x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
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) |
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | x | Smaller reporting company | o |
Emerging growth company | o |
Class | Number of Shares Outstanding | ||
Common Stock $0.01 par value | 349,654,449 shares outstanding as of October 26, 2020 |
• | the magnitude, continued duration, geographic reach and ongoing impact on the global economy and capital and credit markets of the COVID-19 pandemic; |
• | the current and uncertain future impact from the COVID-19 pandemic on our business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity; |
• | 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; |
• | our ability to keep pace with rapid technological changes that could make our services less competitive or obsolete; |
• | the United States and international healthcare industry is subject to political, economic and/or regulatory influences and changes, such as healthcare reform, all of which could adversely affect both our customers’ and our businesses; |
• | any failure of our backlog to accurately predict or convert into future revenue; |
• | the fact that our customers can terminate, delay or reduce the scope of our contracts with them upon short notice or with no notice; |
• | the impact of industry, customer and therapeutic area concentration; |
• | our ability to accurately price our contracts and manage our costs associated with performance of such contracts; |
• | any failures in our information and communication systems, including cybersecurity breaches, impacting us or our customers, clinical trial participants or employees; |
• | any failure to perform services in accordance with contractual requirements, regulatory standards and ethical standards; |
• | our ability to recruit, retain and motivate key personnel, including the loss of any key executive who becomes seriously ill with COVID-19; |
• | our ability to access clinical research sites, attract suitable investigators or enroll a sufficient number of patients (including as a result of the COVID-19 pandemic) for our customers’ clinical trials; |
• | any failure by us to comply with numerous privacy laws; |
• | our dependence on third parties for critical goods and support services, including a significant impact from the COVID-19 pandemic on our suppliers; |
• | 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; |
• | risks related to the drug development services industry that could result in potential liability that could affect our business, reputation and financial condition; |
• | any failure of our insurance to cover the potential liabilities, including indemnification obligations, associated with the operation of our business and provision of services; |
• | our use of biological and hazardous materials, which could violate law or cause injury or death, resulting in liability; |
• | disruptions to our operations by the occurrence of a natural disaster, pandemic (such as the COVID-19 pandemic), or other catastrophic events; |
• | international or U.S. economic, currency, political and other risks, such as those from the COVID-19 pandemic; |
• | economic conditions and regulatory changes relating to the United Kingdom’s exit from the European Union; |
• | any inability to adequately protect our intellectual property or the security of our systems and the data stored therein; |
• | consolidation amongst our customers, and the potential for rationalization of the combined drug development pipeline, resulting in fewer products in clinical development; |
• | any patent or other intellectual property litigation we might be involved in; |
• | changes in tax laws, such as U.S. tax reform, or interpretations of existing tax laws; |
• | 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; |
• | 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. |
Item | Page | |
PART I - FINANCIAL INFORMATION | ||
1. | ||
2. | ||
3. | ||
4. | ||
PART II - OTHER INFORMATION | ||
1. | ||
1A. | ||
2. | ||
3. | ||
4. | ||
5. | ||
6. | ||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 1,233,802 | $ | 1,023,864 | $ | 3,317,182 | $ | 2,984,133 | |||||||
Operating costs and expenses: | |||||||||||||||
Direct costs, exclusive of depreciation and amortization | 433,422 | 369,476 | 1,222,700 | 1,112,181 | |||||||||||
Reimbursed costs | 335,866 | 241,804 | 810,523 | 688,696 | |||||||||||
Selling, general and administrative expenses | 249,320 | 226,996 | 734,712 | 681,431 | |||||||||||
Depreciation and amortization | 71,317 | 66,889 | 206,395 | 197,896 | |||||||||||
Long-lived asset impairment | 1,414 | — | 1,414 | — | |||||||||||
Total operating costs and expenses | 1,091,339 | 905,165 | 2,975,744 | 2,680,204 | |||||||||||
Income from operations | 142,463 | 118,699 | 341,438 | 303,929 | |||||||||||
Interest expense, net of interest income of $433 and $1,089 for the three | |||||||||||||||
months ended September 30, 2020 and 2019, respectively, and $1,996 and | |||||||||||||||
$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 | — | — | (93,534 | ) | — | ||||||||||
(Loss) gain on investments | (53,100 | ) | (15,106 | ) | 16,649 | (22,716 | ) | ||||||||
Other (expense) income, net | (17,153 | ) | 9,157 | (14,097 | ) | (3,158 | ) | ||||||||
Income before provision for income taxes | 22,328 | 26,996 | 84,461 | 48,908 | |||||||||||
Provision for income taxes | 11,169 | 9,044 | 20,682 | 12,387 | |||||||||||
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 | (2,057 | ) | (1,370 | ) | (5,686 | ) | (2,060 | ) | |||||||
Net income | 9,102 | 16,582 | 58,093 | 34,461 | |||||||||||
Net income attributable to noncontrolling interest | (1,587 | ) | (1,161 | ) | (4,499 | ) | (3,390 | ) | |||||||
Net income attributable to PPD, Inc. | 7,515 | 15,421 | 53,594 | 31,071 | |||||||||||
Recapitalization investment portfolio consideration | 44,468 | 11,231 | (6,529 | ) | 16,830 | ||||||||||
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.: | |||||||||||||||
Basic | $ | 0.15 | $ | 0.10 | $ | 0.14 | $ | 0.17 | |||||||
Diluted | $ | 0.15 | $ | 0.09 | $ | 0.14 | $ | 0.17 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 348,672 | 279,425 | 338,277 | 279,235 | |||||||||||
Diluted | 354,830 | 281,193 | 343,159 | 280,055 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income | $ | 9,102 | $ | 16,582 | $ | 58,093 | $ | 34,461 | |||||||
Other comprehensive income (loss), net of tax expense (benefit): | |||||||||||||||
Foreign currency translation | 45,602 | (49,415 | ) | (7,192 | ) | (39,686 | ) | ||||||||
Defined benefit plan, net of income taxes of $28 and $26 for the | |||||||||||||||
three months ended September 30, 2020 and 2019, respectively, and $85 and | |||||||||||||||
$88 for the nine months ended September 30, 2020 and 2019, respectively | 138 | 120 | 380 | 390 | |||||||||||
Derivative instruments, net of income taxes of $297 and $(756) for the | |||||||||||||||
three months ended September 30, 2020 and 2019, respectively, and | |||||||||||||||
$(31,300) and $(2,063) for the nine months ended September 30, 2020 | |||||||||||||||
and 2019, respectively | 503 | (2,419 | ) | (96,992 | ) | (7,157 | ) | ||||||||
Other comprehensive income (loss) | 46,243 | (51,714 | ) | (103,804 | ) | (46,453 | ) | ||||||||
Comprehensive income (loss) | 55,345 | (35,132 | ) | (45,711 | ) | (11,992 | ) | ||||||||
Comprehensive income attributable to noncontrolling interest | (2,078 | ) | (999 | ) | (5,651 | ) | (4,080 | ) | |||||||
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 |
Assets | |||||||
September 30, 2020 | December 31, 2019 | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 803,090 | $ | 345,187 | |||
Accounts receivable and unbilled services, net | 1,460,374 | 1,326,614 | |||||
Income taxes receivable | 29,016 | 27,437 | |||||
Prepaid expenses and other current assets | 122,040 | 119,776 | |||||
Total current assets | 2,414,520 | 1,819,014 | |||||
Property and equipment, net | 474,006 | 458,845 | |||||
Investments in unconsolidated affiliates | 36,501 | 34,028 | |||||
Investments | 252,606 | 250,348 | |||||
Goodwill, net | 1,771,106 | 1,764,104 | |||||
Intangible assets, net | 770,161 | 892,091 | |||||
Other assets | 157,126 | 156,220 | |||||
Operating lease right-of-use assets | 165,508 | 181,596 | |||||
Total assets | $ | 6,041,534 | $ | 5,556,246 | |||
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Deficit | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 120,022 | $ | 130,060 | |||
Accrued expenses: | |||||||
Payables to investigators | 384,004 | 322,231 | |||||
Accrued employee compensation | 328,469 | 263,834 | |||||
Accrued interest | 18,972 | 44,527 | |||||
Other accrued expenses | 216,130 | 138,632 | |||||
Income taxes payable | 11,040 | 15,161 | |||||
Unearned revenue | 1,048,392 | 1,110,872 | |||||
Current portion of operating lease liabilities | 48,339 | 45,962 | |||||
Current portion of long-term debt and finance lease obligations | 36,120 | 35,794 | |||||
Total current liabilities | 2,211,488 | 2,107,073 | |||||
Accrued income taxes | 20,609 | 38,465 | |||||
Deferred tax liabilities | 68,029 | 92,225 | |||||
Recapitalization investment portfolio liability | 183,288 | 191,678 | |||||
Long-term operating lease liabilities, less current portion | 134,994 | 153,766 | |||||
Long-term debt and finance lease obligations, less current portion | 4,233,178 | 5,608,134 | |||||
Other liabilities | 105,189 | 33,017 | |||||
Total liabilities | 6,956,775 | 8,224,358 | |||||
Commitments and contingencies (Note 9) | |||||||
Redeemable noncontrolling interest | 35,687 | 30,036 | |||||
Stockholders’ deficit: | |||||||
