~~Notes,~~decrease in cash paid for interest was partially offset by an increase in interest paid on our interest rate swaps. We expect our cash paid for interest to continue to decrease going forward due to the ~~redemption of the HoldCo Notes and~~ lower interest rate on our New ~~Notes~~Term Loan as compared to the ~~redeemed~~extinguished ~~OpCo~~2015 ~~Notes~~Term Loan and a lower interest rate on our unsecured senior notes. Net cash paid for income taxes increased primarily as a result of ~~lower~~increased foreign tax ~~refunds~~payments ~~received~~ during the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 as compared to the same period in ~~2019~~2020.

4531

Cash flows from investing activities	~~Nine Months Ended September 30,~~			Three Months Ended March 31,
(in thousands)	~~2020~~			~~2019~~2021			2020
Net cash used in investing activities	$	~~(111,775~~	)	$	(~~195~~28,~~548~~030)	)	$	(43,220)

The decrease in cash used during the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 was primarily due to ~~(i) the 2019 Acquisitions in the prior year as compared to no acquisitions in the current year, (ii)~~ a decrease in cash paid for investments in unconsolidated affiliates in the current year as compared to the same period in the prior year and (iii) net distributions received from investments in the current year, partially offset by an increase in purchases of property and equipment in the current year. Cash paid for ~~investments in unconsolidated affiliates for the nine months ended September 30, 2020 and 2019 was $10.0 million and $30.0 million, respectively. Cash paid for~~ property and equipment was $~~116~~26.48 million and $8942.48 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, respectively. The ~~increase~~decrease in cash paid for property and equipment was primarily due to the timing of payments ~~and year over year growth in the business, including investments in our Laboratory Services segment~~. Additionally, distributions (net of capital contributions) received from investments was $14.3 million for the nine months ended September 30, 2020 as compared to capital contributions (net of distributions) paid of $2.6 million for the same period in 2019.

Cash flows from financing activities	~~Nine Months Ended September 30,~~		Three Months Ended March 31,
(in thousands)	~~2020~~		~~2019~~2021			2020
Net cash provided by (used in) financing activities	$	306,298	$	(253,229	)
Net cash (used in) provided by financing activities			$	(58,980)		$	451,858

During the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021, cash ~~provided~~used byin financing activities was primarily ~~due~~related to ~~cash~~the ~~proceeds~~extinguishment of ~~$1,773.0 million from~~ our ~~IPO,~~2015 ~~net~~Credit ofAgreement ~~IPO~~and ~~costs~~the ~~paid.~~entering Ainto ~~portion~~ of ~~the~~our ~~IPO~~New ~~net~~Credit ~~proceeds~~Agreement. ~~were~~Net ~~used~~cash toproceeds ~~redeem~~of ~~our HoldCo Notes, which included~~ $13,~~450~~034.08 million ofreceived ~~principal~~for ~~and~~the aNew ~~$14.5~~Term ~~million~~Loan ~~redemption~~were ~~premium.~~offset ~~Additionally,~~by in(i) ~~June 2020, we issued~~ $13,~~200~~064.0 million of ~~New~~cash ~~Notes, which was~~ used toin ~~redeem~~the ~~our~~extinguishment ~~OpCo~~of ~~Notes,~~the ~~including~~2015 ~~$1,125.0~~Term ~~million~~Loan ~~of principal~~ and a(ii) $3523.90 million ~~redemption premium. We used cash of $18.5 million~~ for payments of debt issuance costs associated with the issuance of the New ~~Notes~~Credit Agreement. Additionally, we ~~received cash proceeds of $14.3 million related to the exercise of stock options,~~ made payments of $3212.18 million onfor ~~our~~a ~~other~~recapitalization ~~long-term~~investment ~~debt~~portfolio distribution and ~~finance~~received ~~leases~~cash ~~and~~proceeds ~~paid~~of $49.3 million ~~for the initial contingent consideration recorded~~ related to ~~our~~the ~~acquisition~~exercise of ~~Medimix~~stock options.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2019~~2020, cash ~~used~~provided inby financing activities was primarily due to acash proceeds of $1,~~086~~774.09 million ~~return~~from ofour ~~capital~~IPO, ~~and~~net ~~special~~of ~~cash~~IPO ~~dividend~~costs paid. toA ~~our~~portion ~~stockholders,~~of ~~partially offset by~~ the ~~cash~~IPO net proceeds ~~received~~were ~~from~~used ~~the~~to ~~issuance~~redeem ofour ~~$891.0 million of Additional~~ HoldCo Notes., Wewhich ~~used~~included ~~cash of~~ $~~30.~~1 ,450.0 million ~~for payments~~ of ~~debt~~principal ~~issuance~~ and ~~debt~~a ~~modification~~$14.5 million ~~costs~~redemption ~~associated with the issuance of the Additional HoldCo Notes and modification of the Initial HoldCo Notes~~premium. Additionally, wein ~~made~~March ~~payments~~2020, ofwe borrowed $29150.0 million onfrom our ~~long-term~~2015 ~~debt~~Revolving ~~and~~Credit ~~finance leases~~Facility.

