UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

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


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

For the transition period from to .

Commission File Number: 001-36730

SYNEOS HEALTH, INC.

(Exact name of registrant as specified in its charter)


Delaware						27-3403111
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1030 Sync Street, Morrisville, North Carolina 27560-5468

(Address of principal executive offices and Zip Code)

(919) 876-9300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	SYNH	The Nasdaq Stock Market LLC

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 Exchange Act). Yes ☐ No ☒

As of ~~October~~April 24, ~~2019,~~2020, there were approximately ~~103,796,489~~104,169,107 shares of the registrant’s common stock outstanding.

Table of Contents

SYNEOS HEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS



	PART I - FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations for the three ~~and~~ ~~nine~~ months ended ~~September~~March 31, 2020 ~~30, 2019~~ and ~~2018~~ 201 9 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive ~~Income (~~Loss ) for the three ~~and~~ ~~nine~~ months ended ~~September~~March ~~30, 2019~~3 1 , 20 20 and ~~2018~~201 9 (unaudited)	4
	Condensed Consolidated Balance Sheets as of ~~September~~March ~~30, 2019~~31 , 20 20 and December 31, ~~2018~~201 9 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September~~March 31 , 2020 ~~30, 2019~~ and ~~2018~~201 9 (unaudited)	6
	Condensed Consolidated Statements of Shareholders’ Equity for the three ~~and~~ ~~nine~~ months ended ~~September~~March 31, 2020 ~~30, 2019~~ and ~~2018~~201 9 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3125
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4539
Item 4.	Controls and Procedures	4640

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	4741
Item 1A.	Risk Factors	4943
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	4944
Item 5.	Other Information	4945
Item 6.	Exhibits	5046
	Signature	5147

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
		(In thousands, except per share data)														(in thousands, except per share data)
Revenue	Revenue	$	1,177,028	$	1,114,918	$	3,462,861	$	3,244,644	Revenue	$	1,163,355	$	1,119,006


Costs and operating expenses:	Costs and operating expenses:									Costs and operating expenses:
Direct costs (exclusive of depreciation and amortization)	Direct costs (exclusive of depreciation and amortization)	913,674		872,214		2,718,005		2,560,502		Direct costs (exclusive of depreciation and amortization)	924,014		886,802

Selling, general, and administrative expenses	Selling, general, and administrative expenses	109,864		96,943		333,860		296,420		Selling, general, and administrative expenses	117,970		113,117
Restructuring and other costs	Restructuring and other costs	13,456		19,349		39,751		41,647		Restructuring and other costs	8,720		14,413
Transaction and integration-related expenses	Transaction and integration-related expenses	10,454		18,561		34,766		61,804		Transaction and integration-related expenses	7,577		16,658

Depreciation	Depreciation	18,844		17,639		57,663		53,224		Depreciation	17,225		19,571
Amortization	Amortization	41,293		50,395		124,423		150,333		Amortization	38,882		41,629
Total operating expenses	Total operating expenses	1,107,585		1,075,101		3,308,468		3,163,930		Total operating expenses	1,114,388		1,092,190
Income from operations	Income from operations	69,443		39,817		154,393		80,714		Income from operations	48,967		26,816

Other income (expense), net:
Other (income) expense, net:										Other (income) expense, net:
Interest income	Interest income	2,426		1,004		6,061		3,498		Interest income	(336)		(1,502)
Interest expense	Interest expense	(32,607)		(33,097)		(101,500)		(97,727)		Interest expense	26,458		34,630
Loss on extinguishment of debt	Loss on extinguishment of debt	—		(1,789)		(4,355)		(3,914)		Loss on extinguishment of debt	—		4,355
Other income (expense), net		30,713		(4,346)		29,365		15,101
Total other income (expense), net		532		(38,228)		(70,429)		(83,042)
Other (income) expense, net										Other (income) expense, net	(18,930)		8,921
Total other expense, net										Total other expense, net	7,192		46,404
Income (loss) before provision for income taxes	Income (loss) before provision for income taxes	69,975		1,589		83,964		(2,328)		Income (loss) before provision for income taxes	41,775		(19,588)
Income tax expense	Income tax expense	(11,055)		(11,983)		(43,756)		(19,058)		Income tax expense	8,201		10,416
Net income (loss)	Net income (loss)	$	58,920	$	(10,394)	$	40,208	$	(21,386)	Net income (loss)	$	33,574	$	(30,004)

Earnings (loss) per share:	Earnings (loss) per share:									Earnings (loss) per share:
Basic	Basic	$	0.57	$	(0.10)	$	0.39	$	(0.21)	Basic	$	0.32	$	(0.29)
Diluted	Diluted	$	0.56	$	(0.10)	$	0.38	$	(0.21)	Diluted	$	0.32	$	(0.29)
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	103,594		103,012		103,553		103,453		Basic	104,265		103,365
Diluted	Diluted	105,021		103,012		104,881		103,453		Diluted	105,642		103,365

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

Table of Contents

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(In thousands)
Net income (loss) $ 58,920 $ (10,394) $ 40,208 $ (21,386)
Unrealized gain (loss) on derivative instruments, net of income tax (expense) benefit of $0, $(475), $332 and $(475), respectively 74 2,624 (13,104) 1,341
Foreign currency translation adjustments, net of income tax benefit of $0, $2,868, $0 and $0, respectively (34,421) (1,295) (25,736) (36,541)
Comprehensive income (loss) $ 24,573 $ (9,065) $ 1,368 $ (56,586)


	Three Months Ended March 31,
	2020		2019
	(in thousands)
Net income (loss)	$	33,574	$	(30,004)
Unrealized loss on derivative instruments, net of income tax benefit of $(6,639) and $(95), respectively	(10,730)		(4,216)
Foreign currency translation adjustments, net of income tax expense of $0 and $0, respectively	(48,788)		20,604
Comprehensive loss	$	(25,944)	$	(13,616)

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

Table of Contents

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
		(in thousands, except par value)							(in thousands, except par value)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	129,204	$	155,932	Cash, cash equivalents, and restricted cash	$	335,960	$	163,689
Accounts receivable and unbilled services, net	Accounts receivable and unbilled services, net	1,295,089		1,256,731		Accounts receivable and unbilled services, net	1,340,648		1,303,641
Prepaid expenses and other current assets	Prepaid expenses and other current assets	68,219		79,299		Prepaid expenses and other current assets	97,929		94,834
Total current assets	Total current assets	1,492,512		1,491,962		Total current assets	1,774,537		1,562,164
Property and equipment, net	Property and equipment, net	201,122		183,486		Property and equipment, net	195,620		203,926
Operating lease right-of-use assets	Operating lease right-of-use assets	220,346		—		Operating lease right-of-use assets	218,437		218,531
Goodwill	Goodwill	4,322,183		4,333,159		Goodwill	4,323,436		4,350,380
Intangible assets, net	Intangible assets, net	1,004,576		1,133,612		Intangible assets, net	925,389		973,081
Deferred income tax assets	Deferred income tax assets	5,502		9,317		Deferred income tax assets	34,239		37,012
Other long-term assets	Other long-term assets	131,072		103,373		Other long-term assets	118,634		108,701
Total assets	Total assets	$	7,377,313	$	7,254,909	Total assets	$	7,590,292	$	7,453,795

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	82,838	$	98,624	Accounts payable	$	112,312	$	136,686
Accrued expenses	Accrued expenses	587,895		563,527		Accrued expenses	504,351		568,911
Deferred revenue	Deferred revenue	703,916		777,141		Deferred revenue	689,672		696,907
Current portion of operating lease obligations	Current portion of operating lease obligations	30,390		—		Current portion of operating lease obligations	40,130		38,055
Current portion of finance lease obligations	Current portion of finance lease obligations	17,945		13,806		Current portion of finance lease obligations	17,044		17,777
Current portion of long-term debt	Current portion of long-term debt	28,750		50,100		Current portion of long-term debt	77,500		58,125
Total current liabilities	Total current liabilities	1,451,734		1,503,198		Total current liabilities	1,441,009		1,516,461
Long-term debt	Long-term debt	2,680,111		2,737,019		Long-term debt	2,831,722		2,550,395
Operating lease long-term obligations	Operating lease long-term obligations	222,199		—		Operating lease long-term obligations	215,375		218,343
Finance lease long-term obligations	Finance lease long-term obligations	36,676		26,759		Finance lease long-term obligations	32,077		36,914
Deferred income tax liabilities	Deferred income tax liabilities	33,500		25,120		Deferred income tax liabilities	8,989		11,101
Other long-term liabilities	Other long-term liabilities	85,577		106,669		Other long-term liabilities	83,198		90,927
Total liabilities	Total liabilities	4,509,797		4,398,765		Total liabilities	4,612,370		4,424,141