Common stock - $0.01 par value; 2,000,000 and 2,080,000 shares authorized as of | |||||||
September 30, 2020 and December 31, 2019, respectively; | |||||||
350,291 shares issued and 349,565 shares outstanding as of September 30, 2020, and | |||||||
280,127 shares issued and 279,426 shares outstanding as of December 31, 2019 | 3,503 | 2,801 | |||||
Treasury stock, at cost, 726 shares and 701 shares as of September 30, 2020 and | |||||||
December 31, 2019, respectively | (13,268 | ) | (12,707 | ) | |||
Additional paid-in-capital | 1,806,607 | 1,983 | |||||
Accumulated deficit | (2,345,062 | ) | (2,391,321 | ) | |||
Accumulated other comprehensive loss | (402,708 | ) | (298,904 | ) | |||
Total stockholders’ deficit | (950,928 | ) | (2,698,148 | ) | |||
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit | $ | 6,041,534 | $ | 5,556,246 |
Nine Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 58,093 | $ | 34,461 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 206,395 | 197,896 | |||||
Long-lived asset impairment | 1,414 | — | |||||
Stock-based compensation expense | 16,099 | 11,701 | |||||
Non-cash operating lease expense | 34,625 | 33,465 | |||||
Amortization of debt issuance costs, modification costs and debt discounts | 8,263 | 12,162 | |||||
Non-cash losses (gains) on interest rate swaps | 942 | (7,157 | ) | ||||
(Gain) loss on investments | (16,649 | ) | 22,716 | ||||
Deferred income tax expense (benefit) | 5,770 | (11,915 | ) | ||||
Loss on extinguishment of debt | 93,534 | — | |||||
Amortization of costs to obtain a contract | 7,973 | 8,533 | |||||
Other | 5,427 | 1,698 | |||||
Change in operating assets and liabilities, net of effect of businesses acquired: | |||||||
Accounts receivable and unbilled services, net | (148,501 | ) | (46,932 | ) | |||
Prepaid expenses and other current assets | 26,908 | (10,059 | ) | ||||
Other assets | (39,813 | ) | (15,328 | ) | |||
Income taxes, net | (23,286 | ) | (7,606 | ) | |||
Accounts payable, accrued expenses and other liabilities | 116,503 | 12,546 | |||||
Operating lease liabilities | (33,165 | ) | (31,639 | ) | |||
Unearned revenue | (52,065 | ) | 109,180 | ||||
Net cash provided by operating activities | 268,467 | 313,722 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (116,418 | ) | (89,398 | ) | |||
Acquisition of businesses, net of cash and cash equivalents acquired | 321 | (74,242 | ) | ||||
Capital contributions paid for investments | (5,382 | ) | (2,792 | ) | |||
Distributions received from investments | 19,704 | 190 | |||||
Investments in unconsolidated affiliates | (10,000 | ) | (30,000 | ) | |||
Other | — | 694 | |||||
Net cash used in investing activities | (111,775 | ) | (195,548 | ) | |||
Cash flows from financing activities: | |||||||
Purchase of treasury stock | (626 | ) | (2,738 | ) | |||
Proceeds from exercise of stock options | 14,272 | 3,625 | |||||
Borrowing on Revolving Credit Facility | 150,000 | — | |||||
Repayment of Revolving Credit Facility | (150,000 | ) | — | ||||
Proceeds from issuance of senior notes | 1,200,000 | 891,000 | |||||
Redemption of HoldCo Notes | (1,464,500 | ) | — | ||||
Redemption of OpCo Notes | (1,160,865 | ) | — | ||||
Payments on long-term debt and finance leases | (32,080 | ) | (28,974 | ) | |||
Payment of debt issuance and debt modification costs | (18,525 | ) | (30,142 | ) | |||
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 |
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, 2020 | $ | 33,609 | 349,312 | $ | 3,493 | $ | 1,787,645 | 726 | $ | (13,268 | ) | $ | (448,951 | ) | $ | (2,397,045 | ) | $ | (1,068,126 | ) | |||||||||||||||
Net income | 1,587 | — | — | — | — | — | — | 7,515 | 7,515 | ||||||||||||||||||||||||||
Other comprehensive income | 491 | — | — | — | — | — | 46,243 | — | 46,243 | ||||||||||||||||||||||||||
Vesting of restricted stock | — | 2 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock for stock option exercises | — | 977 | 10 | 13,553 | — | — | — | — | 13,563 | ||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | 5,409 | — | — | — | — | 5,409 | ||||||||||||||||||||||||||
Recapitalization investment portfolio consideration | — | — | — | — | — | — | — | 44,468 | 44,468 | ||||||||||||||||||||||||||
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 | ) | |||||||||||||||
Net income | 4,499 | — | — | — | — | — | — | 53,594 | 53,594 | ||||||||||||||||||||||||||
Other comprehensive income (loss) | 1,152 | — | — | — | — | — | (103,804 | ) | — | (103,804 | ) | ||||||||||||||||||||||||
Vesting of restricted stock | — | 7 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock for stock option exercises | — | 1,157 | 12 | 16,255 | — | — | — | — | 16,267 | ||||||||||||||||||||||||||
Repurchases of common stock | — | — | — | — | 25 | (561 | ) | — | — | (561 | ) | ||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | 16,099 | — | — | — | — | 16,099 | ||||||||||||||||||||||||||
Recapitalization investment portfolio consideration | — | — | — | — | — | — | — | (6,529 | ) | (6,529 | ) | ||||||||||||||||||||||||
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 | ) |
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 | ) |
(in thousands) | September 30, 2020 | December 31, 2019 | ||||||
Accounts receivable | $ | 792,784 | $ | 726,111 | ||||
Unbilled services | 675,525 | 609,674 | ||||||
Total accounts receivable and unbilled services | 1,468,309 | 1,335,785 | ||||||
Allowance for doubtful accounts | (7,935 | ) | (9,171 | ) | ||||
Total accounts receivable and unbilled services, net | $ | 1,460,374 | $ | 1,326,614 |
(in thousands) | September 30, 2020 | December 31, 2019 | ||||||
Unearned revenue | $ | 1,048,392 | $ | 1,110,872 |
(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 |
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 |
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 |
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 |
(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 |
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 |
(dollars in thousands) | Maturity Date | Effective Rate | Stated Rate | September 30, 2020 | December 31, 2019 | |||||||||
Term Loan | August 2022 | 3.71% | 3.50% | $ | 3,072,112 | $ | 3,096,429 | |||||||
2025 Notes | June 2025 | 4.97% | 4.63% | 500,000 | — | |||||||||
2028 Notes | June 2028 | 5.24% | 5.00% | 700,000 | — | |||||||||
OpCo Notes(1) | — | 6.61% | 6.38% | — | 1,125,000 | |||||||||
Initial HoldCo Notes(1) | — | 8.92% | 7.63% | — | 550,000 | |||||||||
Additional HoldCo Notes(1) | — | 8.90% | 7.75% | — | 900,000 | |||||||||
Other debt(1) | — | 1.13% | 1.13% | — | 5,707 | |||||||||
Finance lease obligations | Various | Various | Various | 26,635 | 28,726 | |||||||||
4,298,747 | 5,705,862 | |||||||||||||
Unamortized debt discount | (4,822 | ) | (13,956 | ) | ||||||||||
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 |
2025 Notes | |||
Period | Redemption Price | ||
2022 | 102.313 | % | |
2023 | 101.156 | % | |
2024 and thereafter | 100.000 | % |
2028 Notes | |||
Period | Redemption Price | ||
2023 | 102.500 | % | |
2024 | 101.250 | % | |
2025 and thereafter | 100.000 | % |
Year | Amount | |||
2020 (remaining three months) | $ | 8,969 | ||
2021 | 36,156 | |||
2022 | 3,035,578 | |||
2023 | 3,690 | |||
2024 | 3,530 | |||
2025 | 503,530 | |||
Thereafter | 707,294 | |||
Total | $ | 4,298,747 |
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 |
(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 | ) | $ | — |
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 | ) | — |
September 30, 2020 | December 31, 2019 | |||||||||||||||||
(in thousands) | Balance sheet location | Assets | Liabilities | Assets | Liabilities | |||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Interest rate swaps | Other accrued expenses | $ | — | $ | 31,591 | $ | — | $ | — | |||||||||
Interest rate swaps | Other liabilities | — | 83,523 | — | — | |||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||
Interest rate swaps | Prepaid expenses and other current assets | 1,810 | — | — | — | |||||||||||||
Interest rate swaps | Other assets | 2,636 | — | — | — | |||||||||||||
Interest rate swaps | Other accrued expenses | — | 5,088 | — | — | |||||||||||||
Interest rate swaps | Other liabilities | — | 13,479 | — | — | |||||||||||||
$ | 4,446 | $ | 133,681 | $ | — | $ | — |
• | 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. |
As of September 30, 2020 | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets | |||||||||||||||
Investments | $ | 2,179 | $ | — | $ | 250,427 | $ | 252,606 | |||||||
Derivative instruments | — | 4,446 | — | 4,446 | |||||||||||
Total assets | $ | 2,179 | $ | 4,446 | $ | 250,427 | $ | 257,052 | |||||||
Liabilities | |||||||||||||||
Derivative instruments | $ | — | $ | 133,681 | $ | — | $ | 133,681 | |||||||
Recapitalization investment portfolio liability | — | — | 198,207 | 198,207 | |||||||||||
Total liabilities | $ | — | $ | 133,681 | $ | 198,207 | $ | 331,888 |
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 |
Quantitative Information About Level 3 Fair Value Measurements for September 30, 2020 | ||||||||
Description | Fair Value | Valuation Technique | Unobservable Input | Range of Rates | ||||
Fair value option investments | $241,203 | Market evaluation/pricing models | Discount for lack of marketability | 17.5% - 32.5% | ||||
Recent acquisition transactions | Discount for lack of control | 20.0% - 35.0% | ||||||
Quantitative Information About Level 3 Fair Value Measurements for December 31, 2019 | ||||||||
Description | Fair Value | Valuation Technique | Unobservable Input | Range of Rates | ||||
