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, 2017
.
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.
Reclassification
During the fourth quarter of 2017, the Company made an accounting policy election to present changes in the estimated fair value of contingent consideration as part of income from operations within transaction-related costs on the consolidated condensed statements of operations. The Company recasted the
$1.0 million
and
$0.9 million
changes in estimated fair value of contingent consideration for the
three and nine months ended September 30, 2017
, respectively, that were previously included in other income, net on the consolidated condensed statements of operations.
Recently Implemented Accounting Pronouncements
On January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, "Revenue from Contracts with Customers," or ASC 606, using the modified retrospective method for all contracts that were not completed as of January 1, 2018. Comparative prior period information continues to be reported under the accounting standards in effect for the period presented. The Company recorded a net decrease in opening retained earnings of
$60.6 million
as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The Company decreased unbilled services by
$67.4 million
, increased deferred tax assets by
$18.3 million
, increased accrued expenses by
$50.8 million
, and decreased advanced billings by
$39.3 million
as of January 1, 2018. The adoption of ASC 606 had
no
net impact on the Company’s consolidated condensed statement of cash flows.
The impact of adoption of ASC 606 on the Company's consolidated condensed statements of operations for the
three months ended September 30, 2018
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Reclassification from adoption of ASC 606
|
|
Impact from adoption of ASC 606
|
|
Balances without adoption of ASC 606
|
Revenue:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
717,596
|
|
|
$
|
(650,514
|
)
|
|
$
|
(67,082
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
—
|
|
|
572,930
|
|
|
—
|
|
|
572,930
|
|
Reimbursement revenue
|
|
—
|
|
|
77,584
|
|
|
—
|
|
|
77,584
|
|
Total revenue
|
|
717,596
|
|
|
—
|
|
|
(67,082
|
)
|
|
650,514
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Direct costs (exclusive of depreciation and amortization)
|
|
371,422
|
|
|
—
|
|
|
—
|
|
|
371,422
|
|
Reimbursable out-of-pocket costs
|
|
77,584
|
|
|
—
|
|
|
—
|
|
|
77,584
|
|
Reimbursable investigator fees
|
|
65,133
|
|
|
—
|
|
|
(65,133
|
)
|
|
—
|
|
Selling, general and administrative expenses
|
|
92,553
|
|
|
—
|
|
|
—
|
|
|
92,553
|
|
Transaction-related costs
|
|
43,837
|
|
|
—
|
|
|
—
|
|
|
43,837
|
|
Depreciation and amortization
|
|
28,270
|
|
|
—
|
|
|
—
|
|
|
28,270
|
|
Gain on disposal of fixed assets, net
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
Income from operations
|
|
$
|
38,812
|
|
|
$
|
—
|
|
|
$
|
(1,949
|
)
|
|
$
|
36,863
|
|
The impact of adoption of ASC 606 on the Company's consolidated condensed statements of operations for the
nine months ended September 30, 2018
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Reclassification from adoption of ASC 606
|
|
Impact from adoption of ASC 606
|
|
Balances without adoption of ASC 606
|
Revenue:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,142,274
|
|
|
$
|
(1,945,138
|
)
|
|
$
|
(197,136
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Service revenue
|
|
—
|
|
|
1,707,831
|
|
|
—
|
|
|
1,707,831
|
|
Reimbursement revenue
|
|
—
|
|
|
237,307
|
|
|
—
|
|
|
237,307
|
|
Total revenue
|
|
2,142,274
|
|
|
—
|
|
|
(197,136
|
)
|
|
1,945,138
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Direct costs (exclusive of depreciation and amortization)
|
|
1,134,509
|
|
|
—
|
|
|
—
|
|
|
1,134,509
|
|
Reimbursable out-of-pocket costs
|
|
237,307
|
|
|
—
|
|
|
—
|
|
|
237,307
|
|
Reimbursable investigator fees
|
|
193,585
|
|
|
—
|
|
|
(193,585
|
)
|
|
—
|
|
Selling, general and administrative expenses
|
|
275,424
|
|
|
—
|
|
|
—
|
|
|
275,424
|
|
Transaction-related costs
|
|
32,709
|
|
|
—
|
|
|
—
|
|
|
32,709
|
|
Depreciation and amortization
|
|
84,163
|
|
|
—
|
|
|
—
|
|
|
84,163
|
|
Loss on disposal of fixed assets, net
|
|
21
|
|
|
—
|
|
|
—
|
|
|
21
|
|
Income from operations
|
|
$
|
184,556
|
|
|
$
|
—
|
|
|
$
|
(3,551
|
)
|
|
$
|
181,005
|
|
Periods presented prior to adoption have been recast to conform with the presentation of a single revenue total in the consolidated condensed statement of operations. Previously, the
three months ended September 30, 2017
included service revenue of
$494.6 million
, reimbursement revenue of
$87.5 million
, and excluded
$57.9 million
in investigator fees which were reported net of costs incurred. The
nine months ended September 30, 2017
included service revenue of
$1,379.6 million
and reimbursement revenue of
$223.9 million
, and excluded
$181.0 million
in investigator fees which were reported net of costs incurred.
In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting,” which provides guidance about what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with ASC Topic 718, “Stock Compensation.” The amendments to ASU No. 2017-09 went into effect for reporting periods beginning after December 15, 2017. The adoption of ASU No. 2017-09 did not have a material impact on the Company's consolidated condensed financial statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which clarifies that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, it should be treated as an acquisition or disposition of an asset. The amendments to ASU No. 2017-01 went into effect for fiscal years beginning after December 15, 2017. The adoption of ASU No. 2017-01 did not have a material impact on the Company's consolidated condensed financial statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which revises the accounting related to leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases with terms greater than
12
months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The provisions of ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018 and should be applied through a modified retrospective transition approach by either adjusting prior periods for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements or by not adjusting the comparative periods and recording a cumulative effect adjustment as of the adoption date. The Company has established an implementation team to assist with the adoption of the new standard. The evaluation and implementation process is ongoing and is expected to continue through the remainder of 2018 as the Company performs an analysis of its lease portfolio to identify potential differences from its current accounting policies, and as it reviews the business processes, systems and controls required to support recognition and disclosure under the new standard. Upon implementation, the Company expects to recognize substantially all of its leases on the balance sheet by recording a right-to-use asset and a corresponding lease liability.
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 amendments to ASU No. 2017-04 are effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company's consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, "Derivatives 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 value of a hedging instrument 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. The amendments to ASU No. 2017-12 are effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of ASU No. 2017-12 is not expected to have a material impact on the Company's consolidated 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 amendments to ASU No. 2018-02 are effective for the reporting period beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. The Company is currently assessing the potential impact of ASU No. 2018-02 on the Company's consolidated 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 amendments to ASU No. 2018-15 are effective for the reporting period beginning after December 15, 2019, and interim periods therein, with early adoption permitted. The adoption of ASU No. 2018-15 is not expected to have a material impact on the Company's consolidated financial statements.