Commitments and contingencies (Note 17)
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at September 30, 2019 and December 31, 2018		—		—
Common stock, $0.01 par value; 600,000 shares authorized, 103,793 and 103,372 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		1,038		1,034
Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at March 31, 2020 and December 31, 2019						Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding at March 31, 2020 and December 31, 2019	—		—
Common stock, $0.01 par value; 600,000 shares authorized, 104,161 and 103,866 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively						Common stock, $0.01 par value; 600,000 shares authorized, 104,161 and 103,866 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	1,042		1,039
Additional paid-in capital	Additional paid-in capital	3,425,826		3,402,638		Additional paid-in capital	3,430,740		3,441,471
Accumulated other comprehensive loss, net of tax		(127,035)		(88,195)
Accumulated other comprehensive loss, net of taxes						Accumulated other comprehensive loss, net of taxes	(131,111)		(71,593)
Accumulated deficit	Accumulated deficit	(432,313)		(459,333)		Accumulated deficit	(322,749)		(341,263)
Total shareholders' equity	Total shareholders' equity	2,867,516		2,856,144		Total shareholders' equity	2,977,922		3,029,654
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	7,377,313	$	7,254,909	Total liabilities and shareholders' equity	$	7,590,292	$	7,453,795

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

Table of Contents

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018			2020		2019
		(In thousands)							(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	40,208	$	(21,386)	Net income (loss)	$	33,574	$	(30,004)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash used in operating activities:						Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	182,086		203,557		Depreciation and amortization	56,107		61,200

Share-based compensation	Share-based compensation	40,864		26,045		Share-based compensation	15,998		14,267
Provision for doubtful accounts	Provision for doubtful accounts	948		(3,453)		Provision for doubtful accounts	271		1,302
Provision for (benefit from) deferred income taxes		13,091		(721)
Foreign currency transaction adjustments		(6,090)		(14,927)
Provision for deferred income taxes						Provision for deferred income taxes	8,159		1,544
Foreign currency transaction gains						Foreign currency transaction gains	(15,019)		(77)

Fair value adjustment of contingent obligations	Fair value adjustment of contingent obligations	(571)		3,582		Fair value adjustment of contingent obligations	(4,095)		724
Loss on extinguishment of debt	Loss on extinguishment of debt	4,355		3,914		Loss on extinguishment of debt	—		4,355
Other non-cash items	Other non-cash items	1,177		3,169		Other non-cash items	1,104		(643)
Changes in operating assets and liabilities, net of effect of business combinations:
Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts receivable, unbilled services, and deferred revenue	Accounts receivable, unbilled services, and deferred revenue	(110,083)		(48,802)		Accounts receivable, unbilled services, and deferred revenue	(53,078)		(25,471)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	12,337		5,371		Accounts payable and accrued expenses	(66,426)		(26,682)
Other assets and liabilities	Other assets and liabilities	(20,389)		34,651		Other assets and liabilities	(15,202)		(13,821)
Net cash provided by operating activities		157,933		191,000
Net cash used in operating activities						Net cash used in operating activities	(38,607)		(13,306)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Payments associated with business combinations, net of cash acquired		—		(90,890)

Purchases of property and equipment	Purchases of property and equipment	(50,645)		(42,963)		Purchases of property and equipment	(11,870)		(11,445)
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	(9,227)		—		Investments in unconsolidated affiliates	(6,750)		—

Net cash used in investing activities	Net cash used in investing activities	(59,872)		(133,853)		Net cash used in investing activities	(18,620)		(11,445)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of discount	Proceeds from issuance of long-term debt, net of discount	183,195		—		Proceeds from issuance of long-term debt, net of discount	—		183,195
Payments of debt financing costs	Payments of debt financing costs	(2,593)		(3,062)		Payments of debt financing costs	—		(184)
Repayments of long-term debt	Repayments of long-term debt	(370,936)		(354,396)		Repayments of long-term debt	—		(216,136)
Proceeds from accounts receivable financing agreement	Proceeds from accounts receivable financing agreement	128,000		183,600		Proceeds from accounts receivable financing agreement	6,600		26,500
Repayments of accounts receivable financing agreement	Repayments of accounts receivable financing agreement	(22,400)		—		Repayments of accounts receivable financing agreement	(6,600)		—

Proceeds from revolving line of credit						Proceeds from revolving line of credit	300,000		—

Payments of contingent consideration related to business combinations	Payments of contingent consideration related to business combinations	(178)		—		Payments of contingent consideration related to business combinations	(26,592)		(8)
Payments of finance leases	Payments of finance leases	(9,429)		(12,664)		Payments of finance leases	(4,674)		(1,274)
Payments for repurchase of common stock		(56,716)		(74,985)
Payments for repurchases of common stock						Payments for repurchases of common stock	(32,029)		(26,616)

Proceeds from exercise of stock options		39,675		18,042
Payments related to tax withholding for share-based compensation		(12,503)		(3,212)
Net cash used in financing activities		(123,885)		(246,677)
Proceeds from exercises of stock options						Proceeds from exercises of stock options	12,358		19,724
Payments related to tax withholdings for share-based compensation						Payments related to tax withholdings for share-based compensation	(19,145)		(11,539)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	229,918		(26,338)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(904)		2,158		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(420)		3,078
Net change in cash, cash equivalents, and restricted cash	Net change in cash, cash equivalents, and restricted cash	(26,728)		(187,372)		Net change in cash, cash equivalents, and restricted cash	172,271		(48,011)
Cash, cash equivalents, and restricted cash - beginning of period	Cash, cash equivalents, and restricted cash - beginning of period	155,932		321,976		Cash, cash equivalents, and restricted cash - beginning of period	163,689		155,932
Cash, cash equivalents, and restricted cash - end of period	Cash, cash equivalents, and restricted cash - end of period	$	129,204	$	134,604	Cash, cash equivalents, and restricted cash - end of period	$	335,960	$	107,921

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

Table of Contents

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
		(in thousands)														(In thousands)
Shareholders' equity, beginning balance	Shareholders' equity, beginning balance	$	2,823,899	$	2,822,672	$	2,856,144	$	3,022,579	Shareholders' equity, beginning balance	$	3,029,654	$	2,856,144
Impact from adoption of ASU 2014-09		—		—		—		(98,815)

Impact from adoption of ASU 2016-13										Impact from adoption of ASU 2016-13	(2,771)		—
Shareholders' equity, adjusted beginning balance	Shareholders' equity, adjusted beginning balance	2,823,899		2,822,672		2,856,144		2,923,764		Shareholders' equity, adjusted beginning balance	3,026,883		2,856,144

Common stock:	Common stock:									Common stock:
Beginning balance	Beginning balance	1,035		1,029		1,034		1,044		Beginning balance	1,039		1,034
Stock repurchase		(1)		—		(13)		(19)
RSU distributions net of shares for tax withholding		—		—		4		1
Stock option exercises		4		3		13		6
Repurchases of common stock										Repurchases of common stock	(6)		(7)
Issuances of common stock										Issuances of common stock	9		11

Ending balance	Ending balance	1,038		1,032		1,038		1,032		Ending balance	1,042		1,038

Additional paid-in capital:	Additional paid-in capital:									Additional paid-in capital:
Beginning balance	Beginning balance	3,404,389		3,371,316		3,402,638		3,414,389		Beginning balance	3,441,471		3,402,638
Stock repurchase		(4,648)		—		(43,515)		(64,482)
RSU distributions net of shares for tax withholding		(1,073)		(829)		(12,851)		(3,213)
Stock option exercises		14,355		10,456		38,690		17,995
Repurchases of common stock										Repurchases of common stock	(19,734)		(22,132)
Issuances of common stock										Issuances of common stock	(6,995)		8,180

Share-based compensation	Share-based compensation	12,803		9,791		40,864		26,045		Share-based compensation	15,998		14,267
Ending balance	Ending balance	3,425,826		3,390,734		3,425,826		3,390,734		Ending balance	3,430,740		3,402,953

Accumulated other comprehensive (loss) income:
Accumulated other comprehensive loss:										Accumulated other comprehensive loss:
Beginning balance	Beginning balance	(92,688)		(55,064)		(88,195)		(22,385)		Beginning balance	(71,593)		(88,195)
Impact from adoption of ASU 2018-02		—		—		—		3,850
Adjusted beginning balance		(92,688)		(55,064)		(88,195)		(18,535)
Unrealized gain (loss) on derivative instruments, net of taxes		74		2,624		(13,104)		1,341