Fair value option investments | $243,067 | Market evaluation/pricing models | Discount for lack of marketability | 10.0% - 30.0% | ||||
Recent acquisition transactions | Discount for lack of control | 20.0% - 35.0% |
(in thousands) | 2020 | 2019 | ||||||
Balance as of January 1, | $ | 248,453 | $ | 256,124 | ||||
Recognized fair value gain (loss) | 16,296 | (14,757 | ) | |||||
Cash distributions received | (19,704 | ) | (190 | ) | ||||
Capital contributions paid | 5,382 | 2,792 | ||||||
Balance as of September 30, | $ | 250,427 | $ | 243,969 |
(in thousands) | 2020 | 2019 | ||||||
Balance as of January 1, | $ | 191,678 | $ | 198,524 | ||||
Recapitalization investment portfolio consideration change in value | 6,529 | (16,830 | ) | |||||
Balance as of September 30, | $ | 198,207 | $ | 181,694 |
September 30, 2020 | December 31, 2019 | |||||||||||||||
(in thousands) | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 803,090 | $ | 803,090 | $ | 345,187 | $ | 345,187 | ||||||||
Liabilities: | ||||||||||||||||
Term Loan | 3,072,112 | 3,067,503 | 3,096,429 | 3,111,911 | ||||||||||||
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 |
(in thousands) | Foreign Currency Translation | Derivative Instruments | 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 | ) |
(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 | (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 | ) |
(in thousands) | Foreign Currency Translation | Derivative Instruments | 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 | ) |
(in thousands) | Foreign Currency Translation | Derivative Instruments | 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 | ) |
(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 | ) |
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 9,102 | $ | 16,582 | $ | 58,093 | $ | 34,461 | ||||||||
Net income attributable to noncontrolling interest | (1,587 | ) | (1,161 | ) | (4,499 | ) | (3,390 | ) | ||||||||
Recapitalization investment portfolio consideration | 44,468 | 11,231 | (6,529 | ) | 16,830 | |||||||||||
Net income attributable to common stockholders of PPD, Inc. | $ | 51,983 | $ | 26,652 | $ | 47,065 | $ | 47,901 | ||||||||
Denominator: | ||||||||||||||||
Basic weighted-average common shares outstanding | 348,672 | 279,425 | 338,277 | 279,235 | ||||||||||||
Effect of dilutive stock options and restricted stock units | 6,158 | 1,768 | 4,882 | 820 | ||||||||||||
Diluted weighted-average common shares outstanding | 354,830 | 281,193 | 343,159 | 280,055 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.15 | $ | 0.10 | $ | 0.14 | $ | 0.17 | ||||||||
Diluted | $ | 0.15 | $ | 0.09 | $ | 0.14 | $ | 0.17 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||
Anti-dilutive equity awards | 320 | 311 | 469 | 537 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Segment revenue: | ||||||||||||||||
Clinical Development Services | $ | 1,008,639 | $ | 846,068 | $ | 2,694,775 | $ | 2,488,773 | ||||||||
Laboratory Services | 225,163 | 177,796 | 622,407 | 495,360 | ||||||||||||
Total segment revenue | 1,233,802 | 1,023,864 | 3,317,182 | 2,984,133 | ||||||||||||
Segment direct costs: | ||||||||||||||||
Clinical Development Services | 330,281 | 287,538 | 922,737 | 871,753 | ||||||||||||
Laboratory Services | 102,355 | 79,445 | 279,154 | 227,171 | ||||||||||||
Total segment direct costs | 432,636 | 366,983 | 1,201,891 | 1,098,924 | ||||||||||||
Segment reimbursed costs: | ||||||||||||||||
Clinical Development Services | 309,117 | 220,873 | 730,872 | 633,466 | ||||||||||||
Laboratory Services | 26,749 | 20,931 | 79,651 | 55,230 | ||||||||||||
Total segment reimbursed costs | 335,866 | 241,804 | 810,523 | 688,696 | ||||||||||||
Segment SG&A expenses: | ||||||||||||||||
Clinical Development Services | 137,984 | 130,576 | 415,334 | 391,551 | ||||||||||||
Laboratory Services | 23,283 | 19,648 | 66,929 | 58,551 | ||||||||||||
Total segment SG&A expenses | 161,267 | 150,224 | 482,263 | 450,102 | ||||||||||||
Segment operating income: | ||||||||||||||||
Clinical Development Services | 231,257 | 207,081 | 625,832 | 592,003 | ||||||||||||
Laboratory Services | 72,776 | 57,772 | 196,673 | 154,408 | ||||||||||||
Total segment operating income | 304,033 | 264,853 | 822,505 | 746,411 | ||||||||||||
Operating costs and expenses not allocated to segments: | ||||||||||||||||
Direct costs | 786 | 2,493 | 20,809 | 13,257 | ||||||||||||
SG&A expenses | 88,053 | 76,772 | 252,449 | 231,329 | ||||||||||||
Depreciation and amortization | 71,317 | 66,889 | 206,395 | 197,896 | ||||||||||||
Long-lived asset impairment | 1,414 | — | 1,414 | — | ||||||||||||
Income from operations | $ | 142,463 | $ | 118,699 | $ | 341,438 | $ | 303,929 |
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Other (expense) income, net: | ||||||||||||||||
Foreign currency (losses) gains, net | $ | (17,509 | ) | $ | 10,700 | $ | (3,055 | ) | $ | (1,435 | ) | |||||
Interest rate swap gains (losses) | 209 | — | (11,398 | ) | — | |||||||||||
Other income | 365 | 684 | 954 | 2,584 | ||||||||||||
Other expense | (218 | ) | (2,227 | ) | (598 | ) | (4,307 | ) | ||||||||
Total other (expense) income, net | $ | (17,153 | ) | $ | 9,157 | $ | (14,097 | ) | $ | (3,158 | ) |
Historical Basis | ASC 606 Basis | |||||||||||||||
(dollars in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net authorizations | $ | 1,200.3 | $ | 900.2 | $ | 1,764.5 | $ | 1,158.7 | ||||||||
Backlog | 7,890.4 | 6,805.7 | 11,720.1 | 9,896.6 | ||||||||||||
Backlog conversion | 11.8 | % | 11.8 | % | 11.0 | % | 10.5 | % | ||||||||
Net book-to-bill | 1.35x | 1.14x | 1.43x | 1.13x |
Revenue | Three Months Ended September 30, | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | Change | ||||||||||||
Revenue | $ | 1,233,802 | $ | 1,023,864 | $ | 209,938 | 20.5 | % |
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 | % |
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 | % |
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 | % |
Interest Expense, Net | Three Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Interest expense, net | $ | 49,882 | $ | 85,754 |
Loss on Investments | Three Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Loss on investments | $ | (53,100 | ) | $ | (15,106 | ) |
Other (Expense) Income, Net | Three Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Other (expense) income, net | $ | (17,153 | ) | $ | 9,157 |
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 | % |
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 |
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 |
Revenue | Nine Months Ended September 30, | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | Change | ||||||||||||
Revenue | $ | 3,317,182 | $ | 2,984,133 | $ | 333,049 | 11.2 | % |
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 | % |
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 | % |
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 | % |
Interest Expense, Net | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Interest expense, net | $ | 165,995 | $ | 229,147 |
Loss on Extinguishment of Debt | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Loss on extinguishment of debt | $ | (93,534 | ) | $ | — |
Gain (Loss) on Investments | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Gain (loss) on investments | $ | 16,649 | $ | (22,716 | ) |
Other Expense, Net | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Other expense, net | $ | (14,097 | ) | $ | (3,158 | ) |
Provision for Income Taxes | Nine Months Ended September 30, | |||||||
(dollars in thousands) | 2020 | 2019 | ||||||
Provision for income taxes | $ | 20,682 | $ | 12,387 | ||||
Effective income tax rate | 24.5 | % | 25.3 | % |
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 |
Nine Months Ended September 30, | |||||||||||||||
(dollars in thousands) | 2020 | 2019 | Change | ||||||||||||
Segment revenue | $ | 622,407 | $ | 495,360 | $ | 127,047 | 25.6 | % | |||||||
Segment direct costs | 279,154 | 227,171 | 51,983 | 22.9 | |||||||||||
Segment reimbursed costs | 79,651 | 55,230 | 24,421 | 44.2 | |||||||||||
Segment SG&A expenses | 66,929 | 58,551 | 8,378 | 14.3 | |||||||||||
Segment operating income | $ | 196,673 | $ | 154,408 | $ | 42,265 | 27.4 |
(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 |
Cash flows from operating activities | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Net cash provided by operating activities | $ | 268,467 | $ | 313,722 |
Cash flows from investing activities | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Net cash used in investing activities | $ | (111,775 | ) | $ | (195,548 | ) |
Cash flows from financing activities | Nine Months Ended September 30, | |||||||
(in thousands) | 2020 | 2019 | ||||||
Net cash provided by (used in) financing activities | $ | 306,298 | $ | (253,229 | ) |
(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. |
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 |
• | 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; |
• | the United States or foreign countries could enact legislation or impose regulations, including unfavorable labor regulations, tax policies or economic sanctions, that could have an adverse effect on our ability to conduct business in or expatriate profits from the countries in which we operate; |
• | the complexities of operating within multiple tax jurisdictions, including potentially negative consequences from changes in tax laws or from current and future tax examinations; |
• | foreign countries are expanding or might 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 trials in such countries, including changes that may be enacted or result from the COVID-19 pandemic; |
