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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, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from        to    
Commission file number: 001-39212
PPD, Inc.
(Exact name of registrant as specified in its charter)
Delaware
45-3806427
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
929 North Front Street, Wilmington, North Carolina 28401
(Address of Principal Executive Offices) (Zip Code)
910-251-0081
(Registrant's telephone number, including area code)
————————————————
                Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per sharePPD
The NASDAQ Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒   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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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 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.
ClassNumber of Shares Outstanding
Common Stock $0.01 par value
351,394,547 shares outstanding as of October 25, 2021



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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements reflect our current views with respect to, among other things, the following: our proposed merger with Thermo Fisher Scientific Inc. (“Thermo Fisher”), our current expectations and anticipated results of operations, our financial performance, the impact from the novel coronavirus disease (“COVID-19”) pandemic, the continued reliance of the biopharmaceutical industry on outsourcing to contract research organizations, the continued growth in research and development spending in the biopharmaceutical industry, estimated growth rates in addressable markets and our ability to effectively recruit, train, develop and retain talented individuals. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such.
These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and other similar expressions. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at this time, including the impact from the COVID-19 pandemic and our proposed merger with Thermo Fisher. As you read this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements contained herein are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, actual results might differ materially from those expressed in the forward-looking statements. In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks listed below and those outlined under Part II, Item 1A, “Risk Factors,” included elsewhere is this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020, as such factors may be further updated from time to time in our periodic filings with the Securities and Exchange Commission.
Some of the factors, risks and uncertainties that might materially affect the forward-looking statements contained herein and may make an investment in our securities speculative or risky include, but are not limited to, the following:
uncertainties associated with the proposed merger with Thermo Fisher;
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
the inability to complete the proposed merger due to the failure to satisfy conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed merger;
risks related to disruption of management’s attention from our ongoing business operations due to the proposed merger;
the effect of the announcement of the proposed merger on our relationships with our customers, operating results and business generally;
the risk that the proposed merger will not be consummated in a timely manner;
the costs of the proposed merger if the proposed merger is not consummated;
restrictions imposed on our business during the pendency of the proposed merger;
potential litigation instituted against us or our directors challenging the proposed merger;
any failure of our backlog to accurately predict or convert into future revenue;
the fact that our customers can terminate, delay or reduce the scope of our contracts with them upon short notice or with no notice;
the impact of industry, customer and therapeutic area concentration;
consolidation amongst our customers, and the potential for rationalization of the combined drug development pipeline, resulting in fewer products in clinical development;
our ability to accurately price our contracts and manage costs associated with the performance of such contracts;
any failures in our information and communication systems, including cybersecurity breaches, impacting us or our customers, clinical trial participants or employees;
our dependence on our technology network, and the impact from upgrades to the network;
any failure to perform services in accordance with contractual requirements, regulatory standards and ethical standards;
our ability to access clinical research sites, attract suitable investigators or enroll a sufficient number of patients for our customers’ clinical trials;
2


any failure by us to comply with numerous privacy laws;
our ability to keep pace with rapid technological changes that could make our services less competitive or obsolete;
our ability to recruit, retain and motivate key personnel, including the loss of any key executive;
our dependence on third parties for critical goods and support services, including a significant impact from the COVID-19 pandemic on our suppliers;
any violation of laws, including laws governing the conduct of clinical trials or other biopharmaceutical research, and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the United Kingdom Bribery Act of 2010;
competition between our existing and potential customers and the potential negative impact on our business;
our management of business restructuring transactions and the integration of acquisitions;
risks related to the drug and medical device development services industry that could result in potential liability that could affect our business, reputation and financial condition;
any failure of our insurance to cover the potential liabilities, including indemnification obligations, associated with the operation of our business and provision of services and changes to our insurance coverage;
our use of biological and hazardous materials, which could violate law or cause injury or death, resulting in liability;
international or U.S. economic, currency, political and other risks, such as those from the COVID-19 pandemic;
disruptions to our operations by the occurrence of a natural disaster, pandemic or other catastrophic events;
the current and uncertain future impact from the COVID-19 pandemic on our business, growth, reputation, prospects, financial condition, results of operations (including components of our financial results), cash flows and liquidity;
changes in tax laws, such as U.S. tax reform, or interpretations of existing tax laws;
economic conditions, import/export implications and regulatory changes relating to the United Kingdom’s exit from the European Union;
any inability to adequately protect our intellectual property or the security of our systems and the data stored therein;
our investments in third parties, which are illiquid and subject to loss;
the substantial value of our goodwill and intangible assets, which we might not fully realize, resulting in impairment losses;
difficult and volatile conditions in the capital and credit markets and in the overall economy, including those caused by the COVID-19 pandemic;
the fragmented and highly competitive nature of the drug development services industry;
changes in trends in the biopharmaceutical industry, including decreases in research and development spending and outsourcing;
the potential adverse effect that the political, economic and/or regulatory influences and changes impacting the United States and international healthcare industry could have on both our customers’ and our businesses, including as a result of healthcare reform;
any patent or other intellectual property litigation we might be involved in;
risks related to our indebtedness;
risks related to ownership of our common stock;
the significant influence certain stockholders have over us; and
other factors beyond our control.
These cautionary statements should not be construed by you to be exhaustive and are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
3