Unrealized loss on derivative instruments, net of taxes										Unrealized loss on derivative instruments, net of taxes	(10,730)		(4,216)
Foreign currency translation adjustment, net of taxes	Foreign currency translation adjustment, net of taxes	(34,421)		(1,295)		(25,736)		(36,541)		Foreign currency translation adjustment, net of taxes	(48,788)		20,604
Ending balance	Ending balance	(127,035)		(53,735)		(127,035)		(53,735)		Ending balance	(131,111)		(71,807)

Accumulated deficit:	Accumulated deficit:									Accumulated deficit:
Beginning balance	Beginning balance	(488,837)		(494,609)		(459,333)		(370,469)		Beginning balance	(341,263)		(459,333)
Impact from adoption of ASU 2014-09		—		—		—		(98,815)
Impact from adoption of ASU 2018-02		—		—		—		(3,850)

Impact from adoption of ASU 2016-13										Impact from adoption of ASU 2016-13	(2,771)		—
Adjusted beginning balance	Adjusted beginning balance	(488,837)		(494,609)		(459,333)		(473,134)		Adjusted beginning balance	(344,034)		(459,333)
Stock repurchase		(2,396)		—		(13,188)		(10,483)
Repurchases of common stock										Repurchases of common stock	(12,289)		(4,477)
Net income (loss)	Net income (loss)	58,920		(10,394)		40,208		(21,386)		Net income (loss)	33,574		(30,004)
Ending balance	Ending balance	(432,313)		(505,003)		(432,313)		(505,003)		Ending balance	(322,749)		(493,814)

Shareholders' equity, ending balance	Shareholders' equity, ending balance	$	2,867,516	$	2,833,028	$	2,867,516	$	2,833,028	Shareholders' equity, ending balance	$	2,977,922	$	2,838,370

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Changes in Significant Accounting Policies

Nature of Operations

Syneos Health, Inc. (the “Company”) is a global provider of end-to-end biopharmaceutical outsourcing solutions. The Company operates under 2 reportable segments, Clinical Solutions and Commercial Solutions, and derives its revenue through a suite of services designed to enhance its customers’ ability to successfully develop, launch, and market their products. The Company offers its solutions on both a standalone and integrated basis with biopharmaceutical development and commercialization services ranging from Phase ~~I to Phase IV~~I-IV clinical trial services to services associated with the commercialization of biopharmaceutical products. The Company’s customers include small, mid-sized, and large companies in the pharmaceutical, biotechnology, and medical device industries.

Unaudited Interim Financial Information

The Company prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting.

The unaudited condensed consolidated financial statements, in management’s opinion, include all adjustments of a normal recurring nature necessary for a fair presentation. 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 Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission (“SEC”) on ~~March 18, 2019.~~February 20, 2020. The results of operations for the three ~~and nine~~ months ended~~September 30, 2019~~ March 31, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2019~~2020 or any other future period. The unaudited condensed consolidated balance sheet at December 31, ~~2018~~2019 is derived from the amounts in the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations for the three months ended March 31, 2020 due to the global emergence of COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.

~~Allowance for Doubtful Accounts~~

The Company maintains a credit approval process and makes judgments in connection with assessing its customers’ ability to pay throughout the contractual obligation period. Generally, the Company has the ability to limit credit exposure by discontinuing services in the event of non-payment. The Company has certain customers that may depend on the ability to continue to raise capital in order to complete the development or commercialization of their products. The Company monitors its customers’ credit worthiness and applies judgment in establishing a provision for estimated credit losses based on historical experience, current receivables aging, and identified customer-specific circumstances that would affect the customers’ ability to meet their obligation. Despite this assessment, from time to time, customers are unable to meet their payment obligations, which could impact the Company’s results of operations.

~~Recently Adopted Accounting Standards~~

~~Leases~~

~~. In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”),~~ ~~Leases (Topic 842)~~, as further amended, to increase transparency and comparability among organizations by requiring the recognition of, at the lease commencement date, a lease liability for the obligation to make lease payments, and a right-of-use ("ROU") asset for the right to use the underlying asset, on the balance sheet. The Company adopted ASU 2016-02, and all related amendments, collectively “ASC 842”, as of January 1, 2019, using the modified retrospective approach. Results for reporting periods beginning on January 1, 2019 are presented under ASC 842, while prior

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Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13 ("ASU 2016-13"), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to modify the impairment model to utilize an expected loss methodology in place of the previous incurred loss methodology and require consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted ASU 2016-13 on January 1, 2020, and recorded the impact of the adoption through a cumulative-effect adjustment to accumulated deficit. Results for reporting periods beginning on January 1, 2020 are presented under ASU No. 2016-13, while prior period amounts continue to be reported and disclosed in accordance with the ~~Company’s~~Company's historical accounting ~~treatment under Accounting Standards Codification 840, Leases~~ (“ASC 840”). In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, does not require the Company to reassess if a contract is or contains a lease and allows the Company to carry forward the historical lease classifications and historical initial direct costs. The Company made an accounting policy election under ASC 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. Lease payments for these leases are recognized as lease costs on a straight-line basis over the lease term. The Company also elected to account for lease components and the associated non-lease components in the contracts as a single lease component for all classes of underlying assets.

treatment. Adoption of the new standard resulted in the recording of additional ~~net lease assets and lease liabilities, mainly related to operating leases,~~allowance for doubtful accounts of approximately ~~$214.0~~$2.8 million as of January 1, ~~2019. The Company’s accounting for finance leases (previously classified as capital leases under ASC 840) remained substantially unchanged.~~2020.

2. Financial Statement Details

Cash, Cash Equivalents, and Restricted Cash

Certain of the Company’s subsidiaries participate in a notional cash pooling arrangement to manage global liquidity requirements. The participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. The net cash balance related to this pooling arrangement is included in cash, cash equivalents, and restricted cash in the unaudited condensed consolidated balance sheets.

Accounts Receivable and Unbilled Services, net

Accounts receivable and unbilled services (including contract assets), net of allowance for doubtful accounts, consisted of the following (in thousands):


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
Accounts receivable billed	Accounts receivable billed	$	774,309	$	733,142	Accounts receivable billed	$	771,925	$	787,652
Less: Allowance for doubtful accounts		(4,974)		(4,587)
Accounts receivable billed, net		769,335		728,555

Accounts receivable unbilled	Accounts receivable unbilled	416,211		422,860		Accounts receivable unbilled	447,886		372,109
Contract assets	Contract assets	109,543		105,316		Contract assets	128,769		149,261
Less: Allowance for doubtful accounts						Less: Allowance for doubtful accounts	(7,932)		(5,381)
Accounts receivable and unbilled services, net	Accounts receivable and unbilled services, net	$	1,295,089	$	1,256,731	Accounts receivable and unbilled services, net	$	1,340,648	$	1,303,641

Accounts Receivable Factoring Arrangement

~~In May 2017, the~~The Company ~~entered into~~has an accounts receivable factoring agreement to sell certain eligible unsecured trade accounts receivable, without recourse, to an unrelated third-party financial institution for cash. For the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company factored ~~$162.0~~$36.2 million and ~~$197.4~~$73.8 million, respectively, of trade accounts receivable on a non-recourse basis and received ~~$160.8~~$36.0 million and ~~$196.4~~$73.2 million, respectively, in cash proceeds from the sale. The fees associated with these transactions were insignificant.

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Goodwill

The changes in the carrying amount of goodwill by segment for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 were as follows (in thousands):

Clinical
Solutions (a) Commercial
Solutions (b) Total
Balance as of December 31, 2018 $ 2,772,803 $ 1,560,356 $ 4,333,159
Business combinations (c) — (204) (204)
Impact of foreign currency translation (9,087) (1,685) (10,772)
Balance as of September 30, 2019 $ 2,763,716 $ 1,558,467 $ 4,322,183


	Clinical Solutions (a)		Commercial Solutions (b)		Total



Balance as of January 1, 2020	$	2,784,952	$	1,565,428	$	4,350,380


Impact of foreign currency translation	(20,197)		(6,747)		(26,944)
Balance as of March 31, 2020	$	2,764,755	$	1,558,681	$	4,323,436

(a) Accumulated impairment losses of $8.1 million associated with the Clinical Solutions segment were recorded prior to 2016 and related to the former Phase I Services segment, now a component of the Clinical Solutions segment. NaN impairment of goodwill was recorded for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

(b) Accumulated impairment losses of $8.0 million associated with the Commercial Solutions segment were recorded prior to 2015 and related to the former Global Consulting segment, now a component of the Commercial Solutions segment. NaN impairment of goodwill was recorded for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

~~(c) Amount represents measurement period adjustments~~During the three months ended March 31, 2020, the Company evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. The Company expects the COVID-19 pandemic will negatively impact its full year 2020 results of operations. However, at this time, the Company does not believe there has been a significant change in the long-term fundamentals of its business. The Company has concluded a triggering event did not occur during the three months ended March 31, 2020, and, as a result, no interim impairment testing was required. The Company will continue to ~~goodwill recognized~~evaluate the impacts of the COVID-19 pandemic on its business. Depending on the extent to which future developments negatively impact the Company's results of operations and financial outlook, an interim impairment test may be required in ~~connection with~~ the ~~acquisition of Kinapse Topco Limited (“Kinapse”).~~

future.

