UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2019~~March 31, 2020

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

For the transition period from to .

Commission file number: 001-36732

PRA Health Sciences, Inc.

(Exact name of registrant as specified in its charter)



Delaware		46-3640387
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4130 ParkLake Avenue, Suite 400, Raleigh, NC 27612

(Address of principal executive offices) (Zip Code)

(919) 786-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:



Title of each class	Name of exchange on which registered	Trading symbol
Common Stock $0.01 par value	Nasdaq Global Select Market	PRAH

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

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

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



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

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



Class	Number of Shares Outstanding
Common Stock $0.01 par value	~~63,248,324~~63,723,442	shares outstanding as of ~~October 28, 2019~~April 24, 2020

PRA HEALTH SCIENCES, INC.

FORM 10-Q

FOR QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2019~~MARCH 31, 2020

TABLE OF CONTENTS



Item Number		Page

	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Condensed Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	3
	Consolidated Condensed Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	4
	Consolidated Condensed Statements of Comprehensive (Loss) Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	5
	Consolidated Condensed Statements of Changes in Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	6
	Consolidated Condensed Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	87
	Notes to Consolidated Condensed Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2521
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3631
Item 4.	Controls and Procedures	3631

	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	3832
Item 1A.	Risk Factors	3832
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3833
Item 3.	Defaults Upon Senior Securities	3833
Item 4.	Mine Safety Disclosures	3833
Item 5.	Other Information	3933
Item 6.	Exhibits	3934
SIGNATURES		4035

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share amounts)


	September 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	181,767		$	144,221		$	150,804		$	236,232
Restricted cash	23			488			36			38
Accounts receivable and unbilled services, net	702,636			568,099
Accounts receivable and unbilled services, net of allowance for credit losses of $2,603 at March 31, 2020							692,251			658,517
Other current assets	76,489			69,547			111,832			90,780
Total current assets	960,915			782,355			954,923			985,567
Fixed assets, net	176,745			154,764			184,899			180,716
Lease right-of-use assets, net	181,813			—
Operating lease right-of-use assets							185,483			186,343
Goodwill	1,484,506			1,494,762			1,659,891			1,502,756
Intangible assets, net	649,295			704,446			646,290			638,577
Other assets	47,182			50,140			49,670			50,471
Total assets	$	3,500,456		$	3,186,467		$	3,681,156		$	3,544,430
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of borrowings under credit facilities							$	—		$	88,800
Current portion of long-term debt							25,000			25,000
Accounts payable	$	58,565		$	43,734		57,728			55,293
Accrued expenses and other current liabilities	304,431			413,783			372,327			304,799
Current portion of operating lease liabilities	34,708			—			37,347			37,603
Advanced billings	474,999			441,357			534,233			505,714
Total current liabilities	872,703			898,874			1,026,635			1,017,209
Long-term debt, net	1,388,395			1,082,384			1,267,973			1,140,178
Long-term portion of operating lease liabilities	169,696			—			171,277			172,370
Deferred tax liabilities	73,522			100,712			60,994			78,511
Other long-term liabilities	49,397			53,077			46,860			46,171
Total liabilities	2,553,713			2,135,047			2,573,739			2,454,439
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock (100,000,000 authorized shares; $0.01 par value)
Issued and outstanding -- none	—			—			—			—
Common stock (1,000,000,000 authorized shares; $0.01 par value)
Issued and outstanding -- 63,240,925 and 65,394,526 at September 30, 2019 and December 31, 2018, respectively	632			654
Issued and outstanding -- 63,625,742 and 63,491,550 at March 31, 2020 and December 31, 2019, respectively							636			635
Additional paid-in capital	975,233			960,535			1,027,099			1,006,182
Accumulated other comprehensive loss	(197,603		)	(170,659		)	(204,260		)	(160,108		)
Retained earnings	168,481			254,500			283,942			243,282
Equity attributable to PRA Health Sciences, Inc. stockholders	946,743			1,045,030
Noncontrolling interest	—			6,390
Total stockholders' equity	946,743			1,051,420			1,107,417			1,089,991
Total liabilities and stockholders' equity	$	3,500,456		$	3,186,467		$	3,681,156		$	3,544,430

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

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Revenue	$	780,691		$	717,596		$	2,266,022		$	2,142,274		$	783,708		$	722,022
Operating expenses:
Direct costs (exclusive of depreciation and amortization)	389,304			371,422			1,153,441			1,134,509			403,862			377,888
Reimbursable expenses	169,965			142,717			471,682			430,892			176,841			140,620
Selling, general and administrative expenses	95,542			92,553			291,439			275,424			106,957			97,095
Transaction-related costs	572			43,837			572			32,709			609			—
Depreciation and amortization expense	29,264			28,270			85,462			84,163			32,278			27,608
Loss (gain) on disposal of fixed assets, net	256			(15		)	900			21
(Gain) loss on disposal of fixed assets, net													(19		)	88
Income from operations	95,788			38,812			262,526			184,556			63,180			78,723
Interest expense, net	(12,974		)	(14,423		)	(37,834		)	(43,860		)	(13,487		)	(12,369		)
Loss on modification or extinguishment of debt	(1,855		)	(454		)	(1,855		)	(454		)
Foreign currency gains (losses), net	5,408			(1,809		)	1,864			(1,416		)
Other income (expense), net	15			(68		)	(66		)	(201		)
Income before income taxes and equity in income of unconsolidated joint ventures	86,382			22,058			224,635			138,625
Foreign currency gains, net													7,842			6,128
Other expense, net													(4		)	(88		)
Income before income taxes													57,531			72,394
Provision for income taxes	3,375			20,248			56,317			55,392			16,871			28,138
Income before equity in income of unconsolidated joint ventures	83,007			1,810			168,318			83,233
Equity in income of unconsolidated joint ventures, net of tax	—			44			—			118
Net income	83,007			1,854			168,318			83,351			40,660			44,256
Net income attributable to noncontrolling interest	—			(359		)	(99		)	(898		)	—			(172		)
Net income attributable to PRA Health Sciences, Inc.	$	83,007		$	1,495		$	168,219		$	82,453		$	40,660		$	44,084
Net income per share attributable to common stockholders:
Basic	$	1.28		$	0.02		$	2.58		$	1.29		$	0.65		$	0.68
Diluted	$	1.25		$	0.02		$	2.53		$	1.24		$	0.63		$	0.66
Weighted average common shares outstanding:
Basic	64,771			64,261			65,096			63,891			62,933			65,192
Diluted	66,213			66,506			66,607			66,258			64,339			66,847

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

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net income $ 83,007
$ 1,854
$ 168,318
$ 83,351
Other comprehensive loss:
Foreign currency translation adjustments, net of income tax of $2,183, $0, $2,447 and $0 (27,582 ) (3,996 ) (26,692 ) (23,182 )
Unrealized (losses) gains on derivative instruments, net of income tax of $(13), $381, $(1,624) and $2,004 (254 ) 1,041
(4,567 ) 5,613
Reclassification adjustments:
Losses on derivatives included in net income, net of income taxes of $398, $393, $1,056 and $1,314 1,213
1,070
2,972
3,666
Comprehensive income (loss) 56,384
(31 ) 140,031
69,448
Comprehensive income attributable to noncontrolling interest —
(193 ) (175 ) (823 )
Comprehensive income (loss) attributable to PRA Health Sciences, Inc. $ 56,384
$ (224 ) $ 139,856
$ 68,625



	Three Months Ended March 31,
	2020			2019
Net income	$	40,660		$	44,256
Other comprehensive loss:
Foreign currency translation adjustments, net of income tax of $4,041 and $0	(42,756		)	143
Unrealized losses on derivative instruments, net of income tax of $(1,157) and $(514)	(3,377		)	(1,433		)
Reclassification adjustments:
Losses on derivatives included in net income, net of income taxes of $679 and $308	1,981			861
Comprehensive (loss) income	(3,492		)	43,827
Comprehensive income attributable to noncontrolling interest	—			(127		)
Comprehensive (loss) income attributable to PRA Health Sciences, Inc.	$	(3,492	)	$	43,700

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

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

Accumulated
Other
Comprehensive
Loss
(Note 13)

Retained
Earnings
Non-controlling Interest
Common Stock
Additional
Paid-in
Capital

Shares Amount Total
Balance at December 31, 2018 65,395
$ 654
$ 960,535
$ (170,659 ) $ 254,500
$ 6,390
$ 1,051,420
Impact from adoption of ASU 2018-02, Reclassification of certain tax effects from accumulated other comprehensive income —
—
—
1,419
(1,419 ) —
—
Balance at January 1, 2019 65,395
654
960,535
(169,240 ) 253,081
6,390
1,051,420
Exercise of common stock options and employee stock purchase plan purchases 219
2
10,668
—
—
—
10,670
Stock-based compensation 33
—
9,247
—
—
—
9,247
Net income —
—
—
—
44,084
172
44,256
Other comprehensive loss, net of tax —
—
—
(384 ) —
(45 ) (429 )
Balance at March 31, 2019 65,647
656
980,450
(169,624 ) 297,165
6,517
1,115,164
Exercise of common stock options and other 84
1
4,074
—
—
—
4,075
Stock-based compensation 5
—
9,916
—
—
—
9,916
Acquisition of noncontrolling interest —
—
1,290
—
—
(6,565 ) (5,275 )
Net income (loss) —
—
—
—
41,128
(73 ) 41,055
Other comprehensive loss, net of tax —
—
—
(1,356 ) —
121
(1,235 )
Balance at June 30, 2019 65,736
657
995,730
(170,980 ) 338,293
—
1,163,700
Exercise of common stock options and employee stock purchase plan purchases 328
6
15,409
—
—
—
15,415
Stock-based compensation 257
—
11,244
—
—
—
11,244
Repurchase and retirement of common stock (3,080 ) (31 ) (47,150 ) —
(252,819 ) —
(300,000 )
Net income —
—
—
—
83,007
—
83,007
Other comprehensive loss, net of tax —
—
—
(26,623 ) —
—
(26,623 )
Balance at September 30, 2019 63,241
$ 632
$ 975,233
$ (197,603 ) $ 168,481
$ —
$ 946,743

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

~~PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~(UNAUDITED)~~

~~(in thousands)~~



						Accumulated Other Comprehensive Loss (Note 15)			Retained Earnings		Non-controlling Interest
	Common Stock			Additional Paid-in Capital
	Shares	Amount		Additional Paid-in Capital									Total
Balance at December 31, 2019	63,492	$	635	$	1,006,182	$	(160,108	)	$	243,282	$	—	$	1,089,991
Exercise of common stock options and stock award distribution	90	1		2,907		—			—		—		2,908
Stock-based compensation	—	—		15,425		—			—		—		15,425
Net income	—	—		—		—			40,660		—		40,660
Issuance of restricted stock for acquisition	44	—		2,585		—			—		—		2,585
Other comprehensive loss, net of tax	—	—		—		(44,152		)	—		—		(44,152		)
Balance at March 31, 2020	63,626	$	636	$	1,027,099	$	(204,260	)	$	283,942	$	—	$	1,107,417

Accumulated
Other
Comprehensive
Loss
(Note 13)

Retained
Earnings
Non-controlling Interest
Common Stock
Additional
Paid-in
Capital

Shares Amount Total
Balance at December 31, 2017 63,624
$ 636
$ 905,423
$ (136,470 ) $ 161,182
$ 5,710
$ 936,481
Impact to retained earnings from adoption of ASC 606 —
—
—
—
(60,587 ) —
(60,587 )
Balance at January 1, 2018 63,624
636
905,423
(136,470 ) 100,595
5,710
875,894
Exercise of common stock options 436
5
1,384
—
—
—
1,389
Stock-based compensation —
—
6,299
—
—
—
6,299
Net income —
—
—
—
38,981
234
39,215
Other comprehensive income, net of tax —
—
—
21,731
—
348
22,079
Balance at March 31, 2018 64,060
641
913,106
(114,739 ) 139,576
6,292
944,876
Exercise of common stock options 126
1
(1 ) —
—
—
—
Stock award distributions, net of shares for tax withholding 71
1
(5,338 ) —
—
—
(5,337 )
Stock-based compensation —
—
6,399
—
—
—
6,399
Net income —
—
—
—
41,977
305
42,282
Other comprehensive loss, net of tax —
—
—
(33,840 ) —
(257 ) (34,097 )
Balance at June 30, 2018 64,257
643
914,166
(148,579 ) 181,553
6,340
954,123
Exercise of common stock options and employee stock purchase plan purchases 568
5
17,735
—
—
—
17,740
Stock award distributions, net of shares for tax withholding 90
1
(1 ) —
—
—
—
Stock-based compensation —
—
8,544
—
—
—
8,544
Net income —
—
—
—
1,495
359
1,854
Other comprehensive loss, net of tax —
—
—
(1,719 ) —
(166 ) (1,885 )
Balance at September 30, 2018 64,915
$ 649
$ 940,444
$ (150,298 ) $ 183,048
$ 6,533
$ 980,376



						Accumulated Other Comprehensive Loss (Note 15)			Retained Earnings			Non-controlling Interest
	Common Stock			Additional Paid-in Capital
	Shares	Amount		Additional Paid-in Capital											Total
Balance at December 31, 2018	65,395	$	654	$	960,535	$	(170,659	)	$	254,500		$	6,390		$	1,051,420
Impact from adoption of ASU 2018-02, Reclassification of certain tax effects from accumulated other comprehensive income	—	—		—		1,419			(1,419		)	—			—
Balance at January 1, 2019	65,395	654		960,535		(169,240		)	253,081			6,390			1,051,420
Exercise of common stock options and employee stock purchase plan purchases	219	2		10,668		—			—			—			10,670
Stock-based compensation	33	—		9,247		—			—			—			9,247
Net income	—	—		—		—			44,084			172			44,256
Other comprehensive loss, net of tax	—	—		—		(384		)	—			(45		)	(429		)
Balance at March 31, 2019	65,647	$	656	$	980,450	$	(169,624	)	$	297,165		$	6,517		$	1,115,164

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

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
Cash flows from operating activities:
Net income	$	168,318		$	83,351		$	40,660		$	44,256
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	85,462			84,163			32,278			27,608
Amortization of debt issuance costs	1,364			1,619			421			448
Amortization of terminated interest rate swaps	4,960			5,478			1,565			1,631
Stock-based compensation expense	30,407			20,469			15,425			9,247
Change in fair value of acquisition-related contingent consideration	—			32,868			574			—
Non-cash transaction-related costs	—			773
Unrealized foreign currency gains, net	(7,773		)	(131		)	(4,788		)	(7,967		)
Non-cash loss on extinguishment of debt	—			454
Deferred income tax (benefit) expense	(25,408		)	17,499
Equity in income of unconsolidated joint ventures	—			(118		)
Deferred income tax benefit							(18,524		)	(10,521		)
Other reconciling items	792			52			135			(78		)
Changes in operating assets and liabilities:
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Accounts receivable, unbilled services and advanced billings	(104,589		)	(12,552		)	(7,600		)	(36,848		)
Other operating assets and liabilities	(4,289		)	(319		)	436			13,250
Payment of acquisition-related contingent consideration	(83,249		)	(35,029		)
Net cash provided by operating activities	65,995			198,577			60,582			41,026
Cash flows from investing activities:
Purchase of fixed assets	(61,210		)	(40,086		)	(21,460		)	(19,895		)
Proceeds received for interest on interest rate swap, net	1,076			125
Proceeds from the sale of fixed assets							26			—
(Cash paid) proceeds received for interest on interest rate swap, net							(780		)	416
Distributions from unconsolidated joint ventures	418			—			—			418
Proceeds from the sale of marketable securities	—			183
Proceeds from the sale of fixed assets	26			43
Acquisition of Care Innovations, Inc., net of cash acquired							(159,078		)	—
Net cash used in investing activities	(59,690		)	(39,735		)	(181,292		)	(19,061		)
Cash flows from financing activities:
Payment of acquisition-related contingent consideration	—			(79,663		)
Repurchase and retirement of common stock	(300,000		)	—
Borrowings on accounts receivable financing agreement	30,000			60,000
Borrowings on line of credit	40,000			—			100,000			—
Proceeds from issuance of long-term debt	300,000			—
Repayments on accounts receivable financing agreement	—			(10,000		)
Repayments on line of credit	(40,000		)	(91,500		)
Repayments of line of credit							(55,000		)	—
Repayments of long-term debt	(25,000		)	(114,395		)	(6,250		)	—
Taxes paid related to net shares settlement of equity awards	—			(5,337		)
Acquisition of noncontrolling interest	(4,138		)	—
Proceeds from stock issued under employee stock purchase plan and stock option exercises	30,180			19,273			2,908			10,419
Net cash provided by (used in) financing activities	31,042			(221,622		)
Payments for debt issuance costs							(470		)	—
Net cash provided by financing activities							41,188			10,419
Effects of foreign exchange changes on cash, cash equivalents, and restricted cash	(266		)	(2,275		)	(5,908		)	506
Change in cash, cash equivalents, and restricted cash	37,081			(65,055		)	(85,430		)	32,890
Cash, cash equivalents, and restricted cash, beginning of period	144,709			192,890			236,270			144,709
Cash, cash equivalents, and restricted cash, end of period	$	181,790		$	127,835		$	150,840		$	177,599

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

PRA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Basis of Presentation

The Company

PRA Health Sciences, Inc. and its subsidiaries, or the Company, is a full-service global contract research organization providing a broad range of product development and data solution services to pharmaceutical and biotechnology companies around the world. The Company’s integrated services include data management, statistical analysis, clinical trial management, and regulatory and drug development consulting.