~~Contractual Obligations and Commercial Commitments~~Indebtedness

~~Our~~On ~~contractual~~January ~~obligations~~13, ~~and~~2021, ~~commercial~~together ~~commitments~~with ~~have~~the ~~been~~Co-Borrower, ~~updated~~we ~~for~~entered ~~our~~into ~~redemption~~and ofclosed on the ~~OpCo~~New ~~Notes~~Term Loan and ~~HoldCo~~the ~~Notes~~New ~~and~~Revolving ~~our~~Credit ~~issuance~~Facility of(together with the New ~~Notes~~Term Loan, the “Bank Facilities”) under the New Credit Agreement. ~~Other~~Borrowings ~~than~~under ~~those~~the ~~changes~~New Term Loan bear interest, initially, at a rate equal to, at our ~~long-term~~option ~~debt~~of ~~arrangements,~~either ~~there~~(a) ~~have~~Adjusted ~~been~~LIBOR noplus ~~material~~a ~~changes~~margin of 2.25% with an “Adjusted LIBOR floor” of 0.50% or (b) Base Rate plus a margin of 1.25%, ~~outside~~with a “Base Rate floor” of 1.50%. Loans under the ~~ordinary~~New ~~course~~Revolving ofCredit ~~business~~Facility bear interest, initially, at a rate equal to, at our ~~contractual~~option ~~obligations~~of either (a) Adjusted LIBOR plus a margin of 2.00% with an “Adjusted LIBOR floor” of 0.00% or (b) Base Rate plus a margin of 1.00% with a “Base Rate floor” of 1.00%. Pricing on each of the Bank Facilities includes a 25 basis point step-down to the respective interest rate margins upon the achievement and ~~commercial~~maintenance ~~commitments~~of asa ~~previously~~total ~~disclosed~~net inleverage ratio of 3.75:1.00 or lower or upon the public announcement that our ~~Annual~~corporate ~~Report~~credit rating from each of Moody’s and S&P is equal to or better than Ba2 or BB, respectively. In addition to paying interest on ~~Form~~any ~~10-K~~outstanding ~~for~~principal under the ~~year~~New ~~ended~~Revolving ~~December~~Credit Facility, we are required to pay a commitment fee on the unused portion, payable quarterly in arrears. Interest on the New Term Loan was based on Adjusted LIBOR as of March 31, ~~2019~~2021. Principal payments on the New Term Loan are payable on the last business day of each quarter beginning in June 2021.

As of ~~September~~March 3031, ~~2020~~2021, ~~future~~we ~~minimum~~had ~~payments~~total ~~on all our~~ long-term debt and finance lease obligations outstanding of approximately $4,301.4 ~~including~~million, ~~interest~~as well as $598.4 million of availability under our New Revolving Credit Facility, ~~for~~after giving effect to outstanding letters of credit. Other than the ~~remainder~~customary covenants and default provisions related to the issuance of ~~2020~~the New Credit Agreement, ~~and~~there ~~years~~were ~~subsequent~~no changes to the debt covenants or default provisions related to our outstanding debt or other obligations during the first three months of 2021. We were in compliance with all covenants for all long-term debt arrangements as of March 31, 2021 and December 31, 2020. ~~were~~For asadditional ~~follows:~~information on our debt and finance lease arrangements, debt covenants and default provisions, see Note 4, “Long-term Debt and Finance Lease Obligations,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and Note 9, “Long-term Debt and Finance Lease Obligations,” of our audited consolidated financial statements included in our 2020 Form 10-K.

(in thousands)		2020 (remaining three months)				2021-2022				2023-2024				2025-Thereafter				Total
Long-term debt, including interest(1)		$	65,686			$	3,354,534			$	116,250			$	1,331,434			$	4,867,904

(1) We may be required to make mandatory prepayments of principal on the term loan outstanding under our senior secured credit facilities in future years based on our cash flows in those years. Future interest expense on our indebtedness is calculated assuming a blended rate of 3.9%. The table above assumes that the amounts will remain outstanding until maturity, with minimum payments occurring as currently scheduled and no future borrowings, and does not include the impact of our interest rate swaps entered into during the first quarter of 2020.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” ofin our ~~May~~audited consolidated financial statements included in our 2020 Form 810-K. The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. We monitor estimates and assumptions on a continuous basis and update these estimates and assumptions as facts and circumstances change and new information is obtained,. ~~including~~Actual ~~facts~~results could differ materially from those estimates and ~~circumstances~~assumptions. ~~related~~We discussed the accounting policies that we believe are most critical to the ~~COVID-19~~portrayal ~~pandemic.~~of ~~Actual~~our results ~~could~~of ~~differ~~operations ~~from~~and ~~those~~financial ~~estimates~~condition and ~~assumptions~~require ~~due~~management’s tomost difficult, ~~among~~subjective ~~other~~and ~~things~~complex judgments in Part II, ~~the~~Item ~~impacts~~7, ~~caused~~“Management’s byDiscussion ~~the~~and ~~COVID~~Analysis of Financial Condition and Results of Operations,” in our 2020 Form 10-19K. ~~pandemic~~There were no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2021.