(2) Significant Accounting Policies Update
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, 2017. Significant changes to the Company's accounting policies as a result of adopting ASC 606 are discussed below:
Revenue Recognition
All revenue is generated from contracts with customers. Revenue is recognized when control of the performance obligation is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Revenue recognition is determined through the application of the following steps:
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•
|
identification of the contract, or contracts, with a customer;
|
|
|
•
|
identification of the performance obligations in the contract;
|
|
|
•
|
determination of the transaction price;
|
|
|
•
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
|
•
|
recognition of revenue when, or as, the Company satisfies a performance obligation.
|
Clinical Research
The Company generally enters into contracts with customers to provide clinical research services with payments based on either fixed‑fee, time and materials, or fee‑for‑service arrangements. The Company is also entitled to reimbursement for investigator fees and out-of-pocket costs associated with these services. At contract inception, the Company assesses the services promised in the contracts with customers to identify the performance obligations in the arrangement. The Company’s long term fixed-fee arrangements for clinical research services are considered a single performance obligation because the Company provides a highly-integrated service. A single performance obligation requires the inclusion of investigator fees and out-of-pocket costs in both the contract revenue value and in the cost used to measure progress in transferring control to the customer.
The inclusion of investigator fees and out-of-pocket costs in the measurement of progress under these long-term fixed-fee contracts as part of a single performance obligation can create a timing difference between amounts the Company is entitled to receive in reimbursement for costs incurred and the amount of revenue recognized related to such costs on individual projects, which is recognized as unbilled services. The magnitude of this timing difference compared to historical accounting is dependent on the relative size and progress of the direct service portion of the arrangement compared to the progress of the reimbursable investigator fees and reimbursable out-of-pocket costs relative to their respective forecasted costs over the life of the project.
Revenue is recognized for the single performance obligation over time due to the Company’s right to payment for work performed to date. The contracts generally provide for the right to invoice the customer as work progresses, either based on units performed or the achievement of billing milestones. The Company generally uses the cost-to-cost measure of progress for the Company's contracts because it best depicts the transfer of control to the customer as the performance obligation is fulfilled. For this method, the Company compares the contract costs incurred to date to the estimated total contract costs through completion. As part of the client proposal and contract negotiation process, the Company develops a detailed project budget for the direct costs and reimbursable costs based on the scope of the work, the complexity of the study, the geographical location involved and the Company’s historical experience.
The estimated total contract costs at the project level are reviewed and revised periodically throughout the lives of the contracts, with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are identified. Contract costs consist primarily of direct labor and other reimbursable project-related costs such as travel, third-party vendor costs and investigator fees.
The Company establishes pricing based on the Company’s internal pricing guidelines, discount agreements, if any, and negotiations with the client. The transaction price is the contractually defined amount that includes adjustment for variable consideration such as reimbursable costs, discounts, and bonus or penalties, which are estimable.
A majority of the Company’s contracts undergo modifications over the contract period and the Company’s contracts provide for these modifications. During the modification process, the Company recognizes revenue to the extent it incurs costs, provided that a contractual understanding has been reached.
Fixed-fee arrangements for Phase I and Phase II(a) clinical services and bio-analytical services are short-term contracts for accounting purposes as these contracts are cancellable and the termination penalties for exiting these contracts are not substantive. The Company generally bills for services on a milestone basis. The transaction price, representing the value of the services to be provided over the entire contract inclusive of all costs for which the Company is a principal, is the contractually defined amount that includes adjustment for variable consideration, such as reimbursable expenses and discounts, which are estimable. When multiple performance obligations exist, the transaction price is allocated to the performance obligations on a relative standalone selling price basis. Given the highly integrated nature of the services provided, most contracts represent a single performance obligation. Due to the Company's right to payment for work performed, revenue is recognized over time as services are delivered.
Clinical research services delivered under fee-for-service arrangements are recognized over time. The services are accounted for as a single performance obligation that is a series of distinct services with substantially the same pattern of transfer to the customer. Clinical research services provided in these types of arrangements are typically linked to the delivery of resources billed at contractual rates, such rates being dependent on the role and the tenure of the resource provided. The fee-for-service is typically billed one month in arrears, which generally results in an unbilled services asset at period-end. In addition, out-of-pocket costs are reimbursed by the customer. Fees are allocated to each distinct month of service using time elapsed as a measure of progress toward the satisfaction of the performance obligation and variable consideration is allocated to the period in which it is incurred.
Revenue from time and materials contracts is recognized as hours are incurred.
The Company often offers volume discounts to certain of its large customers based on annual volume, which is variable consideration that is considered in the contract value. The Company records an estimate of the volume rebate as a reduction of the transaction price based on the estimated total rebates to be earned by the customers for the period.
Data Solutions
The Company provides data reports and analytics to customers based on agreed-upon specifications, including the timing of delivery, which is typically either weekly, monthly, or quarterly. If a customer requests more than one type of data report or series of data reports within a contract, each distinct type of data report is a separate performance obligation. The contracts provide for the Company to be compensated for the value of each deliverable. The transaction price is determined using list prices, discount agreements, if any, and negotiations with the customers, and generally includes any out-of-pocket expenses. Typically, the Company bills in advance of services being provided with the amount being recorded as advanced billings.
When multiple performance obligations exist, the transaction price is allocated to performance obligations on a relative standalone selling price basis. In cases where the Company contracts to provide a series of data reports, or in some cases data, the Company recognizes revenue over time using the ‘units delivered’ output method as the data or reports are delivered. Expense reimbursements are recorded to revenue as the expenses are incurred as they relate directly to the services performed.
Certain Data Solutions arrangements include upfront customization or consultative services for customers; these arrangements often include payments based on the achievement of certain contractual milestones. Under these arrangements, the Company contracts with a customer to carry out a specific study, ultimately resulting in delivery of a custom report or data product. These arrangements are a single performance obligation given the integrated nature of the service being provided. The Company typically recognizes revenue under these contracts over time, using an output-based measure, generally time elapsed,
to measure progress and transfer of control of the performance obligation to the customer. Expense reimbursements are recorded to revenue as the expenses are incurred as they relate directly to the service performed.
The Company's Data Solutions segment enters into contracts with some of its larger data suppliers that involve non-monetary terms. The Company will issue purchase credits to be used toward the data supplier's purchase of the Company's services. In exchange, the Company receives monetary discounts on the data received from the data suppliers. The fair value of the revenue earned from the customer purchases is determined based on similar product offerings to other customers. At the end of the contract year, any unused customer purchase credits may be forfeited or carried over to the next contract year based on the terms of the data supplier contract. For the
three and nine months ended September 30, 2018
, the Company recognized service in kind revenue of
$3.0 million
and
$12.8 million
, respectively, from these transactions, which is included in revenue in the accompanying consolidated condensed statements of operations.