Unaudited Interim Financial Information

The interim consolidated condensed financial statements include the accounts of the Company and variable interest entities where the Company is the primary beneficiary. These financial statements are prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and are unaudited. In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. The accompanying interim consolidated condensed financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

The preparation of the interim consolidated condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated condensed financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates.

Recently Implemented Accounting Pronouncements

On January 1, 2019, the Company adopted Accounting Standards Codification, or ASC, Topic 842, “Leases,” or ASC 842, using the revised modified retrospective approach provided by ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.” The revised modified retrospective approach recognizes the effects of initially applying the new leases standard as a cumulative effect adjustment to retained earnings as of the adoption date. Under this election, the provisions of ASC 840 apply to the accounting and disclosures for lease arrangements in the comparative periods in the Company's financial statements.

The adoption of ASC 842 resulted in the recognition of lease liabilities of $211.7 million (recorded as $31.9 million in short-term lease liabilities and $179.8 million in long-term lease liabilities) and $187.1 million of lease right-of-use, or ROU, assets as of January 1, 2019. Upon adoption of ASC 842, the Company had lease obligations associated with deferred rent, lease loss liabilities, above market lease liabilities, and tenant improvement allowances, totaling $25.7 million, that were reclassified to the lease right-to-use assets. The Company had prepaid rent balances, totaling $1.1 million, that were reclassified as a reduction of the current portion of operating lease liabilities. The adoption of ASC 842 did not impact the consolidated condensed statement of operations for the nine months ended September 30, 2019, consolidated condensed statement of cash flows, or earnings per share. See "Note 2 - Significant Accounting Policies" for further disclosures regarding the adoption of ASC 842.

In ~~August 2017,~~June 2016, the Financial Accounting Standards Board, or FASB, issued ASU No. ~~2017-12, "Derivatives~~2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," in order to simplify certain aspects of hedge accounting and improve disclosures of hedging arrangements. ASU No. 2017-12 eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair valuerequire consideration of a ~~hedging instrument~~broader range of reasonable and supportable information to be presented in the same income statement line as the hedged item. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively.inform credit loss estimates. The Company adopted this standard effective January 1, ~~2019~~2020 and the application of ASU ~~No. 2017-12~~2016-13 did not have a material impact on the Company's consolidated condensed financial statements.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects

resulting from the Tax Cuts and Jobs Act of 2017, or the Act. The amendments in this update also require entities to disclose their accounting policy for releasing income tax effects from accumulated other comprehensive income. The Company adopted this standard effective January 1, 2019 and the application of ASU No. 2018-02 resulted in a reclassification of $1.4 million from accumulated other comprehensive loss to retained earnings for the stranded tax effects resulting from the Act.

In October 2018, the FASB issued ASU No. 2018-16, "Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes," which amends ASC 815, Derivatives and Hedging. This ASU adds the OIS rate based on SOFR to the list of permissible benchmark rates for hedge accounting purposes. The Company adopted ASU No. 2018-16 concurrent with adoption of ASU No. 2017-12, on January 1, 2019, and the application of ASU No. 2018-16 did not have a material impact on the Company’s consolidated condensed financial statements.

~~Recently Issued Accounting Pronouncements~~

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment,” in order to simplify the subsequent measurement of goodwill by eliminating the Step 2 goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ~~guidance is~~Company adopted this standard effective ~~for fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption~~January 1, 2020 and the application of ASU ~~No.~~ 2017-04 isdid not ~~expected to~~ have a material impact on the Company's consolidated condensed financial statements.

In August 2018, the FASB issued ASU No. 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," in order to expand on the FASB's guidance of capitalized costs incurred in a cloud computing arrangement. The amendments in this update require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ~~guidance is~~Company adopted this standard effective ~~for~~January 1, 2020 and the ~~reporting period beginning after December 15, 2019, and interim periods therein, with early adoption permitted. The adoption~~application of ASU ~~No.~~ 2018-15 isdid not ~~expected to~~ have a material impact on the Company's consolidated condensed financial statements.

Recently Issued Accounting Pronouncements

In ~~June 2016,~~December 2019, the FASB issued ASU No. ~~2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”~~2019-12, "Simplifying the Accounting for Income Taxes". The provisions of ASU ~~2016-13 modify~~2019-12 include eliminating certain exceptions related to the ~~impairment model to utilize~~approach for intra-period tax allocation, the

methodology for calculating income taxes in an ~~expected loss methodology in place~~interim period and the recognition of ~~the currently used incurred loss methodology and require consideration of a broader range of reasonable and supportable information to inform credit loss estimates.~~deferred tax liabilities for outside basis differences. The guidance is effective for the reporting period beginning after December 15, ~~2019,~~2020, and the interim periods therein. The ~~adoption~~Company is currently assessing the potential impact of ASU ~~2016-13 is not expected to have a material impact~~2019-12 on the ~~Company’s~~Company's consolidated financial statements.

(2) Significant Accounting Policies

Significant accounting policies are detailed in "Note 3: Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2019.

Cash, Cash Equivalents, and Restricted Cash

The Company receives cash advances from its customers to be used for the payment of investigator fees and other pass-through expenses. The terms of certain customer contracts require that such advances be maintained in separate escrow accounts; thus, these accounts are not commingled with the Company’s cash and cash equivalents. These accounts are presented separately in the consolidated condensed balance sheets as restricted cash.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated condensed balance sheets that sum to the total of the same amounts shown in the consolidated condensed statements of cash flows (in thousands):

September 30, December 31,
2019 2018 2018 2017
Cash and cash equivalents $ 181,767
$ 127,517
$ 144,221
$ 192,229
Restricted cash 23
318
488
661
Total cash, cash equivalents, and restricted cash $ 181,790
$ 127,835
$ 144,709
$ 192,890

~~(2) Significant Accounting Policies~~

Significant accounting policies are detailed in "Note 2: Significant Accounting Policies" of the Annual Report on Form 10-K for the year ended December 31, 2018. Significant changes to the Company's accounting policies as a result of adopting ASC 842 are discussed below:

On January 1, 2019, the Company adopted ASC 842 using the revised modified retrospective approach. The revised modified retrospective approach recognizes the effects of initially applying the new leases standard as a cumulative effect adjustment to retained earnings as of the adoption date. Under this election, the provisions of ASC 840 apply to the accounting and disclosures for lease arrangements in the comparative periods in an entity’s financial statements. In addition, the Company elected the package of practical expedients permitted under the transition guidance within ASC 842, in which the Company need not reassess (i) the historical lease classification, (ii) whether any expired or existing contract is or contains a lease, or (iii) the initial direct costs for any existing leases.

The Company’s material lease obligations are operating leases for office and other facilities in which the Company conducts business. The facility leases generally provide an initial lease term ranging from three to 20 years and include one or more optional extensions. The Company's leases have remaining lease terms of one year to 17 years. The leases typically include rent escalation clauses and for some markets the leases frequently include periodic market adjustments to the base rent over the term of the lease. In certain instances, the Company subleases space that has been exited or is no longer required. The Company’s sublease income is immaterial.

Upon the initial application of ASC 842 on January 1, 2019, or the transition date, lease liabilities were measured by using the remaining minimum rental payments under ASC 840. The Company’s ASC 840 minimum rental payments include executory costs and rental payments that depend on an index or rate are calculated based on the rate in effect at the transition date. The lease liability is measured at the present value of future lease payments, discounted using the discount rate as of the transition date. In addition to recognizing the lease liability, the Company recognized a corresponding asset representing its right to use the underlying asset over the lease term, referred to as the lease ROU asset. The ROU asset is initially measured as the amount of lease liability, adjusted for any initial lease costs or lease payments made before or at the commencement of the lease, and reduced by any lease incentives and deferred rent. As of the transition date, the Company’s leases consisted of only operating leases and upon recognition of the lease liability and ROU assets, there was no adjustment to retained earnings.

All leases entered into after January 1, 2019 are accounted for under ASC 842. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset. The Company determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an underlying asset available for use by a lessee.

At the lease commencement date, a lease liability is recognized based on the present value of the lease payments not yet paid, discounted using the discount rate for the lease at lease commencement. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease. As the Company's leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate based on the lease term and economic environment at the lease commencement date. The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. With limited exceptions, the nature of the Company's facility leases is such that there are not economic or other conditions that would indicate that it is reasonably certain at lease commencement that the Company will exercise options to extend the term.

The Company determines if its lease obligations are operating or finance leases at the lease commencement date and considers whether the lease grants an option to purchase the underlying asset that it is reasonably certain to exercise, the remaining economic life of the underlying asset, the present value of the sum of the remaining lease payments and any residual value guaranteed, and the nature of the asset.

The initial measurement of the lease liability is determined based on the future lease payments, which may include lease payments that depend on an index or a rate (such as the consumer price index or other market index). The Company initially measures payments based on an index or rate by using the applicable rate at lease commencement and subsequent changes in such rates are recognized as variable lease costs. Variable payments that do not depend on a rate or index are not included in the lease liability and are recognized as they are incurred. The Company’s contracts that include a lease component generally include additional services that are transferred to the lessee (e.g., common-area maintenance services), which are

nonlease components. Contracts typically also include other costs and fees that do not provide a separate service to the lessee, such as costs paid by the lessee to reimburse the lessor for administrative costs or payment for the lessor’s costs for property taxes, insurance related to the leased asset, and other lessor costs. The Company elected the practical expedient to account for the lease and nonlease components as a single lease component. At the lease commencement date, the Company recognizes a ROU asset representing its right to use the underlying asset over the lease term. If significant events, changes in circumstances, or other events indicate that the lease term has changed, the Company would reassess lease classification, remeasure the lease liability by using revised inputs as of the reassessment date, and adjust the ROU asset. These reassessment events are typically related to the exercise of optional renewals or significant new investments in leasehold improvements. The costs of services and costs related to reimbursements of the lessor’s cost are generally variable rent obligations, which are excluded from the future lease payments included in the lease liability. For leases with a term of one year or less, or short-term leases, the Company has elected to not recognize the lease liability for these arrangements and the lease payments are recognized in the consolidated statement of operations on a straight-line basis over the lease term.

The total expense for the operating lease liability is recognized on a straight-line basis over the lease term, beginning on the lease commencement date. The Company classifies the lease costs within operating expenses consistent with the classification policies for all other operating costs.

~~The components of lease expense were as follows for the~~ ~~three and nine~~ ~~months ended September 30, 2019 (in thousands):~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Lease cost:
   Operating lease cost $ 9,788
$ 28,583
   Short-term lease cost 725
2,033
   Variable lease cost 2,175
5,796
   Lease income (47 ) (130 )
   Net lease cost $ 12,641
$ 36,282

~~Supplemental cash flow information related to leases was as follows for the~~ ~~three and nine~~ ~~months ended September 30, 2019 (in thousands):~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurements of lease liabilities, all included in operating cash flows $ 9,772
$ 28,262
Right-of-use assets obtained in exchange for lease obligations 5,100
26,148

~~Supplemental balance sheet information related to leases was as follows as of September 30, 2019:~~



		~~As of September 30, 2019~~
~~Weighted average remaining lease term~~		~~8.0 years~~
~~Weighted average discount rate~~		~~4.3%~~

~~Maturities of operating lease liabilities were as follows as of September 30, 2019 (in thousands):~~

2019 (remaining) $ 9,192
2020 42,946
2021 39,210
2022 31,454
2023 25,891
Thereafter 93,864
Total lease payments 242,557
Less imputed interest (38,153 )
Total $ 204,404

As of September 30, 2019, the Company has an additional non-cancelable operating lease that has not yet commenced with future lease payments totaling $0.5 million. This lease will commence in October 2019 with an initial lease term of two years.

~~As of December 31, 2018, the Company disclosed the following future non-cancelable rent obligations as determined under ASC 840 (in thousands):~~

2019 $ 43,675
2020 40,948
2021 37,469
2022 30,238
2023 24,235
Thereafter 90,978
Total lease payments $ 267,543



	March 31,				December 31,
	2020		2019		2019		2018
Cash and cash equivalents	$	150,804	$	177,142	$	236,232	$	144,221
Restricted cash	36		457		38		488
Total cash, cash equivalents, and restricted cash	$	150,840	$	177,599	$	236,270	$	144,709

(3) Business Combinations

Care Innovations, Inc.

In January 2020, the Company acquired all of the outstanding equity interests of Care Innovations, Inc., or Care Innovations,an entity that provides digital health services. The purchase price was $208.6 million, which consisted of $161.5 million of cash, $2.6 million of restricted stock and $44.5 million of estimated contingent consideration in the form of a potential earn-out payment. The earn-out payment, which is capped at $50.0 million, is contingent on the achievement of two 2020 financial targets. The fair value of the contingent consideration was based on significant inputs not observed in the market and thus represented a Level 3 fair value measurement. Any change in the fair value of the contingent consideration subsequent to the acquisition date, excluding adjustments that qualify as measurement period adjustments. will be recognized in earnings in the period of any such change. With this acquisition, the Company expects to expand its ability to serve customers with technologies that deliver enhancements to the Company’s mobile health platform and provide expanded remote patient monitoring support to expand the Company's ability to deliver virtual and decentralized trials.

The acquisition of Care Innovations was accounted for as a business combination and, accordingly, the assets acquired and the liabilities assumed have been recorded at their respective fair values as of the acquisition date. The consideration paid was allocated as follows: (i) $33.5 million to definite-lived intangible assets primarily consisting of developed technology with a weighted average amortization period of five years, (ii) $174.3 million to goodwill and (iii) $0.8 million to other net assets. The acquisition costs are included in transaction-related costs in the consolidated condensed statement of operations and were immaterial.

Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of September 2020, and in any case, no later than one year from the acquisition date in accordance with GAAP.

The Company has not disclosed post-acquisition or pro-forma revenue and earnings attributable to Care Innovations as they did not have a material effect on the Company’s consolidated results.

(4) Fair Value Measurements

The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, unbilled services, contract assets, accounts payable and advanced billings, approximate fair value due to the short maturities of these instruments.