We perform our annual impairment test of goodwill during the fourth quarter of each year, or more frequently if impairment indicators arise, which requires significant judgment. As of the date of our 2019 annual goodwill impairment test, of our eight reporting units with goodwill allocated, one reporting unit’s estimate of the fair value did not exceed its respective carrying value by a substantial margin. This reporting unit had recorded goodwill of $30.0 million as of the goodwill impairment testing date. The percentage by which the reporting unit’s estimated fair value exceeded carrying value was 22.0%. Certain portions of this reporting unit and another reporting unit were negatively impacted by the COVID-19 pandemic and to the extent that the impacts are significant or that they result in a change to long-term outlook, such could trigger an impairment to these reporting units in the future.

Given the present uncertainty surrounding the global economy due to the COVID-19 pandemic, including but not limited to stock price volatility of the overall market, the volatility of our stock price as well as that of our competitors and current and future impacts to our operations from the COVID-19 pandemic, it is possible that we could experience a non-cash impairment loss of a portion of our goodwill or other long-lived assets in the future. While no goodwill impairment charges were recorded during the three or nine months ended September 30, 2020, future goodwill or other long-lived asset impairment, if any, could have a material impact on our results of operations.

We discussed the accounting policies that we believe are most critical to the portrayal of our results of operations

and financial condition and require management’s most difficult, subjective and complex judgments in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2019, as superseded by, and solely to the extent set forth in, our May 2020 Form 8-K. There were no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2020.

Recently Adopted Accounting Standard

A recently adopted accounting standard relevant to our condensed consolidated financial statements is described more fully in the “Recently Adopted Accounting Standard” section in Note 1, “Basis of Presentation,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Standard

Date	Title	Effective Date
August 2018	Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	Adopted January 1, 2020

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021, there were 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~~2020 ~~Report on~~ Form 10-K ~~for the year ended December 31, 2019, other than the effects of the COVID-19 pandemic on the global economy and overall capital and credit markets~~. Additionally, in February 2020, we considered refinancing certain portions of our outstanding debt with new variable rate debt and, in anticipation thereof, we entered into three new variable to fixed interest rate swaps to hedge future interest rate exposure. The three swaps have a notional value of $3.5 billion, with an effective date of March 31, 2020 and a termination date of March 31, 2025. In March 2020, we entered into a fixed to variable interest rate swap with a notional value of $0.5 billion, with identical effective and termination dates, that offset one of the three February 2020 variable to fixed interest rate swaps, as we had not yet entered into the new variable rate debt structure. See Note 6, “Long-term Debt and Finance Lease Obligations” and Note 8, “Derivative Instruments and Hedging Activities,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on impacts to our market risks.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating the 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.

Changes in Internal Control Over Financial Reporting

There ~~have~~were ~~been~~ no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4833

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are party to legal proceedings incidental to our business. While ~~our~~ management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our condensed consolidated financial statements, all litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations.

Item 1A. Risk Factors

There have been no significant changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 except as disclosed below. Refer to Part 1, Item 1A, “Risk Factors,” ofin our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for a detailed discussion of risk factors affecting us.

~~Our~~Uncertainties ~~operations~~associated ~~might~~with bethe ~~affected~~transaction bywith ~~the~~Thermo ~~occurrence~~Fisher ofScientific ~~natural~~Inc. ~~disasters,~~could ~~pandemics,~~adversely ~~such~~affect asour ~~the~~business, ~~COVID-19~~results ~~pandemic,~~of oroperations ~~other~~and ~~catastrophic~~financial ~~events~~condition.