Significant Judgments and Estimates
Accounting for the Company’s long term contracts requires estimates of future costs to be incurred to fulfill the contract obligations.
Due to the nature of the work required to be performed by the Company to fulfill performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. The Company's long-term contracts may contain incentive fees, penalties, or other provisions that can either increase or decrease the transaction price. The Company estimates variable consideration at the most likely amount to which the Company expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company's estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and information that is available to the Company. Judgment is also required to identify performance obligations and in determining the relative standalone selling price of those obligations, specifically for the Data Solutions segment. The estimates and assumptions are evaluated on an ongoing basis and adjusted, as needed, using historical experience and contract specific factors. Actual results could differ significantly from these estimates.
Performance Obligations
Revenue recognized for the
three and nine
months ended
September 30, 2018
from services completed in prior periods was
$24.4 million
and
$57.3 million
, 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
$4.6 billion
as of
September 30, 2018
; this amount includes reimbursement revenue and investigator fees. 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.
Accounts Receivable and Unbilled Services
Accounts receivable represent amounts for which invoices have been sent to clients based upon contract terms. Unbilled services represent amounts earned for services that have been rendered but for which customers have not been billed. Unbilled services where the Company’s right to bill is conditioned on something other than the passage of time are contract assets and are separately disclosed in Note 6.
Advanced Billings
Advanced billings, also referred to as contract liabilities, consist of advanced payments and billings on a contract in excess of revenue recognized; these amounts represent consideration received or unconditionally due from a customer prior to transferring services to the customer under the terms of the service contract. These balances are reported net of contract assets on a contract-by-contract basis at the end of each reporting period.
In order to determine revenue recognized in the period from advanced billings liabilities, the Company first allocates revenue from the customer contract to the individual advanced billings liability balance outstanding at the beginning of the period until the revenue exceeds that balance.
Secondary Offerings
In August 2018, KKR PRA Investors L.P., or KKR, sold
6,500,000
shares of the Company’s common stock as part of a secondary offering, or the Secondary Offering. The Company incurred expenses in connection with the Secondary Offering of
$0.5 million
during the
three and nine months ended September 30, 2018
. The expenses are included in transaction-related costs in the accompanying consolidated condensed statement of operations. As of
September 30, 2018
, KKR owned
10.3%
of the Company’s outstanding common stock.
(3) Business Combinations
Symphony Health Solutions, Inc.
On September 6, 2017, the Company acquired all of the outstanding equity interest of Symphony Health Solutions, Inc., or Symphony Health, a provider of data and analytics to help professionals understand the full market lifecycle of products offered for sale by companies in the pharmaceutical industry, for
$539.4 million
in cash and contingent consideration, which was not capped, in the form of potential earn-out payments based on a multiple of future earnings for the twelve-month periods ending December 2017 and December 2018. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical research and commercialization process with technologies that provide data and analytics.
The fair value of the contingent consideration was determined by using a probability-weighted method that includes key assumptions such as the discount rate and projected future earnings over the earn-out periods. As the fair value was based on significant inputs not observed in the market, the valuation represented a Level 3 measurement. The Company reassesses the fair value of expected contingent consideration and the corresponding liability each reporting period using a probability-weighted method reflecting updated assumptions as of the valuation date. Changes in the fair value of the contingent consideration are recognized in earnings in the period of such change.
During February 2018, the Company made the year-end 2017 preliminary earn-out payment, which totaled
$114.7 million
that was recognized at December 31, 2017. During April 2018, the Company and the sellers of Symphony Health finalized the 2017 earn-out calculation and the actual 2017 earn-out payment was adjusted to
$112.8 million
. As a result, the Company recorded a
$1.9 million
reduction to transaction-related costs during the
nine months ended September 30, 2018
, and a
$1.9 million
reduction to accrued expenses and other current liabilities in the consolidated condensed balance sheet as of
September 30, 2018
.
As of
September 30, 2018
, the 2018 earn-out liability totaled
$83.5 million
, which is included in accrued expenses in the consolidated condensed balance sheet. The 2018 earn-out payment, which is based on 2018 earnings and is payable in the first quarter of 2019, could range from
$0
to approximately
$110.2 million
. The Company recorded a
$42.6 million
and
$32.9 million
increase to the estimated fair value of the 2018 earn-out liability during the three and
nine months ended September 30, 2018
, respectively, which is included in transaction-related costs in the consolidated condensed statement of operations. The 2018 earn-out liability varies based on earnings for 2018, including the possible achievement of
two
thresholds that would each result in an additional
$25.0 million
payment. Accordingly, the amount of earn-out liability is highly sensitive to changes in the earnings of the business. This uncertainty may result in additional material changes to the liability through its finalization in the fourth quarter of 2018.
The acquisition of Symphony Health 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. In connection with the acquisition, the Company recorded approximately
$476.9 million
of goodwill, which was assigned to the Data Solutions segment and is
no
t deductible for income tax purposes. The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existing operations. Since December 31, 2017, goodwill increased by
$0.9 million
, as a result of adjustments made to the acquired advanced billings balance.
The Company’s purchase price allocation is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Purchase Price Allocation
|
|
Weighted Amortization Period
|
Cash and cash equivalents
|
|
$
|
26,297
|
|
|
|
Accounts receivable and unbilled services
|
|
39,132
|
|
|
|
Other current assets
|
|
23,726
|
|
|
|
Fixed assets
|
|
12,340
|
|
|
|
Customer relationships
|
|
190,100
|
|
|
10 years
|
Database
|
|
137,100
|
|
|
3 years
|
Tradename
|
|
2,000
|
|
|
2 years
|
Accounts payable and accrued expenses
|
|
(42,222
|
)
|
|
|
Advanced billings
|
|
(66,846
|
)
|
|
|
Deferred tax liabilities
|
|
(104,869
|
)
|
|
|
Other long-term liabilities
|
|
(6,740
|
)
|
|
|
Estimated fair value of net assets acquired
|
|
210,018
|
|
|
|
Purchase price, including contingent consideration and working capital adjustment
|
|
686,877
|
|
|
|
Total goodwill
|
|
$
|
476,859
|
|
|
|
The following unaudited pro-forma information assumes the acquisition of Symphony Health occurred as of the beginning of 2016. This pro-forma financial information is not necessarily indicative of operating results if the acquisition had been completed at the date indicated, nor is it necessarily an indication of future operating results.
|
|
|
|
|
|
(in thousands, except per share amounts)
|
|
Nine Months Ended September 30, 2017
|
Total revenue
|
|
$
|
1,752,514
|
|
Net income attributable to PRA Health Sciences, Inc.
|
|
126,092
|
|
Net income per share:
|
|
|
Basic
|
|
$
|
2.03
|
|
Diluted
|
|
$
|
1.92
|
|
The unaudited pro-forma adjustments primarily relate to the amortization of acquired intangible assets as well as interest expense and amortization of debt issuance costs related to the incremental borrowings to fund the acquisition. In addition, the unaudited pro-forma net income for the nine months ended September 30, 2017 was adjusted to exclude
$3.9 million
of nonrecurring transaction-related costs, net of tax, as well as a
$1.9 million
loss on the modification or extinguishment of long-term debt, net of tax.