Recurring Fair Value Measurements

The following table summarizes the fair value of the Company’s financial liabilities that are measured on a recurring basis as of ~~September 30, 2019~~March 31, 2020 (in thousands):


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Contingent consideration									$	—	$	—	$	45,074	$	45,074
Interest rate swaps	$	—	$	3,805	$	—	$	3,805	—		6,416		—		6,416
Total	$	—	$	3,805	$	—	$	3,805	$	—	$	6,416	$	45,074	$	51,490

The Company values contingent consideration using models that include significant unobservable Level 3 inputs, such as projected market performance over the earnout period along with estimates for market volatility and the discount rate applicable to potential cash payments. Interest rate swaps are measured at fair value using a market approach valuation technique. The valuation is based on an estimate of the net present value of the expected cash flows using relevant mid-market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation.

The following table summarizes the changes in Level 3 financial liabilities measured on a recurring basis for three months ended March 31, 2020 (in thousands).



	Contingent Consideration
Balance at December 31, 2019	$	—
Initial estimate of Care Innovations contingent consideration	44,500
Change in fair value recognized in transaction-related costs	574
Balance at March 31, 2020	$	45,074

The $45.1 million balance at March 31, 2020, which was valued using a Monte Carlo simulation, relates to the earn-out payments to Care Innovations and is based on the achievement of certain financial targets. The primary assumptions that impact the earn-out valuation are the projected revenues and adjusted earnings before interest, taxes, depreciation and amortization of the acquired business, which are unobservable inputs into the valuation model. The liability is recorded in accrued expenses and other current liabilities in the consolidated condensed balance sheet. Refer to "Note 3 - Business Combinations" for additional information regarding the Care Innovations acquisition.

Non-recurring Fair Value Measurements

Certain assets and liabilities are carried on the accompanying consolidated condensed balance sheets at cost and are not remeasured to fair value on a recurring basis. These assets include finite-lived intangible assets that are tested for impairment when a triggering event occurs and goodwill and identifiable indefinite-lived intangible assets that are tested for impairment annually on October 1 or when a triggering event occurs.

As of ~~September 30, 2019,~~March 31, 2020, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaled approximately ~~$2,133.8~~$2,306.2 million and are identified as Level 3 assets. These assets are comprised of goodwill of ~~$1,484.5~~$1,659.9 million and identifiable intangible assets, net of ~~$649.3~~$646.3 million.

Refer to "Note 79 - Revolving Credit Facilities and Long-Term Debt" for additional information regarding the fair value of long-term debt balances.

~~(4)~~(5) Concentration of Credit Risk and Expected Credit Losses

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, unbilled services, and derivatives. As of ~~September 30, 2019,~~March 31, 2020, substantially all of the Company’s cash and cash equivalents and derivatives were held in or invested with large financial institutions.

Accounts receivable primarily include amounts due from pharmaceutical and biotechnology ~~companies.~~companies under credit terms that generally do not extend beyond 90 days. The Company ~~establishes~~maintains an allowance for ~~potentially uncollectible receivables. In management’s opinion, there~~expected credit losses resulting from the inability of its customers to make required payments. The Company performs credit reviews of each customer, monitors collections and payments from customers, and determines the allowance based upon historical experience and specific customer collection issues. The Company ages billed accounts receivable and assesses exposure by customer type, by aged category, and by specific identification. After all attempts to collect a receivable have failed, the receivable is ~~no additional material credit risk beyond amounts provided for such losses.~~

~~There were no individual customers for which revenue was greater than 10% of consolidated revenue in~~written off against the ~~three and nine months ended September 30, 2019 and 2018.~~allowance or, to the extent unreserved, to bad debt expense.

Accounts receivable and unbilled services from individual customers that were equal to or greater than 10% of consolidated accounts receivable and unbilled services at the respective dates were as follows:


	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Customer A	10.6	%	12.2	%	11.0	%	11.2	%
Customer B	15.5	%	11.4	%	10.3	%	15.6	%

Revenue from individual customers greater than 10% of consolidated revenue in the respective periods was as follows:



	Three Months Ended March 31,
	2020		2019
Customer C	10.6	%	*

* Less than 10%

~~(5)~~(6) Accounts Receivable, Unbilled Services and Advanced Billings

Accounts receivable and unbilled services were as follows (in thousands):


	September 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Accounts receivable	$	557,077		$	437,001		$	515,429		$	512,061
Unbilled services	147,952			133,147			179,425			149,194
Total accounts receivable and unbilled services	705,029			570,148			694,854			661,255
Less allowance for doubtful accounts	(2,393		)	(2,049		)
Less allowance for credit losses							(2,603		)	(2,738		)
Total accounts receivable and unbilled services, net	$	702,636		$	568,099		$	692,251		$	658,517

Unbilled services as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 includes ~~$75.1~~$78.0 million and ~~$66.6~~$76.0 million, respectively, of contract assets where the Company’s right to bill is conditioned on criteria other than the passage of time. Impairment losses on contract assets were immaterial in the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Advanced billings were as follows (in thousands):

September 30, December 31,
2019 2018
Advanced billings $ 474,999
$ 441,357



	March 31,		December 31,
	2020		2019
Advanced billings	$	534,233	$	505,714

The ~~$33.6~~$28.5 million increase in advanced billings from December 31, ~~2018~~2019 to ~~September 30, 2019~~March 31, 2020 was primarily due to the timing of customer payments. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company recognized revenue of ~~$398.4~~$307.7 million and ~~$382.5~~$261.1 million related to advanced billings recorded as of January 1, ~~2019~~2020 and ~~2018,~~2019, respectively.

Performance Obligations

Revenue recognized for the three months ended March 31, 2020 and 2019 from reimbursable expenses and services completed in prior periods was ~~$14.8~~$7.7 million and ~~$65.2~~$26.5 million, ~~for the three and nine months ended September 30, 2019, respectively, and $24.4 million and $57.3 million for the three and nine months ended September 30, 2018,~~ respectively. This primarily relates to adjustments attributable to changes in estimates such as estimated total contract costs, and from contract modifications on long-term fixed price contracts executed in the current period, which results in changes to the transaction price.

The Company does not disclose the value of the transaction price allocated to unsatisfied performance obligations on contracts that have an original contract term of less than one year. These contracts are short in duration and revenue recognition generally follows the delivery of the promised services. The total transaction price for the undelivered performance obligation on contracts with an original initial contract term greater than one year is ~~$5.2~~$5.1 billion as of ~~September 30, 2019.~~March 31, 2020. This amount includes reimbursement revenue. The Company expects to recognize revenue over the remaining contract term of the individual projects, with contract terms generally ranging from one to five years.

(7) Leases

The Company’s material lease obligations are operating leases for office and other facilities in which the Company conducts business. The facility leases generally provide an initial lease term ranging from three to 20 years and include one or more optional extensions. The Company's leases have remaining lease terms of one year to 20 years. The leases typically include rent escalation clauses and for some markets the leases frequently include periodic market adjustments to the base rent over the term of the lease. In certain instances, the Company subleases space that has been exited or is no longer required. The Company’s sublease income is immaterial.

The components of lease cost were as follows (in thousands):



	Three Months Ended March 31,
	2020			2019
Lease cost:
Operating lease cost	$	11,164		$	9,469
Short-term lease cost	570			536
Variable lease cost	1,968			1,684
Lease income	(47		)	(39		)
Net lease cost	$	13,655		$	11,650

Supplemental cash flow information related to leases was as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
Cash paid for amounts included in the measurements of lease liabilities, all included in operating cash flows	$	11,674	$	9,807
Right-of-use assets obtained in exchange for lease obligations	10,865		846

Supplemental balance sheet information related to leases was as follows:



	As of March 31,	As of December 31,
	2020	2019
Weighted average remaining lease term	8.1 years	7.7 years
Weighted average discount rate	4.2%	4.3%

Maturities of operating lease liabilities were as follows as of March 31, 2020 (in thousands):



2020 (remaining)	$	32,779
2021	43,898
2022	35,756
2023	28,109
2024	19,512
Thereafter	86,220
Total lease payments	246,274
Less imputed interest	(37,650		)
Total	$	208,624

As of March 31, 2020, the Company has an additional non-cancelable operating lease that has not yet commenced with future lease payments totaling $0.4 million. This lease will commence in April 2020 with an initial lease term of five years.

~~(6)~~(8) Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands):

Clinical Research Data Solutions Consolidated
Balance at December 31, 2018 $ 1,017,903
$ 476,859
$ 1,494,762
Currency translation (10,256 ) —
(10,256 )
Balance at September 30, 2019 $ 1,007,647
$ 476,859
$ 1,484,506



	Clinical Research			Data Solutions		Consolidated
Balance at December 31, 2019	$	1,025,897		$	476,859	$	1,502,756
Acquisition of Care Innovations, Inc.	174,334			—		174,334
Currency translation	(17,199		)	—		(17,199		)
Balance at March 31, 2020	$	1,183,032		$	476,859	$	1,659,891

There are 0 accumulated impairment charges as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

Goodwill recorded in connection with the acquisition of Care Innovations was assigned to the Clinical Research segment and is not deductible for income tax purposes. The goodwill is attributable to the workforce of Care Innovations and expected synergies with the Company’s existing operations.

Intangible Assets

Intangible assets consist of the following (in thousands):


	September 30, 2019							December 31, 2018							March 31, 2020							December 31, 2019
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer relationships	$	551,020	$	(127,070	)	$	423,950	$	555,915	$	(103,248	)	$	452,667	$	552,840	$	(143,610	)	$	409,230	$	559,768	$	(137,728	)	$	422,040
Trade names (finite-lived)	28,524		(15,636		)	12,888		28,505		(12,810		)	15,695		29,875		(17,318		)	12,557		28,536		(16,582		)	11,954
Patient list and other intangibles	44,474		(34,476		)	9,998		44,474		(30,939		)	13,535
Developed technology and other intangibles															74,174		(38,318		)	35,856		44,474		(35,654		)	8,820
Database	137,100		(52,651		)	84,449		137,100		(32,561		)	104,539		137,100		(66,463		)	70,637		137,100		(59,347		)	77,753
Total finite-lived intangible assets	761,118		(229,833		)	531,285		765,994		(179,558		)	586,436		793,989		(265,709		)	528,280		769,878		(249,311		)	520,567
Trade names (indefinite-lived)	118,010		—			118,010		118,010		—			118,010		118,010		—			118,010		118,010		—			118,010
Total intangible assets	$	879,128	$	(229,833	)	$	649,295	$	884,004	$	(179,558	)	$	704,446	$	911,999	$	(265,709	)	$	646,290	$	887,888	$	(249,311	)	$	638,577

Amortization expense was ~~$17.1~~$19.1 million and ~~$51.4~~$17.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $17.9 million and $54.0 million for the three and nine months ended September 30, 2018,~~ respectively.

The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands):


2019 (remaining)	$	17,079
2020	68,711
2020 (remaining)			$	56,957
2021	63,619		70,376
2022	49,244		55,763
2023	37,515		43,561
2024 and thereafter	295,117
2024			34,375
2025 and thereafter			267,248
Total	$	531,285	$	528,280

~~(7)~~(9) Revolving Credit Facilities and Long-Term Debt

~~Long-term~~The Company had the following debt ~~consists~~outstanding as of ~~the following~~March 31, 2020 and December 31, 2019 (in thousands):


	September 30,			December 31,					Principal amount
	2019			2018			Interest rate as of		March 31,			December 31,
Term loans, first lien	$	1,191,533		$	916,533
							March 31, 2020		2020			2019			Maturity Date
Senior Secured Credit Facility:
First Lien Term Loan							2.52	%	$	993,750		$	1,000,000		October 2024
Revolver							2.52	%	133,800			88,800			October 2024
Accounts receivable financing agreement	200,000			170,000			3.07	%	170,000			170,000			May 2021
Total debt	1,391,533			1,086,533					1,297,550			1,258,800
Less current portion of Revolver⁽¹⁾									—			(88,800		)
Less current portion of long-term debt	—			—					(25,000		)	(25,000		)
Total long-term debt	1,391,533			1,086,533					1,272,550			1,145,000
Less debt issuance costs	(3,138		)	(4,149		)			(4,577		)	(4,822		)
Total long-term debt, net	$	1,388,395		$	1,082,384				$	1,267,973		$	1,140,178

(1) The Company assesses its ability and intent to repay the outstanding borrowings on the Revolver at the end of each reporting period in order to determine the proper balance sheet classification. Outstanding borrowings on the Revolver that the Company intends to repay in less than 12 months are classified as current.

As of March 31, 2020, the contractual maturities of the Company's debt obligations were as follows (in thousands):



Current maturities of long-term debt:
2020 (remaining)	$	18,750
2021	195,000
2022	25,000
2023	25,000
2024 and thereafter	1,033,800
Total	$	1,297,550

~~Principal payments on long-term debt~~The Company's primary financing arrangements are ~~due as follows (in thousands):~~

Current maturities of long-term debt:
2019 (remaining) $ —
2020 —
2021 1,391,533
2022 —
Total $ 1,391,533

its senior secured credit facility (the "Senior Secured Credit Facility"), which consists of a first lien term loan ("First Lien Term Loan") and a revolving credit facility (the "Revolver"), and its Accounts Receivable Financing Agreement.

~~2016~~Senior Secured Credit ~~Facilities~~Facility

The overall capacity of the Senior Secured Credit Facility is $1.75 billion (consisting of a $1.0 billion First Lien Term Loan and a $750.0 million Revolver). As collateral for borrowings under the ~~senior secured credit facilities, or 2016~~Senior Secured Credit ~~Facilities,~~Facility, the Company granted a pledge on primarily all of its assets, ~~and~~ the ~~stock~~interests of wholly-owned U.S. restricted subsidiaries, and a portion of the interests of wholly-owned non-U.S. restricted subsidiaries. The Company is subject to certain financial covenants, which require the Company to maintain certain debt-to-EBITDA and interest expense-to-EBITDA ratios. The ~~2016~~Senior Secured Credit Facilities also contain covenants that, among other things, restrict the Company’s ability to create any liens, make investments and acquisitions, incur or guarantee additional indebtedness, enter into mergers or consolidations and other fundamental changes, conduct sales and other dispositions of property or assets, enter into sale-leaseback transactions or hedge agreements, prepay subordinated debt, pay dividends or make other payments in respect of capital stock, change the line of business, enter into transactions with affiliates, enter into burdensome agreements with negative pledge clauses, and make subsidiary distributions. After giving effect to the applicable restrictions on the payment of dividends under the ~~2016~~Senior Secured Credit Facilities, subject to compliance with applicable law, as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, all amounts in retained earnings were free of restriction and were available for the payment of dividends. The ~~2016~~Senior Secured Credit ~~Facilities~~Facility also ~~contain~~contains customary representations, warranties, affirmative covenants, and events of default. The variable interest rate is a rate equal to the London Interbank Offered Rate, or LIBOR, or the adjusted base rate, or ABR, at the election of the Company, plus a margin based on the ratio of total indebtedness to EBITDA. The margin ranges from ~~1.00%~~1.0% to ~~2.00%~~2.0%, in the case of LIBOR loans, and ~~0.00%~~0.0% to ~~1.00%~~1.0%, in the case of ABR loans. The Company has the option of ~~1, 2, 3~~one-, two-, three- or ~~6 month~~six-month base interest rates. ~~For~~The credit agreement governing the ~~nine months ended September 30, 2019,~~Senior Secured Credit Facility includes provisions that allow the ~~weighted average interest~~agreement to be amended to replace the LIBOR rate ~~on the first lien term loan was 3.75%.~~with a comparable or successor floating rate.

~~On September 3, 2019,~~The First Lien Term Loan requires the Company ~~received~~to repay 2.5% of the proceeds from a $300.0 million incremental term loan under the 2016 Credit Facilities, or the Incremental Borrowing. The Incremental Borrowing was used to fund the share repurchase which is discussed furtheroriginal aggregate principal amount per annum in ~~"Note 8 - Stockholders' Equity". In accordance~~equal quarterly installments beginning March 31, 2020 through September 30, 2024, with the ~~guidance in ASC 470-50, "Debt - Modifications~~remaining balance due at maturity. There are 0 voluntary prepayment penalties and ~~Extinguishments,"~~prepayment is required upon the ~~Incremental Borrowing was accounted for as a~~issuance of certain debt modification. The Incremental Borrowing resulted in a $1.9 million loss on modification of debt, which consists of third-party fees associated with the transaction. The Company's voluntary term loan prepayments made during 2018 and 2019 fully satisfied all required quarterly principal payments through maturity.or asset sales or other events.