WeOn ~~depend~~April ~~on our customers~~15, ~~investigators~~2021, ~~laboratories~~we entered into an Agreement and ~~other~~Plan ~~facilities~~of ~~for~~Merger (the ~~continued~~“Merger ~~operation~~Agreement”) ofby ~~our~~and ~~business~~among us, Thermo Fisher Scientific Inc., ~~While~~a weDelaware ~~maintain~~corporation ~~disaster~~(“Thermo ~~recovery~~Fisher”) and ~~business~~Powder ~~continuity~~Acquisition ~~plans~~Corp., ~~they~~a ~~might~~Delaware ~~not~~corporation ~~adequately~~and ~~protect~~a ~~us.~~wholly ~~Despite~~owned ~~any~~subsidiary ~~precautions~~of weThermo ~~take~~Fisher ~~for~~(“Merger ~~natural~~Sub”) ~~disasters~~pursuant orto ~~other~~which ~~catastrophic~~we ~~events~~will be, ~~these~~subject ~~events,~~to ~~including~~the ~~terrorist~~terms ~~attacks,~~and ~~hurricanes,~~conditions ~~fires,~~of ~~floods~~the Merger Agreement, ~~ice~~merged with and ~~snowstorms~~into ~~and~~Merger ~~pandemics~~Sub, ~~such~~with PPD continuing as the ~~COVID-19~~surviving ~~pandemic,~~corporation ~~may~~and ~~result~~a inwholly ~~interruptions~~owned insubsidiary ~~our~~of ~~ability~~Thermo toFisher ~~provide~~(the ~~services to our customers~~“Merger”). ~~Disruptions~~Completion inof the ~~infrastructure,~~Merger ~~laboratory,~~is ~~clinic~~subject orto ~~office~~various ~~closures~~closing conditions, ~~mandatory~~including ~~stay~~but atnot ~~home~~limited ~~orders~~to, orthe ~~other~~receipt ~~social~~of ~~distancing~~required ~~measures~~regulatory ~~caused~~clearances, byincluding ~~events~~the ~~such~~expiration asor ~~natural~~termination ~~disasters,~~of orthe ~~other~~applicable ~~“acts~~waiting ofperiod ~~god,”~~(and ~~the~~any ~~outbreak~~extension ofthereof) ~~war,~~under the ~~escalation~~Hart-Scott-Rodino ofAntitrust ~~hostilities~~Improvements ~~and~~Act ~~acts~~ of ~~terrorism~~1976, oras ~~pandemics~~amended, ~~such~~and asapprovals ~~the~~under ~~COVID-19~~certain ~~pandemic,~~other ~~particularly~~competition ~~involving~~and ~~countries~~foreign ~~and~~direct ~~cities~~investment inlaws. ~~which~~The weregulatory ~~have~~agencies ~~laboratories,~~from ~~clinics~~which orcertain ~~offices,~~of ~~could~~these ~~adversely~~clearances ~~affect~~will ~~our~~be ~~businesses.~~sought ~~Although~~have webroad ~~carry~~discretion ~~business~~in ~~interruption~~administering ~~insurance~~the ~~policies~~governing ~~and~~regulations. ~~typically~~As ~~have~~a ~~provisions~~condition into ~~our~~their ~~contracts~~clearance ~~that~~of ~~protect~~the usMerger, ~~from~~agencies ~~certain~~may ~~events~~impose requirements, ~~our~~limitations ~~coverage~~or ~~might~~costs ~~not~~or ~~respond~~require divestitures or beplace ~~adequate~~restrictions toon ~~compensate~~the usconduct ~~for~~of ~~all~~the ~~losses~~parties’ ~~that~~business. ~~may~~These ~~occur~~requirements, ~~including~~limitations, ~~those~~costs, ~~relating~~divestitures toor restrictions could jeopardize or delay the ~~COVID-19~~consummation ~~pandemic~~of the Merger. ~~Any~~The ~~natural~~parties ~~disaster~~to orthe ~~catastrophic~~Merger ~~event,~~Agreement ~~such~~may asnot receive the ~~COVID-19~~necessary ~~pandemic,~~approvals ~~affecting~~for usthe transaction or ~~our~~receive ~~customers,~~them ~~investigators~~within orthe ~~payers~~expected ~~could~~timeframe. In ~~have~~addition, athe ~~significant~~Merger ~~negative~~may ~~impact~~fail onto ~~our~~close ~~operations~~for orother ~~financial performance~~reasons.

~~To date, the COVID-19 pandemic has impacted our business across both our Clinical Development Services and Laboratory Services segments.~~ The ~~impacts~~announcement ~~include the ability of our employees to visit hospitals~~ and ~~other~~pendency ~~clinical research sites to conduct monitoring and other critical site visits and patient recruitment and enrollment activities as part~~ of ~~services~~the ~~offered within our Clinical Development Services segment~~Merger, as well as aany ~~temporary~~delays ~~shutdown of our Phase I clinics beginning~~ in ~~March~~the ~~2020.~~expected ~~Furthermore~~timeframe, wecould ~~have~~cause ~~had~~disruption ~~customers~~in ~~delay new studies~~ and~~/or~~ ~~pause~~create ~~ongoing~~uncertainties, ~~studies~~which orcould ~~certain~~have ~~activities~~an ~~thereof,~~adverse ~~such~~effect ason ~~patient~~our ~~recruitment~~business, ~~patient~~results ~~enrollment,~~of ~~site~~operations ~~visits~~ and ~~site~~financial ~~monitoring~~condition, ~~impacting~~regardless ~~our~~of ~~Clinical~~whether ~~Development~~the ~~Services~~Merger ~~segment~~is completed. ~~Additionally,~~These atrisks ~~the onset of the pandemic~~include, ~~our~~but ~~Laboratory~~are ~~Services~~not ~~segment experienced~~ limited ~~reductions in central lab services due~~ to ~~delays in clinical trial activity that impacted sample volumes.~~ :