Takeda Transactions
On June 1, 2017, the Company acquired all of the outstanding shares of Takeda Pharmaceutical Data Services, Ltd., or TDS, from Takeda Pharmaceutical Company Ltd., or Takeda, for
$0.7 million
in cash. The Company recorded approximately
$1.0 million
of goodwill, which is assigned to the Clinical Research segment and is not deductible for income tax purposes.
On June 1, 2017, the Company and Takeda also 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 TDC joint venture. The Company paid
$5.4 million
for a
50%
equity interest in the TDC joint venture, which represents
50%
of the fair value of the net assets and workforce that Takeda contributed to the joint venture. The joint venture provides services including clinical trial monitoring, project management, regulatory strategy and submissions, data management, biostatistics, drug safety reporting, and medical monitoring. The Company is required to buy-out Takeda’s
50%
interest in the TDC joint venture in
two years
from the date of the closing of the joint venture transaction. The Company also has an early buy-out option of Takeda’s
50%
interest in December 2018, if both parties agree.
The Company determined that the TDC joint venture is a variable interest entity, or VIE, in which the Company is the primary beneficiary. Accordingly, the Company accounted for the
$5.4 million
contribution to the TDC joint venture as a business combination and consolidated the VIE in its financial statements with a noncontrolling interest for the
50%
portion
owned by Takeda. The assets acquired and the liabilities assumed have been recorded at their respective estimated fair values as of June 1, 2017. The Company recorded approximately
$2.7 million
of goodwill, which is assigned to the Clinical Research segment and is not deductible for income tax purposes. The goodwill is primarily attributable to the assembled workforce.
The Company’s fair value of the net assets acquired as part of the TDC joint venture transaction at the closing date of the business combination is as follows (in thousands):
|
|
|
|
|
|
|
|
Purchase Price Allocation
|
Cash and cash equivalents
|
|
$
|
8,120
|
|
Other current assets
|
|
1,671
|
|
Other assets
|
|
799
|
|
Accounts payable and accrued expenses
|
|
(2,380
|
)
|
Estimated fair value of net assets acquired
|
|
8,210
|
|
PRA purchase price
|
|
5,440
|
|
Fair value of Takeda's noncontrolling interest
|
|
5,440
|
|
Total goodwill
|
|
$
|
2,670
|
|
Parallel 6, Inc.
On May 10, 2017, the Company acquired all of the outstanding equity interest of Parallel 6, Inc., or Parallel 6, a developer of technologies for improving patient enrollment, engagement, and management of clinical trials, for
$39.0 million
in cash and contingent consideration in the form of a potential earn-out payment of up to
$10.0 million
. The earn-out payment was contingent upon the achievement of certain external software sales targets during the
18
-month period following closing. With this acquisition, the Company expects to enhance its ability to serve customers throughout the clinical research process with technologies that provide improved efficiencies by reducing study durations and costs through integrated operational management.
The acquisition of Parallel 6 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. In connection with the acquisition, the Company recorded approximately
$31.3 million
of goodwill, which was assigned to the Clinical Research segment and is not deductible for income tax purposes. The goodwill is attributable to the workforce of the acquired business and expected synergies with the Company’s existing information technology operations. Since December 31, 2017, goodwill decreased by
$1.1 million
, primarily as a result of adjustments made to the acquired income tax balances.
The Company’s purchase price allocation is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Purchase Price Allocation
|
|
Weighted Amortization Period
|
Cash and cash equivalents
|
|
$
|
132
|
|
|
|
Accounts receivable and unbilled services
|
|
929
|
|
|
|
Other current assets
|
|
26
|
|
|
|
Software intangible
|
|
15,500
|
|
|
5 years
|
Other intangibles
|
|
920
|
|
|
5 years
|
Accounts payable and accrued expenses
|
|
(780
|
)
|
|
|
Advanced billings
|
|
(692
|
)
|
|
|
Other long-term liabilities
|
|
(31
|
)
|
|
|
Estimated fair value of net assets acquired
|
|
16,004
|
|
|
|
Purchase price, including contingent consideration
|
|
47,339
|
|
|
|
Total goodwill
|
|
$
|
31,335
|
|
|
|
(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 assets and liabilities that are measured on a recurring basis as of
September 30, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
7,948
|
|
|
$
|
—
|
|
|
$
|
7,948
|
|
Total
|
|
$
|
—
|
|
|
$
|
7,948
|
|
|
$
|
—
|
|
|
$
|
7,948
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,512
|
|
|
$
|
83,512
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,512
|
|
|
$
|
83,512
|
|
The Company values contingent consideration using models that include significant unobservable Level 3 inputs, such as projected financial performance over the earn-out 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 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 the
nine months ended
September 30, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Consideration - Accrued expenses and other current liabilities
|
|
Contingent Consideration - Other long-term liabilities
|
Balance at December 31, 2017
|
|
$
|
—
|
|
|
$
|
50,644
|
|
Reclassification adjustment
|
|
50,644
|
|
|
(50,644
|
)
|
Change in fair value recognized in transaction-related costs
|
|
32,868
|
|
|
—
|
|
Balance at September 30, 2018
|
|
$
|
83,512
|
|
|
$
|
—
|
|
The
$83.5 million
balance at
September 30, 2018
, which was valued using a probability-weighted method, relates to the 2018 earn-out payment to Symphony Health and is based on its future adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA. Key assumptions include probability adjusted level of Adjusted EBITDA of
$56.2 million
for the year ended December 31, 2018, and a discount rate of
8%
. Refer to Note 3 for additional discussion of the Symphony Health 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 which are tested for impairment when a triggering event occurs and goodwill and identifiable indefinite-lived intangible assets which are tested for impairment annually on October 1 or when a triggering event occurs.
As of
September 30, 2018
, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaling approximately
$2,226.6 million
and are identified as Level 3 assets. These assets are comprised of goodwill of
$1,501.6 million
and identifiable intangible assets, net of
$725.0 million
.
Refer to Note 8, Revolving Credit Facilities and Long-Term Debt, for additional information regarding the fair value of long-term debt balances.