~~2016 Revolver~~

The ~~revolving credit facility under~~Revolver requires the 2016 Credit Facilities, or 2016 Revolver, provides for $225.0 million of potential borrowings and expires on December 6, 2021. The interest rate on the 2016 Revolver is based on the LIBOR with a 0% LIBOR floor or ABR, at the election of the Company ~~plus an applicable margin, based on the leverage ratio of the Company. The Company, at its discretion, may elect interest periods of 1, 2, 3 or 6 months. The Company is required~~ to pay to the lenders a commitment fee for unused commitments of ~~0.2%~~0.15% to ~~0.4%~~0.35% based on the Company’s debt-to-EBITDA ratio. ~~At September 30, 2019~~Principal amounts are due and payable in full at maturity. In addition, at March 31, 2020 and December 31, ~~2018, the Company had 0 outstanding borrowings under the 2016 Revolver. In addition, at September 30,~~ 2019, ~~and December 31, 2018,~~ the Company had $5.2 million and $5.4 million, respectively, in letters of credit outstanding, which are secured by the ~~2016~~ Revolver.

Accounts Receivable Financing Agreement

~~The Company had~~ ~~$200.0 million~~ ~~and $170.0 million outstanding on its accounts receivable financing agreement as of September 30, 2019 and December 31, 2018, respectively.~~

Loans under the accounts receivable financing agreement accrue interest at either a reserve-adjusted LIBOR or a base rate, plus 1.25%. The Company may prepay loans upon one business day's prior notice and may terminate the accounts receivable financing agreement with 15 days’ prior notice. ~~For the nine months ended September 30, 2019, the weighted average interest rate on the accounts receivable financing agreement was 3.86%.~~

The accounts receivable financing agreement contains various customary representations and warranties and covenants, and default provisions that provide for the termination and acceleration of the commitments and loans under the agreement in circumstances including, but not limited to, failure to make payments when due, breach of representations, warranties or covenants, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

As of December 31, ~~2018,~~2019, there was $30.0 million of remaining capacity available under the accounts receivable financing agreement. ~~At September 30, 2019, there~~However, as of March 31, 2020, borrowing capacity was ~~no remaining capacity available under~~limited to $13.2 million due to an increase in the Company's non-U.S. dollar receivables, which are excluded from the calculation of the borrowing base to the extent they exceed 2.5% of the eligible accounts receivable ~~financing agreement.~~balance.

Fair Value of Debt

The estimated fair value of the Company’s debt and outstanding borrowings under its revolving credit facilities was ~~$1,390.0~~$1,292.6 million and ~~$1,084.2~~$1,255.8 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The fair values of the term loans, borrowings under credit facilities, and accounts receivable financing agreement were determined based on Level 2 inputs, which are primarily based on rates at which the debt is traded among financial institutions adjusted for the Company's credit standing.

~~(8)~~(10) Stockholders’ Equity

Authorized Shares

The Company is authorized to issue up to 1000000000 shares of common stock, with a par value of $0.01. The Company is authorized to issue up to 100 shares of preferred stock, with a par value of $0.01.

Share Repurchase Program

On August 30, 2019, the Company's Board of Directors, or the Board, approved a share repurchase program, or the Repurchase Program, authorizing the repurchase of up to $500.0 million of the Company's common stock in open market purchases, privately-negotiated transactions, secondary offerings, block trades or otherwise in accordance with all applicable securities laws and regulations, including through Rule 10b5-1 trading plans and pursuant to Rule 10b-18 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Repurchase Program does not obligate the Company to repurchase any particular amount of its common stock, and it may be modified, suspended or terminated at any time at the Board's discretion. The Repurchase Program expires on December 31, 2021.

On September 6, 2019, KKR PRA Investors L.P., or KKR, sold 6,666,684 shares of the Company's common stock as part of a secondary offering, or the Secondary Offering, of which the Company repurchased from the underwriter, and subsequently retired, 3,079,765 shares at a price of $97.41 per share, for an aggregate purchase price of approximately $300.0 million. The Company incurred expenses in connection with the Secondary Offering of $0.6 million during the three and nine months ended September 30, 2019. The expenses are included in transaction-related costs in the accompanying consolidated condensed statement of operations.

As of ~~September 30, 2019~~March 31, 2020, the Company has remaining authorization to repurchase up to $200.0 million of its common stock under the Repurchase Program.

~~Noncontrolling Interest~~

~~Below is a summary of noncontrolling interest for the nine months ended September 30 (in thousands):~~

2019 2018
Balance as of January 1, $ 6,390
$ 5,710
Comprehensive income
Net income 99
898
Foreign currency adjustments, net of income tax 76
(75 )
Acquisition of noncontrolling interest (6,565 ) —
Balance as of September 30, $ —
$ 6,533

On June 1, 2017, the Company and Takeda Pharmaceutical Company Ltd., or Takeda, closed on a joint venture transaction that enables the Company to provide clinical trial delivery and pharmacovigilance services as a strategic partner of Takeda in Japan. The joint venture transaction was effectuated through the creation of a new legal entity, Takeda PRA Development Center KK, or the TDC joint venture. On May 31, 2019, per the terms of the agreement, the TDC joint venture dissolved and the Company acquired Takeda's interest for $4.1 million.

~~(9)~~(11) Stock-Based Compensation

Stock Option and RSA/RSU Activity

The 2018 Stock Incentive Plan, or the 2018 Plan, was approved by stockholders at the annual meeting on May 31, 2018. The 2018 Plan allows for the issuance of stock options, stock appreciation rights, restricted shares and restricted stock units, other stock-based awards, and performance compensation awards as permitted by applicable laws. The 2018 Plan authorized the issuance of 2,000,000 shares of common stock plus all shares that remained available under the prior plan on May 31, 2018.

The Company granted ~~1,150,000~~23,300 service-based options and ~~352,036~~53,702 restricted stock awards and units, or RSAs/RSUs, with a total grant date fair value of ~~$37.8~~$0.8 million and ~~$34.2~~$5.9 million, respectively, during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

Aggregated information regarding the Company’s option plans is summarized below:


	Options		Wtd. Average Exercise Price		Wtd. Average Remaining Contractual Life (in years)	Intrinsic Value (millions)		Options		Wtd. Average Exercise Price		Wtd. Average Remaining Contractual Life (in years)	Intrinsic Value (millions)
Outstanding at December 31, 2018	4,641,600		$	62.29	7.8	$	149.7
Outstanding at December 31, 2019								4,861,606		$	72.45	7.5	$	188.3
Granted	1,150,000		98.42					23,300		99.69
Exercised	(464,564	)	33.86					(74,940	)	38.80
Expired or forfeited	(199,550	)	82.92					(83,775	)	92.92
Outstanding at September 30, 2019	5,127,486		$	72.17	7.7	$	144.8
Exercisable at September 30, 2019	1,975,811		$	42.71	6.0	$	112.5
Outstanding at March 31, 2020								4,726,191		$	72.75	7.3	$	85.1
Exercisable at March 31, 2020								1,892,291		$	45.52	5.6	$	77.2

The Company’s RSAs/RSUs activity in ~~2019~~2020 is as follows:


	Awards		Wtd. Average Grant-Date Fair Value		Intrinsic Value (millions)		Awards		Wtd. Average Grant-Date Fair Value		Intrinsic Value (millions)
Unvested December 31, 2018	344,250		$	81.39	$	31.7
Unvested December 31, 2019							632,436		$	91.07	$	70.3
Granted	352,036		97.06				53,702		109.04
Forfeited	(40,500	)	80.72				(5,700	)	95.94
Vested	(22,750	)	61.57				(86,000	)	58.95
Unvested September 30, 2019	633,036		$	90.87	$	62.8
Unvested March 31, 2020							594,438		$	97.30	$	49.4

Employee Stock Purchase Plan

In April 2017, the Board approved the PRA Health Sciences, Inc. 2017 Employee Stock Purchase Plan, or ESPP, which was approved by the Company’s shareholders on June 1, 2017. The ESPP allows eligible employees to authorize payroll deductions of up to 15% of their base salary or wages to be applied toward the purchase of shares of the Company’s common stock on the last trading day of any offering period. Participating employees will purchase shares of the Company's common stock at a discount of up to 15% on the lesser of the closing price of the Company's common stock on the NASDAQ Global Select Market (i) on the first trading day of the offering period or (ii) the last day of any offering period. Offering periods under the ESPP will generally be in six month increments, with the administrator of the ESPP having the right to establish different offering periods. The Company recognized stock-based compensation expense of ~~$3.0 million and $2.5~~$1.1 million associated with the ESPP during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019~~, respectively.~~. As of ~~September 30, 2019,~~March 31, 2020, there have been ~~242,329~~301,975 shares issued and ~~2,757,671~~2,698,025 shares reserved for future issuance under the ESPP.

Stock-based Compensation Expense

Stock-based compensation expense related to employee stock plans are summarized below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Direct costs	$	3,685	$	2,451	$	9,780	$	6,900	$	3,853	$	2,928
Selling, general and administrative	7,559		5,319		20,627		13,569		11,572		6,319
Transaction-related costs	—		773		—		773
Total stock-based compensation expense	$	11,244	$	8,543	$	30,407	$	21,242	$	15,425	$	9,247

~~(10)~~(12) Income Taxes

The Company’s effective income tax rate was ~~25.1%~~29.3% and ~~40.0%~~38.9% for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. The effective tax rate for the nine months ended September 30, 2018 included the effect of an increase in the fair value of the earn-out liability related to the stock acquisition of Symphony Health, which was not included in taxable income, but instead increased tax stock basis. The variation between the Company’s effective income tax rate and the U.S. statutory rate of 21% for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 is primarily due to (i) geographic distribution of global pre-tax income (ii) the U.S. inclusion of amounts related to the estimated tax on global intangible low-taxed income, or GILTI, ~~(ii)~~and (iii) state income ~~taxes, and (iii)~~taxes. The effective tax rate for the ~~effects~~three months ended March 31, 2019 included the effect of ~~other jurisdictional and permanent differences, including excess~~base erosion anti-abuse tax, ~~benefits.~~ or BEAT. No provision for BEAT is included in the effective rate for the three months ended March 31, 2020.

Significant judgment is required related to the application of the recent U.S. tax reform, or the Act, particularly with respect to GILTI and ~~the base erosion anti-abuse tax, or~~ BEAT provisions. If changes occur in the Company’s tax structure, the structure of its arrangements, interpretations, or regulations that clarify these or other provisions of the Act, these changes could have a material effect on the Company’s tax provision. In the quarter ended September 30, 2019, the Company updated its analysis of BEAT and its impact on the annual estimated effective tax rate for the 2019 tax year to reflect revisions to contractual arrangements.

GAAP requires a two-step approach when evaluating uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence demonstrates that it is more likely than not that the position will be sustained upon audit, including resolution of any related appeals or litigation processes. The second step is to

quantify the amount of tax benefit to recognize as the amount that is cumulatively more than 50% likely to be realized upon ultimate settlement with the taxing authorities. During the ~~nine~~three months ended ~~September 30, 2019, the liability for~~March 31, 2020, there was no significant change in uncertain tax positions increased by $18.7 million. This increase in the liability for uncertain tax positions had no impact on income tax expense for the nine months ended September 30, 2019 as it was previously accrued. If such uncertain positions were recognized, they would impact the effective tax rate.positions.

~~(11)~~(13) Commitments and Contingencies

Legal Proceedings

The Company is involved in legal proceedings from time to time in the ordinary course of its business, including employment claims and claims related to other business transactions. Although the outcome of such claims is uncertain, management believes that these legal proceedings will not have a material adverse effect on the financial condition or results of future operations of the Company.

The Company is currently a party to litigation with the City of Sao Paulo, Brazil. The dispute relates to whether the export of services provided by the Company is subject to a local tax on services. The Company has not recorded a liability associated with the claim, which totaled $4.9 million at September 30, 2019, given that it is not deemed probable the Company will incur a loss related to this case. However, a deposit totaling $4.9 million has been made to the Brazilian court in order to annul the potential tax obligation and to avoid the accrual of additional interest and penalties. This balance is recorded in other assets on the consolidated condensed balance sheet. In June 2015, the Judiciary Court of Justice of the State of Sao Paulo ruled in the favor of the Company; however, the judgment was appealed by the City of Sao Paulo. In September 2017, a judge from the Superior Court of Justice of Brazil denied relief to the City of Sao Paulo's appeal and upheld the lower court's ruling in favor of the Company for the years 2005 to 2012, and in the period from January to October 2013. The judge from the Superior Court of Justice of Brazil also ruled that the Company must appeal the lower court's verdict for October 2013 and the subsequent periods as the Judiciary Court of Justice of the State of Sao Paulo only reviewed the facts that pertained to the period before October 2013. The Company expects to recover the full amount of the deposit when the case is settled.

~~(12)~~(14) Derivatives

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk that the Company seeks to manage by using derivative instruments is interest rate risk arising from movement in market interest rates. Accordingly, the Company has instituted an interest rate hedging program that uses interest rate swaps designated as cash flow hedges to mitigate interest rate volatility. The Company swaps the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount, at specified intervals. The Company’s interest rate contracts are designated as hedging instruments.

The following table presents the notional amounts and fair values (determined using Level 2 inputs) of the Company’s derivatives as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (in thousands):

September 30, 2019 December 31, 2018
Balance Sheet Classification
Notional
amount
Asset/(Liability)
Notional
amount
Asset/(Liability)
Derivatives in an asset position: Other assets $ —
$ —
$ 625,000
$ 3,318
Derivatives in a liability position: Other long-term liabilities 625,000
(3,805 ) —
—
$ 625,000
$ (3,805 ) $ 625,000
$ 3,318



	March 31, 2020					December 31, 2019
Balance Sheet Classification	Notional amount		Asset/(Liability)			Notional amount		Asset/(Liability)
Accrued expenses and other current liabilities	$	625,000	$	(6,416	)	$	625,000	$	(2,976	)
	$	625,000	$	(6,416	)	$	625,000	$	(2,976	)

The Company records the change in the fair value of derivatives designated as hedging instruments under ASC 815 to accumulated other comprehensive loss in the Company's consolidated condensed balance sheet, net of deferred taxes, and will later reclassify into earnings, including the associated tax impact, when the hedged item affects earnings or is no longer expected to occur. For other derivative contracts that do not qualify or no longer qualify for hedge accounting, changes in the fair value of the derivatives are recognized in earnings each period.

The table below presents the effect of the Company's derivatives on the consolidated condensed statements of operations and comprehensive (loss) income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps)	2019			2018			2019			2018			2020			2019
Amount of pre-tax (loss) gain recognized in other comprehensive income	$	(266	)	$	1,422		$	(6,190	)	$	7,617
Amount of pre-tax loss recognized in other comprehensive (loss) income													$	(4,534	)	$	(1,947	)
Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net	(1,611		)	(1,463		)	(4,028		)	(4,980		)	(2,660		)	(1,169		)

The Company expects that ~~$9.5~~$9.4 million of unrealized losses will be reclassified out of accumulated other comprehensive loss and into interest expense, net over the next 12 months.