PPD, INC.
FORM 10-Q
TABLE OF CONTENTS

ItemPage
PART I - FINANCIAL INFORMATION
1.
2.
3.
4.
PART II - OTHER INFORMATION
1.
1A.
6.

4


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue$1,560,796 $1,233,802 $4,514,648 $3,317,182 
Operating costs and expenses:
Direct costs, exclusive of depreciation and amortization529,690 433,422 1,507,510 1,222,700 
Reimbursed costs433,358 335,866 1,330,704 810,523 
Selling, general and administrative expenses335,624 249,320 959,587 734,712 
Depreciation and amortization74,028 71,317 227,426 206,395 
Long-lived asset impairment 1,414 1,584 1,414 
Total operating costs and expenses1,372,700 1,091,339 4,026,811 2,975,744 
Income from operations188,096 142,463 487,837 341,438 
Interest expense, net of interest income of $381 and $433 for the three months ended September 30, 2021 and 2020, respectively, and $1,377 and $1,996 for the nine months ended September 30, 2021 and 2020, respectively
(46,231)(49,882)(139,577)(165,995)
Loss on extinguishment of debt  (10,677)(93,534)
Gain (loss) on investments18,971 (53,100)(28,127)16,649 
Other income (expense), net21,022 (17,153)17,392 (14,097)
Income before provision for income taxes181,858 22,328 326,848 84,461 
Provision for income taxes39,993 11,169 81,421 20,682 
Income before equity in earnings (losses) of unconsolidated affiliates141,865 11,159 245,427 63,779 
Equity in earnings (losses) of unconsolidated affiliates, net of income taxes27,250 (2,057)22,488 (5,686)
Net income 169,115 9,102 267,915 58,093 
Net income attributable to noncontrolling interest (2,044)(1,587)(3,955)(4,499)
Net income attributable to PPD, Inc.167,071 7,515 263,960 53,594 
Recapitalization investment portfolio consideration(14,150)44,468 22,189 (6,529)
Net income attributable to common stockholders of PPD, Inc.$152,921 $51,983 $286,149 $47,065 
Earnings per share attributable to common stockholders of PPD, Inc.:
Basic$0.44 $0.15 $0.82 $0.14 
Diluted$0.43 $0.15 $0.80 $0.14 
Weighted-average common shares outstanding:
Basic351,351 348,672 350,974 338,277 
Diluted359,538 354,830 358,826 343,159 





The accompanying notes are an integral part of these condensed consolidated financial statements.
5


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income $169,115 $9,102 $267,915 $58,093 
Other comprehensive (loss) income, net of tax expense (benefit):
Foreign currency translation (54,083)45,602 (52,997)(7,192)
Defined benefit plan, net of income taxes of $41 and $28 for the three months ended September 30, 2021 and 2020, respectively, and $128 and $85 for the nine months ended September 30, 2021 and 2020, respectively
179 138 550 380 
Derivative instruments, net of income taxes of $1,812 and $297 for the three months ended September 30, 2021 and 2020, respectively, and $13,476 and $(31,300) for the nine months ended September 30, 2021 and 2020, respectively
5,548 503 40,975 (96,992)
Other comprehensive (loss) income(48,356)46,243 (11,472)(103,804)
Comprehensive income (loss)120,759 55,345 256,443 (45,711)
Comprehensive income attributable to noncontrolling interest(1,689)(2,078)(2,805)(5,651)
Comprehensive income (loss) attributable to PPD, Inc.119,070 53,267 253,638 (51,362)
Recapitalization investment portfolio consideration(14,150)44,468 22,189 (6,529)
Comprehensive income (loss) attributable to common stockholders of PPD, Inc.$104,920 $97,735 $275,827 $(57,891)




