(5) Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, unbilled services, contract assets and derivatives. As of
September 30, 2018
, substantially all of the Company’s cash and cash equivalents and derivatives were held in or invested with large financial institutions. Accounts receivable include amounts due from pharmaceutical and biotechnology companies. The Company establishes an allowance for potentially uncollectible receivables. In management’s opinion, there is no additional material credit risk beyond amounts provided for such losses.
Revenue from individual customers greater than
10%
of consolidated revenue in the respective periods was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Customer A
|
|
—
|
%
|
|
10.1
|
%
|
|
—
|
%
|
|
10.6
|
%
|
Accounts receivable and unbilled receivables from individual customers that were equal to or greater than
10%
of consolidated accounts receivable and unbilled receivables at the respective dates were as follows:
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Customer A
|
|
12.0
|
%
|
|
11.5
|
%
|
Customer B
|
|
11.4
|
%
|
|
—
|
%
|
(6) Accounts Receivable, Unbilled Services and Advanced Billings
Accounts receivable and unbilled services were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Accounts receivable
|
|
$
|
485,214
|
|
|
$
|
457,676
|
|
Unbilled services
|
|
133,697
|
|
|
170,760
|
|
Total accounts receivable and unbilled services
|
|
618,911
|
|
|
628,436
|
|
Less allowance for doubtful accounts
|
|
(1,971
|
)
|
|
(1,433
|
)
|
Total accounts receivable and unbilled services, net
|
|
$
|
616,940
|
|
|
$
|
627,003
|
|
Unbilled services as of
September 30, 2018
includes
$67.8 million
of contract assets where the Company’s right to bill is conditioned on criteria other than the passage of time. The increase in contract assets from
December 31, 2017
to
September 30, 2018
was due to the adoption of ASC 606. Impairment losses on contract assets were immaterial in the
nine months ended September 30, 2018
.
Advanced billings were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Advanced billings
|
|
$
|
479,686
|
|
|
$
|
469,211
|
|
The
$10.5 million
increase
in advanced billings from
December 31, 2017
to
September 30, 2018
was primarily due to the adoption of ASC 606 and the timing of customer payments. During the
nine months ended September 30, 2018
, the Company recognized revenue of
$382.5 million
related to advanced billings recorded as of January 1, 2018.
(7) 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, 2017
|
|
$
|
1,036,443
|
|
|
$
|
475,981
|
|
|
$
|
1,512,424
|
|
Adjustments to Parallel 6 purchase price allocation
|
|
(1,117
|
)
|
|
—
|
|
|
(1,117
|
)
|
Adjustments to Symphony Health purchase price allocation
|
|
—
|
|
|
878
|
|
|
878
|
|
Currency translation
|
|
(10,565
|
)
|
|
—
|
|
|
(10,565
|
)
|
Balance at September 30, 2018
|
|
$
|
1,024,761
|
|
|
$
|
476,859
|
|
|
$
|
1,501,620
|
|
There are
no
accumulated impairment charges as of
September 30, 2018
and
December 31, 2017
.
Intangible Assets
Intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Net Amount
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Net Amount
|
Customer relationships
|
$
|
559,585
|
|
|
$
|
(95,833
|
)
|
|
$
|
463,752
|
|
|
$
|
565,638
|
|
|
$
|
(72,133
|
)
|
|
$
|
493,505
|
|
Customer backlog
|
122,088
|
|
|
(121,306
|
)
|
|
782
|
|
|
123,746
|
|
|
(120,583
|
)
|
|
3,163
|
|
Trade names (finite-lived)
|
28,521
|
|
|
(11,926
|
)
|
|
16,595
|
|
|
28,558
|
|
|
(9,265
|
)
|
|
19,293
|
|
Patient list and other intangibles
|
44,474
|
|
|
(29,397
|
)
|
|
15,077
|
|
|
44,474
|
|
|
(24,226
|
)
|
|
20,248
|
|
Database
|
137,100
|
|
|
(26,307
|
)
|
|
110,793
|
|
|
137,100
|
|
|
(7,544
|
)
|
|
129,556
|
|
Non-competition agreements
|
2,704
|
|
|
(2,704
|
)
|
|
—
|
|
|
2,767
|
|
|
(2,706
|
)
|
|
61
|
|
Total finite-lived intangible assets
|
894,472
|
|
|
(287,473
|
)
|
|
606,999
|
|
|
902,283
|
|
|
(236,457
|
)
|
|
665,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names (indefinite-lived)
|
118,010
|
|
|
—
|
|
|
118,010
|
|
|
118,010
|
|
|
—
|
|
|
118,010
|
|
Total intangible assets
|
$
|
1,012,482
|
|
|
$
|
(287,473
|
)
|
|
$
|
725,009
|
|
|
$
|
1,020,293
|
|
|
$
|
(236,457
|
)
|
|
$
|
783,836
|
|
Amortization expense was
$17.9 million
and
$54.0 million
for the
three and nine
months ended
September 30, 2018
, respectively, and
$11.3 million
and
$29.5 million
for the
three and nine
months ended
September 30, 2017
, respectively.
The estimated future amortization expense of finite-lived intangible assets is expected to be as follows (in thousands):
|
|
|
|
|
2018 (remaining)
|
$
|
17,687
|
|
2019
|
68,791
|
|
2020
|
69,172
|
|
2021
|
64,062
|
|
2022
|
49,672
|
|
2023 and thereafter
|
337,615
|
|
Total
|
$
|
606,999
|
|
(8)
Revolving Credit Facilities and Long-Term Debt
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Term loans, first lien
|
|
$
|
1,026,533
|
|
|
$
|
1,140,927
|
|
Accounts receivable financing agreement
|
|
170,000
|
|
|
120,000
|
|
Total debt
|
|
1,196,533
|
|
|
1,260,927
|
|
Less current portion of long-term debt
|
|
—
|
|
|
(28,789
|
)
|
Total long-term debt
|
|
1,196,533
|
|
|
1,232,138
|
|
Less debt issuance costs
|
|
(5,022
|
)
|
|
(6,741
|
)
|
Total long-term debt, net
|
|
$
|
1,191,511
|
|
|
$
|
1,225,397
|
|
Principal payments on long-term debt are due as follows (in thousands):
|
|
|
|
|
Current maturities of long-term debt:
|
|
2018 (remaining)
|
$
|
—
|
|
2019
|
—
|
|
2020
|
—
|
|
2021
|
1,196,533
|
|
Total
|
$
|
1,196,533
|
|
2016 Credit Facilities
The senior secured credit facilities, or 2016 Credit Facilities, provide senior secured financing up to
$1,400.0 million
, consisting of:
•
a first lien term loan in an aggregate principal amount of up to
$1,175.0 million
; and
•
revolving credit facilities, or the 2016 Revolver, in an aggregate principal amount of up to
$225.0 million
As collateral for borrowings under the 2016 Credit Facilities, the Company granted a pledge on primarily all of its assets, and the stock of wholly-owned 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 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 Credit Facilities, subject to compliance with applicable law, as of
September 30, 2018
and
December 31, 2017
, all amounts in retained earnings were free of restriction and were available for the payment of dividends. The 2016 Credit Facilities also contain 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%
to
2.00%
, in the case of LIBOR loans,
and
0.00%
to
1.00%
, in the case of ABR loans. The Company has the option of
1
,
2
,
3
or
6
month base interest rates. For the
nine months ended September 30, 2018
, the weighted average interest rate on the first lien term loan was
3.62%
.