Transaction and Integration-Related Expenses

Transaction and integration-related expenses consisted of the following (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Professional fees $ 7,108 $ 14,851 $ 26,632 $ 40,624
Debt modification and related expenses 1,582 409 5,555 1,726
Integration and personnel retention-related costs 1,394 2,107 3,150 15,847
Fair value adjustments to contingent obligations 370 1,194 (571) 3,582
Other — — — 25
Total transaction and integration-related expenses $ 10,454 $ 18,561 $ 34,766 $ 61,804


	Three Months Ended March 31,
	2020		2019
Professional fees	$	10,123	$	12,846

Debt modification and related expenses	—		2,241
Integration and personnel retention-related costs	1,549		847
Fair value adjustments to contingent obligations	(4,095)		724

Total transaction and integration-related expenses	$	7,577	$	16,658

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Accumulated Other Comprehensive Loss, Net of ~~Tax~~

Taxes

Accumulated other comprehensive loss, net of ~~tax,~~taxes, consisted of the following (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Beginning balance $ (92,688) $ (55,064) $ (88,195) $ (22,385)
Foreign Currency Translation:
  Beginning balance (72,270) (55,166) (80,955) (23,514)
    Impact from adoption of ASU 2018-02 — — — 3,594
  Adjusted beginning balance (72,270) (55,166) (80,955) (19,920)
    Other comprehensive loss before reclassifications (34,421) (1,295) (25,736) (36,541)
    Reclassification adjustments — — — —
  Ending balance (106,691) (56,461) (106,691) (56,461)
Derivative Instruments:
  Beginning balance (20,418) 102 (7,240) 1,129
    Impact from adoption of ASU 2018-02 — — — 256
  Adjusted beginning balance (20,418) 102 (7,240) 1,385
    Other comprehensive (loss) income before reclassifications (1,105) 2,397 (15,351) 1,712
    Reclassification adjustments 1,179 227 2,247 (371)
  Ending balance (20,344) 2,726 (20,344) 2,726
Ending balance $ (127,035) $ (53,735) $ (127,035) $ (53,735)


	Three Months Ended March 31,
	2020		2019
Beginning balance	$	(71,593)	$	(88,195)

Foreign currency translation:
Beginning balance	(56,757)		(80,955)


Other comprehensive (loss) income before reclassifications	(48,788)		20,604

Ending balance	(105,545)		(60,351)

Derivative instruments:
Beginning balance	(14,836)		(7,240)


Other comprehensive loss before reclassifications	(12,510)		(3,729)
Reclassification adjustments	1,780		487
Ending balance	(25,566)		(11,456)

Accumulated other comprehensive loss, net of taxes	$	(131,111)	$	(71,807)

Changes in accumulated other comprehensive loss consisted of the following (in thousands):


	Three Months Ended March 31,
	2020		2019
Foreign currency translation adjustments:


Foreign currency translation adjustments, net of taxes	$	(48,788)	$	20,604
Unrealized loss on derivative instruments:
Unrealized loss during period, before taxes	(19,783)		(3,805)
Income tax benefit	(7,273)		(76)
Unrealized loss during period, net of taxes	(12,510)		(3,729)
Reclassification adjustment, before taxes	2,414		506
Income tax expense	634		19
Reclassification adjustment, net of taxes	1,780		487
Total unrealized loss on derivative instruments, net of taxes	(10,730)		(4,216)
Total other comprehensive (loss) income, net of taxes	$	(59,518)	$	16,388

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Foreign currency translation adjustments:
    Foreign currency translation adjustments, before tax $ (34,421) $ (4,163) $ (25,736) $ (36,541)
    Income tax benefit — 2,868 — —
  Foreign currency translation adjustments, net of tax (34,421) (1,295) (25,736) (36,541)
Unrealized gain (loss) on derivative instruments:
    Unrealized (loss) gain during period, before tax (1,144) 2,863 (15,760) 2,178
    Income tax benefit (expense) 39 (466) 409 (466)
  Unrealized (loss) gain during period, net of tax (1,105) 2,397 (15,351) 1,712
    Reclassification adjustment, before tax 1,218 236 2,324 (362)
    Income tax expense (39) (9) (77) (9)
  Reclassification adjustment, net of tax 1,179 227 2,247 (371)
  Total unrealized gain (loss) on derivative instruments, net of tax 74 2,624 (13,104) 1,341
Total other comprehensive (loss) income, net of tax $ (34,347) $ 1,329 $ (38,840) $ (35,200)
Other (Income) Expense, Net

Other (income) expense, net consisted of the following (in thousands):


	Three Months Ended March 31,
	2020		2019
Net realized foreign currency (gain) loss	$	(5,096)	$	8,406
Net unrealized foreign currency gain	(15,019)		(77)
Other, net	1,185		592
Total other (income) expense, net	$	(18,930)	$	8,921

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~~Other Income (Expense), Net~~

~~Other income (expense), net consisted of the following (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net realized foreign currency gain $ 26,762 $ 1,978 $ 25,631 $ 2,146
Net unrealized foreign currency gain (loss) 5,131 (4,706) 6,090 14,927
Other, net (1,180) (1,618) (2,356) (1,972)
Total other income (expense), net $ 30,713 $ (4,346) $ 29,365 $ 15,101

3. ~~Business Combinations~~

~~inVentiv Health Merger~~

On August 1, 2017, the Company completed a merger (the “Merger”) with Double Eagle Parent, Inc. (“inVentiv”), the parent company of inVentiv Health, Inc., with the Company surviving as the accounting and legal entity acquirer. The Merger was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, ~~Business Combinations~~. The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their fair values. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The goodwill in connection with the Merger is primarily attributable to the assembled workforce of inVentiv and the expected synergies of the Merger.

In connection with the Merger, the Company assumed certain contingent tax-sharing obligations of inVentiv. The fair value of the contingent tax-sharing liability is remeasured at the end of each reporting period, with changes in the estimated fair value reflected in earnings until the liability is fully settled. The estimated fair value of the contingent tax-sharing obligations liability was $14.9 million and $15.7 million as of September 30, 2019 and December 31, 2018, respectively. The liability is included in accrued expenses and other long-term liabilities on the accompanying unaudited condensed consolidated balance sheets.

~~Kinapse Limited Acquisition~~

In August 2018, the Company completed its acquisition of Kinapse, a provider of advisory and operational solutions to the global life sciences industry. The total purchase consideration was $100.1 million plus assumed debt, and included cash acquired of $4.9 million. The Company recognized $74.5 million of goodwill and $57.3 million of intangible assets, principally customer relationships, as a result of the acquisition. The goodwill is 0t deductible for income tax purposes. The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their fair values. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The operating results from the Kinapse acquisition have been included in the Company’s Commercial Solutions segment from the date of acquisition.

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4. Long-Term Debt Obligations

The Company’s debt obligations consisted of the following (in thousands):

September 30, 2019 December 31, 2018
Secured Debt
Term Loan A due March 2024 $ 1,150,000 $ 975,000
Term Loan B due August 2024 862,564 1,221,000
Accounts receivable financing agreement due September 2021 275,000 169,400
Total secured debt 2,287,564 2,365,400
Unsecured Debt
7.5% Senior Unsecured Notes due 2024 (the "Senior Notes") 403,000 403,000
Total debt obligations 2,690,564 2,768,400
Add: unamortized Senior Notes premium, net of term loan original issuance discount 27,178 32,303
Less: unamortized deferred issuance costs (8,881) (13,584)
Less: current portion of debt (28,750) (50,100)
Total debt obligations, non-current portion $ 2,680,111 $ 2,737,019


	March 31, 2020		December 31, 2019

Term Loan A due March 2024	$	1,550,000	$	1,550,000
Term Loan B due August 2024	795,564		795,564
Revolving credit facility due March 2024	300,000		—
Accounts receivable financing agreement due September 2021	275,000		275,000
Total debt obligations	2,920,564		2,620,564
Less: Term loan original issuance discount	(4,620)		(4,928)
Less: Unamortized deferred issuance costs	(6,722)		(7,116)
Less: Current portion of debt	(77,500)		(58,125)
Total debt obligations, non-current portion	$	2,831,722	$	2,550,395

~~Concurrent with the completion of the Merger on August 1, 2017, the~~The Company ~~entered into~~is party to a credit agreement (as amended, the "Credit Agreement") for: (i) a ~~$1.0~~$1.55 billion Term Loan A facility that ~~would mature~~matures on ~~August 1, 2022 (the “Term~~March 26, 2024 ("Term Loan A”); (ii) a ~~$1.6~~$1.60 billion Term Loan B facility that ~~would mature~~matures on August 1, 2024 ~~(the “Term~~(“Term Loan B”); and (iii) a ~~five-year $500.0~~$600.0 million revolving credit facility (the “Revolver”) that ~~would mature~~matures on ~~August 1, 2022.~~March 26, 2024.