The effect of cash flow hedge accounting on the consolidated condensed statements of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018,~~2019, respectively, is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Interest expense, net	$	(12,974	)	$	(14,423	)	$	(37,834	)	$	(43,860	)	$	(13,487	)	$	(12,369	)
Loss on cash flow hedging relationships in Subtopic 815-20 (interest contracts):
Loss reclassified from accumulated other comprehensive loss into interest expense, net	(1,611		)	(1,463		)	(4,028		)	(4,980		)	(2,660		)	(1,169		)

~~(13)~~(15) Accumulated Other Comprehensive Loss

Below is a summary of the components of accumulated other comprehensive loss (in thousands):

Foreign
Currency
Translation, Net of Tax

Derivative
Instruments, Net of Tax
Total
Balance at December 31, 2018 $ (158,349 ) $ (12,310 ) $ (170,659 )
Impact from adoption of ASU 2018-02, Reclassification of certain tax effects from accumulated other comprehensive income —
1,419
1,419
Balance at January 1, 2019 (158,349 ) (10,891 ) (169,240 )
Other comprehensive loss before reclassifications (26,768 ) (4,567 ) (31,335 )
Reclassification adjustments —
2,972
2,972
Balance at September 30, 2019 $ (185,117 ) $ (12,486 ) $ (197,603 )



	Foreign Currency Translation, Net of Tax			Derivative Instruments, Net of Tax			Total
Balance at December 31, 2019	$	(149,342	)	$	(10,766	)	$	(160,108	)
Other comprehensive loss before reclassifications	(42,756		)	(3,377		)	(46,133		)
Reclassification adjustments	—			1,981			1,981
Balance at March 31, 2020	$	(192,098	)	$	(12,162	)	$	(204,260	)

Foreign Currency Translation

The change in the Company's foreign currency translation adjustment was due primarily to the movements in the British pound (GBP), Euro (EUR), Canadian dollar (CAD) and Russian ruble (RUB) exchange rates against the U.S. dollar. The U.S. dollar strengthened by ~~3.4%~~6.2%, 1.9%, 8.2%, and ~~4.6%~~21.2% versus the ~~British pound~~GBP, EUR, CAD, and ~~Euro, respectively, and weakened by 3.0% and 7.3% versus the Canadian dollar and the Russian ruble,~~RUB, respectively, between December 31, ~~2018~~2019 and ~~September 30, 2019.~~March 31, 2020. The movement in the ~~Euro~~GBP, EUR, CAD and ~~British pound~~RUB contributed to a ~~$15.7~~$17.1 million, $6.6 million, $3.8 million, and ~~$7.4~~$6.9 million increase in other comprehensive loss, respectively, ~~which was offset by decreases in other comprehensive loss of $1.6 million and $1.1 million due to movement in the Russian ruble and Canadian dollar, respectively,~~ during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

Derivative Instruments

See "Note 1214 - Derivatives" for further information on changes to accumulated other comprehensive loss related to the derivative instruments.

~~(14)~~(16) Net Income Per Share

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the applicable period. Diluted net income per share is calculated after adjusting the denominator of the basic net income per share calculation for the effect of all potentially dilutive common shares, which, in the Company’s case, includes shares issuable under the stock option and incentive award plans.

The following table reconciles the basic to diluted weighted average shares outstanding (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2019	2018	2019	2018	2020	2019
Basic weighted average common shares outstanding	64,771	64,261	65,096	63,891	62,933	65,192
Effect of dilutive stock options and other awards under share-based compensation programs	1,442	2,245	1,511	2,367	1,406	1,655
Diluted weighted average common shares outstanding	66,213	66,506	66,607	66,258	64,339	66,847

Anti-dilutive shares	2,150	987	1,914	1,670	2,399	1,523

The dilutive and anti-dilutive shares disclosed above were calculated using the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of RSAs/RSUs, reduced by the repurchase of shares with the proceeds from the assumed exercises, and unrecognized compensation expense for outstanding awards.

~~(15)~~(17) Segments

The Company is managed through 2 reportable segments: (i) the Clinical Research segment and (ii) the Data Solutions segment. In accordance with the provisions of ASC 280, "Segment Reporting", the Company's chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company.


•	Clinical Research Segment: The Clinical Research segment, which primarily serves biopharmaceutical clients, provides outsourced clinical research and clinical trial related services.


•	Data Solutions Segment: The Data Solutions segment provides data and analytics, technology solutions and real-world insights and services primarily to the Company’s life science customers.

The Company's chief operating decision-maker uses segment profit as the primary measure of each segment's operating results in order to allocate resources and in assessing the Company's performance. Asset information by segment is not presented, as this measure is not used by the chief operating decision-maker to assess the Company's performance.

The Company’s reportable segment information is presented below (in thousands):

Three Months Ended September 30, 2019 Three Months Ended September 30, 2018
Clinical Research Data Solutions Total Clinical Research Data Solutions Total
Revenue $ 719,005
$ 61,686
$ 780,691
$ 656,979
$ 60,617
$ 717,596

Direct costs (exclusive of depreciation and amortization) 342,695
46,609
389,304
330,037
41,385
371,422
Reimbursable expenses 169,965
—
169,965
142,717
—
142,717
Segment profit 206,345
15,077
221,422
184,225
19,232
203,457
Less expenses not allocated to segments:

Selling, general and administrative expenses 95,542
92,553
Transaction-related costs 572
43,837
Depreciation and amortization expense 29,264
28,270
Loss (gain) on disposal of fixed assets, net 256
(15 )
Income from operations 95,788
38,812
Interest expense, net (12,974 ) (14,423 )
Loss on modification or extinguishment of debt (1,855 ) (454 )
Foreign currency gains (losses), net 5,408
(1,809 )
Other income (expense), net 15
(68 )
Income before income taxes and equity in income of unconsolidated joint ventures $ 86,382
$ 22,058


	Nine Months Ended September 30, 2019							Nine Months Ended September 30, 2018							Three Months Ended March 31, 2020							Three Months Ended March 31, 2019
	Clinical Research		Data Solutions		Total			Clinical Research		Data Solutions		Total			Clinical Research		Data Solutions		Total			Clinical Research		Data Solutions		Total
Revenue	$	2,087,863	$	178,159	$	2,266,022		$	1,966,762	$	175,512	$	2,142,274		$	726,135	$	57,573	$	783,708		$	666,631	$	55,391	$	722,022

Direct costs (exclusive of depreciation and amortization)	1,022,329		131,112		1,153,441			1,010,915		123,594		1,134,509			358,351		45,511		403,862			337,515		40,373		377,888
Reimbursable expenses	471,682		—		471,682			430,892		—		430,892			176,841		—		176,841			140,620		—		140,620
Segment profit	593,852		47,047		640,899			524,955		51,918		576,873			190,943		12,062		203,005			188,496		15,018		203,514
Less expenses not allocated to segments:
Selling, general and administrative expenses					291,439							275,424							106,957							97,095
Transaction-related costs					572							32,709							609							—
Depreciation and amortization expense					85,462							84,163							32,278							27,608
Loss on disposal of fixed assets, net					900							21
(Gain) loss on disposal of fixed assets, net																			(19		)					88
Income from operations					262,526							184,556							63,180							78,723
Interest expense, net					(37,834		)					(43,860		)					(13,487		)					(12,369		)
Loss on modification or extinguishment of debt					(1,855		)					(454		)
Foreign currency gains (losses), net					1,864							(1,416		)
Foreign currency gains, net																			7,842							6,128
Other expense, net					(66		)					(201		)					(4		)					(88		)
Income before income taxes and equity in income of unconsolidated joint ventures					$	224,635						$	138,625
Income before income taxes																			$	57,531						$	72,394

Revenue by geographic location for each segment is as follows (in thousands):


	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018						Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	Clinical Research		Data Solutions		Total		Clinical Research		Data Solutions		Total		Clinical Research		Data Solutions		Total		Clinical Research		Data Solutions		Total
Revenue
Americas:
United States	$	467,096	$	61,686	$	528,782	$	433,050	$	60,617	$	493,667	$	466,863	$	57,573	$	524,436	$	442,969	$	55,391	$	498,360
Other	12,255		—		12,255		11,396		—		11,396		10,007		—		10,007		12,573		—		12,573
Total Americas	479,351		61,686		541,037		444,446		60,617		505,063		476,870		57,573		534,443		455,542		55,391		510,933
Europe, Africa, and Asia-Pacific
United Kingdom	191,994		—		191,994		170,252		—		170,252		199,764		—		199,764		171,238		—		171,238
Netherlands	30,144		—		30,144		28,334		—		28,334		28,067		—		28,067		24,367		—		24,367
Other	17,516		—		17,516		13,947		—		13,947		21,434		—		21,434		15,484		—		15,484
Total Europe, Africa, and Asia-Pacific	239,654		—		239,654		212,533		—		212,533		249,265		—		249,265		211,089		—		211,089
Total revenue	$	719,005	$	61,686	$	780,691	$	656,979	$	60,617	$	717,596	$	726,135	$	57,573	$	783,708	$	666,631	$	55,391	$	722,022

Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018
Clinical Research Data Solutions Total Clinical Research Data Solutions Total
Revenue
Americas:
United States $ 1,368,344
$ 178,159
$ 1,546,503
$ 1,284,678
$ 175,512
$ 1,460,190
Other 37,268
—
37,268
35,346
—
35,346
Total Americas 1,405,612
178,159
1,583,771
1,320,024
175,512
1,495,536
Europe, Africa, and Asia-Pacific

United Kingdom 551,460
—
551,460
516,442
—
516,442
Netherlands 82,839
—
82,839
87,340
—
87,340
Other 47,952
—
47,952
42,956
—
42,956
Total Europe, Africa, and Asia-Pacific 682,251
—
682,251
646,738
—
646,738
Total revenue $ 2,087,863
$ 178,159
$ 2,266,022
$ 1,966,762
$ 175,512
$ 2,142,274

~~(16) Subsequent Events~~

On October 28, 2019, the Company refinanced its 2016 Credit Facilities. The Company entered into a new credit agreement with a syndicate of banks for an aggregate principal amount of $1,000.0 million of first lien term debt due in 2024, or the 2019 First Lien Term Loan, and a five-year $750.0 million revolving line of credit, collectively known as the 2019 Credit Facilities. The proceeds from the 2019 Credit Facilities were primarily used to repay the 2016 First Lien Term Loan principal balance of $1,191.5 million. The 2019 Credit Facilities also contain customary representations, warranties, affirmative covenants, and events of default. The variable interest rate is a rate equal to LIBOR or ABR, at the election of the Company, plus a margin based on the ratio of total indebtedness to EBITDA. The margin ranges from 1.0% to 2.0%, in the case of LIBOR loans, and 0.0% to 1.0%, in the case of ABR loans. The Company has the option of 1, 2, 3 or 6 month base interest rates. The 2019 First Lien Term Loan requires the Company to repay 2.5% of the original aggregate principal amount per annum in equal quarterly installments beginning on March 31, 2020 through September 30, 2024, with the remaining balance due at maturity.

(18) Overview of the Impact of the COVID-19 Pandemic

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, during the second half of March 2020, the Company experienced disruptions in its global operations as the COVID-19 virus continued to spread and impact countries in which the Company operates. These disruptions are expected to have a more significant adverse impact on the Company's operating results in the second quarter of 2020, and the full extent of the COVID-19 outbreak in 2020 and its impact on its operations is uncertain. A prolonged outbreak could continue to interrupt the operations of the Company and its customers and suppliers.

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated condensed financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, or the Annual Report, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

We use the terms “we,” “us,” “our,” or the "Company” in this report to refer to PRA Health Sciences, Inc. and its subsidiaries.

Overview

We are one of the world’s leading global contract research organizations, or CROs, by revenue, providing outsourced clinical development services to the biotechnology and pharmaceutical industries. We believe we are one of a select group of CROs with the expertise and capability to conduct clinical trials across major therapeutic areas on a global basis. Our therapeutic expertise includes areas that are among the largest in pharmaceutical development, and we focus in particular on oncology, immunology, central nervous system inflammation, respiratory, cardiometabolic and infectious diseases. We believe that we further differentiate ourselves from our competitors through our investments in medical informatics and clinical technologies designed to enhance efficiencies, improve study predictability and provide better transparency for our clients throughout their clinical development processes. Our Data Solutions segment allows us to better serve our clients across their entire product lifecycle by (i) improving clinical trial design, recruitment, and execution; (ii) creating real-world data solutions based on the use of medicines by actual patients in normal situations; and (iii) increasing the efficiency of healthcare companies' commercial organizations through enhanced analytics and outsourcing services.

Overview of the Impact of COVID-19 to our Business

The recent outbreak of novel coronavirus COVID-19, or COVID-19, which surfaced in Wuhan, China, in December 2019, has been declared a pandemic and has spread to multiple global regions, including the United States and Europe. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses around the world. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, have placed significant restrictions on travel and many businesses have announced extended closures. While these actions vary by locale, they have generally been expanding in scope.

The disruptions caused by COVID-19 did not have a material impact on our financial results to start the year; however, as the global spread of the virus began to accelerate late in the first quarter of 2020, we began to experience an adverse impact to our financial results. We believe that we will continue to experience disruptions to our business due to the COVID-19 pandemic through the end of the second quarter and anticipate that the disruption caused by COVID-19 will likely extend into the second half of 2020.

As the COVID-19 pandemic continues to evolve rapidly, we cannot at this time accurately predict the effects of these conditions on our operations. Uncertainties remain as to the ultimate geographic spread of the virus and the severity of the disease, the duration of the outbreak, and the length and scope of the travel restrictions and business closures imposed by the governments of impacted countries. The COVID-19 outbreak has had, and a continuing outbreak or future outbreaks may have, several important impacts on our business:


•	Workforce: In response to the outbreak and business disruption, first and foremost, we have prioritized the health and safety of our employees and we have closed the majority of our physical office locations worldwide. However, most of our workforce is able to work remotely in an effective way.

•

Backlog: We have not experienced any material COVID-19 related trial cancellations. However, due to travel restrictions put in place as a result of COVID-19, business development activity began to slow at the end of the quarter, with bid-defense meeting postponements and delays in study award decision-making. This has had an impact on new business awards in both the Clinical Research and Data Solutions segments, leading to a decrease in gross new business awards in the first quarter of 2020 compared to the prior year period as disclosed below.


•	Clinical Research segment: During March 2020, we began to experience global site closures, which has led to a decline in site-based monitoring. We have been able to implement remote monitoring activities through the use of our technology platforms in an effort to mitigate the impact of these site closures. Limitations on

travel and business closures recommended by federal, state, and local governments, could, among other things, impact our ability to enroll patients in clinical trials, recruit clinical site investigators, and obtain timely approvals from local regulatory authorities.


•	Data Solutions segment: Our Data Solutions segment is relatively more insulated from the effects of the virus, due to its high proportion of recurring license revenue. However, businesses in this segment that rely on face-to-face interactions or are dependent on in-person gatherings, events or conferences may experience significant disruption.


•	Mitigation strategies: In light of the current situation, we have initiated proactive cost management strategies. These include, among other things, hiring restrictions, reductions in third-party costs and certain compensation adjustments. We have also implemented proactive cash conservation initiatives, including delaying some capital expenditures and halting voluntary debt repayments.


•	Liquidity position: We believe that we have a strong liquidity position, which includes cash on hand and access to our revolving credit facility. We are currently subject to two debt covenants in our Senior Secured Credit Facility:



	Requirement:	As of March 31, 2020
Total indebtedness to EBITDA	≤ 4.25x	1.87x
Interest expense to EBITDA	≥ 3.00x	11.68x

We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. The CARES Act is an approximate $2 trillion emergency economic stimulus package passed in response to the coronavirus outbreak. The CARES Act includes broad sweeping provisions including direct financial assistance to Americans in the form of one-time payments to individuals; aid to small businesses in the form of loans and grants; efforts to stabilize the U.S. economy and keep Americans employed in general; and support for healthcare professionals, patients and hospitals. Also included in the CARES Act are numerous tax provisions including, but not limited to, certain payroll tax benefits, changes to the net operating loss rules, and the business interest expense deduction rules under Code Section 163(j). Due to the recent enactment of this legislation, there is a high degree of uncertainty around its implementation and we continue to assess the potential impacts of this legislation on our business, results of operations, financial condition and cash flows. There can be no assurance that we will receive any funding under the CARES Act.