~~Beginning~~•an inadverse ~~the~~effect ~~second~~on ~~quarter~~our ofrelationships ~~2020~~with vendors, ~~as travel restrictions were lifted and phased reopenings began in jurisdictions in which we operate~~customers, ~~we reopened a limited number of our offices~~ and ~~also allowed business-critical travel to occur~~employees, including ~~employee~~if ~~visits to hospitals and other clinical research sites, as well as the activation of new sites. We also began a phased reopening of all of~~ our ~~Phase I clinics~~vendors, ~~with~~customers ~~such~~or ~~phased~~others ~~reopening~~attempt ~~resulting in reduced domiciling of patients for clinical trials as compared~~ to ~~pre-pandemic~~negotiate ~~levels.~~changes ~~Due~~in toexisting ~~safety~~business ~~measures~~relationships, weconsider ~~implemented~~entering ~~shortly~~into ~~following~~business ~~the~~relationships ~~onset~~with ofparties ~~the~~other ~~COVID-19~~than ~~pandemic~~us, ~~our~~delay ~~laboratory~~or ~~facilities~~defer ~~continued~~decisions toconcerning ~~operate~~their atbusiness ~~near~~with ~~full~~us, ~~capacity during the pandemic. While we saw improvements over the course of the second and third quarters of 2020 in relation to fewer customers delaying new~~ or ~~ongoing~~terminate ~~studies,~~their ~~steady~~existing ~~improvements~~business inrelationships ~~site-based~~with ~~activities~~us ~~and~~during the ~~return~~pendency of ~~pre-pandemic testing volumes at our central labs, these delays have impacted and will continue to impact~~ the ~~timing and extent to which backlog has and will convert to revenue.~~Merger;

We•a dodiversion ~~not yet know nor can we predict the full extent~~ of ~~the impact the COVID-19 pandemic will have on our business, results of operations, financial condition or the global economy as~~ a ~~whole,~~significant asamount ~~the ultimate impact~~ of ~~the~~management ~~pandemic~~time ~~is highly uncertain~~ and ~~subject~~resources totowards ~~change. While~~ the ~~COVID-19~~completion ~~pandemic has impacted our business and results~~ of ~~operations, we have been able to partially offset~~ the financial impact due to the mitigation activities discussed elsewhere in this Quarterly Report on Form 10-Q. However, the operational and financial impacts from COVID-19 could significantly increase in the future due to the magnitude, continued duration, geographic reach, ongoing impact on the global economy and capital and credit markets, and current travel and other restrictions relating to the COVID-19 pandemic. In addition, we might not be able to mitigate future impacts as we have done to date. Merger;

~~Furthermore,~~•being ~~federal,~~subject ~~state and local governments have implemented economic and other stimulus measures~~ to ~~support~~certain ~~individuals~~restrictions ~~and~~on ~~businesses impacted by~~ the ~~COVID-19~~conduct ~~pandemic, and while we have utilized such measures where applicable there can be no assurance that such measures will benefit us or otherwise offset any or all~~ of ~~the financial impacts from the COVID-19 pandemic. To date, such measures have not been material to~~ our ~~results of operations.~~business;

49•possibly foregoing certain business opportunities that we might otherwise pursue absent the pending Merger;

If•difficulties ~~the~~attracting ~~pandemic continues for an extended period or worsens, such as a second global wave, governments’ actions to contain the spread of COVID-19 were to be ineffective~~ and~~/or~~ ~~there~~retaining iskey a significant delay in the development or distribution of an effective vaccine, these factors could result in a material negative impact on our business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity. Such impacts could include, but are not limited to, additional customer delays or cancellations of awarded services, reductions in research and development drug development pipelines which could result in lower growth to the clinical research organization industry, additional costs related to restructuring activities, non-cash impairments of goodwill and other long-lived assets, decreases in the value of our investments, loss of hedge accounting and restrictions on our ability to obtain additional financing, if needed, or refinancing of our senior secured credit facilities. employees;

~~Our~~•the ~~business~~magnitude ~~is subject to international~~ and ~~U.S.~~duration ~~economic,~~of ~~currency,~~the ~~political~~COVID-19 pandemic and ~~other~~its ~~risks,~~impact ~~including~~on ~~those caused by~~ the ~~COVID-19~~global ~~pandemic,~~economy ~~that~~and ~~could~~financial ~~negatively~~market ~~affect~~conditions and our business, results of operations, and financial condition; and~~/or cash flows.~~

We•general ~~provide services globally and have business operations in numerous countries throughout the world. Because we provide our services worldwide~~competitive, ~~our business is subject to risks associated with doing business internationally~~economic, ~~including~~political ~~risks associated with a global pandemic such as the COVID-19 pandemic. Revenue from our non-U.S. operations represented approximately 43.8% of our revenue for the nine months ended September 30, 2020~~ and ~~47.1%~~market ofconditions ~~our revenue for the year ended December 31, 2019. We anticipate that we will continue to perform a significant portion of our services through our international operations. Our U.S.~~ and ~~international operations are subject to risks and uncertainties inherent in operating in these regions, including:~~fluctuations.

• conducting a clinical trial in multiple countries is complex, and issues in one country can affect the progress of the trial in other countries and result in delays or cancellation of contracts, including delays and other issues caused by the COVID-19 pandemic;34

•Failure ~~the~~to ~~United~~complete ~~States~~the orMerger ~~foreign countries~~ could ~~enact~~adversely ~~legislation~~affect ~~or impose regulations, including unfavorable labor regulations, tax policies or economic sanctions, that could have an adverse effect on~~ our ~~ability to conduct~~ business inand orthe ~~expatriate~~market ~~profits~~price ~~from~~of ~~the~~our ~~countries~~shares inof ~~which~~common ~~we operate;~~stock.