~~On May 4, 2018,~~During the three months ended March 31, 2020, the Company entered into Amendment No. 1 to the Credit Agreement, which, among other things, modified the terms of the Credit Agreement to reduce by 0.25% overall the applicable margins for Alternate Base Rate (as defined in the Credit Agreement) loans and Adjusted Eurocurrency Rate (as defined in the Credit Agreement) loans with respect to both thedid not make any voluntary prepayments against Term Loan ~~A and Term Loan B facilities.~~

During the nine months ended September 30, 2019, the Company voluntarily prepaid $179.8 million towards reducing its outstanding Term Loan B balance, which was applied against the regularly-scheduled quarterly principal payments.B. As a result of ~~these and~~ previous voluntary prepayments, the Company is not required to make a mandatory ~~principal~~ payment against the Term Loan B principal balance until maturity in August 2024. Additionally, during the ~~nine months ended September 30, 2019, the Company made mandatory principal repayments of $12.5 milliontowards its Term Loan A.~~

~~Amendment No. 2 to the Credit Agreement~~

On March 26, 2019, the Company entered into Amendment No. 2 to the Credit Agreement (the "Second Amendment”). The Second Amendment, among other things, modifies the terms of the Credit Agreement to refinance the existing Term Loan A facility and the Revolver as follows:

(a) to increase the existing Term Loan A facility by $587.5 million to $1.55 billion. $187.5 million of such increase was applied at closing to repay a portion of the Company’s existing Term Loan B facility and the fees and expenses incurred in connection with the Second Amendment, and the remaining $400.0 million will be available to be funded in multiple draws within nine months of closing;

(b) to increase the existing Revolver commitments available by $100.0 million to $600.0 million, and reduce the margin spread by 0.25% overall, resulting in (i) for Adjusted Eurocurrency Rate loans, a margin spread of 1.50% and (ii) for Alternate Base Rate loans, a margin spread of 0.50%, with a single 0.25% step-down based on the achievement of certain leverage ratios; and

~~(c) to extend the maturity of the Term Loan A facility and the Revolver to March 26, 2024.~~

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The Term Loan A facility and the Revolver will continue to be subject to the same affirmative covenants and negative covenants. The financial covenant will be set at a First Lien Leverage Ratio (as defined in the Credit Agreement) of 5.00:1.00 with a single step-down to 4.50:1.00 commencing with the fiscal quarter ending March 31, 2020. The Company was in compliance with all covenants of the Credit Agreement as of September 30, 2019.

~~In connection with the Second Amendment, during the~~ three months ended March 31, ~~2019,~~2020, the Company ~~recorded a $4.4 million loss on extinguishment of debt, mainly due~~was not required to ~~the write-off of the deferred issuance costs and debt discount.~~

~~The funded amount of the~~make mandatory principal payments towards Term Loan A facility was issued net of a discount and debt issuance costs totaling $2.8 million. These costs are being accreted as a component of interest expense using the effective interest rate method over the term of this facility.

The Company recorded debt issuance costs and related fees in connection with the Revolver and the unfunded amount of the Term Loan A facility of approximately $3.5 million, which are included in other long-term assets in the unaudited condensed consolidated balance sheet. These costs are amortized as a component of interest expense on a straight-line basis over the related terms.

~~Redemption of Senior Notes~~

~~On October 2, 2019,~~A. In March 2020, the Company drew ~~down~~$300.0 million on the ~~$400.0~~Revolver.

Letters of Credit

The Revolver includes letters of credit ("LOCs") with a sublimit of $150.0 million. As of March 31, 2020, there were $300.0 million ~~Term Loan A balance~~outstanding Revolver borrowings and ~~used~~$19.2 million of LOCs outstanding, leaving $280.8 million available borrowings under the ~~proceeds and cash on hand to redeem all of the Senior Notes for $403.0 million and pay a $15.1 million premium related to the early redemption.~~

~~Covenant Restrictions under Lease Agreement~~Revolver.

The lease agreement for the ~~Company’s new~~ corporate headquarters in Morrisville, North Carolina includes a provision that ~~requires~~may require the Company to issue a ~~letter of credit~~LOC in certain amounts to the landlord based on the ~~Company’s~~ debt rating of the Company issued by Moody’s Investors Service (or other nationally-recognized debt rating agency). As of ~~September 30, 2019~~March 31, 2020 (and through the date of this filing), the Company’s ~~credit~~debt rating was ~~Ba3. As~~ such that no ~~letter of credit was~~LOC is currently required. Any required ~~through the date of this filing. Any letters of credit issued in accordance with the aforementioned requirements~~LOCs could be issued under the Company’s Revolver, and, if issued under the Revolver, would reduce its available borrowing capacity by the same ~~amount.~~

~~As of September 30, 2019, the Company ha~~d ~~$580.2 million (net of $19.8 million in outstanding letters of credit) of available borrowings under the Revolver and $0.7 million of letters of credit that were issued under the Revolver.~~amount accordingly.

Accounts Receivable Financing Agreement

~~On June 29, 2018, the~~The Company ~~entered into~~has an accounts receivable financing agreement (as amended) with a termination date of September 30, 2021, unless terminated earlier pursuant to its terms. Under this agreement, certain of the Company’s consolidated subsidiaries sell accounts receivable and unbilled services (including contract assets) balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”). On September 30, 2019, the Company entered into an amendment that increased the amount the SPE can borrow from a third-party lender from $250.0 million to $275.0 million, secured by liens on certain receivables and other assets of the SPE. The Company has guaranteed the performance of the obligations of existing and future subsidiaries that sell and service the accounts receivable under this agreement. The available borrowing capacity varies monthly according to the levels of the Company’s eligible ~~accounts receivable~~billed and unbilled ~~receivables.~~services (including contract assets). Loans under this agreement will accrue interest at a reserve-adjusted LIBOR rate or a base rate equal to the higher of (i) the applicable lender’s prime rate and (ii) the federal funds rate plus 0.50%. The Company may prepay loans upon one business ~~day’s~~day prior notice and may terminate or reduce the facility limit of the accounts receivable financing agreement with 15 days’ prior notice. ~~The aforementioned amendment entered into on September 30, 2019 also extended the termination date as stated above from June 29, 2020 to September 30, 2021.~~

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As of ~~September 30, 2019,~~March 31, 2020, the Company had $275.0 million of outstanding borrowings under the accounts receivable financing agreement, which are recorded in long-term debt on the accompanying unaudited condensed consolidated balance sheet. There was 0 remaining borrowing capacity under this agreement as of ~~September 30, 2019.~~March 31, 2020.

As of ~~September 30, 2019,~~March 31, 2020, the contractual maturities of the Company’s debt obligations (excluding leases) were as follows (in thousands):


		Principal		Interest			Principal		Interest (a)
2019		$	—	$	32,004
2020	2020	43,125		126,606		2020	$	58,125	$	107,636
2021	2021	354,063		120,732		2021	381,562		107,425
2022	2022	107,813		111,147		2022	145,313		97,104
2023	2023	115,000		106,493		2023	155,000		90,828
2024 and thereafter		2,070,563		53,970
Less: deferred issuance costs		(8,881)
Unamortized Senior Notes premium, net of term loan original issuance discount		27,178
2024						2024	2,180,564		30,208

Less: Deferred issuance costs						Less: Deferred issuance costs	(6,722)
Less: Term loan original issuance discount						Less: Term loan original issuance discount	(4,620)
Total	Total	$	2,708,861	$	550,952	Total	$	2,909,222	$	433,201

(a) The interest payments on long-term debt in the above table are based on interest rates in effect as of March 31, 2020.

~~5. Leases~~4. Derivatives

The Company’s operating leases are primarily related to its office facilities. The Company’s finance leases are related to vehicles that the Company leases for certain sales representatives in its Commercial Solutions segment. The Company's leases have remaining lease terms of less than one year to 13 years, some of which include options to extend the term or terminate the lease. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option.