During the third quarter of 2018, the Company made an additional
$92.8 million
in voluntary principal payments. In accordance with the guidance in ASC 470-50, "Debt—Modifications and Extinguishments," the debt repayments were accounted for as a partial debt extinguishment. The repayments resulted in the write-off of
$0.5 million
in unamortized debt issuance costs which is included in loss on modification or extinguishment of debt in the consolidated condensed statement of operations during the three and nine months ended September 30, 2018.
2016 Revolver
The 2016 Revolver provides for
$225.0 million
of potential borrowings and expire 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%
to
0.4%
based on the Company’s debt-to-EBITDA ratio. At
September 30, 2018
, the Company had
no
outstanding borrowings under the 2016 Revolver. At
December 31, 2017
, the Company had
$91.5 million
outstanding borrowings under the 2016 Revolver. In addition, at
September 30, 2018
and
December 31, 2017
, the Company had
$5.1 million
and
$4.9 million
, respectively, in letters of credit outstanding, which are secured by the 2016 Revolver.
Accounts Receivable Financing Agreement
On May 31, 2018, the Company amended its receivable financing agreement, which the Company refers to as the "accounts receivable financing agreement." The amendment increased the accounts receivable financing agreement's borrowing capacity to
$200.0 million
, decreased the applicable margin from
1.60%
to
1.25%
, and extended the termination date to May 31, 2021, unless terminated earlier pursuant to its terms. The Company had
$170.0 million
and
$120.0 million
outstanding on the accounts receivable financing agreement as of
September 30, 2018
and
December 31, 2017
, respectively; the additional borrowings during 2018 were used to repay amounts outstanding on the Company's 2016 Revolver.
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, 2018
, the weighted average interest rate on the accounts receivable financing agreement was
3.60%
.
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.
At
September 30, 2018
and
December 31, 2017
, there was
$30.0 million
and
$20.0 million
, respectively, of remaining capacity available under the accounts receivable financing agreement.
Fair Value of Debt
The estimated fair value of the Company’s debt and outstanding borrowings under its 2016 Revolver was
$1,194.0 million
and
$1,352.4 million
at
September 30, 2018
and
December 31, 2017
, respectively. The fair values of the term loans, borrowings under credit facilities, and accounts receivable financing agreement were determined based on Level 3 inputs, which are primarily based on rates at which the debt is traded among financial institutions adjusted for the Company's credit standing.
(9) Stockholders’ Equity
Authorized Shares
The Company is authorized to issue up to
one billion
shares of common stock, with a par value of
$0.01
. The Company is authorized to issue up to
one hundred million
shares of preferred stock, with a par value of
$0.01
.
Noncontrolling Interest
Below is a summary of noncontrolling interest for the
nine months ended September 30
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Balance as of January 1,
|
|
$
|
5,710
|
|
|
$
|
—
|
|
Investment by noncontrolling interest
|
|
—
|
|
|
5,440
|
|
Comprehensive income
|
|
|
|
|
Net income
|
|
898
|
|
|
513
|
|
Foreign currency adjustments, net of income tax
|
|
(75
|
)
|
|
(90
|
)
|
Balance as of September 30,
|
|
$
|
6,533
|
|
|
$
|
5,863
|
|
(10) 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
1,468,000
service-based options and
240,228
restricted stock awards and units, or RSAs/RSUs, with a total grant date fair value of
$49.8 million
and
$22.7 million
, respectively, during the
nine months ended September 30, 2018
.
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)
|
Outstanding December 31, 2017
|
|
5,245,625
|
|
|
$
|
39.14
|
|
|
7.6
|
|
$
|
272.4
|
|
Granted
|
|
1,468,000
|
|
|
97.79
|
|
|
|
|
|
Exercised
|
|
(1,189,254
|
)
|
|
21.17
|
|
|
|
|
|
Expired or forfeited
|
|
(257,475
|
)
|
|
58.21
|
|
|
|
|
|
Outstanding September 30, 2018
|
|
5,266,896
|
|
|
$
|
58.61
|
|
|
7.8
|
|
$
|
271.7
|
|
Exercisable September 30, 2018
|
|
2,067,067
|
|
|
$
|
22.69
|
|
|
5.8
|
|
$
|
180.9
|
|
The Company’s RSAs/RSUs activity in 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Wtd. Average Grant-Date Fair Value
|
|
Intrinsic Value (millions)
|
Unvested December 31, 2017
|
|
309,538
|
|
|
$
|
46.76
|
|
|
$
|
28.2
|
|
Granted
|
|
240,228
|
|
|
94.51
|
|
|
|
|
Forfeited
|
|
(32,500
|
)
|
|
81.14
|
|
|
|
|
Vested
|
|
(156,516
|
)
|
|
31.62
|
|
|
|
|
Unvested September 30, 2018
|
|
360,750
|
|
|
$
|
82.03
|
|
|
$
|
39.8
|
|
Employee Stock Purchase Plan
In April 2017, the Board of Directors 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, commencing on January 1 and July 1 of each calendar year with the Compensation Committee having the right to establish different offering periods. The Company recognized stock-based compensation expense of
$0.9 million
and
$2.5 million
associated with the ESPP during the
three and nine
months ended
September 30, 2018
, respectively. As of
September 30, 2018
, there have been
76,116
shares issued and
2,923,884
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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Direct costs
|
|
$
|
2,451
|
|
|
$
|
956
|
|
|
$
|
6,900
|
|
|
$
|
2,208
|
|
Selling, general and administrative
|
|
5,319
|
|
|
2,493
|
|
|
13,569
|
|
|
5,478
|
|
Transaction-related costs
|
|
773
|
|
|
5,294
|
|
|
773
|
|
|
5,294
|
|
Total stock-based compensation expense
|
|
$
|
8,543
|
|
|
$
|
8,743
|
|
|
$
|
21,242
|
|
|
$
|
12,980
|
|
All stock options granted under the 2013 Stock Incentive Plan for Key Employees of PRA Health Sciences, Inc. and its Subsidiaries, or the 2013 Plan, are subject to transfer restrictions of the stock option's underlying shares once vested and exercised. This lack of marketability was included as a discount when calculating the grant date value of these options. In conjunction with secondary offerings, the transfer restrictions on a portion of such shares issuable upon exercise of vested options granted under the 2013 Plan were released. The release of the transfer restrictions is considered a modification under ASC Topic 718, “Stock Compensation.” As a result of these modifications, the Company incurred approximately
$0.8 million
and
$5.3 million
of incremental compensation expense associated with service-based options during the
nine
months ended
September 30, 2018
and
2017
, respectively, which is included in transaction-related costs in the accompanying consolidated condensed statement of operations.