•The closing of the ~~complexities~~Merger ofmay ~~operating~~not ~~within~~occur. ~~multiple~~The ~~tax~~Merger ~~jurisdictions~~Agreement contains certain termination rights for us and Thermo Fisher, including, ~~potentially~~among ~~negative~~others, ~~consequences~~the ~~from~~right ~~changes~~to terminate the Merger Agreement (i) by mutual written consent of us, Thermo Fisher and Merger Sub and (ii) by us or Thermo Fisher if the Merger has not been consummated on or before the Outside Date (as such term is defined in, ~~tax~~and ~~laws~~as may be extended pursuant to the terms of, the Merger Agreement). If the Merger Agreement is terminated under certain circumstances, we may be required to pay Thermo Fisher a termination fee. Payment of this termination fee may require us to use available cash that would otherwise be used for general purposes or strategic initiatives, which could adversely affect our business, results of operations or financial condition. Additionally, if the Merger is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including: (i) adverse reactions from ~~current~~the financial markets, including negative impacts on our stock price; (ii) adverse reactions from our customers, regulators and ~~future~~employees; ~~tax~~(iii) ~~examinations~~payment of certain costs relating to the Merger, including legal, accounting and financial advisor fees; (iv) the limitations on us to take certain specified actions during the pendency of the Merger and (v) the fact that matters relating to the Merger will require substantial commitments of time and resources by management which could otherwise have been devoted to ongoing operations and other opportunities that may have been beneficial to us as an independent company.

•The ~~foreign~~Merger ~~countries~~Agreement ~~are~~contains ~~expanding~~provisions orthat ~~might~~limit ~~expand their regulatory framework with respect to patient informed consent or other aspects of the conduct of clinical trials, which could delay or inhibit~~ our ability to ~~conduct~~pursue ~~trials~~alternatives into ~~such countries, including changes that may be enacted or result from~~ the ~~COVID-19 pandemic;~~Merger.

•Under the ~~regulatory~~Merger Agreement, we are restricted from soliciting, initiating or ~~judicial~~knowingly ~~authorities~~encouraging ofor ~~foreign~~facilitating ~~countries~~alternative ~~might~~acquisition ~~not~~proposals ~~enforce~~from ~~legal~~third ~~rights~~parties and/or ~~recognize~~to ~~business~~providing ~~procedures~~non-public ininformation ato ~~manner~~third parties in response to ~~which~~any weinquiries ~~are~~regarding, ~~accustomed~~or the submission of any proposal or offer that constitutes, or would reasonably ~~expect;~~be expected to lead to, any Company Takeover Proposal (as defined in the Merger Agreement). These provisions could discourage a third party that may have an interest in acquiring all or a significant part of our business from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the consideration in the Merger.

•Potential ~~changes~~litigation ininstituted ~~political~~against us and ~~economic~~our ~~conditions~~directors ~~might~~challenging ~~lead to changes in~~ the ~~business~~proposed ~~environment~~Merger inmay ~~which~~prevent ~~we operate, such as~~ the ~~current~~Merger ~~changes~~from ~~caused~~becoming byeffective ~~the~~within ~~COVID-19 pandemic, including those to protect~~ the ~~general~~expected ~~population~~timeframe ~~and~~or ~~patient~~at ~~safety in clinical trials;~~all.

•Potential ~~actual~~litigation orrelated ~~perceived~~to ~~risk~~the ofMerger ~~infection~~may ~~relating~~result toin ~~COVID-19~~injunctive or ~~otherwise~~other ~~might~~relief ~~impact~~prohibiting, ~~the~~delaying ~~willingness~~or ofotherwise ~~patients~~adversely toaffecting ~~enroll~~our inability ~~clinical~~to ~~trials~~complete ~~and~~the toMerger. ~~visit~~Such ~~clinics,~~relief ~~hospitals~~may ~~and~~prevent ~~other~~the ~~clinical~~Merger ~~research~~from ~~sites~~becoming ~~for~~effective ~~procedures~~within ~~associated~~the ~~with~~expected ~~the~~timeframe ~~conduct~~or ofat ~~clinical~~all. ~~trials~~In addition, ~~which~~defending inagainst ~~turn~~such ~~could~~claims ~~have~~may anbe ~~adverse~~expensive ~~effect~~and ondivert ~~our~~management's ~~ability~~attention toand ~~conduct~~resources, ~~business~~which incould ~~relevant~~adversely ~~countries~~affect ~~and~~our ~~regions;~~business.

~~• changes in foreign currency exchange rates, including the impact of contractual provisions that shift the risk of unfavorable movement in certain exchange rates to us;~~35

• potential violations of existing or newly enacted laws may cause difficulties in staffing and managing international operations;

• customers in foreign countries may have longer payment cycles, and it may be more difficult to collect receivables in those countries;

• political unrest could interrupt our services, endanger our personnel or cause project delays or loss of clinical trial material or results; and

• any failure by us to comply with foreign regulations or restrictions or become aware of and acknowledge changes in foreign regulations or restrictions, including changes in foreign regulations or restrictions due to the COVID-19 pandemic, which could result in the delay of a clinical trial.