ROU assets and lease liabilities are recognized based on the present value of the fixed lease payments over the lease term at the commencement date. The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date, and are reduced by lease incentives. The Company uses its incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases that do not have a readily determinable implicit discount rate. The Company’s incremental borrowing rate is the rate of interest that it would have to borrow on a collateralized basis over a similar term and amount in a similar economic environment. The Company determines the incremental borrowing rates for its leases by adjusting the local risk freehas entered into various interest rate ~~with a credit risk premium corresponding~~swaps to ~~the Company’s credit rating.~~

~~The Company records rent expense for~~mitigate its ~~operating leases~~exposure to changes in interest rates on a straight-line basis from the lease commencement date until the end of the lease term. The Company records finance lease cost as a combination of the amortization expense for the ROU assets and interest expense for the outstanding lease liabilities using the discount rate discussed above. Variable lease payments for operating leases are related to the office facilities and include but are not limited to common area maintenance, parking, electricity, and management fees. The variable lease payments for finance leases are related to maintenance programs for leased vehicles. Variable lease payments are based on occurrence or based on usage; therefore, they are not included as part of the initial calculations of the ROU assets and liabilities.

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

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating leases:
Fixed lease costs Selling, general, and administrative expenses $ 15,720 $ 49,825
Short-term lease costs Selling, general, and administrative expenses 630 1,204
Variable lease costs Selling, general, and administrative expenses 8,580 25,234
Total operating lease costs $ 24,930 $ 76,263
Finance leases:
Amortization of right-of-use assets Depreciation $ 3,677 $ 11,987
Interest on lease liabilities Interest expense 502 1,309
Variable lease costs Selling, general, and administrative expenses 2,138 5,769
Total finance lease costs $ 6,317 $ 19,065

~~Supplemental balance sheet information related to finance leases was as follows as of September 30, 2019 (in thousands):~~



~~Property and equipment, gross~~	$	~~66,875~~
~~Accumulated depreciation~~	~~(18,513)~~
~~Property and equipment, net~~	$	~~48,362~~

~~Current portion of finance lease obligations~~	$	~~17,945~~
~~Finance lease long-term obligations~~	~~36,676~~
~~Total finance lease liabilities~~	$	~~54,621~~

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


~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows for operating leases~~	$	~~(12,115)~~
~~Operating cash flows for finance leases~~	~~(1,309)~~
~~Financing cash flows for finance leases~~	~~(9,429)~~

~~Right-of-use assets obtained in exchange for lease obligations:~~
~~Operating leases~~	$	~~48,548~~
~~Finance leases~~	~~30,525~~

~~Lease obligations closed out in exchange for right-of-use assets:~~
~~Operating leases~~	$	~~(634)~~

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~~Weighted average remaining lease term as of September 30, 2019:~~

~~Operating leases~~			~~8 years~~
~~Finance leases~~			~~3 years~~


~~Weighted average discount rate as of September 30, 2019:~~
~~Operating leases~~	~~4.9~~	%
~~Finance leases~~	~~3.3~~	%

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

Operating Leases Finance Leases Total
2019 $ 2,816 $ 5,530 $ 8,346
2020 52,426 18,918 71,344
2021 46,974 16,952 63,926
2022 40,717 12,762 53,479
2023 35,723 4,366 40,089
2024 and thereafter 131,233 — 131,233
Total lease payments 309,889 58,528 $ 368,417
Less: management fee (768)
Less: imputed interest (57,300) (3,139)
Total lease liabilities $ 252,589 $ 54,621

Under ASC 840, as of December 31, 2018, the Company had total capital lease assets of $55.3 million and accumulated depreciation of $17.6 million, which are included within property and equipment, net, on the unaudited condensed consolidated balance sheet. The related capital lease obligations totaled $40.6 million as of December 31, 2018. For the three and nine months endedits term loans.~~September 30, 2018, the Company recorded rent expense of $15.1 million and $48.4 million, respectively, for operating leases.~~

~~6. Derivatives~~

In May 2016, the Company entered into interest rate swaps ~~with a combined~~that had an initial notional value of $300.0 million ~~in an effort to limit its exposure to variable interest rates on its term loans. The swaps~~and became effective on June 30, ~~2016 and a~~2016. A portion of the interest rate swaps expired on June 30, 2018, ~~with~~and the remainder ~~expiring~~will expire on May 14, 2020. As of ~~September 30, 2019,~~March 31, 2020, the remaining notional value of these interest rate swaps was $100.0 million.

In June 2018, the Company entered into aninterest rate swaps with multiple counterparties. The first interest rate swap ~~with~~had an aggregate notional value of $1.22 billion, began accruing interest on June 29, 2018, and expired on December 31, 2018. The second interest rate swap had an initial aggregate notional value of $1.01 billion, ~~that became~~an effective ondate of December 31, 2018, and will expire on June 30, 2021. ~~The significant terms~~As of ~~these derivatives are substantially~~March 31, 2020, the ~~same as those contained within~~remaining notional value of this interest rate swap was $940.3 million.

In March 2020, the ~~Credit Agreement, including monthly settlements with the swap counterparties. Interest~~Company entered into interest rate swaps ~~are designated as hedging instruments. During the three~~with multiple counterparties. The interest rate swaps had an initial aggregate notional value of $549.2 million, increasing to $1.42 billion in 2021, an effective date of March 31, 2020, and ~~nine months ended September 30, 2019, the amount of loss recognized in other income (expense), net with respect to these contracts was inconsequential.~~

~~As a result of an acquisition that occurred during the third quarter of 2018, the Company became a party to certain foreign currency exchange rate forward contracts. These contracts expired~~will expire on various dates through April 2019. During the three and nine months ended September 30, 2019, the amount of loss recognized in other income (expense), net with respect to these contracts was inconsequential.

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March 31, 2023.

The fair values of the Company’s derivative financial instruments and the line items on the accompanying ~~unaudited~~ condensed consolidated balance sheets to which they were recorded were as follows (in thousands):


								Balance Sheet Classification	March 31, 2020				December 31, 2019
Interest rate swaps - current							Interest rate swaps - current	Prepaid expenses and other current assets	$	—			$	155

Fair value of derivative assets							Fair value of derivative assets				$	—			$	155

		Balance Sheet Classification	September 30, 2019		December 31, 2018
Interest rate swaps - current	Interest rate swaps - current	Prepaid expenses and other current assets	$	306	$	1,355	Interest rate swaps - current	Accrued expenses	$	24,770			$	11,358
Interest rate swaps - non-current	Interest rate swaps - non-current	Other long-term assets	—		441		Interest rate swaps - non-current	Other long-term liabilities	9,898				6,095
Foreign currency exchange rate swaps - current		Accrued expenses	—		(138)
Interest rate swaps - current		Accrued expenses	(11,083)		(3,031)
Interest rate swaps - non-current		Other long-term liabilities	(10,241)		(6,201)

Fair value of derivative liabilities							Fair value of derivative liabilities				$	34,668			$	17,453

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5. Fair Value Measurements

Assets and Liabilities Carried at Fair Value

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company’s financial assets and liabilities carried at fair value included cash and cash equivalents, restricted cash, trading securities, ~~billed and~~accounts receivable, unbilled ~~accounts receivable~~services (including contract assets), accounts payable, accrued expenses, deferred revenue, ~~assumed~~ contingent obligations, ~~finance leases,~~ liabilities under the accounts receivable financing agreement, and derivative instruments.

The fair values of cash and cash equivalents, restricted cash, ~~billed and~~accounts receivable, unbilled ~~accounts receivable~~services (including contract assets), accounts payable, accrued expenses, deferred revenue, and the liabilities under the accounts receivable financing agreement approximate their respective carrying amounts because of the liquidity and short-term nature of these financial instruments.