The accompanying notes are an integral part of these condensed consolidated financial statements.
6


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,172,716 $767,999 
Accounts receivable and unbilled services, net2,071,676 1,609,718 
Income taxes receivable12,312 22,386 
Prepaid expenses and other current assets172,363 146,100 
Total current assets3,429,067 2,546,203 
Property and equipment, net509,314 496,474 
Investments in unconsolidated affiliates78,037 43,178 
Investments241,482 265,894 
Goodwill, net1,798,369 1,820,208 
Intangible assets, net619,749 748,404 
Other assets191,923 201,643 
Operating lease right-of-use assets160,076 171,839 
Total assets$7,028,017 $6,293,843 
Liabilities, Redeemable Noncontrolling Interest and Stockholders Deficit
Current liabilities:
Accounts payable$181,499 $176,341 
Accrued expenses:
Payables to investigators524,647 404,654 
Accrued employee compensation354,604 331,156 
Other accrued expenses202,465 195,779 
Income taxes payable26,453 21,206 
Unearned revenue1,429,817 1,060,544 
Current portion of operating lease liabilities44,555 51,643 
Current portion of long-term debt and finance lease obligations34,521 36,238 
Total current liabilities2,798,561 2,277,561 
Accrued income taxes22,198 18,658 
Deferred tax liabilities50,827 54,535 
Recapitalization investment portfolio liability169,734 191,923 
Long-term operating lease liabilities, less current portion128,382 137,657 
Long-term debt and finance lease obligations, less current portion4,207,811 4,226,192 
Other liabilities37,191 98,908 
Total liabilities7,414,704 7,005,434 
Commitments and contingencies (Note 7)
Redeemable noncontrolling interest37,734 34,929 
Stockholders’ deficit:
Preferred stock - $0.01 par value; 100,000 shares authorized;
None issued and outstanding
  