These risks and uncertainties could negatively impact our ability to, among other things, perform large, global projects for our customers. Furthermore, our ability to manage these risks and uncertainties could be affected by U.S. laws and could have an adverse impact on our business, results of operations, financial condition and/or cash flows.

Difficult and volatile conditions in the capital and credit markets and in the overall economy, including those caused by the COVID-19 pandemic, could materially adversely affect our business, financial position, results of operations and/or cash flows.

Our business, financial position, results of operations and/or cash flows could be materially adversely affected by difficult conditions and volatility in the capital and credit markets and changes in national or global economic conditions including, but not limited to, inflation, interest rates, the negative impacts caused by pandemics, including the COVID-19 pandemic, and the effects of governmental initiatives to manage economic conditions. Difficult conditions in these markets and the overall economy affect our business and operations in a number of ways. For example:

• as a result of the COVID-19 pandemic, customers may delay or cancel clinical trials (i) to protect patient safety, (ii) as a result of government restrictions, (iii) to limit impacts on healthcare systems and (iv) due to concerns regarding the ability of hospitals and other clinical research sites to conduct clinical trials safely, efficiently and effectively;

• if a significant percentage of our workforce is unable to work, including because of illness, travel or government restrictions in connection with the COVID-19 pandemic, our operations may be negatively impacted;

• as a result of the COVID-19 pandemic, we temporarily shut down our Phase I clinics beginning in March 2020 and begun a phased reopening during the second quarter and continued during the third quarter of 2020, with such phased reopening resulting in reduced domiciling of patients for clinical trials as compared to pre-pandemic levels. Depending on the future duration, severity and impacts of the COVID-19 pandemic, we may have to again shut down one or all of our Phase I clinics and also shut down (or delay reopening) one or more of our laboratories, other clinics or offices due to patient safety, government restrictions, illness or other impacts in connection with the COVID-19 pandemic;

• market conditions, including those caused by the COVID-19 pandemic, could result in our key customers experiencing financial difficulties and/or electing to limit spending or delay payment of invoices, or become unable to pay invoices, which in turn could result in decreased revenues, cash flows and earnings for us;

• under difficult market conditions there can be no assurance that borrowings under our senior secured credit facilities would be available or sufficient, and in such a case, we might not be able to successfully obtain additional financing or refinancing of our senior secured credit facilities on reasonable terms and within a reasonable time period acceptable to us, or at all, which could also impact our hedge accounting on our variable rate debt; and

• in order to respond to market conditions, we may need to seek waivers of various provisions in the credit agreement governing our senior secured credit facilities, and we might not be able to obtain such waivers on reasonable terms, if at all.

If we are unable to recruit, retain and motivate key personnel, our business could be adversely affected.

Our success depends on the collective performance, contribution and expertise of our senior management team and other key personnel throughout our businesses, including qualified management, professional, operational, scientific, technical and business development personnel. There is significant competition for qualified personnel in the biopharmaceutical and related services industries, particularly personnel with advanced degrees and those with significant experience and expertise. The loss of any key executive, including if he or she becomes seriously ill with COVID-19 or otherwise, or our inability to continue to recruit, retain and motivate key personnel and replace departed personnel in a timely fashion, may adversely impact our ability to compete effectively and grow our business and negatively affect our ability to meet our short- and long-term financial and operational objectives.

We depend on third parties for critical goods and support services.

We depend on third parties for a variety of goods and support services that are critical to us. These third-party providers include, but are not limited to, software and other technology providers, transportation and travel providers, suppliers of study drugs for clinical trials, couriers, customs brokers, drug depots and distributors, suppliers of licensing agreements, investigator meeting planners, suppliers of kits, reagents, contractors and other supplies used by our laboratory segments and equipment maintenance providers. The failure of any of these third parties to adequately provide goods or services to us or to comply with relevant laws and regulations could have a material adverse effect on our reputation, business, results of operations, financial condition and/or cash flows. While we have not seen an adverse impact from the COVID-19 pandemic on the third parties that we rely on to provide goods and services, there can be no guarantee that a significant impact to our third-party providers will not occur in the future.

Our business depends on the efficient and uninterrupted operation of our information and communication systems, including systems we use to deliver services to our customers, and failures in, breach of, or unauthorized access to or use of these systems or data contained therein may materially limit our operations and result in significant harm to our business.

Our success depends on the security and efficient and uninterrupted operation of our information and communication systems, including information and communication systems maintained by third parties on our behalf, and we expect to increase our reliance on these and similar systems over time. As the breadth, complexity and reliance on information systems grows, we will be increasingly exposed to the risks inherent in the development, deployment, operation, use and reliance on these systems, including:

• disruption, impairment or failure of data centers, telecommunications facilities or other key infrastructure platforms;

• security breaches of, cyber-attacks on and other failures or malfunctions in our critical application systems or their associated hardware; and

• excessive costs, delays or other deficiencies in systems development and deployment.