Financial Instruments Subject to Recurring Fair Value Measurements

As of ~~September 30,~~March 31, 2020, the fair values of the major classes of the Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):


	Level 1		Level 2		Level 3		Investments Measured at Net Asset Value		Total
Assets:
Trading securities (a)	$	18,081	$	—	$	—	$	—	$	18,081
Partnership interest (b)	—		—		—		7,226		7,226

Total assets	$	18,081	$	—	$	—	$	7,226	$	25,307

Liabilities:
Derivative instruments (c)	$	—	$	34,668	$	—	$	—	$	34,668
Contingent obligations related to business combinations (d)	—		—		6,380		—		6,380
Total liabilities	$	—	$	34,668	$	6,380	$	—	$	41,048

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As of December 31, 2019, the fair values of the major classes of the Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

Level 1 Level 2 Level 3 Investments Measured
at Net Asset Value Total
Assets:
Trading securities (a) $ 21,026 $ — $ — $ — $ 21,026
Partnership interest (b) — — — 6,227 6,227
Derivative instruments (c) — 306 — — 306
Total assets $ 21,026 $ 306 $ — $ 6,227 $ 27,559
Liabilities:
Derivative instruments (c) $ — $ 21,324 $ — $ — $ 21,324
Contingent obligations related to business combinations (d) — — 19,200 �� $ — 19,200
Total liabilities $ — $ 21,324 $ 19,200 $ — $ 40,524

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~~As of December 31, 2018, the fair values of the major classes of the Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):~~


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Investments Measured at Net Asset Value		Total
Assets:	Assets:									Assets:
Trading securities (a)	Trading securities (a)	$	14,945	$	—	$	—	$	14,945	Trading securities (a)	$	21,552	$	—	$	—	$	—	$	21,552
Derivative instruments (e)		—		1,796		—		1,796
Partnership interest (b)										Partnership interest (b)	—		—		—		7,226		7,226
Derivative instruments (c)										Derivative instruments (c)	—		155		—		—		155
Total assets	Total assets	$	14,945	$	1,796	$	—	$	16,741	Total assets	$	21,552	$	155	$	—	$	7,226	$	28,933

Liabilities:	Liabilities:									Liabilities:
Derivative instruments (e)		$	—	$	9,370	$	—	$	9,370
Derivative instruments (c)										Derivative instruments (c)	$	—	$	17,453	$	—	$	—	$	17,453
Contingent obligations related to business combinations (d)	Contingent obligations related to business combinations (d)	—		—		20,127		20,127		Contingent obligations related to business combinations (d)	—		—		37,324		—		37,324
Total liabilities	Total liabilities	$	—	$	9,370	$	20,127	$	29,497	Total liabilities	$	—	$	17,453	$	37,324	$	—	$	54,777

(a) Represents fair value of investments in mutual funds based on quoted market prices that are used to fund the liability associated with the Company's deferred compensation plan.

(b) The Company has committed to invest ~~$20.0~~$21.5 million as a limited partner in two private equity funds. The private equity funds invest in opportunities in the ~~NovaQuest Pharma Opportunities Fund V, LP (the "Fund”).~~healthcare and life sciences industry. As of ~~September 30, 2019,~~March 31, 2020, the Company’s remaining unfunded commitment in the private equity funds was ~~$14.1~~$14.6 million. The Company holds minor ownership interests (less than 3%) in each of the private equity funds and has determined that it does not exercise significant influence over the ~~Fund’s~~private equity funds' operating and finance activities. As the ~~Fund does~~private equity funds do not have a readily determinable fair ~~value,~~values, the Company has estimated the fair ~~value~~values using ~~the Fund’s~~each fund’s Net Asset Value, the amount by which the value of ~~the~~all assets exceeds all debt and liabilities, in accordance with ASC Topic 946, Financial Services – Investment ~~Companies.~~Companies.

(d) Represents the fair value of contingent consideration obligations related to business ~~combinations (see "Note 3 - Business Combinations" for further information).~~combinations. The fair value of these liabilities are determined based on the Company’s best estimate of the probable timing and amount of settlement.

~~(e) Represents fair value of interest rate swap and foreign currency exchange rate forward contract arrangements (see "Note 6 - Derivatives" for further information).~~

The following table presents a reconciliation of changes in the carrying amount of contingent obligations ~~related to business combinations~~ classified as Level 3 ~~within the fair value hierarchy~~ for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 (in thousands):


Balance atas of December 31, ~~2018~~2019	$	~~20,127~~37,324
Additions	—
Changes in fair value recognized in earnings	~~(749)~~(4,352)
Payments	~~(178)~~(26,592)
Balance ~~at September 30, 2019~~as of March 31, 2020	$	~~19,200~~6,380

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, there were no transfers of assets or liabilities between Level 1, Level 2, or Level 3 fair value measurements.

1915

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Financial Instruments Subject to Non-Recurring Fair Value Measurements

Certain assets, including goodwill and identifiable intangible assets, are carried on the accompanying condensed consolidated balance sheets at cost and, subsequent to initial recognition, are measured at fair value on a non-recurring basis when certain identified events or changes in circumstances that may have a significant adverse effect on the carrying values of these assets occur. These assets are classified as Level 3 fair value measurements within the fair value hierarchy. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate a triggering event has occurred. Intangible assets are tested for impairment upon the occurrence of certain triggering events. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, assets ~~subject~~carried on the condensed consolidated balance sheets and not remeasured to ~~non-recurring~~ fair value ~~measurements~~on a recurring basis totaled ~~$5.33~~$5.25 billion and ~~$5.47~~$5.32 billion, respectively.

Fair Value Disclosures for Financial Instruments Not Carried at Fair Value

The estimated fair ~~value~~values of the outstanding term loans ~~and the Senior Notes is~~are determined based on ~~the price that the Company would have to pay to settle the liabilities.~~quoted market prices. As these liabilities are not actively traded, they are classified as Level 2 fair value measurements. The estimated fair values of the Company’s outstanding term loans ~~and Senior Notes~~ were as follows (in thousands):


		September 30, 2019						December 31, 2018							March 31, 2020				December 31, 2019
		Carrying Value (a)		Estimated Fair Value		Carrying Value (a)		Estimated Fair Value			Carrying Value (a)		Estimated Fair Value		Carrying Value (a)		Estimated Fair Value
Term Loan A due March 2024	Term Loan A due March 2024	$	1,146,656	$	1,150,000	$	973,218	$	975,000	Term Loan A due March 2024	$	1,545,997	$	1,443,750	$	1,545,721	$	1,550,000
Term Loan B due August 2024	Term Loan B due August 2024	861,673		862,564		1,219,755		1,221,000		Term Loan B due August 2024	794,947		775,675		794,915		795,564
7.5% Senior Unsecured Notes due 2024		434,413		418,133		438,330		423,150

(a) The carrying value of the term loan debt is shown net of original issue debt discounts. ~~The carrying value of the Senior Notes is inclusive of unamortized premiums.~~

8.6. Restructuring and Other Costs

Merger-Related Restructuring

InDuring 2017, in connection with the ~~Merger,~~merger (the "Merger") with Double Eagle Parent, Inc. ("inVentiv"), the parent company of inVentiv Health, Inc., the Company established a restructuring plan to eliminate redundant positions and reduce its facility footprint worldwide. The Company expects to continue the ongoing evaluations of its workforce and facilities infrastructure needs ~~through 2020~~ in an effort to optimize its resources. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company recognized ~~approximately: (i) $14.6~~approximately $1.0 million of employee severance and benefits related ~~costs;~~costs and ~~(ii) $10.7~~$0.6 million of facility closure and lease termination costs. The Company expects to continue to incur ~~significant~~ costs related to ~~the~~ restructuring of its operations in order to achieve targeted ~~synergies as a result of the Merger.~~synergies. However, the timing and the amount of these costs depend on various factors, including, but not limited to, identifying and realizing synergy opportunities and executing the integration of ~~the Company’s~~its combined operations.

~~Non-Merger~~Non Merger-Related Restructuring and Other Costs

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company ~~incurred $3.4~~recognized approximately $6.6 million of employee severance and benefits related costs, $0.1 million of facility closure and lease termination costs, ~~related~~and $0.4 million of other costs in its continued efforts to ~~the Company’s pre-Merger activities aimed at optimizing~~optimize its resources worldwide. Additionally, ~~during the nine months ended September 30, 2019,~~ the Company ~~recognized approximately $11.1 million of employee severance~~expects to incur incremental restructuring and ~~benefits~~other costs related ~~costs.~~

to its cost savings initiatives in response to the COVID-19 pandemic.

2016

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Accrued Restructuring Liabilities

The following table summarizes activity related to the liabilities associated with restructuring and other costs during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 (in thousands):

Employee
Severance Costs Facility Closure and Lease Termination Costs Other Costs Total
Balance at December 31, 2018 $ 7,474 $ 16,761 $ 52 $ 24,287
Adoption of ASC 842 (a) — (16,761) — (16,761)
Expenses incurred (b) 25,607 — 273 25,880
Cash payments made (22,513) — (303) (22,816)
Balance at September 30, 2019 $ 10,568 $ — $ 22 $ 10,590


	Employee Severance Costs		Other Costs		Total
Balance as of December 31, 2019	$	5,728	$	22	$	5,750

Expenses incurred (a)	7,621		366		7,987
Cash payments made	(9,034)		(366)		(9,400)
Balance as of March 31, 2020	$	4,315	$	22	$	4,337

(a) As a result of the adoption of ASC 842, accrued expenses related to facility closure and lease termination costs are now reflected within the current portion of operating lease obligations and operating lease long-term obligations on the unaudited condensed consolidated balance sheets as of September 30, 2019. These facility costs will be paid over the remaining terms of exited facilities, which range from 2019 through 2027.