Common stock - $0.01 par value; 2,000,000 shares authorized;
352,029 shares issued and 351,390 shares outstanding as of September 30, 2021 and
350,858 shares issued and 350,132 shares outstanding as of December 31, 2020
3,520 3,509 
Treasury stock, at cost, 639 and 726 shares as of September 30, 2021 and December 31, 2020, respectively
(11,928)(13,268)
Additional paid-in-capital1,865,963 1,819,892 
Accumulated deficit(1,985,659)(2,271,808)
Accumulated other comprehensive loss(296,317)(284,845)
Total stockholders’ deficit(424,421)(746,520)
Total liabilities, redeemable noncontrolling interest and stockholders’ deficit$7,028,017 $6,293,843 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income $267,915 $58,093 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization227,426 206,395 
Stock-based compensation expense33,548 16,099 
Operating lease right-of-use asset expense34,174 34,625 
Amortization of debt issuance costs and debt discounts6,046 8,263 
Loss (gain) on investments28,127 (16,649)
Deferred income tax (benefit) expense(8,907)5,770 
Loss on extinguishment of debt10,677 93,534 
Amortization of costs to obtain a contract11,793 7,973 
Equity in (earnings) losses of unconsolidated affiliates, net of income taxes(22,488)5,686 
Other(1,280)256 
Change in operating assets and liabilities:
Accounts receivable and unbilled services, net(516,639)(148,501)
Prepaid expenses and other current assets(24,150)26,908 
Other assets(6,570)(39,813)
Income taxes, net22,101 (21,445)
Accounts payable, accrued expenses and other liabilities167,687 116,503 
Operating lease liabilities(38,203)(33,165)
Unearned revenue395,136 (52,065)
Net cash provided by operating activities586,393 268,467 
Cash flows from investing activities:
Purchases of property and equipment(88,213)(116,418)
Capital contributions paid for investments(3,827)(5,382)
Distributions received from investments112 19,704 
Investment in unconsolidated affiliate(5,000)(10,000)
Other(1,600)321 
Net cash used in investing activities(98,528)(111,775)
Cash flows from financing activities:
Proceeds from New Term Loan3,034,750  
Redemption of 2015 Term Loan(3,064,006) 
Borrowing on revolving credit facility 150,000 
Repayment of revolving credit facility (150,000)
Proceeds from issuance of 2025 and 2028 Notes 1,200,000 
Redemption of HoldCo Notes (1,464,500)
Redemption of OpCo Notes (1,160,865)
Payments on long-term debt and finance leases(18,118)(32,080)
Payment of debt issuance costs(24,120)(18,525)
Payment of contingent consideration for acquisition of business (4,338)
Net proceeds from initial public offering 1,772,960 
Recapitalization investment portfolio distribution(12,819) 
Proceeds from exercise of stock options16,075 14,272 
Payments related to tax withholdings for stock-based compensation(2,314) 
Purchase of treasury stock (626)
Net cash (used in) provided by financing activities(70,552)306,298 
Effect of exchange rate changes on cash and cash equivalents(12,596)(5,087)
Net increase in cash and cash equivalents404,717 457,903 
Cash and cash equivalents, beginning of the period767,999 345,187 
Cash and cash equivalents, end of the period$1,172,716 $803,090 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND REDEEMABLE NONCONTROLLING INTEREST
(unaudited)
(in thousands)
PPD, Inc. Stockholders’ Deficit
Common StockTreasury Stock
Redeemable Noncontrolling InterestSharesAmountPaid-in-CapitalSharesAmountAccumulated Other Comprehensive LossAccumulated Deficit
Total Stockholders’ Deficit
Balance, June 30, 2021$36,045 351,952 $3,520 $1,852,175 640 $(11,941)$(247,961)$(2,138,580)$(542,787)
Net income 2,044 — — — — — — 167,071 167,071 
Other comprehensive loss(355)— — — — — (48,356)— (48,356)
Issuance of common stock— 77  1,262 (1)13 — — 1,275 
Stock-based compensation expense— — — 12,600 — — — — 12,600 
Payments for taxes withheld for stock-based compensation— — — (74)— — — — (74)
Recapitalization investment portfolio consideration— — — — — — — (14,150)(14,150)
Balance, September 30, 2021$37,734 352,029 $3,520 $1,865,963 639 $(11,928)$(296,317)$(1,985,659)$(424,421)
Balance, December 31, 2020$34,929 350,858 $3,509 $1,819,892 726 $(13,268)$(284,845)$(2,271,808)$(746,520)
Net income3,955 — — — — — — 263,960 263,960 
Other comprehensive loss(1,150)— — — — — (11,472)— (11,472)
Issuance of common stock— 1,171 11 14,836 (87)1,340 — — 16,187 
Stock-based compensation expense— — — 33,548 — — — — 33,548 
Payments for taxes withheld for stock-based compensation— — — (2,313)— — — — (2,313)
Recapitalization investment portfolio consideration— — — — — — — 22,189 22,189 
Balance, September 30, 2021$37,734 352,029 $3,520 $1,865,963 639 $(11,928)$(296,317)$(1,985,659)$(424,421)














The accompanying notes are an integral part of these condensed consolidated financial statements.
9


PPD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND REDEEMABLE NONCONTROLLING INTEREST
(unaudited)
(in thousands)
PPD, Inc. Stockholders’ Deficit
Common StockTreasury Stock
Redeemable Noncontrolling InterestSharesAmountPaid-in-CapitalSharesAmountAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Deficit
Balance, June 30, 2020$33,609 349,312 $3,493 $1,787,645 726 $(13,268)$(448,951)$(2,397,045)$(1,068,126)
Net income1,587 — — — — — — 7,515 7,515 
Other comprehensive income491 — — — — — 46,243 — 46,243 
Issuance of common stock— 979 10 13,553 — — — — 13,563 
Stock-based compensation expense— — — 5,409 — — — — 5,409 
Recapitalization investment portfolio consideration— — — — — — — 44,468 44,468 
Balance, September 30, 2020$35,687 350,291 $3,503 $1,806,607 726 $(13,268)$(402,708)$(2,345,062)$(950,928)
Balance, December 31, 2019$30,036 280,127 $2,801 $1,983 701 $(12,707)$(298,904)$(2,391,321)$(2,698,148)
Net income4,499 — — — — — — 53,594 53,594 
Other comprehensive income (loss)1,152 — — — — — (103,804)— (103,804)
Issuance of common stock— 70,164 702 1,788,525 — — — — 1,789,227 
Repurchases of common stock— — — — 25 (561)— — (561)
Stock-based compensation expense— — — 16,099 — — — — 16,099 
Recapitalization investment portfolio consideration— — — — — — — (6,529)(6,529)
Other— — — — — — — (806)(806)
Balance, September 30, 2020$35,687 350,291 $3,503 $1,806,607 726 $(13,268)$(402,708)$(2,345,062)$(950,928)