• | the regulatory or judicial authorities of foreign countries might not enforce legal rights and recognize business procedures in a manner to which we are accustomed or would reasonably expect; |
• | changes in political and economic conditions might lead to changes in the business environment in which we operate, such as the current changes caused by the COVID-19 pandemic, including those to protect the general population and patient safety in clinical trials; |
• | actual or perceived risk of infection relating to COVID-19 or otherwise might impact the willingness of patients to enroll in clinical trials and to visit clinics, hospitals and other clinical research sites for procedures associated with the conduct of clinical trials, which in turn could have an adverse effect on our ability to conduct business in relevant countries and regions; |
• | 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; |
• | 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. |
• | 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. |
• | 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. |
Incorporated by Reference | |||||||||
Exhibit Number | Exhibit Description | Filed Herewith | Form | File No. | Exhibit | Filing Date | |||
31.1 | X | - | - | - | - | ||||
31.2 | X | - | - | - | - | ||||
32.1 | X | - | - | - | - | ||||
32.2 | X | - | - | - | - | ||||
101.INS | XBRL Instance Document | X | - | - | - | - | |||
101.SCH | XBRL Taxonomy Extension Schema Document | X | - | - | - | - | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | - | - | - | - | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | - | - | - | - | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | - | - | - | - | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | - | - | - | - |
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) |
1. | I have reviewed this Quarterly Report on Form 10-Q of PPD, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | October 28, 2020 | By: | /s/ David Simmons | |
David Simmons | ||||
Chairman and Chief Executive Officer | ||||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of PPD, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | October 28, 2020 | By: | /s/ Christopher G. Scully | |
Christopher G. Scully | ||||
Executive Vice President and Chief Financial Officer | ||||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | October 28, 2020 | By: | /s/ David Simmons | |
David Simmons | ||||
Chairman and Chief Executive Officer | ||||
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | October 28, 2020 | By: | /s/ Christopher G. Scully | |
Christopher G. Scully | ||||
Executive Vice President and Chief Financial Officer | ||||
(Principal Financial Officer) |
Document and Entity Information Document - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Oct. 26, 2020 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | PPD, Inc. | |
Entity Central Index Key | 0001793294 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Interactive Data Current | Yes | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 349,654,449 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Statement [Abstract] | ||||
Investment income. interest | $ 433 | $ 1,089 | $ 1,996 | $ 4,383 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Defined benefit plan adjustments, income tax benefit (expense) | $ 28 | $ 26 | $ 85 | $ 88 |
Derivative instruments adjustments, income tax expense (benefit) | $ 297 | $ (756) | $ (31,300) | $ (2,063) |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par or stated value per share (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 2,000,000,000 | 2,080,000,000 |
Common stock, shares, issued (in shares) | 350,291,000 | 280,127,000 |
Common stock, shares, outstanding (in shares) | 349,565,000 | 279,426,000 |
Treasury stock, shares (in shares) | 726,000 | 701,000 |
Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 to patients around the world. The Company has been in the drug development services business for more 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 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 8-K”). There have been no significant changes to the Company’s significant accounting policies during the first nine months of 2020, except for a change in how the Company’s Chief Operating Decision Maker (“CODM”) assesses segment performance. 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”). 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 30, 2020 are not necessarily indicative of the results to be expected for the full twelve-month period ending December 31, 2020 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 May 2020 Form 8-K. The information as of December 31, 2019 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 8-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. |
Revenue |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Performance Obligations Revenue recognized from performance obligations partially satisfied in prior periods was $28.4 million and $82.9 million for the three and nine months ended September 30, 2020, respectively, and $35.1 million and $80.4 million for the three and nine months ended September 30, 2019, respectively. These cumulative catch-up adjustments primarily related to (i) contract modifications executed in the current period, which resulted in changes to the transaction price, (ii) changes in transaction price related to variable consideration and (iii) changes in estimates such as estimated total costs. As of September 30, 2020, the aggregate amounts of transaction price allocated to unsatisfied performance obligations with an original contract term of greater than one year was $7.0 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. 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:
The Company’s unearned revenue consisted of the following amounts on the dates set forth below:
As of September 30, 2020 and December 31, 2019, contract assets of $160.6 million and $178.8 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 months ended September 30, 2020 and 2019, the Company recognized revenue of $815.4 million and $653.8 million, respectively, from the balance of unearned revenue outstanding as of January 1, 2020 and January 1, 2019, respectively. Impairments of accounts receivable, unbilled services and contract assets were insignificant during the three and nine months ended September 30, 2020 and 2019. 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 30, 2020, one customer accounted for approximately 11% of accounts receivable and unbilled services, net. As of December 31, 2019, two customers each individually accounted for approximately 11% 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 30, 2020 and 2019. |
Stockholders’ Deficit and Redeemable Noncontrolling Interest |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ Deficit and Redeemable Noncontrolling Interest | Stockholders’ Deficit and Redeemable Noncontrolling Interest Shares 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:
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. |
Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | 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:
The following table summarizes the consideration and the fair values of identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):
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:
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. |
Goodwill and Intangible Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets, Net | Goodwill and Intangible Assets, Net Goodwill, Net The changes in the carrying amount of goodwill by segment consisted of the following on the dates set forth below:
Intangible Assets, Net 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. |
Long-term Debt and Finance Lease Obligations |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt and Finance Lease Obligations | 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:
(1) Effective rate and stated rate are as of December 31, 2019 for the extinguished OpCo Notes, Initial HoldCo Notes, Additional HoldCo Notes and Other debt. Revolving Credit Facility The Company has a revolving credit facility (the “Revolving Credit Facility”) available for use under the credit agreement dated as of August 18, 2015, as amended (the “Credit Agreement”), with a total committed credit of $300.0 million. In March 2020, the Company borrowed $150.0 million from the Revolving Credit Facility as a precautionary measure in 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. In June 2020, the Company repaid the outstanding balance of the Revolving Credit Facility using cash on hand. From time to time, the Company is required to have letters of credit issued on its behalf to provide credit support for guarantees, contractual commitments and insurance policies. As of September 30, 2020 and December 31, 2019, the Company had letters of credit outstanding with an aggregate value of $1.6 million, which reduced available borrowings under the Revolving Credit Facility by such amount. As of September 30, 2020, the Company had available credit under the Revolving Credit Facility of $298.4 million. The Company did not have any borrowings outstanding under the Revolving Credit Facility as of September 30, 2020 and December 31, 2019. Issuance of the 2025 Notes and the 2028 Notes 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. The Company 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. On or after June 15, 2022, in the case of the 2025 Notes, and June 15, 2023, in the case of the 2028 Notes, the Company may redeem some or all of such notes at the redemption prices listed below (expressed as a percentage of the principal amount), plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period commencing on June 15 of the years set forth below.