How We Assess the Performance of Our Business

The Company is managed through two reportable segments: (i) the Clinical Research segment; and (ii) the Data Solutions segment. Our chief operating decision-maker uses segment profit as the primary measure of each segment's operating results in order to allocate resources and in assessing the Company's performance. In addition to our financial measures in conformity with U.S. generally accepted accounting principles, or GAAP, including revenue, costs and expenses and other measures discussed below, we review various financial and operational metrics. For our Clinical Research segment, we review new business awards, cancellations, and backlog.

Our gross new business awards for our Clinical Research segment for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were ~~$2,300.3~~$657.9 million and ~~$2,286.7~~$747.6 million, respectively. New business awards arise when a client selects us to execute its trial and is documented by written or electronic correspondence, or for our Strategic Solutions offering when the amount of revenue expected to be recognized is measurable. The number of new business awards can vary significantly from year to year, and awards can have terms ranging from several months to several years. For our Strategic Solutions offering, the value of a new business award is the anticipated revenue to be recognized in the corresponding quarter of the next fiscal year. For the remainder of our Clinical Research segment, the value of a new award is the anticipated revenue over the life of the contract, which does not include reimbursable expenses.

In the normal course of business, we experience contract cancellations, which are reflected as cancellations when the client provides us with written or electronic correspondence that the work should cease. During the ~~nine~~three months ended ~~September 30,~~March

31, 2020 and 2019, ~~and 2018,~~ we had ~~$295.6~~$53.2 million and ~~$309.3~~$83.0 million, respectively, of cancellations for which we received correspondence from the client for our Clinical Research segment. The number of cancellations can vary significantly from ~~year~~period to ~~year.~~period. The value of the cancellation is the remaining amount of unrecognized service revenue, less the estimated effort to transition the work back to the client.

Our backlog consists of anticipated revenue from new business awards that either have not started or are in process but have not been completed for our Clinical Research segment. Backlog varies from period to period depending upon new business awards and contract modifications, cancellations, and the amount of revenue recognized under existing contracts. Our backlog at ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$4.6~~$4.7 billion and ~~$4.1~~$4.4 billion, respectively.

Sources of Revenue

Total revenues are comprised of revenues from the provision of our services and revenues from reimbursed expenses and reimbursable investigator grants that are incurred while providing our services. We do not have any material product revenues.

Costs and Expenses

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

Direct Costs (Exclusive of Depreciation and Amortization)

For our Clinical Research segment, direct costs consist primarily of labor‑related charges. They include elements such as salaries, benefits and incentive compensation for our employees. In addition, we utilize staffing agencies to procure primarily part time individuals to perform work on our contracts. Labor-related charges as a percentage of the Clinical Research segment's total direct costs were ~~96.2%~~96.9% and ~~95.9%~~96.5% for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. The cost of labor procured through staffing agencies is included in these percentages and represents ~~3.1%~~2.9% and ~~4.5%~~3.0% of the Clinical Research segment's total direct costs for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Our remaining direct costs are items such as travel, meals, postage and freight, patient costs, medical waste and supplies. The total of all these items as a percentage of the Clinical Research segment's total direct costs were ~~3.8%~~3.1% and ~~4.1%~~3.5% for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Historically, direct costs have increased with an increase in revenues. The future relationship between direct costs and revenues may vary from historical relationships. Several factors will cause direct costs to decrease as a percentage of revenues. Deployment of our billable staff in an optimally efficient manner has the most impact on our ratio of direct cost to revenue. The most effective deployment of our staff is when they are fully engaged in billable work and are accomplishing contract related activities at a rate that meets or exceeds budgeted targets. We also seek to optimize our efficiency by performing work using the employee with the lowest cost. Generally, the following factors may cause direct costs to increase as a percentage of revenues: our staff are not fully deployed, as is the case when there are unforeseen cancellations or delays, or when our staff are accomplishing tasks at levels of effort that exceed budget, such as rework, as well as pricing pressure from increased competition.

For our Data Solutions segment, direct costs consist primarily of data costs. Data costs as a percentage of the Data Solutions segment's total direct costs were ~~73.3%~~74.3% and ~~73.0%~~72.9% for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Labor-related charges, such as salaries, benefits and incentive compensation for our employees, were ~~20.0%~~20.2% and ~~20.2%~~19.9% of the Data Solutions segment's total direct costs for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Our remaining direct costs are items such as travel, meals, and supplies and were ~~6.7%~~5.5% and ~~6.8%~~7.2% of the Data Solutions segment's total direct costs for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Reimbursable Expenses

As is customary in our industry, we also routinely enter into separate agreements on behalf of our clients with independent physician investigators in connection with clinical trials. We also receive funds from our clients for investigator fees. We are not obligated either to perform the service or to pay the investigator in the event of default by the client. In addition, we do not pay the independent physician investigator until funds are received from the client. We include these investigator fees, as well as our out-of-pocket costs that are reimbursable by our customers, as reimbursable expenses in our consolidated condensed statements of operations.

Reimbursable expenses are not included in our backlog because they are pass-through costs to our clients.

We believe that the fluctuations in reimbursable expenses are not meaningful to the final economic performance as measured on a net basis given that such costs are passed through to the client. The reimbursable expenses are included in our measure of progress for our long-term contracts.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of administration payroll and benefits, marketing expenditures, and overhead costs such as information technology and facilities costs. These expenses also include central overhead costs that are not directly attributable to our operating business and include certain costs related to insurance, professional fees and property.

Transaction-related Costs

Transaction-related costs include fees associated with our secondary offerings, ~~stock-based compensation expense related to the transfer restrictions on vested options, the amendment to our accounts receivable financing agreement,~~ costs associated with acquisition related earn-out liabilities, and expenses associated with our acquisitions.

~~Loss on Modification or Extinguishment of Debt~~

Loss on modification or extinguishment of debt consists of costs incurred in connection with incremental borrowings under our credit facilities and the write-off of previously unamortized debt financing costs that were expensed as a result of voluntary debt repayments.

Depreciation and Amortization Expense

Depreciation expense represents the depreciation charged on our fixed assets. The charge is recorded on a straight-line method, based on estimated useful lives of three to seven years for computer hardware and software and five to seven years for furniture and equipment. Leasehold improvements are depreciated over the lesser of the life of the lease term or the useful life of the improvements.

Amortization expense consists of amortization recorded on acquisition-related intangible assets. Customer relationships, backlog and finite-lived trade names are amortized on an accelerated basis, which coincides with the period of economic benefit we expect to receive. All other finite-lived intangibles are amortized on a straight-line basis. In accordance with GAAP, we do not amortize goodwill and indefinite-lived intangible assets.

Income Taxes

Because we conduct operations on a global basis, our effective tax rate has depended and will continue to depend upon the geographic distribution of our pre‑tax earnings among several different taxing jurisdictions. Our effective tax rate can also vary based on changes in the tax rates of the different jurisdictions. Our effective tax rate is also impacted by tax credits and the establishment or release of deferred tax asset valuation allowances and tax reserves, as well as significant non‑deductible items such as portions of transaction‑related costs.

In addition, our effective income tax rate is influenced by U.S. tax law which has been substantially modified by the U.S. Tax Cuts and Jobs Act of 2017, or the Act. The following provisions of the Act could have an adverse effect on our tax rate:

global intangible low-taxed income, or GILTI;

limitations on the U.S. deductions for net business interest;

base erosion anti-abuse provisions, or BEAT; and

performance-based compensation subject to $1 million limit.

Significant judgment is required related to the application of the Act, particularly with respect to GILTI and BEAT provisions. If changes occur in the Company’s tax structure, the structure of its customer arrangements, or interpretations of regulations that clarify these or other provisions of the Act, these changes could have a material effect on the Company’s tax provision.

Foreign subsidiaries are taxed separately in their respective jurisdictions. We have foreign net operating loss carryforwards in some jurisdictions. The carryforward periods for these losses vary from four years to an indefinite carryforward period depending on the jurisdiction. Our ability to offset future taxable income with the net operating loss carryforwards may be limited in certain instances, including changes in ownership.

Exchange Rate Fluctuations

The majority of our foreign operations transact in the Euro, or EUR, or British pound, or GBP. As a result, our revenue and expenses are subject to exchange rate fluctuations with respect to these currencies. We have translated these currencies into U.S. dollars using the following average exchange rates:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2019	2018	2019	2018	2020	2019
U.S. dollars per:
Euro	1.11	1.16	1.12	1.19	1.10	1.14
British pound	1.23	1.30	1.27	1.35	1.28	1.30

Results of Operations

Consolidated Results of Operations for the Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to the Three Months Ended ~~September 30, 2018~~March 31, 2019


	Three Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
(in thousands)
Revenue	$	780,691		$	717,596		$	783,708		$	722,022
Operating expenses:
Direct costs (exclusive of depreciation and amortization)	389,304			371,422			403,862			377,888
Reimbursable expenses	169,965			142,717			176,841			140,620
Selling, general and administrative expenses	95,542			92,553			106,957			97,095
Transaction-related costs	572			43,837			609			—
Depreciation and amortization expense	29,264			28,270			32,278			27,608
Loss (gain) on disposal of fixed assets	256			(15		)
(Gain) loss on disposal of fixed assets							(19		)	88
Income from operations	95,788			38,812			63,180			78,723
Interest expense, net	(12,974		)	(14,423		)	(13,487		)	(12,369		)
Loss on modification or extinguishment of debt	(1,855		)	(454		)
Foreign currency gains (losses), net	5,408			(1,809		)
Other income (expense), net	15			(68		)
Income before income taxes and equity in income of unconsolidated joint ventures	86,382			22,058
Foreign currency gains, net							7,842			6,128
Other expense, net							(4		)	(88		)
Income before income taxes							57,531			72,394
Provision for income taxes	3,375			20,248			16,871			28,138
Income before equity in income of unconsolidated joint ventures	83,007			1,810
Equity in income of unconsolidated joint ventures, net of tax	—			44
Net income	83,007			1,854			40,660			44,256
Net income attributable to noncontrolling interest	—			(359		)	—			(172		)
Net income attributable to PRA Health Sciences, Inc.	$	83,007		$	1,495		$	40,660		$	44,084

Revenue increased by ~~$63.1~~$61.7 million, or ~~8.8%~~8.5%, from ~~$717.6~~$722.0 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$780.7~~$783.7 million during the three months ended ~~September 30, 2019.~~March 31, 2020. Revenue for the three months ended ~~September 30, 2019~~March 31, 2020 benefited from an increase in billable hours and volume-related increases in clinical activities ~~as well as an increase in the effective rate of hours billed on our studies,~~ offset by an unfavorable impact of ~~$6.3~~$5.3 million from foreign currency exchange rate fluctuations. The growth in revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were active during the period, the growth in new business awards as a result of higher demand for our services across the industries we serve, more effective sales efforts, and the growth in the overall CRO market. The increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and services that we provide to those clients.period.

Direct costs, exclusive of depreciation and amortization, increased by ~~$17.9~~$26.0 million, or ~~4.8%~~6.9%, from ~~$371.4~~$377.9 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$389.3~~$403.9 million during the three months ended ~~September 30, 2019.~~March 31, 2020. Salaries and related benefits in our Clinical Research segment increased ~~$19.8~~$27.8 million as we continue to hire billable staff to ensure appropriate staffing levels for our current studies and future growth. Data costs in our Data Solutions segment increased

~~$4.5~~ $4.4 million as we continue to expand our sources of data. This was offset by a favorable impact of ~~$6.7~~$6.5 million from foreign currency exchange rate fluctuations. Direct costs as a percentage of revenue were ~~49.9%~~51.5% and ~~51.8%~~52.3% during the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively.

Reimbursable expenses increased by ~~$27.2~~$36.2 million from ~~$142.7~~$140.6 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$170.0~~$176.8 million during the three months ended ~~September 30, 2019.~~March 31, 2020. We believe that the fluctuations in reimbursable expenses from period to period are not meaningful to our underlying performance over the full terms of the relevant contracts.

Selling, general and administrative expenses increased by ~~$3.0~~$9.9 million, or ~~3.2%~~10.2%, from ~~$92.6~~$97.1 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$95.5~~$107.0 million during the three months ended ~~September 30, 2019.~~March 31, 2020. The increase in selling, general and administrative expenses is primarily related to an increase in salaries and related benefits, including stock-based compensation expense, as we continue to hire staff and add additional office space to support our growing business. Selling, general and administrative expenses as a percentage of revenue were ~~12.2%~~13.6% and ~~12.9%~~13.4% during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~The decrease in selling, general and administrative expenses as a percentage of revenue is primarily related to our continued efforts to effectively leverage our selling and administrative functions.~~

Transaction-related costs for the three months ended ~~September 30, 2019,~~March 31, 2020, totaling $0.6 million, consisted of costs incurred in connection with the September 2019 secondary offering of common stock. For the three months ended September 30, 2018, we incurred $43.8 million of transaction-related costs. These costs consisted of $42.6 million forare primarily related to changes in the ~~estimated~~ fair value of contingent consideration ~~related to our acquisitions, $0.8 million of stock-based compensation expense related to the release of the remaining portion of the transfer restrictions on vested options,~~ and ~~$0.5 million of~~other expenses incurred in ~~connection~~conjunction with ~~our August 2018 secondary offering~~the acquisition of ~~common stock.~~Care Innovations, Inc. in January 2020.

Depreciation and amortization expense was ~~$29.3~~$32.3 million and ~~$28.3~~$27.6 million during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Depreciation and amortization expense as a percentage of revenue was ~~3.7%~~4.1% during the three months ended ~~September 30, 2019~~March 31, 2020 and ~~3.9%~~3.8% during the three months ended ~~September 30, 2018.~~March 31, 2019. The increase is due to the amortization of the intangible assets acquired in the acquisition of Care Innovations, Inc. as well as an increase in depreciation expense due to an increase in our depreciable asset base.

Interest expense, net, ~~decreased~~increased by ~~$1.4~~$1.1 million, or ~~10.0%~~9.0%, from ~~$14.4~~$12.4 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$13.0~~$13.5 million during the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~change~~increase is primarily due to an increase in the average outstanding debt balance and was partially offset by a decrease in the weighted average interest rate ~~on our outstanding debt as well as a decrease in the average outstanding debt balance~~ as compared to the three months ended ~~September 30, 2018.~~

The loss on modification of debt was $1.9 million for the three months ended September 30, 2019, which consisted of costs incurred associated with the incremental borrowing under the senior secured credit facilities. The loss on extinguishment of debt incurred during the three months ended September 30, 2018, totaling $0.5 million, consisted of previously capitalized unamortized debt financing costs that were expensed as a result of voluntary debt repayments made during the quarter.March 31, 2019.

Foreign currency gains, ~~(losses),~~ net, ~~changed~~increased by ~~$7.2~~$1.7 million from ~~foreign currency losses of $1.8~~$6.1 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~foreign currency gains of $5.4~~$7.8 million during the three months ended ~~September 30, 2019.~~March 31, 2020. Foreign currency gains and losses are due to fluctuations in the U.S. dollar, gains or losses that arise in connection with the revaluation of short-term inter-company balances between our domestic and international subsidiaries, and gains or losses from foreign currency transactions, such as those resulting from the settlement of third-party accounts receivables and payables denominated in a currency other than the local currency of the entity making the payment. During the three months ended ~~September 30, 2019,~~March 31, 2020, foreign currency gains were primarily due to movement of the U.S. dollar versus the British pound, ~~the~~ Euro, Canadian dollar and ~~Brazilian real.~~Russian ruble.