The accompanying notes are an integral part of these condensed consolidated financial statements.
10


PPD, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.    Basis of Presentation
Description of Business
PPD, Inc. (together with its subsidiaries “PPD” or the “Company”) is a holding company incorporated in Delaware. References to the “Company” throughout these condensed consolidated financial statements refer to PPD, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. The Company is a leading provider of drug development services to the biopharmaceutical industry, focused on helping the Company’s customers bring their medicines and other treatments to patients around the world. The Company has been in the drug development services business for 35 years, providing a comprehensive suite of clinical development and laboratory services to pharmaceutical, biotechnology, medical device, government organizations and other industry participants. The Company has deep experience across a broad range of rapidly growing areas of drug development and engages with customers through a variety of commercial models, including both full-service and functional service partnerships and other offerings tailored to address the specific needs of the Company’s customers. The Company has two reportable segments, Clinical Development Services (“Clinical Development Services”) and Laboratory Services (“Laboratory Services”).
Unaudited Interim Financial Information and the Use of Estimates
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies it follows for annual financial reporting and are disclosed in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”). There have been no significant changes to the Company’s significant accounting policies during the first nine months of 2021.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company monitors estimates and assumptions on a continuous basis and updates these estimates and assumptions as facts and circumstances change and new information is obtained, including facts and circumstances related to the novel coronavirus disease (“COVID-19”) pandemic. Actual results could differ from those estimates and assumptions due to, among other things, the impacts caused by the COVID-19 pandemic.
In the opinion of the Company’s management, these condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full twelve-month period ending December 31, 2021 or any other future period. Therefore, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2020 Form 10-K. The information as of December 31, 2020 in the Company’s condensed consolidated balance sheet included herein is derived from the Company’s audited consolidated financial statements included in the 2020 Form 10-K.
Merger Agreement
On April 15, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Thermo Fisher Scientific Inc., a company organized under the laws of Delaware (“Thermo Fisher”) and Powder Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Thermo Fisher (“Merger Sub”) pursuant to which the Company will be, subject to the terms and conditions of the Merger Agreement, merged with and into Merger Sub, with PPD continuing as the surviving corporation and a wholly owned subsidiary of Thermo Fisher. Under, and subject to, the terms of the Merger Agreement, the Company’s stockholders will have the right to receive $47.50 per share in cash, without interest and less applicable withholding tax, for each share of Company common stock upon the closing of the proposed merger. The board of directors of the Company have unanimously approved the Merger Agreement and the transactions contemplated thereby and stockholders holding in aggregate approximately 60% of the issued and outstanding shares of the Company’s common stock duly executed and delivered to Thermo Fisher a written consent, adopting and approving the Merger Agreement and the transactions contemplated thereby. The consummation of the proposed merger remains subject to the satisfaction or, to the extent permitted by law, waiver of customary closing conditions, including approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and certain other competition and foreign direct investment laws. Subject to such closing conditions, the Company continues to expect the proposed merger to close by the end of 2021.
11