(11) Income Taxes
The Company’s effective income tax rate was
40.0%
and
(0.2)%
for the
nine
months ended
September 30, 2018
and
2017
, respectively. The effective tax rate for the
nine months ended September 30, 2017
included the effect of a release of a valuation allowance on the Company’s net federal deferred tax assets, which was fully reversed within 2017. The variation between the Company’s effective income tax rate and the U.S. statutory rate of
21%
for the
nine
months ended
September 30, 2018
is primarily due to (i) the U.S. inclusion of amounts related to the estimated tax on global intangible low-taxed income, or GILTI, (ii) the U.S. inclusion of amounts related to the estimated base erosion anti abuse tax, or BEAT, and (iii) the 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.
On December 22, 2017, the Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a modified territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative untaxed foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the Act at the date of enactment and additional measurement period adjustments related to the 2017 transition tax in our quarterly income tax provision in accordance with our understanding of the Act including recently-released guidance. As a result, the Company has recorded
$3.5 million
as additional income tax expense for the
nine months ended September 30, 2018
relating to the impact of adjustments to the Company’s December 31, 2017 transition tax provisional amounts, of which a
$0.1 million
benefit relates to adjustments made in the third quarter of 2018. The adjustment to the provisional amount related to opting to offset the one-time transition tax on the mandatory deemed repatriation of untaxed foreign earnings with current losses and prior year net operating losses in lieu of utilizing foreign tax credits. The Company is continuing to analyze the overall impact of the transition tax inclusion and will update the provisional estimate as it completes its analysis during the measurement period. Due to the complexity of the new law, the Company is still in the process of investigating the related accounting implications. Specifically, for the GILTI tax the Company intends to make an accounting policy decision around whether to account for GILTI as a period cost in the relevant period, or to record deferred taxes related to the basis in the Company’s foreign subsidiaries. The Company is currently analyzing recently issued guidance and will make a determination regarding its accounting policy for GILTI tax amounts in the fourth quarter of 2018. Anticipated amounts for GILTI have been included as a component of current tax expense in the Company’s third quarter annual effective tax rate calculation. The Company is currently projecting to be subject to BEAT for 2018. Pursuant to relevant FASB guidance, the Company has accounted for BEAT as a current expense and recorded U.S. deferred tax assets and liabilities at the regular statutory rate for the period ended
September 30, 2018
. Adjustments to the recorded provisional amounts or changes resulting from the issuance of additional guidance will be reflected in the period when the Company's analysis is updated or in the period the additional guidance is issued, respectively.
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. There were no material changes to the unrecognized tax benefits during the three and nine months ended
September 30, 2018
.
(12) 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
$4.6 million
at
September 30, 2018
, given that it is not deemed probable the Company will incur a loss related to this case. However, a deposit totaling
$4.6 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.
(13) 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.
On January 5, 2018, the Company entered into
two
new interest rate swaps in order to manage its cash flow exposure to variable rate debt and also to replace an interest rate swap that was scheduled to mature in September 2018. The first interest rate swap has an aggregate notional amount of
$375.0 million
and a fixed payment rate of
2.2%
offsetting a one-month LIBOR variable rate with an effective date of January 8, 2018, and a maturity date of December 6, 2020. The second interest rate swap has an aggregate notional amount of
$250.0 million
and a fixed payment rate of
2.3%
offsetting a one-month LIBOR variable rate with an effective date of September 6, 2018, and a maturity date of September 6, 2020.
The following table presents the notional amounts and fair values (determined using Level 2 inputs) of the Company’s derivatives as of
September 30, 2018
and
December 31, 2017
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|
|
Balance Sheet Classification
|
|
Notional
amount
|
|
Asset/
(Liability)
|
|
Notional
amount
|
|
Asset/
(Liability)
|
Derivatives in an asset position:
|
|
Other current assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250,000
|
|
|
$
|
428
|
|
|
|
Other assets
|
|
625,000
|
|
|
7,948
|
|
|
—
|
|
|
—
|
|
|
|
|
|
$
|
625,000
|
|
|
$
|
7,948
|
|
|
$
|
250,000
|
|
|
$
|
428
|
|
The Company records the effective portion of any 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 when the hedged item affects earnings or is no longer expected to occur. Gains and losses from the ineffective portion of any hedge are recognized in earnings immediately. 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 income for the
three and nine
months ended
September 30, 2018
and
2017
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Amount of pre-tax gain (loss) recognized in other comprehensive income
|
|
$
|
1,422
|
|
|
$
|
35
|
|
|
$
|
7,617
|
|
|
$
|
(32
|
)
|
Amount of loss reclassified from accumulated other comprehensive loss into interest expense, net
|
|
(1,463
|
)
|
|
(1,758
|
)
|
|
(4,980
|
)
|
|
(5,175
|
)
|
The Company expects that
$4.1 million
of unrealized losses will be reclassified out of accumulated other comprehensive loss and into interest expense, net over the next 12 months.
(14) Accumulated Other Comprehensive Loss
Below is a summary of the components of accumulated other comprehensive loss (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
|
|
Derivative
Instruments, Net of Tax
|
|
Total
|
Balance at December 31, 2017
|
|
$
|
(117,180
|
)
|
|
$
|
(19,290
|
)
|
|
$
|
(136,470
|
)
|
Other comprehensive income before reclassifications
|
|
(23,107
|
)
|
|
5,613
|
|
|
(17,494
|
)
|
Reclassification adjustments
|
|
—
|
|
|
3,666
|
|
|
3,666
|
|
Balance at September 30, 2018
|
|
$
|
(140,287
|
)
|
|
$
|
(10,011
|
)
|
|
$
|
(150,298
|
)
|
Foreign Currency Translation
The change in the Company's foreign currency translation adjustment was due primarily to the movements in the British pound and Euro exchange rates against the U.S. dollar. The U.S. dollar strengthened by
3.3%
,
3.0%
,
3.3%
, and
12.2%
versus the British pound, Euro, Canadian dollar, and Russian ruble, respectively, between
December 31, 2017
and
September 30, 2018
. The movement in the British pound, Euro, Canadian dollar, and Russian ruble represented
$2.7 million
,
$10.3 million
,
$1.9 million
, and
$3.3 million
, respectively, out of the
$23.1 million
foreign currency translation adjustment during the
nine months ended September 30, 2018
.