Provision for income taxes decreased by ~~$16.9~~$11.3 million from ~~$20.2~~$28.1 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$3.4~~$16.9 million during the three months ended ~~September 30, 2019.~~March 31, 2020. Our effective tax rate was ~~91.8%~~38.9% and ~~3.9%~~29.3% during the three months ended ~~September 30, 2018~~March 31, 2019 and ~~2019,~~2020, respectively. In the quarter ended September 30, 2019, we updated our analysis of the base erosion anti-abuse tax, or BEAT, and its impact on the annual estimated effective tax rate for the 2019 tax year to reflect revisions to contractual arrangements, which reducedThe decrease in the effective tax rate ~~for~~of 9.6% was primarily due to the ~~quarter. For~~effect of BEAT included in the provision for the three months ended ~~September 30,~~March 31, 2019 and no provision for BEAT being included in the ~~annual estimated~~ effective tax rate varied from the U.S. statutory rate of 21% primarily due to (i) the U.S. inclusion of amounts related to the estimated tax on global intangible low-taxed income, or GILTI, (ii) state income taxes, and (iii) the effects of other jurisdictional and permanent differences, including excess tax benefits. The effective tax rate for the three months ended ~~September 30, 2018 was significantly impacted by~~March 31, 2020, which reduced the ~~transaction costs associated with an increase in fair value of the earn-out liability related to the stock acquisition of Symphony Health, which is not~~

~~deductible for tax but instead increases tax stock basis. These quarter events contributed to the comparative reduction in the~~estimated annual effective tax rate infor the ~~three months ended September 30, 2019 by 87.9%.~~quarter.

~~Consolidated~~Segment Results of Operations for the ~~Nine~~Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to the ~~Nine~~Three Months Ended ~~September 30, 2018~~March 31, 2019

Clinical Research

Nine Months Ended September 30,
2019 2018
(in thousands)
Revenue $ 2,266,022
$ 2,142,274
Operating expenses:
Direct costs (exclusive of depreciation and amortization) 1,153,441
1,134,509
Reimbursable expenses 471,682
430,892
Selling, general and administrative expenses 291,439
275,424
Transaction-related costs 572
32,709
Depreciation and amortization expense 85,462
84,163
Loss on disposal of fixed assets 900
21
Income from operations 262,526
184,556
Interest expense, net (37,834 ) (43,860 )
Loss on modification or extinguishment of debt (1,855 ) (454 )
Foreign currency gains (losses), net 1,864
(1,416 )
Other expense, net (66 ) (201 )
Income before income taxes and equity in income of unconsolidated joint ventures 224,635
138,625
Provision for income taxes 56,317
55,392
Income before equity in income of unconsolidated joint ventures 168,318
83,233
Equity in income of unconsolidated joint ventures, net of tax —
118
Net income 168,318
83,351
Net income attributable to noncontrolling interest (99 ) (898 )
Net income attributable to PRA Health Sciences, Inc. $ 168,219
$ 82,453



	Three Months Ended March 31,
	2020			2019
(in thousands)
Revenue	$	726,135		$	666,631
Segment profit	190,943			188,496
Segment profit %	26.3		%	28.3		%

Revenue increased by ~~$123.7~~$59.5 million, or ~~5.8%~~8.9%, from ~~$2,142.3~~$666.6 million during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 to ~~$2,266.0~~$726.1 million during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Revenue for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 benefited from an increase in billable hours and volume-related increases in our clinical activities as well as an increase in the effective rate of hours billed on our studies, offset by an unfavorable impact of $27.0 million from foreign currency exchange rate fluctuations. The growth in revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were active during the period, the growth in new business awards as a result of higher demand for our services across the industries we serve, more effective sales efforts, and the growth in the overall CRO market. The increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and services that we provide to those clients.

Direct costs, exclusive of depreciation and amortization, increased by $18.9 million, or 1.7%, from $1,134.5 million during the nine months ended September 30, 2018 to $1,153.4 million during the nine months ended September 30, 2019. Salaries and related benefits in our Clinical Research segment increased $44.9 million as we continue to hire billable staff to ensure appropriate staffing levels for our current studies and future growth. Data costs in our Data Solutions segment increased $6.3 million as we continue to expand our sources of data. These were offset by a favorable impact of $32.4 million from foreign currency exchange rate fluctuations. Direct costs as a percentage of revenue were 50.9% and 53.0% during the nine months ended September 30, 2019 and ~~2018, respectively.~~

Reimbursable expenses increased by $40.8 million from $430.9 million during the nine months ended September 30, 2018 to $471.7 million during the nine months ended September 30, 2019. We believe that the fluctuations in reimbursable expenses from period to period are not meaningful to our underlying performance over the full terms of the relevant contracts.

Selling, general and administrative expenses increased by $16.0 million, or 5.8%, from $275.4 million during the nine months ended September 30, 2018 to $291.4 million during the nine months ended September 30, 2019. The increase in selling, general and administrative expenses is primarily due to an increase in salaries and related benefits, including stock-based

compensation expense as we continue to hire staff and add additional office space to support our growing business. Selling, general and administrative expenses as a percentage of revenue were 12.9% during the nine months ended September 30, 2019 and 2018.

Transaction-related costs for the nine months ended September 30, 2019, totaling $0.6 million, consisted of costs incurred in connection with the September 2019 secondary offering of common stock. For the nine months ended September 30, 2018, we recorded $32.7 million of transaction-related costs. These costs consisted of $30.9 million for changes in the estimated fair value of contingent consideration related to our acquisitions, $0.8 million of stock-based compensation expense related to the release of a portion of the transfer restrictions on vested options, $0.5 million of third-party fees associated with the amendment to our accounts receivable financing agreement and $0.5 million of expenses incurred in connection with our August 2018 secondary offering of common stock.

Depreciation and amortization expense increased by $1.3 million, or 1.5%, from $84.2 million during the nine months ended September 30, 2018 to $85.5 million during the nine months ended September 30, 2019. Depreciation and amortization expense as a percentage of revenue was 3.8% during the nine months ended September 30, 2019 and 3.9% during the nine months ended September 30, 2018.

Interest expense, net, decreased by $6.0 million, or 13.7%, from $43.9 million during the nine months ended September 30, 2018 to $37.8 million during the nine months ended September 30, 2019. The change is primarily due to the voluntary principal prepayments made during 2018 and 2019 which was partially offset by interest expense incurred on the September 2019 incremental borrowing.

The loss on modification of debt was $1.9 million for the nine months ended September 30, 2019, and consisted of costs incurred associated with the incremental borrowing under the senior secured credit facilities. The loss on extinguishment of debt incurred during the nine months ended September 30, 2018, totaling $0.5 million, consisted of previously capitalized unamortized debt financing costs that were expensed as a result of voluntary debt repayments made during the period.

Foreign currency gains (losses), net, changed by $3.3 million from foreign currency losses of $1.4 million during the nine months ended September 30, 2018 to foreign currency gains of $1.9 million during the nine months ended September 30, 2019. Foreign currency gains and losses are due to fluctuations in the U.S. dollar, gains or losses that arise in connection with the revaluation of short-term inter-company balances between our domestic and international subsidiaries, and gains or losses from foreign currency transactions, such as those resulting from the settlement of third-party accounts receivables and payables denominated in a currency other than the local currency of the entity making the payment. During the nine months ended September 30, 2019, foreign currency gains were primarily due to movement of the U.S. dollar versus the British pound and the Euro.

Provision for income taxes increased by $0.9 million from $55.4 million during the nine months ended September 30, 2018 to $56.3 million during the nine months ended September 30, 2019. Our effective tax rate was 40.0% and 25.1% during the nine months ended September 30, 2018 and 2019, respectively. The decrease in the effective tax rate of 14.9% was primarily attributable to (i) higher levels of BEAT inclusion in the nine months ended September 30, 2018 than the nine months ended September 30, 2019; and (ii) the exclusion of the effect of an increase in the fair value of the earn-out liability related to the stock acquisition of Symphony Health during the nine months ended September 30, 2018, which is not included for taxable income but instead increases tax stock basis. During the nine months ended September 30, 2019, we updated our analysis of BEAT and its impact on the annual estimated effective tax rate for the 2019 tax year to reflect revisions to contractual arrangements.

~~Segment Results of Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018~~

~~Clinical Research~~

Three Months Ended September 30,
2019 2018
(in thousands)
Revenue $ 719,005
$ 656,979
Segment profit 206,345
184,225
Segment profit % 28.7 %
28.0 %

Revenue increased by $62.0 million, or 9.4%, from $657.0 million during the three months ended September 30, 2018 to $719.0 million during the three months ended September 30, 2019. Revenue for the three months ended September 30, 2019 benefited from an increase in billable hours and an increase in the effective rate of hours billed on our studies.activities. The growth in revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were active during the period, the growth in new business awards as a result of higher demand for our services across the industries we serve, and more effective sales efforts and the growth in the overall CRO market. The increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and services that we provide to those clients.

Segment profit increased by ~~$22.1~~$2.4 million, or ~~12.0%~~1.3%, from ~~$184.2~~$188.5 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$206.3~~$190.9 million during the three months ended ~~September 30, 2019~~March 31, 2020 primarily due to an increase in revenue. Segment profit as a percentage of revenue ~~increased~~decreased from ~~28.0%~~28.3% during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~28.7%~~26.3% for the same period in ~~2019.~~2020. Segment profit as a percentage of revenue ~~increased~~decreased primarily due to the ~~increased utilization of our staff.~~increase in reimbursable expenses.

Data Solutions


	Three Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2020			2019
(in thousands)
Revenue	$	61,686		$	60,617		$	57,573		$	55,391
Segment profit	15,077			19,232			12,062			15,018
Segment profit %	24.4		%	31.7		%	21.0		%	27.1		%

Revenue increased by ~~$1.1~~$2.2 million, or ~~1.8%~~3.9%, from ~~$60.6~~$55.4 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$61.7~~$57.6 million during the three months ended ~~September 30, 2019.~~March 31, 2020. The increase in revenue was related to an increase in ~~service in kind~~ services provided during the quarter. Service in kind revenue was ~~$4.3~~$3.3 million and ~~$3.0~~$4.0 million during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Segment profit decreased by ~~$4.2~~$3.0 million, or ~~21.6%~~19.7%, from ~~$19.2~~$15.0 million during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~$15.1~~$12.1 million during the three months ended ~~September 30, 2019~~March 31, 2020 due to an increase in direct costs (exclusive of depreciation and amortization). The increase in direct costs is attributable to higher data costs as we have expanded our sources of data and have experienced increased costs on the renewal of existing contracts, as well as an increase in salaries and benefits as we have increased headcount to support segment growth. Segment profit as a percentage of revenue decreased from ~~31.7%~~27.1% during the three months ended ~~September 30, 2018~~March 31, 2019 to ~~24.4%~~21.0% for the same period in ~~2019~~2020 primarily due to factors noted above.

~~Segment Results of Operations for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018~~

~~Clinical Research~~

Nine Months Ended September 30,
2019 2018
(in thousands)
Revenue $ 2,087,863
$ 1,966,762
Segment profit 593,852
524,955
Segment profit % 28.4 % 26.7 %

Revenue increased by $121.1 million, or 6.2%, from $1,966.8 million during the nine months ended September 30, 2018 to $2,087.9 million during the nine months ended September 30, 2019. Revenue for the nine months ended September 30, 2019 benefited from an increase in billable hours and an increase in the effective rate of hours billed on our studies. The growth in revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year, the type of services we are providing on our active studies, which was driven by the life cycles of projects that were active during the period, the growth in new business awards as a result of higher demand for our services across the industries we serve, more effective sales efforts and the growth in the overall CRO market. The increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and services that we provide to those clients.

Segment profit increased by $68.9 million, or 13.1%, from $525.0 million during the nine months ended September 30, 2018 to $593.9 million during the nine months ended September 30, 2019 primarily due to an increase in revenue. Segment profit as a percentage of revenue increased from 26.7% during the nine months ended September 30, 2018 to 28.4% for the same period in 2019. Segment profit as a percentage of revenue increased primarily due to the increased utilization of our staff.

~~Data Solutions~~

Nine Months Ended September 30,
2019 2018
(in thousands)
Revenue $ 178,159
$ 175,512
Segment profit 47,047
51,918
Segment profit % 26.4 % 29.6 %

Revenue increased by $2.6 million, or 1.5%, from $175.5 million during the nine months ended September 30, 2018 to $178.2 million during the nine months ended September 30, 2019. The increase in revenue was related to an increase in the volume of data services provided during the nine month period offset by a decrease in the amount of consulting and service in kind services provided during the nine month period. Service in kind revenue was $11.9 million and $12.8 million during the nine months ended September 30, 2019 and 2018, respectively.

Segment profit decreased by $4.9 million, or 9.4%, from $51.9 million during the nine months ended September 30, 2018 to $47.0 million during the nine months ended September 30, 2019 due to an increase in direct costs (exclusive of depreciation and amortization). The increase in direct costs is attributable to higher data costs as we have expanded our sources of data and have experienced increased costs on the renewal of existing contracts, as well as an increase in salaries and benefits as we have increased headcount to support segment growth. Segment profit as a percentage of revenue decreased from 29.6% during the nine months ended September 30, 2018 to 26.4% for the same period in 2019 primarily due to the factors noted above.

Seasonality

Although our business is not generally seasonal, we typically experience a slight decrease in our revenue growth rate during the fourth quarter due to holiday vacations and a similar decrease in new business awards in the first quarter due to our clients’ budgetary cycles and vacations during the year-end holiday period.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is operating cash flows. As of ~~September 30, 2019,~~March 31, 2020, we had approximately ~~$181.8~~$150.8 million of cash and cash equivalents of which ~~$56.0~~$68.0 million was held by our foreign subsidiaries. Additionally, as of March 31, 2020 our Revolver and Accounts Receivable Financing Agreement provided for $624.2 million of potential borrowings. Our expected primary cash needs on both a short and long-term basis are for capital expenditures, expansion of services, geographic expansion, debt repayments, acquisitions and other strategic transactions, and other general corporate purposes. We have historically funded our operations and growth, including acquisitions, with cash flow from operations, borrowings, and issuances of equity securities. We expect to continue expanding our operations through internal growth and strategic acquisitions and investments. We expect these activities will be funded from existing cash, cash flow from operations and, if necessary or appropriate, borrowings under our existing or future credit facilities. Our sources of liquidity could be affected by our dependence on a small number of industries and clients, compliance with regulations, international risks (including the ongoing COVID-19 pandemic), and personal injury, environmental or other material litigation claims.

Cash Collections

Cash collections from accounts receivable were ~~$2,195.2~~$784.2 million during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, including ~~$261.5~~$116.6 million of funds received from customers to pay independent physician investigators, or investigators, as compared to ~~$2,133.0~~$702.5 million during the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, including ~~$258.3~~$81.4 million of funds received from customers to pay investigators. The increase in cash collections during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 is related to our increase in revenue, driven by an increase in new business awards and an increase in our backlog.

Discussion of Cash Flows

Cash Flow from Operating Activities

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, net cash provided by operations was ~~$66.0~~$60.6 million compared to ~~$198.6~~$41.0 million provided by operations for the same period of ~~2018.~~2019. Cash ~~from~~provided by operating activities ~~decreased~~increased over the prior year primarily due to ~~an increase in~~increased cash ~~outflows associated with acquisition related earn-out payments~~flows from our operating performance as well as ~~an increase~~a decrease in cash outflows from working ~~capital.~~capital changes. The changes in working capital were driven by ~~changes in our accounts receivable, unbilled services and advanced billings accounts, as a result of~~ an ~~increase~~improvement in our days sales outstanding as compared to the prior year.

Cash Flow from Investing Activities

Net cash used in investing activities was ~~$59.7~~$181.3 million during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$39.7~~$19.1 million for the same period of ~~2018. Cash outflows from capital expenditures increased from $40.1 million during the nine months ended September 30, 2018 to $61.2 million during the same period in~~ 2019. The increase in ~~capital expenditures~~cash outflows is primarily ~~related~~attributable to ~~leasehold improvements and furniture and fixtures associated with new office space added to support our growing business.~~the acquisition of Care Innovations, Inc.

Cash Flow from Financing Activities

Net cash provided by financing activities was ~~$31.0~~$41.2 million during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~net cash used in financing activities of $221.6~~$10.4 million for the same period of ~~2018.~~2019. During the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 our ~~long-term~~ debt balances increased by ~~$305.0 million compared to a $155.9 million decrease for the same period of 2018.~~$38.8 million. Additionally, cash flows for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 include ~~an additional $10.9~~$2.9 million of cash inflows from ~~our~~stock option exercises compared to $10.4 million of cash inflows in the prior year related to option exercises and employee stock purchase plan as compared to the same period in the prior year. The remaining change in cash flows from financing activities is primarily attributable to cash outflows for the repurchase and retirement of common stock in the current year and the portion of acquisition related earn-out payments being classified as a financing activity in the prior year.purchases.