Third-party costs incurred related to the proposed merger during the three and nine months ended September 30, 2021 were $1.9 million and $13.4 million, respectively, and are recorded as a component of selling, general and administrative (“SG&A”) expenses on the condensed consolidated statements of operations.
Gain on Investment in Unconsolidated Affiliate
During September 2021, one of the Company’s equity method investments, Medable, Inc. (“Medable”), completed a round of financing to raise capital which resulted in a dilution of the Company’s ownership. The net effect of this dilution on the Company’s ownership resulted in a gain of $31.9 million, net of taxes. The gain is recorded as a component of equity in earnings (losses) of unconsolidated affiliates, net of income taxes, on the condensed consolidated statements of operations. The Company continues to have the ability to exercise significant influence from its investment in Medable. See Note 6, “Investments,” of the Company’s 2020 Form 10-K for additional information on the Company’s investments.
2.    Revenue
Performance Obligations
Revenue recognized from performance obligations partially satisfied in prior periods was $65.3 million and $149.3 million for the three and nine months ended September 30, 2021, respectively, and $28.4 million and $82.9 million for the three and nine months ended September 30, 2020, respectively. These cumulative catch-up adjustments primarily relate to contract modifications executed in the relevant period, which resulted in changes to the transaction price, and to a lesser extent, changes in transaction price related to variable consideration and changes in estimates such as estimated total costs.
As of September 30, 2021, the aggregate amounts of transaction price allocated to unsatisfied performance obligations with an original contract term of greater than one year was $10.3 billion. The Company expects to recognize 36% to 42% of the transaction price allocated to unsatisfied performance obligations over the next 12 months as services are rendered, with the remainder recognized thereafter during the remaining contract term. The Company does not include the value of the transaction price allocated to unsatisfied performance obligations for contracts that have an original contract term of less than one year, for contracts which are determined to be short-term based on certain termination for convenience provisions or where the right to invoice practical expedient has been applied.
Accounts Receivable and Unbilled Services, Net and Unearned Revenue
The Company’s accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:
(in thousands)September 30, 2021December 31, 2020
Accounts receivable$1,031,077 $735,568 
Unbilled services1,047,180 882,078 
Total accounts receivable and unbilled services2,078,257 1,617,646 
Allowance for doubtful accounts(6,581)(7,928)
Total accounts receivable and unbilled services, net$2,071,676 $1,609,718 
The Company’s unearned revenue consisted of the following amounts on the dates set forth below:
(in thousands)September 30, 2021December 31, 2020
Unearned revenue$1,429,817 $1,060,544 
As of September 30, 2021 and December 31, 2020, contract assets of $215.3 million and $171.2 million, respectively, were included in unbilled services. The changes in the Company’s contract assets and unearned revenue resulted from the timing difference between the Company’s satisfaction of performance obligations under its contracts, achievement of billing milestones and customer payments. Additionally, during the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $757.7 million and $815.4 million, respectively, from the balance of unearned revenue outstanding as of the beginning of each respective year. Impairments of accounts receivable, unbilled services and contract assets were insignificant during the three and nine months ended September 30, 2021 and 2020.
Customer Concentration
Concentrations of credit risk with respect to accounts receivable and unbilled services, net, are limited due to the Company’s large number of customers. As of September 30, 2021 and December 31, 2020, one customer accounted for approximately 11% and 12%, respectively, of accounts receivable and unbilled services, net. No one customer accounted for greater than 10% of revenues for the three and nine months ended September 30, 2021 or 2020.
12


3.    Goodwill and Intangible Assets, Net
Goodwill, Net
The changes in the carrying amount of goodwill by segment consisted of the following on the dates set forth below:
(in thousands)TotalClinical Development ServicesLaboratory Services
Balance at December 31, 2020:
Goodwill$1,946,919 $1,720,305 $226,614 
Accumulated impairment losses(126,711)(99,432)(27,279)
Goodwill, net1,820,208 1,620,873 199,335 
Activity:
Translation adjustments(21,839)(21,839) 
Balance at September 30, 2021:
Goodwill 1,925,080 1,698,466 226,614 
Accumulated impairment losses(126,711)(99,432)(27,279)
Goodwill, net$1,798,369 $1,599,034 $199,335 
Intangible Assets, Net
The Company’s definite-lived intangible assets consisted of the following on the dates set forth below:
September 30, 2021December 31, 2020
(in thousands)Carrying AmountAccumulated AmortizationNetCarrying AmountAccumulated AmortizationNet
Customer relationships$893,385 $(513,486)$379,899 $902,302 $(479,341)$422,961 
Trade names375,156 (177,687)197,469 378,764 (159,131)219,633 
Backlog179,686 (179,686) 181,762 (181,196)566 
Investigator/payer network240,168 (231,480)8,688 245,683 (217,963)27,720 
Technology/intellectual property8,600 (4,934)3,666 8,600 (4,256)4,344 
Know-how/processes593,343 (563,316)30,027 598,922 (525,742)73,180 
Total$2,290,338 $(1,670,589)$619,749 $2,316,033 $(1,567,629)$748,404 
Amortization expense was $37.8 million and $122.5 million for the three and nine months ended September 30, 2021, respectively, and $39.5 million and $118.6</