Upon the occurrence of specific kinds of changes of control events, the holders of the New Notes will have the right to cause the Company to repurchase some or all of the New Notes at 101% of face amount, plus accrued and unpaid interest, if any, to the repurchase date. Additionally, if the Company or its restricted subsidiaries sells assets, under certain circumstances, the Company will be required to make an offer to purchase a specified amount of New Notes equal to the net proceeds of such sale at an offer price in cash at the amount equal to 100% of the principal amount of the New Notes to be redeemed, plus accrued and unpaid interest, if any, to the repurchase date. The New Notes are unsecured obligations and (i) rank senior in right of payment to all of the Company’s existing and future subordinated indebtedness, (ii) rank equally in right of payment with all of the Company’s existing and future senior indebtedness, (iii) are effectively subordinated to any of the Company’s existing and future secured debt, to the extent of the value of the assets securing such debt and (iv) are structurally subordinated to all of the existing and future liabilities of each of the Company’s subsidiaries that do not guarantee the New Notes. The New Notes contain customary covenants including, but not limited to, restrictions on the Company and its restricted subsidiaries’ ability to incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions in respect of, or repurchase or redeem, 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 subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of their assets. Additionally, the Indenture for the New Notes includes certain customary events of default which may require acceleration of payment. Such events of default include nonpayment of principal or interest, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, bankruptcy and insolvency events and cross acceleration, the occurrence of which could result in the principal of and accrued interest on the New Notes to become or be declared due and payable immediately. Redemption of OpCo Notes 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. Redemption of HoldCo Notes 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, there were no changes to the debt covenants or default provisions related to the Company’s outstanding debt under its Credit Agreement or other obligations during the first nine months of 2020. 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 30, 2020 and December 31, 2019. For additional information on the Company’s debt arrangements, debt covenants and default provisions, 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. Scheduled Maturities of Long-term Debt and Finance Lease Obligations As of September 30, 2020, the scheduled maturities of long-term debt and settlement of finance lease obligations for the remainder of 2020, each of the next five years and thereafter were as follows (in thousands):
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Income Taxes |
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Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 Act provides wide-ranging economic relief, including significant changes to U.S. business tax provisions. These changes include, in summary, (i) modifications to limitations on the deductibility of net operating losses, (ii) modifications to limitations on the deductibility of business interest, (iii) alternative minimum tax credit acceleration and (iv) the expensing of qualified improvement property. The most significant impact to the Company from the CARES Act 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 of the CARES Act on tax years prior to 2020 within the period ended March 31, 2020 and accounted for the impact on the current tax year in its annual effective tax rate and provision for income taxes for the three and nine months ended September 30, 2020. The Company is continuing to assess the income tax impact of the CARES Act and other legislative changes enacted and being considered by governments around the world in response to the COVID-19 pandemic. The Company’s effective income tax rate was 50.0% and 33.5% for the three months ended September 30, 2020 and 2019, respectively, and 24.5% and 25.3% for the nine months ended September 30, 2020 and 2019, respectively. The Company’s provision for income taxes for the three months ended September 30, 2020 was primarily due to the estimated tax on the Company’s distribution of pre-tax income among domestic and foreign jurisdictions and the impacts of a tax rate change in the United Kingdom. The Company’s provision for income taxes for the nine months ended September 30, 2020 was primarily due to the estimated tax effect on the Company’s pre-tax income. The Company’s provision for income taxes for the three and nine months ended September 30, 2019 was primarily due to the estimated tax effect on the Company’s pre-tax income. As of September 30, 2020 and December 31, 2019, the Company’s total unrecognized tax benefits were $21.4 million and $39.7 million, respectively. The decrease to the Company’s unrecognized tax benefits during the nine months ended September 30, 2020, was primarily the result of a $13.0 million release as a result of the application of the provisions of the CARES Act. Included in the balance of unrecognized tax benefits as of September 30, 2020 and December 31, 2019, were $14.6 million and $28.8 million, respectively, net of the federal benefit for state taxes, that if recognized, would reduce the Company’s effective tax rate. In addition, the Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an amount up to $6.4 million within the next 12 months due to the settlement of audits and the expiration of the statutes of limitations. 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 jurisdictions. The significant jurisdictions with periods subject to examination are the 2017 through 2019 tax years for the United States and the 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. |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company has variable rate borrowings under its senior secured term loan outstanding under the Credit Agreement (the “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 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 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 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 (expense) 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. The following table summarizes the material terms of the interest rate swaps outstanding as of September 30, 2020 (dollars in thousands):
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. The Company expects to reclassify current unrealized losses of $31.2 million within the next 12 months from AOCL to interest expense, net, on the condensed consolidated statements of operations as interest payments are made on the Term Loan. 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:
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:
The fair value of derivative instruments consisted of the following balances as set forth on the dates below:
The 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. |
Commitments and Contingencies |
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Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company records and discloses a liability for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable. The Company reviews claims and 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 pertinent matters. Legal costs associated with contingencies are charged to expense as incurred. 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. These 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. |
Fair Value Measurements |
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Fair Value Measurements | 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:
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):
Fair Value Investments The following table summarizes the Company’s quantitative information about the fair value measurements of Auven Therapeutics Holdings, L.P. and venBio Global Strategic Fund, L.P. at the dates indicated (dollars in thousands):
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. Changes in fair value of the Company’s investments measured on a recurring basis using significant unobservable inputs (Level 3) were as follows:
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) were as follows:
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 following table presents information about the carrying value and estimated fair value of the Company’s financial instruments on the dates set forth below:
Cash and Cash Equivalents - The carrying amount approximates fair value due to the short-term maturity of these financial instruments (less than three months). The Company considers the fair value of cash and cash equivalents to be a Level 1 classification within the fair value hierarchy. 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 source. The Company considers the fair value of the Term Loan to be a Level 2 classification within the fair value hierarchy. 2025 Notes, 2028 Notes, OpCo Notes and HoldCo Notes - The estimated fair values of the 2025 Notes and 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 values of the 2025 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. Other Debt - The carrying amount of the previously outstanding other debt approximated fair value due to the nature of the obligation. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The balances of AOCL, net of tax, were as follows for the three and nine months ended September 30, 2020 and 2019:
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:
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Related Party Transactions |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | 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:
SNBL Transactions Both the Company and SNBL have service agreements to provide administrative and 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 and SNBL also have a collaboration agreement under which the parties may collaborate on various drug development services. This collaboration agreement will remain in effect as long as SNBL owns at least 20% of PPD-SNBL. For the three months ended September 30, 2020 and 2019, the Company incurred expenses for services rendered under the services agreement of $0.2 million and $0.3 million, respectively. For the nine months ended September 30, 2020 and 2019, the Company incurred expenses under the services agreement of $0.8 million and $0.9 million, respectively. The expenses are recorded as a component of SG&A expenses on the condensed consolidated statements of operations. As of September 30, 2020 and December 31, 2019, the Company owed SNBL $0.3 million for services rendered under the services agreement. Additionally, as of December 31, 2019, PPD-SNBL owed SNBL $5.7 million related to a working capital loan. During the first nine months of 2020, the Company repaid the balance of this working capital loan. 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.” |
Earnings Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 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:
See Note 3, “Stockholders’ Deficit and Redeemable Noncontrolling Interest,” for additional information related to shares and Note 2, “Recapitalization Transaction,” of the Company’s audited consolidated financial statements included in the May 2020 Form 8-K for additional information related to the recapitalization investment portfolio consideration. Potential common shares outstanding that are considered anti-dilutive are excluded from the computation of diluted EPS. Potential common shares related to stock options and other awards under share-based 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 Company incurs a net loss. 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 as follows:
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Segments |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | Segments The 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 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. The Company’s CODM assesses segment performance and makes resource allocation decisions based on segment revenues and segment operating income. During the first quarter of 2020, the CODM began assessing performance and making resource allocation decisions based on total segment revenue, including direct, third-party pass-through and out-of-pocket 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, 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. 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. 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:
Entity-wide Information by Geographic Location 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:
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Entity-wide Information by Geographic Location |
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Segments, Geographical Areas [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity-wide Information by Geographic Location | Segments The 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 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. The Company’s CODM assesses segment performance and makes resource allocation decisions based on segment revenues and segment operating income. During the first quarter of 2020, the CODM began assessing performance and making resource allocation decisions based on total segment revenue, including direct, third-party pass-through and out-of-pocket 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, 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. 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. 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:
Entity-wide Information by Geographic Location 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:
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Other (Expense) Income, Net |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (Expense) Income, Net | Other (Expense) Income, Net The components of other (expense) income, net, for the respective periods were as follows:
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Basis of Presentation (Policies) |
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Sep. 30, 2020 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Unaudited Interim Financial Information | 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 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 8-K”). There have been no significant changes to the Company’s significant accounting policies during the first nine months of 2020, except for a change in how the Company’s Chief Operating Decision Maker (“CODM”) assesses segment performance. See Note 14, “Segments,” for additional information. |
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Use of Estimates | 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”). Actual results could differ from those estimates and assumptions due to, among other things, the impacts caused by the COVID-19 pandemic. |
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Principles of Consolidation | 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. |
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Recently Adopted Accounting Standard | 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. |
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Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company has variable rate borrowings under its senior secured term loan outstanding under the Credit Agreement (the “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 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 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 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 (expense) 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. |
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Commitments and Contingencies | Commitments and Contingencies The Company records and discloses a liability for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable. The Company reviews claims and 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 pertinent matters. Legal costs associated with contingencies are charged to expense as incurred. |
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Fair Value Measurements | 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:
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Revenue (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable and Unbilled Services | The Company’s accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:
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Contract with Customer, Asset and Liability | The Company’s unearned revenue consisted of the following amounts on the dates set forth below:
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Stockholders’ Deficit and Redeemable Noncontrolling Interest (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders Equity | The following is a summary of the Company’s authorized, issued and outstanding shares of common stock as of the periods set forth below:
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Business Combinations (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets Acquired | The Company acquired the following definite-lived intangible assets with the acquisition of Medimix:
The Company acquired the following definite-lived intangible assets with the acquisition of Synarc:
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the consideration and the fair values of identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):
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Goodwill and Intangible Assets, Net (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount of Goodwill by Segment | The changes in the carrying amount of goodwill by segment consisted of the following on the dates set forth below:
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Schedule of Definite-Lived Intangible Assets | The Company’s definite-lived intangible assets were composed of the following on the dates set forth below:
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Long-term Debt and Finance Lease Obligations (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of 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:
(1) Effective rate and stated rate are as of December 31, 2019 for the extinguished OpCo Notes, Initial HoldCo Notes, Additional HoldCo Notes and Other debt. |
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Schedule of Redemption Prices | On or after June 15, 2022, in the case of the 2025 Notes, and June 15, 2023, in the case of the 2028 Notes, the Company may redeem some or all of such notes at the redemption prices listed below (expressed as a percentage of the principal amount), plus accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period commencing on June 15 of the years set forth below.