Indebtedness

As of ~~September 30, 2019,~~March 31, 2020, we had ~~$1,391.5~~$1,297.6 million of total indebtedness. Additionally, our 2016 Revolver provided $225.0 million of potential borrowings. At September 30, 2019, we had no outstanding borrowings under our 2016 Revolver and had $5.2 million in letters of credit outstanding, which were secured by the 2016 Revolver. We do not expect to pay dividends in the foreseeable future. Our long-term debt arrangements contain usual and customary restrictive covenants, and, as of ~~September 30, 2019,~~March 31, 2020, we were in compliance with these covenants.

On October 25, 2019, we refinanced our 2016 Credit Facilities by entering into the 2019 Credit Facilities. We entered into the 2019 First Lien Term Loan, with a syndicate of banks for an aggregate principal amount of $1,000.0 million of first lien term debt due in 2024, and a five-year $750.0 million revolving line of credit. The proceeds from the 2019 Credit Facilities were used to repay the 2016 First Lien Term Loan principal balance of $1,191.5 million and approximately $4.5 million in related fees and expenses.

See ~~Notes 7 and 16~~Note 9 to our consolidated condensed financial statements included in this Quarterly Report on Form 10-Q, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” and Note 911 to our audited consolidated financial statements, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, for additional details regarding our credit arrangements.

Contractual Obligations and Commercial Commitments

In ~~September 2019, the Company borrowed an additional $300.0 million~~January 2020, we acquired Care Innovations, Inc., which was partially funded using borrowings under the ~~2016 Credit Facilities, or~~Revolver. We also recognized a liability related to contingent consideration associated with the ~~Incremental Borrowing. See Note 7 to our consolidated condensed financial statements for information about the Incremental Borrowing.~~acquisition. As a result of these changes, our long-term debt obligations and contingent consideration as of ~~September 30, 2019~~March 31, 2020 are updated below.


	Payments due by Period										Payments Due by Period
	Remaining 2019 (3 Months)		2020 to 2021		2022 to 2023		Thereafter		Total		Remaining 2020 (9 Months)		2021 and 2022		2023 and 2024		Thereafter		Total
Principal payments on long-term debt (1)	$	—	$	1,391,533	$	—	$	—	$	1,391,533	$	18,750	$	220,000	$	1,058,800	$	—	$	1,297,550
Interest payments on long-term debt (1)	11,874		87,284		—		—		99,158		25,538		57,239		48,380		—		131,157
Contingent consideration on acquisition (2)											—		45,074		—		—		45,074
Total	$	11,874	$	1,478,817	$	—	$	—	$	1,490,691	$	44,288	$	322,313	$	1,107,180	$	—	$	1,473,781

(1) Principal payments are based on the terms contained in our agreements. Interest payments are based on the interest ~~rates~~rate in effect on ~~September 30, 2019.~~March 31, 2020.

(2) This amount is remeasured at fair value every reporting period with the change in fair value recorded in Transaction-related costs, net (see Note 3 to our consolidated condensed financial statements). The actual amounts ultimately paid out may be different depending on the level of achievement of certain earnings milestones.

Other than the ~~item~~items included above, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for fiscal year ended December 31, ~~2018.~~2019.

Critical Accounting Policies and Estimates

~~Other than the accounting policy changes noted in "Note 2 - Significant Accounting Policies Update" of the consolidated condensed financial statements in this Quarterly Report on Form 10-Q, there~~There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition to historical consolidated condensed financial information, this Quarterly Report on Form 10-Q contains forward-looking statements that reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may constitute forward-looking statements. Without limiting the foregoing, words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements

speak only as of the date hereof, and unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

~~We caution~~The Company cautions you that actual results may differ materially from ~~our~~the Company's expectations due to a number of factors, including that the current COVID-19 pandemic has adversely affected and may continue to affect adversely our business and results of operations; most of ~~our~~the Company’s contracts may be terminated on short notice and that wethe Company may be unable to maintain large customer contracts or to enter into new contracts; wethe Company may underprice contracts, overrun ~~our~~its cost estimates, or fail to receive approval for, or experience delays in, documenting change orders; the historical indications of the relationship of backlog to revenues may not be indicative of their future relationship; ~~if we are unable to achieve operating efficiencies or grow revenues faster than expenses, operating margins will be adversely affected; we~~the Company may be unable to attract suitable investigators and patients for ~~our~~its clinical trials; wethe Company could be subject to employment liability with ~~our~~its embedded and functional outsourcing solutions as ~~we place~~it places employees at the physical workplaces of ~~our~~its clients; wethe Company may lose key personnel or be unable to recruit and retain experienced personnel; changes in accounting standards may adversely affect our financial statements; our effective income tax rate may fluctuate which may adversely affect our operations, earnings, and earnings per share; wethe Company may be unable to maintain information systems or effectively update them; a failure or breach of ~~our~~the Company’s IT systems could result in customer information being compromised or otherwise significantly disrupt ~~our~~the Company’s business operations; client or therapeutic concentration or competition among clients could harm ~~our~~the Company’s business; ~~our~~if the Company does not keep pace with rapid technological changes, its services may become less competitive or obsolete; the Company may be unable to successfully identify, acquire and integrate businesses, services and technologies or to manage joint ventures; the Company’s business is subject to economic, political and other risks associated with international operations, including economic, political and other risks such as compliance with a myriad of laws and regulations, complications from conducting clinical trials in multiple countries simultaneously and changes in exchange rates; we are subject to a number of additional risks associated with our business outside the United States, including changes in tax law, foreign currency exchange ~~fluctuations and restrictive regulations, as well as~~rate fluctuations; the ~~risks and uncertainties associated with the United Kingdom’s expected withdrawal from the European Union and the adoption of trade restrictions between the U.S. and other national governments; we~~Company may be ~~unable~~exposed to ~~successfully develop and market new services or enter new markets; government regulators or customers may limit~~liabilities under anti-corruption laws due to the ~~scope~~global nature of ~~prescriptions or withdraw products from~~its business; the ~~market; government regulators may impose new regulations affecting our business; our~~Company’s failure to perform services in accordance with contractual requirements, certain laws and regulatory standards, and ethical considerations may subject usit to significant costs or liability, damage ~~our~~its reputation and cause usit to lose existing business or not receive new business; ~~our~~the Company’s services are related to treatment of human patients, and weit could face liability if a patient is harmed; ~~if we do not keep pace with rapid technological changes, our services may become less competitive or obsolete; our~~the Company’s relationships with existing or potential clients who are in competition with each other may adversely impact the degree to which other clients or potential clients use ~~our~~its services; wethe Company may be unable to compete effectively with other players in the biopharmaceutical services industry; wechanges in accounting standards may ~~be unable to successfully identify, acquire~~adversely affect the Company’s financial statements; the Company’s effective income tax rate may fluctuate which may adversely affect its operations, earnings, and ~~integrate businesses, services and technologies or to manage joint ventures; we~~earnings per share; the Company may not realize the full value of ~~our~~its goodwill and intangible assets, and may be unable to use net operating loss carry-forwards; ~~our disposal~~the Company’s suppliers may increase its costs to obtain, restrict its use of ~~hazardous substances~~or refuse to license its data, or the Company may otherwise be unable to continue to obtain products, services and ~~waste could give rise to liability; we~~licenses from third parties; the Company may be unable to protect ~~our~~its intellectual ~~property,~~property; patent and other intellectual property litigation could be ~~time consuming~~time-consuming and costly; biopharmaceutical industry outsourcing trends could change and adversely affect ~~our~~the Company’s operations and growth rate; government regulators or customers may limit the scope of prescriptions or withdraw products from the market; the U.S. and international healthcare industry is subject to political, economic and/or regulatory influences and changes, such as healthcare reform; current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost or could limit ~~our~~the Company’s service offerings; ~~circumstances beyond our control could cause industry-wide reduction in demand for our services; we~~the Company has substantial indebtedness, some of which have ~~substantial indebtedness~~interest rates pricing using a spread over LIBOR, and may incur additional indebtedness in the future, which could adversely affect ~~our~~the Company’s financial condition; circumstances beyond the Company’s control could cause industry-wide reduction in demand for its services; and other factors that are set forth in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on February ~~28, 2019.~~21, 2020.

Website and Social Media Disclosure

We use our website (www.prahs.com) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission, or SEC, filings and public conference calls and webcasts. The contents of our website are not, however, a part of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Item 4. Controls and Procedures

As of ~~September 30, 2019,~~March 31, 2020, we carried out an evaluation under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Regulations under the Exchange Act require public companies, including us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange

Act to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required or necessary disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. In accordance with the SEC's published guidance, the internal control over financial reporting of Care Innovations, Inc., or Care Innovations, which was acquired in January 2020 was excluded from our evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2020. Care Innovations represented 6% of our consolidated total assets and less than 1% of our consolidated revenue and net income as of and for the quarter ended March 31, 2020. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to accomplish their objective at a reasonable assurance level.

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are in the process of reviewing the internal control structure of Care Innovations and, if necessary, will make appropriate changes as we integrate Care Innovations into our overall internal control over financial reporting process.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information required with respect to this item can be found under “Commitments and Contingencies” in Note 1113 to our consolidated condensed financial statements included elsewhere in this Form 10-Q and is incorporated by reference into this Item 1.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018. There~~2019. In addition, we have identified the following additional risk as of March 31, 2020.

The effects of the COVID-19 outbreak could adversely affect our business, results of operations, and financial condition.

In December 2019, a novel strain of coronavirus, now known as COVID-19, was reported to have surfaced in Wuhan, China and to cause a severe respiratory illness. Since then, COVID-19 has spread globally, including to numerous countries in which we have ongoing and planned clinical trials. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. In an effort to halt the outbreak of COVID-19, a number of countries, including the United States, have placed significant restrictions on travel and many businesses have announced extended closures. While these actions vary by locale, they have generally been ~~no significant changes~~expanding in scope. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response.

The global COVID-19 pandemic continues to rapidly evolve. The extent to which COVID-19 may impact our business and clinical trials will depend on future developments that are highly uncertain and cannot be predicted with any degree of confidence, such as the following: the ultimate geographic spread and severity of the disease; the duration of the outbreak or future outbreaks; travel restrictions and the implementation of social distancing in the United States and other countries; business closures or business disruptions; and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and current and future outbreaks. We may experience disruptions due to the COVID-19 pandemic that could severely impact our business and clinical trials in our Clinical Research segment, including:

delays, difficulties or a suspension in enrolling patients in our ongoing and planned clinical trials;

delays, difficulties or a suspension in clinical site initiation, including difficulties in recruiting clinical site investigators;

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state or local governments; and

limitations in employee resources that would otherwise be focused on our business and the conduct of our clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, and governmental orders that limit the ability of our employees to leave their homes.

For our clinical trials that are planned to be conducted at sites in countries that are experiencing heightened impact from COVID-19, in addition to the risks listed above, we may also experience the following adverse impacts:

delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;

interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials;

changes in local regulations as part of a response to the COVID-19 outbreak that may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

refusal of the United States Food and Drug Administration to accept data from clinical trials in these affected geographies.

Our Data Solutions business is relatively more insulated from the effects of the virus due to a high portion of recurring license revenue in this segment. However, businesses in this segment that rely on face-to-face interactions or are dependent on in-person gatherings, events or conferences may experience significant disruption.

We have also closed the majority of our physical office locations worldwide, requiring most of our workforce in both our Clinical Research and Data Solutions businesses to work remotely. While we believe that most of our employees are able to work remotely in an effective way, our operations could be disrupted if key members of our senior management or a significant percentage of our workforce are unable to continue to work because of illness, government directives or otherwise. Having shifted to remote working arrangements, we also face a heightened risk ~~factors previously disclosed in such annual report.~~of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities.

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


(a)	Not applicable.


(b)	Not applicable.


(c)	Purchases of Equity Securities by the Issuer

On August 30, 2019, our board of directors authorized a share repurchase program, or the Repurchase Program, pursuant to which we may repurchase up to $500 million of common stock, effective immediately and through and including December 31, 2021, when the ~~date on which the repurchase program~~Repurchase Program will expire. Under the repurchase program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions, secondary offerings, block trades or otherwise in accordance with all applicable securities laws and regulations, including through Rule 10b5-1 trading plans and pursuant to Rule 10b-18 under the Exchange Act.

On September 6, 2019, KKR PRA Investors L.P. sold 6,666,684 shares of our common stock as part of a secondary offering, of which we repurchased 3,079,765 shares for an aggregate purchase price of approximately $300.0 million.No repurchases were made during the three months ended March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, we have remaining authorization to repurchase up to $200.0 million of common stock under the ~~share repurchase program.~~

The following table summarizes the share repurchase program activity for the three months ended September 30, 2019, and the approximate dollar value of shares that may yet be purchased pursuant to the share repurchase program.

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs
(in thousands, except share and per share data)
July 1, 2019 - July 31, 2019 —
$ —
—
$ —
August 1, 2019 - August 31, 2019 —
—
—

500,000 ⁽¹⁾

September 1, 2019 - September 30, 2019 3,079,765
97.41
3,079,765
200,000
3,079,765
3,079,765


~~(1)~~	~~All shares are covered by the program described above. The program was announced on September 3, 2019 and expires on December 31, 2021.~~

Repurchase Program.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits



Exhibit
Number		Description of Exhibit

~~10.1~~		Third Joinder Agreement, dated as September 3, 2019, by and among of Pharmaceutical Research Associates, Inc., PRA Health Sciences, Inc., each of the subsidiaries from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent and collateral agent and other agents and lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 4, 2019 (No. 001-36732)).

~~10.2~~		Underwriting Agreement, dated as of September 3, 2019, among PRA Health Sciences, Inc., the Selling Stockholder named therein and Goldman Sachs & Co. LLC, as Underwriter (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed on September 6, 2019 (No. 001-36732)).

31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following financial information from PRA Health Sciences, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019~~March 31, 2020 formatted in inline XBRL (iXBRL): (i) Consolidated Condensed Balance Sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, (ii) Consolidated Condensed Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (iii) Consolidated Condensed Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31 2020 and 2019, ~~and 2018,~~ (iv) Consolidated Condensed Statements of Changes in Stockholders' Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (v) Consolidated Condensed Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and (v) Notes to Consolidated Condensed Financial Statements.

104*		Cover page from PRA Health Sciences, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019,~~March 31, 2020, formatted iXBRL and contained in Exhibit 101.




*		Filed herewith

SIGNATURES

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



	PRA HEALTH SCIENCES, INC.

	/s/ Michael J. Bonello
	Michael J. Bonello
	Executive Vice President and Chief Financial Officer
	(Authorized Signatory)

Date: ~~October 31, 2019~~May 1, 2020

4035



2019 (remaining)	$	9,192
2020	42,946
2021	39,210
2022	31,454
2023	25,891
Thereafter	93,864
Total lease payments	242,557
Less imputed interest	(38,153		)
Total	$	204,404



2019	$	43,675
2020	40,948
2021	37,469
2022	30,238
2023	24,235
Thereafter	90,978
Total lease payments	$	267,543



	2019			2018
Balance as of January 1,	$	6,390		$	5,710
Comprehensive income
Net income	99			898
Foreign currency adjustments, net of income tax	76			(75		)
Acquisition of noncontrolling interest	(6,565		)	—
Balance as of September 30,	$	—		$	6,533



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
	(in thousands, except share and per share data)
July 1, 2019 - July 31, 2019	—	$	—	—	$	—
August 1, 2019 - August 31, 2019	—	—		—	500,000 ⁽¹⁾
September 1, 2019 - September 30, 2019	3,079,765	97.41		3,079,765	200,000
	3,079,765			3,079,765