Accumulated earnings of the Company’s U.K. subsidiary totaling
$375.4 million
have been previously taxed in the U.S. or were deemed to have been repatriated as part of the one-time transition tax under the Act enacted December 22, 2017. The Company has deemed a corresponding amount of intercompany accounts between its U.S. and U.K. subsidiaries to be of a long-term investment nature; these balances have been remeasured to foreign currency translation adjustment during the
nine months ended September 30, 2018
.
Derivative Instruments
See Note 13 for further information on changes to accumulated other comprehensive income related to the derivative instruments.
(15) 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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Basic weighted average common shares outstanding
|
|
64,261
|
|
|
62,730
|
|
|
63,891
|
|
|
62,185
|
|
Effect of dilutive stock options and other awards under share-based compensation programs
|
|
2,245
|
|
|
3,142
|
|
|
2,367
|
|
|
3,498
|
|
Diluted weighted average common shares outstanding
|
|
66,506
|
|
|
65,872
|
|
|
66,258
|
|
|
65,683
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares
|
|
987
|
|
|
733
|
|
|
1,670
|
|
|
381
|
|
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.
(16) Segments
Subsequent to the acquisition of Symphony Health, the Company is managed through
two
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, 2018
|
|
Three Months Ended September 30, 2017
|
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
Revenue
|
|
$
|
656,979
|
|
|
$
|
60,617
|
|
|
$
|
717,596
|
|
|
$
|
563,047
|
|
|
$
|
18,962
|
|
|
$
|
582,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs (exclusive of depreciation and amortization)
|
|
330,037
|
|
|
41,385
|
|
|
371,422
|
|
|
314,904
|
|
|
11,961
|
|
|
326,865
|
|
Reimbursable out-of-pocket costs
|
|
77,584
|
|
|
—
|
|
|
77,584
|
|
|
87,459
|
|
|
—
|
|
|
87,459
|
|
Reimbursable investigator fees
|
|
65,133
|
|
|
—
|
|
|
65,133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Segment profit
|
|
184,225
|
|
|
19,232
|
|
|
203,457
|
|
|
160,684
|
|
|
7,001
|
|
|
167,685
|
|
Less expenses not allocated to segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
92,553
|
|
|
|
|
|
|
79,307
|
|
Transaction-related costs
|
|
|
|
|
|
43,837
|
|
|
|
|
|
|
11,741
|
|
Depreciation and amortization
|
|
|
|
|
|
28,270
|
|
|
|
|
|
|
18,853
|
|
(Gain) loss on disposal of fixed assets, net
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
8
|
|
Income from operations
|
|
|
|
|
|
38,812
|
|
|
|
|
|
|
57,776
|
|
Interest expense, net
|
|
|
|
|
|
(14,423
|
)
|
|
|
|
|
|
(11,557
|
)
|
Loss on modification or extinguishment of debt
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
(3,089
|
)
|
Foreign currency losses, net
|
|
|
|
|
|
(1,809
|
)
|
|
|
|
|
|
(12,794
|
)
|
Other (expense) income, net
|
|
|
|
|
|
(68
|
)
|
|
|
|
|
|
5
|
|
Income before income taxes and equity in income of unconsolidated joint ventures
|
|
|
|
|
|
$
|
22,058
|
|
|
|
|
|
|
$
|
30,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2017
|
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
Revenue
|
|
$
|
1,966,762
|
|
|
$
|
175,512
|
|
|
$
|
2,142,274
|
|
|
$
|
1,584,531
|
|
|
$
|
18,962
|
|
|
$
|
1,603,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs (exclusive of depreciation and amortization)
|
|
1,010,915
|
|
|
123,594
|
|
|
1,134,509
|
|
|
903,027
|
|
|
11,961
|
|
|
914,988
|
|
Reimbursable out-of-pocket costs
|
|
237,307
|
|
|
—
|
|
|
237,307
|
|
|
223,921
|
|
|
—
|
|
|
223,921
|
|
Reimbursable investigator fees
|
|
193,585
|
|
|
—
|
|
|
193,585
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Segment profit
|
|
524,955
|
|
|
51,918
|
|
|
576,873
|
|
|
457,583
|
|
|
7,001
|
|
|
464,584
|
|
Less expenses not allocated to segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
275,424
|
|
|
|
|
|
|
229,770
|
|
Transaction-related costs
|
|
|
|
|
|
32,709
|
|
|
|
|
|
|
11,816
|
|
Depreciation and amortization
|
|
|
|
|
|
84,163
|
|
|
|
|
|
|
50,146
|
|
Loss on disposal of fixed assets, net
|
|
|
|
|
|
21
|
|
|
|
|
|
|
240
|
|
Income from operations
|
|
|
|
|
|
184,556
|
|
|
|
|
|
|
172,612
|
|
Interest expense, net
|
|
|
|
|
|
(43,860
|
)
|
|
|
|
|
|
(31,088
|
)
|
Loss on modification or extinguishment of debt
|
|
|
|
|
|
(454
|
)
|
|
|
|
|
|
(3,089
|
)
|
Foreign currency losses, net
|
|
|
|
|
|
(1,416
|
)
|
|
|
|
|
|
(35,004
|
)
|
Other expense, net
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
(200
|
)
|
Income before income taxes and equity in income of unconsolidated joint ventures
|
|
|
|
|
|
$
|
138,625
|
|
|
|
|
|
|
$
|
103,231
|
|
Revenue by geographic location for each segment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
|
Clinical Research
|
|
Data Solutions
|
|
Total
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
433,050
|
|
|
$
|
60,617
|
|
|
$
|
493,667
|
|
|
$
|
1,284,678
|
|
|
$
|
175,512
|
|
|
$
|
1,460,190
|
|
Other
|
|
11,396
|
|
|
—
|
|
|
11,396
|
|
|
35,346
|
|
|
—
|
|
|
35,346
|
|
Total Americas
|
|
444,446
|
|
|
60,617
|
|
|
505,063
|
|
|
1,320,024
|
|
|
175,512
|
|
|
1,495,536
|
|
Europe, Africa, and Asia-Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
170,252
|
|
|
—
|
|
|
170,252
|
|
|
516,442
|
|
|
—
|
|
|
516,442
|
|
Netherlands
|
|
28,334
|
|
|
—
|
|
|
28,334
|
|
|
87,340
|
|
|
—
|
|
|
87,340
|
|
Other
|
|
13,947
|
|
|
—
|
|
|
13,947
|
|
|
42,956
|
|
|
—
|
|
|
42,956
|
|
Total Europe, Africa, and Asia-Pacific
|
|
212,533
|
|
|
—
|
|
|
212,533
|
|
|
646,738
|
|
|
—
|
|
|
646,738
|
|
Total revenue
|
|
$
|
656,979
|
|
|
$
|
60,617
|
|
|
$
|
717,596
|
|
|
$
|
1,966,762
|
|
|
$
|
175,512
|
|
|
$
|
2,142,274
|
|