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Scheduled Maturities of Long-term Debt and Finance Lease Obligations | As of September 30, 2020, the scheduled maturities of long-term debt and settlement of finance lease obligations for the remainder of 2020, each of the next five years and thereafter were as follows (in thousands):
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Derivative Instruments and Hedging Activities (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Derivatives | The following table summarizes the material terms of the interest rate swaps outstanding as of September 30, 2020 (dollars in thousands):
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Derivative Instruments, Gain (Loss) | 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:
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Reclassification out of Accumulated Other Comprehensive Income | 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:
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:
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair value of derivative instruments consisted of the following balances as set forth on the dates below:
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liability Measured at Fair Value | The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands):
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Fair Value Measurement Inputs and Valuation Techniques | The following table summarizes the Company’s quantitative information about the fair value measurements of Auven Therapeutics Holdings, L.P. and venBio Global Strategic Fund, L.P. at the dates indicated (dollars in thousands):
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Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation | Changes in fair value of the Company’s investments measured on a recurring basis using significant unobservable inputs (Level 3) were as follows:
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Fair Value Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | Changes in fair value of the recapitalization investment portfolio liability measured on a recurring basis using significant unobservable inputs (Level 3) were as follows:
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Fair Value by Balance Sheet Grouping | 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:
|
Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The balances of AOCL, net of tax, were as follows for the three and nine months ended September 30, 2020 and 2019:
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Reclassification out of Accumulated Other Comprehensive Income | 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:
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:
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Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The amounts paid to the relevant affiliates for the Term Loan for the respective periods were as follows:
|
Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | 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:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | 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 as follows:
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Segments (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information by Segment | 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:
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Entity-wide Information by Geographic Location (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments, Geographical Areas [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Geographic Area | Revenues by geographic location are as follows:
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Other (Expense) Income, Net (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Other Nonoperating Income (Expense) | The components of other (expense) income, net, for the respective periods were as follows:
|
Revenue - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Concentration Risk [Line Items] | |||||
Revenue recognized from performance obligations partially satisfied in prior periods | $ 28.4 | $ 35.1 | $ 82.9 | $ 80.4 | |
Unsatisfied performance obligations, amount | 7,000.0 | 7,000.0 | |||
Contract assets | $ 160.6 | 160.6 | $ 178.8 | ||
Contract with customer, liability, revenue recognized | $ 815.4 | $ 653.8 | |||
Customer Concentration Risk | Largest Customer | Accounts Receivable and Unbilled Revenues | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 11.00% | ||||
Customer Concentration Risk | Two Largest Customers | Accounts Receivable and Unbilled Revenues | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 11.00% |
Revenue - Remaining Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01 |
Sep. 30, 2020 |
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Unsatisfied performance obligations, expected timing of satisfaction, period | 12 months |
Minimum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Unsatisfied performance obligations, percentage | 36.00% |
Maximum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Unsatisfied performance obligations, percentage | 42.00% |
Revenue - Schedule of Accounts Receivable and Unbilled Services (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Accounts receivable | $ 792,784 | $ 726,111 |
Unbilled services | 675,525 | 609,674 |
Total accounts receivable and unbilled services | 1,468,309 | 1,335,785 |
Allowance for doubtful accounts | (7,935) | (9,171) |
Total accounts receivable and unbilled services, net | $ 1,460,374 | $ 1,326,614 |
Revenue - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Unearned revenue | $ 1,048,392 | $ 1,110,872 |
Stockholders’ Deficit and Redeemable Noncontrolling Interest - Schedule of Stockholders Equity (Details) - shares |
Sep. 30, 2020 |
Feb. 29, 2020 |
Jan. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Class of Stock [Line Items] | ||||
Shares authorized (in shares) | 2,000,000,000 | 2,000,000,000.0 | 2,080,000,000.00 | 2,080,000,000 |
Shares issued (in shares) | 350,291,000 | 280,127,000 | ||
Shares outstanding (in shares) | 349,565,000 | 279,426,000 | ||
Voting | ||||
Class of Stock [Line Items] | ||||
Shares outstanding (in shares) | 349,565,000 | 276,052,000 | ||
Non-voting | ||||
Class of Stock [Line Items] | ||||
Shares outstanding (in shares) | 0 | 3,374,000 |
Stockholders’ Deficit and Redeemable Noncontrolling Interest - Additional Information (Details) |
1 Months Ended | |||
---|---|---|---|---|
Jan. 31, 2020
shares
|
Sep. 30, 2020
shares
|
Feb. 29, 2020
shares
|
Dec. 31, 2019
shares
|
|
Schedule of Equity Method Investments [Line Items] | ||||
Stock split, conversion ratio | 1.8 | |||
Common stock, shares authorized (in shares) | 2,080,000,000.00 | 2,000,000,000 | 2,000,000,000.0 | 2,080,000,000 |
Preferred stock, shares authorized (in shares) | 100,000,000.0 | 100,000,000 | ||
Preferred stock, shares issued (in shares) | 0 | |||
Preferred stock, shares outstanding (in shares) | 0 | |||
PPD-SNBL | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage by parent | 60.00% | |||
SNBL | PPD-SNBL | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage by noncontrolling owners | 40.00% |
Business Combinations - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Sep. 03, 2019 |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|---|
Liabilities assumed: | |||
Goodwill | $ 1,771,106 | $ 1,764,104 | |
Synarc | |||
Business Acquisition [Line Items] | |||
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 |
Goodwill and Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 39.5 | $ 40.1 | $ 118.6 | $ 121.1 |
Foreign currency translation gain (loss) | $ (2.6) |
Long-term Debt and Finance Lease Obligations - Schedule of Redemption Prices (Details) - Senior Notes |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
2025 Notes | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 104.625% |
2025 Notes | Redemption Period One | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 102.313% |
2025 Notes | Redemption Period Two | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 101.156% |
2025 Notes | Redemption Period Three | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 100.00% |
2028 Notes | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 105.00% |
2028 Notes | Redemption Period One | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 102.50% |
2028 Notes | Redemption Period Two | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 101.25% |
2028 Notes | Redemption Period Three | |
Debt Instrument, Redemption [Line Items] | |
Redemption Price | 100.00% |
Long-term Debt and Finance Lease Obligations - Scheduled Maturities of Long-term Debt and Finance Lease Obligations (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2020 (remaining three months) | $ 8,969 |
2021 | 36,156 |
2022 | 3,035,578 |
2023 | 3,690 |
2024 | 3,530 |
2025 | 503,530 |
Thereafter | 707,294 |
Total | $ 4,298,747 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 50.00% | 24.50% | 33.50% | 25.30% | |
Unrecognized tax benefits | $ 21.4 | $ 21.4 | $ 39.7 | ||
Decrease in unrecognized tax benefits due to CARES Act | 13.0 | ||||
Unrecognized tax benefits that would impact effective tax rate | 14.6 | 14.6 | $ 28.8 | ||
Reasonably possible decrease in unrecognized tax benefits | $ 6.4 | $ 6.4 |