The occurrence of these risks could impede the processing of data, the delivery of services to our customers and the day-to-day management and operation of our business and could result in the corruption, loss, disclosure or unauthorized access to proprietary, confidential or other data, which in turn could result in diminished internal and external reporting capabilities, impaired ability to process transactions, harm to our control environment, diminished employee productivity and unanticipated increases in costs.

While we maintain disaster recovery plans, they might not adequately protect us. Despite any precautions we take,

damage from cybersecurity attacks, computer viruses, fire, floods, hurricanes, power loss, telecommunications failures, break-ins and similar events at our facilities or those of our suppliers could result in interruptions in the flow of data to our servers and from our servers to our customers. Corruption or loss of data could result in the need to repeat a trial at no cost to our customer, but at significant cost to us, and may result in the termination of a contract and/or damage to our reputation. Additionally, significant delays in system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation and harm our business. Although we carry insurance, our coverage might not respond or be adequate to compensate us for all losses that may occur.

Unauthorized disclosure of or access to sensitive or confidential data, including confidential information of our customers, whether through third-party attack, system failure, employee negligence, fraud or misappropriation, could significantly damage our business. We have been, and expect we will continue to be, subject to attempts to gain unauthorized access to or through our information systems, whether by our employees or third parties, including by cyber-attack from computer programmers or hackers who deploy viruses, worms or other malicious software programs. To date, these attacks have not had a material impact on our operations or financial results. However, attacks in the future could result in fines, negative publicity, significant remediation costs, liability and/or damage to our reputation, and could have a material adverse effect on our business, results of operations, financial condition and/or cash flows. In addition, any insurance coverage we have might not respond or be sufficient to cover us against claims or penalties imposed by the federal government or state governments related to security breaches, cyber-attacks and other related breaches.

Our ability to serve customers effectively depends on the reliability of our technology network and we depend on information systems to perform many critical business needs. During the fourth quarter of 2020, we expect to complete the transition of our existing human capital management, financial management and general ledger systems to an integrated enterprise resource planning (“ERP”) system. The implementation and maintenance of a new ERP system has required and may continue to require significant financial and/or human capital resources. Furthermore, despite extensive planning, system testing and training for our employees, we could experience disruptions in our business operations in the future because of the project’s complexity and we may not fully optimize the ERP as planned. The potential consequences could include project and other delays, loss of information, diminished internal and external reporting capabilities, impaired ability to process transactions, harm to our internal control environment, diminished employee productivity and unanticipated increases in costs, all of which could result in material adverse effects on our business, results of operations, financial condition and/or cash flows.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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

			~~Incorporated by Reference~~				Incorporated by Reference
Exhibit Number	~~Exhibit Description~~	~~Filed Herewith~~	~~Form~~Exhibit Description	~~File No.~~	~~Exhibit~~	~~Filing Date~~	Form	File No.	Exhibit	Filing Date
31.1	Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X	-	-	-	-
2.1			Agreement and Plan of Merger, dated as of April 15, 2021, by and among PPD, Inc., Thermo Fisher Scientific Inc. and Powder Acquisition Corp.				8-K	001-39212	2.1	April 16, 2021
31.2	Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X	-	-	-	-
10.1			Credit Agreement, dated as of January 13, 2021, by and among PPD, Inc., PPD Development, L.P., each lender from time to time party thereto, each L/C Issuer party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Collateral Agent and a L/C Issuer				8-K	001-39212	10.1	January 14, 2021
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X	-	-	-	-
10.2*			Form of PSU Grant Notice and Agreement for Employees under the PPD, Inc. 2020 Omnibus Incentive Plan				10-K	001-39212	10.43	February 26, 2021
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X	-	-	-	-
10.3*			Amendment No. 3 to the Johnston Employment Agreement, dated as of February 23, 2021				10-K	001-39212	10.44	February 26, 2021
101.INS	XBRL Instance Document	X	-	-	-	-
10.4*			Amendment No. 1 to the Thakral Employment Agreement, dated as of February 23, 2021				10-K	001-39212	10.45	February 26, 2021
101.SCH	XBRL Taxonomy Extension Schema Document	X	-	-	-	-
31.1			Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				-	-	-	Filed Herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X	-	-	-	-
31.2			Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				-	-	-	Filed Herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X	-	-	-	-
32.1^			Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				-	-	-	Furnished Herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X	-	-	-	-
32.2^			Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				-	-	-	Furnished Herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X	-	-	-	-
101.INS			Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document				-	-	-	Filed Herewith
101.SCH			Inline XBRL Taxonomy Extension Schema Document				-	-	-	Filed Herewith
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document				-	-	-	Filed Herewith
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document				-	-	-	Filed Herewith
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document				-	-	-	Filed Herewith
101.PRE			Inline Taxonomy Extension Presentation Linkbase Document				-	-	-	Filed Herewith
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)				-	-	-	Filed Herewith

53* Denotes management contract or compensatory plan or arrangement.

^ Furnished herewith. The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of PPD, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized on ~~October 28~~April 29, ~~2020~~2021.


PPD, Inc.

By:			/s/ Christopher G. Scully
Name:			Christopher G. Scully
Title:			Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer)

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