Derivative Instruments and Hedging Activities - Additional Information (Details) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2020
USD ($)
|
Feb. 29, 2020
instrument
|
|
Derivative [Line Items] | |||
Gain (loss) recorded in other (expense) income | $ 0.4 | $ (1.5) | |
Unrealized losses to be reclassified within the next 12 months | $ 31.2 | $ 31.2 | |
Interest rate swaps | Designated as Hedging Instrument | |||
Derivative [Line Items] | |||
Number of interest rate swaps entered | instrument | 3 |
Derivative Instruments and Hedging Activities - Schedule of Interest Rate Derivatives (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
Swap 1 | Designated as Hedging Instrument | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Notional Amount | $ 1,500,000 |
Fixed Interest Rate | 1.19% |
Swap 2 | Designated as Hedging Instrument | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Notional Amount | $ 1,500,000 |
Fixed Interest Rate | 1.22% |
Swap 3 | Designated as Hedging Instrument | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Notional Amount | $ 500,000 |
Fixed Interest Rate | 1.17% |
Swap 4 | Not Designated as Hedging Instrument | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |
Notional Amount | $ 500,000 |
Fixed Interest Rate | 0.52% |
Derivative Instruments and Hedging Activities - Derivative Instruments, Gain (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Interest rate swaps | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Pre-Tax Loss Recognized in AOCL | $ (4,364) | $ 0 | $ (142,709) | $ 0 |
Derivative Instruments and Hedging Activities - Reclassification out of Accumulated Other Comprehensive Income (Details) - Interest rate swaps - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Interest expense, net | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Pre-Tax (Loss) Gain Reclassified from AOCL into Statements of Operations | $ (5,001) | $ 3,175 | $ (4,513) | $ 9,220 |
Other (expense) income, net | ||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||||
Pre-Tax (Loss) Gain Reclassified from AOCL into Statements of Operations | $ (163) | $ 0 | $ (9,904) | $ 0 |
Fair Value Measurements - Fair Value Measurement Inputs and Valuation Techniques (Details) - Fair Value, Recurring - Level 3 $ in Thousands |
Sep. 30, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
---|---|---|
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair Value | $ 241,203 | $ 243,067 |
Discount for lack of marketability | Market evaluation/pricing models | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Range of Rates | 0.175 | 0.100 |
Discount for lack of marketability | Market evaluation/pricing models | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Range of Rates | 0.325 | 0.300 |
Discount for lack of control | Recent acquisition transactions | Minimum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Range of Rates | 0.200 | 0.200 |
Discount for lack of control | Recent acquisition transactions | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Range of Rates | 0.350 | 0.350 |
Fair Value Measurements - Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - Investments - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 248,453 | $ 256,124 |
Recognized fair value gain (loss) | 16,296 | (14,757) |
Cash distributions received | (19,704) | (190) |
Capital contributions paid | 5,382 | 2,792 |
Ending balance | $ 250,427 | $ 243,969 |
Fair Value Measurements - Fair Value Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - Recapitalization Investment Liability - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 191,678 | $ 198,524 |
Recapitalization investment portfolio consideration change in value | 6,529 | (16,830) |
Ending balance | $ 198,207 | $ 181,694 |
Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Current recapitalization investment portfolio liability | $ 14,900 | $ 14,900 | |
Contingent consideration liability paid | $ 4,338 | $ 0 | |
Medimix | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Contingent consideration liability paid | $ 9,500 |
Related Party Transactions (Details) - Affiliated Entity - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Majority Sponsor Affiliates | |||||
Related Party Transaction [Line Items] | |||||
Due to related parties | $ 12.7 | $ 12.7 | $ 78.0 | ||
SNBL | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, expenses incurred | 0.2 | $ 0.3 | 0.8 | $ 0.9 | |
Due to related parties | $ 0.3 | $ 0.3 | 0.3 | ||
Collaboration agreement minimum requirement for ownership percentage | 20.00% | 20.00% | |||
SNBL | PPD-SNBL | |||||
Related Party Transaction [Line Items] | |||||
Notes payable, related parties | $ 5.7 | ||||
Consulting and Out-of-Pocket Expenses | Majority Sponsor Affiliates | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, expenses incurred | $ 0.9 | $ 0.4 | $ 2.9 |
Related Party Transactions - Schedule of Related Party Transactions (Details) - Majority Sponsor Affiliates - Affiliated Entity - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Interest paid | ||||
Related Party Transaction [Line Items] | ||||
Repayments of related party debt | $ 114 | $ 1,002 | $ 1,511 | $ 3,023 |
Principal paid | ||||
Related Party Transaction [Line Items] | ||||
Repayments of related party debt | $ 33 | $ 210 | $ 408 | $ 633 |
Earnings Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
(in thousands, except per share data) | ||||
Net income | $ 9,102 | $ 16,582 | $ 58,093 | $ 34,461 |
Net income attributable to noncontrolling interest | (1,587) | (1,161) | (4,499) | (3,390) |
Recapitalization investment portfolio consideration | 44,468 | 11,231 | (6,529) | 16,830 |
Net income attributable to common stockholders of PPD, Inc. | $ 51,983 | $ 26,652 | $ 47,065 | $ 47,901 |
Denominator: | ||||
Basic weighted-average common shares outstanding (in shares) | 348,672 | 279,425 | 338,277 | 279,235 |
Effect of dilutive stock options and restricted stock (in shares) | 6,158 | 1,768 | 4,882 | 820 |
Diluted weighted-average common shares outstanding (in shares) | 354,830 | 281,193 | 343,159 | 280,055 |
Earnings per share: | ||||
Basic (in usd per share) | $ 0.15 | $ 0.10 | $ 0.14 | $ 0.17 |
Diluted (in usd per share) | $ 0.15 | $ 0.09 | $ 0.14 | $ 0.17 |
Earnings Per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Anti-dilutive equity awards (in shares) | 320 | 311 | 469 | 537 |
Segments - Additional Information (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segments - Schedule of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Segment Reporting Information [Line Items] | ||||
Revenue | $ 1,233,802 | $ 1,023,864 | $ 3,317,182 | $ 2,984,133 |
Direct costs | 433,422 | 369,476 | 1,222,700 | 1,112,181 |
Reimbursed costs | 335,866 | 241,804 | 810,523 | 688,696 |
SG&A expenses | 249,320 | 226,996 | 734,712 | 681,431 |
Depreciation and amortization | 71,317 | 66,889 | 206,395 | 197,896 |
Long-lived asset impairment | 1,414 | 0 | 1,414 | 0 |
Income from operations | 142,463 | 118,699 | 341,438 | 303,929 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 1,233,802 | 1,023,864 | 3,317,182 | 2,984,133 |
Direct costs | 432,636 | 366,983 | 1,201,891 | 1,098,924 |
Reimbursed costs | 335,866 | 241,804 | 810,523 | 688,696 |
SG&A expenses | 161,267 | 150,224 | 482,263 | 450,102 |
Income from operations | 304,033 | 264,853 | 822,505 | 746,411 |
Operating Segments | Clinical Development Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 1,008,639 | 846,068 | 2,694,775 | 2,488,773 |
Direct costs | 330,281 | 287,538 | 922,737 | 871,753 |
Reimbursed costs | 309,117 | 220,873 | 730,872 | 633,466 |
SG&A expenses | 137,984 | 130,576 | 415,334 | 391,551 |
Income from operations | 231,257 | 207,081 | 625,832 | 592,003 |
Operating Segments | Laboratory Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 225,163 | 177,796 | 622,407 | 495,360 |
Direct costs | 102,355 | 79,445 | 279,154 | 227,171 |
Reimbursed costs | 26,749 | 20,931 | 79,651 | 55,230 |
SG&A expenses | 23,283 | 19,648 | 66,929 | 58,551 |
Income from operations | 72,776 | 57,772 | 196,673 | 154,408 |
Not Allocated to Segments | ||||
Segment Reporting Information [Line Items] | ||||
Direct costs | 786 | 2,493 | 20,809 | 13,257 |
SG&A expenses | 88,053 | 76,772 | 252,449 | 231,329 |
Depreciation and amortization | $ 71,317 | $ 66,889 | 206,395 | 197,896 |
Long-lived asset impairment | $ 1,414 | $ 0 |
Entity-wide Information by Geographic Location (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue: | ||||
Revenue | $ 1,233,802 | $ 1,023,864 | $ 3,317,182 | $ 2,984,133 |
North America | ||||
Revenue: | ||||
Revenue | 737,234 | 541,841 | 1,869,533 | 1,568,767 |
Latin America | ||||
Revenue: | ||||
Revenue | 39,589 | 35,184 | 130,210 | 113,777 |
Europe, Middle East and Africa | ||||
Revenue: | ||||
Revenue | 331,996 | 334,924 | 965,606 | 992,095 |
Asia-Pacific | ||||
Revenue: | ||||
Revenue | $ 124,983 | $ 111,915 | $ 351,833 | $ 309,494 |
Other (Expense) Income, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Other Income and Expenses [Abstract] | ||||
Foreign currency (losses) gains, net | $ (17,509) | $ 10,700 | $ (3,055) | $ (1,435) |
Interest rate swap gains (losses) | 209 | 0 | (11,398) | 0 |
Other income | 365 | 684 | 954 | 2,584 |
Other expense | (218) | (2,227) | (598) | (4,307) |
Total other (expense) income, net | $ (17,153) | $ 9,157 | $ (14,097) | $ (3,158) |
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