~~(b)~~ The amount of expenses incurred for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 excludes ~~$4.8 million of non-cash restructuring and other expenses, because these expenses were not subject to accrual prior to the period in which they were incurred, and $9.0~~$0.7 million of facility lease closure and lease termination ~~costs. Under ASC 842, these~~ costs that are reflected as a reduction of operating lease right-of-use assets on the unaudited condensed consolidated balance ~~sheets.~~sheet under ASC 842.

The Company expects ~~that substantially all of~~ the employee severance costs accrued as of ~~September 30, 2019~~March 31, 2020 will be paid within the next twelve months. Certain facility costs will be paid over the remaining lease terms of the exited facilities that range from 2020 through 2027. Liabilities associated with these costs are included in accrued expenses and other long-term liabilities on the accompanying ~~unaudited~~ condensed consolidated balance sheets. Restructuring and other costs included in net income for the three and nine months ended September 30, 2019 are presented in restructuring and other costs in the unaudited condensed consolidated statements of operations.

9.7. Shareholders' Equity

Shares Outstanding

Shares of common stock outstanding were as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Common stock shares, beginning balance 103,460 102,871 103,372 104,436
   Stock repurchase (141) — (1,323) (1,973)
   RSU distributions net of shares for tax withholding 33 32 423 134
   Stock option exercises 441 320 1,321 626
Common stock shares, ending balance 103,793 103,223 103,793 103,223


	Three Months Ended March 31,
	2020	2019
Common stock shares, beginning balance	103,866	103,372
Repurchases of common stock	(600)	(673)
Issuances of common stock	895	1,054
Common stock shares, ending balance	104,161	103,753

~~2018~~ Stock Repurchase Program

On February 26, 2018, the Company’s Board of Directors (the "Board") authorized the repurchase of up to an aggregate of $250.0 million of the Company’s common stock to be executed from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or through privately negotiated transactions ~~(“2018 stock~~(the "stock repurchase program”). ~~The 2018~~On December 5, 2019, the Board increased the dollar amount authorized under the stock repurchase program ~~commenced on March 1, 2018~~to up to an aggregate of $300.0 million and ~~will end no later than~~extended the term of the stock repurchase program to December 31, ~~2019.~~2020. The Company intends to use cash on hand and future operating cash flow to fund the ~~2018~~ stock repurchase program.

The ~~2018~~ stock repurchase program does not obligate the Company to repurchase any particular amount of the Company’s common stock and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases will be determined by the Company’s management based on a variety of factors such as the market price of the Company’s common stock, the Company’s corporate requirements for cash, and overall market conditions. The ~~2018~~ stock repurchase program is subject to applicable legal requirements, including federal and state securities laws and ~~the~~ applicable Nasdaq rules. The Company may also repurchase shares of its common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would

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permit shares of the Company’s common stock to be repurchased when the Company might otherwise be precluded from doing so by law.

InThe following table sets forth repurchase activity under the stock repurchase program from inception through March 2018, the Company repurchased 948,100 shares of its common stock in open market transactions at an average price of $39.55 per share, resulting in a total purchase price of approximately $37.5 million. In April 2018, the Company repurchased 1,024,400 shares of its common stock in open market transactions at an average price of $36.60 per share, resulting in a total purchase price of approximately $37.5 million. In January 2019, the Company repurchased 552,100 shares of its common stock in open market transactions at an average price of $39.16 per share, resulting in a total purchase price of approximately $21.6 million. In February 2019, the Company repurchased 120,600shares of its common stock in open market transactions at an average price of $41.40 per share, resulting in a total purchase price of approximately $5.0 million. In June 2019, the Company repurchased 509,100 shares of its common stock in open market transactions at an average price of $45.29 per share, resulting in a total purchase price of approximately $23.1 million. In August 2019, the Company repurchased 141,100 shares of its common stock in open market transactions at an average price of $49.93 per share, resulting in a total purchase price of approximately $7.0 million. 31, 2020:


	Total number of shares purchased	Average price paid per share		Approximate dollar value of shares purchased (in thousands)
March 2018	948,100	$	39.55	$	37,493
April 2018	1,024,400	36.60		37,492
January 2019	552,100	39.16		21,623
February 2019	120,600	41.40		4,993
June 2019	509,100	45.29		23,055
August 2019	141,100	49.93		7,045
March 2020	600,000	53.38		32,029
Total	3,895,400			$	163,730

The Company immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in capital, with the remainder applied to accumulated deficit.

As of ~~September 30, 2019,~~March 31, 2020, the Company had remaining authorization to repurchase up to approximately ~~$118.3~~$136.3 million of shares of its common stock under the ~~2018~~ stock repurchase program.

~~10.~~8. Earnings (Loss) Per Share

The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations (in thousands, except per share data):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
Numerator:	Numerator:									Numerator:
Net income (loss)	Net income (loss)	$	58,920	$	(10,394)	$	40,208	$	(21,386)	Net income (loss)	$	33,574	$	(30,004)
Denominator:	Denominator:									Denominator:
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	103,594		103,012		103,553		103,453		Basic weighted average common shares outstanding	104,265		103,365
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Stock options and other awards under deferred share-based compensation programs	Stock options and other awards under deferred share-based compensation programs	1,427		—		1,328		—		Stock options and other awards under deferred share-based compensation programs	1,377		—
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	105,021		103,012		104,881		103,453		Diluted weighted average common shares outstanding	105,642		103,365
Earnings (loss) per share:	Earnings (loss) per share:									Earnings (loss) per share:
Basic	Basic	$	0.57	$	(0.10)	$	0.39	$	(0.21)	Basic	$	0.32	$	(0.29)
Diluted	Diluted	$	0.56	$	(0.10)	$	0.38	$	(0.21)	Diluted	$	0.32	$	(0.29)

Potential common shares outstanding that are considered anti-dilutive are excluded from the computation of diluted earnings (loss) per share. Potential common shares related to stock options and other awards under ~~deferred~~ share-based compensation programs may be determined to be anti-dilutive based on the application of the treasury stock method. Potential common shares are also considered anti-dilutive in periods when the ~~event of~~Company incurs a net loss.

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The number of potential shares outstanding that were ~~considered~~ anti-dilutive ~~using the treasury stock method~~ and therefore excluded from the computation of diluted earnings (loss) per share, weighted for the portion of the period they were outstanding were as follows (in thousands):


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended March 31,
		2019	2018	2019	2018		2020	2019
Anti-dilutive stock options and other awards	Anti-dilutive stock options and other awards	220	335	296	1,224	Anti-dilutive stock options and other awards	911	294
Anti-dilutive stock options and other awards under share-based compensation programs excluded based on reporting a net loss for the period	Anti-dilutive stock options and other awards under share-based compensation programs excluded based on reporting a net loss for the period	—	1,621	—	1,208	Anti-dilutive stock options and other awards under share-based compensation programs excluded based on reporting a net loss for the period	—	1,438
Total common stock equivalents excluded from diluted loss per share		220	1,956	296	2,432
Total common stock equivalents excluded from diluted earnings (loss) per share						Total common stock equivalents excluded from diluted earnings (loss) per share	911	1,732

~~11.~~9. Income Taxes

Income Tax Expense

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company recorded income tax expense of ~~$11.1~~$8.2 million ~~and $43.8 million, respectively,~~, compared to pre-tax income of ~~$70.0~~$41.8 million. Income tax expense for the three months ended March 31, 2020 included $7.1 million of discrete tax benefits primarily related to excess tax benefits from stock-based compensation and ~~$84.0 million, respectively.~~the benefit from foreign tax credits related to prior years that were quantified or claimed on amended returns during the period. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020, excluding discrete items, varied from the ~~U.S.~~United States federal statutory income tax rate of 21.0% primarily ~~due to: (i) base erosion and anti-abuse minimum tax (“BEAT”), (ii)~~due to foreign income inclusions such as the Global Intangible Low-Taxed Income provisions ("GILTI"), state and ~~(iii) valuation allowance change~~local taxes on ~~domestic deferred tax assets.~~United States income, and research and general business credits.

For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, the Company recorded an income tax expense of ~~$12.0~~$10.4 million, ~~and $19.1 million, respectively,~~ compared to ~~pre-tax income of $1.6 million and~~a pre-tax loss of ~~$2.3 million, respectively.~~$19.6 million. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 varied from the ~~U.S.~~United States federal statutory income tax rate of 21.0% primarily due ~~to: (i) the recognition of unfavorable discrete adjustments related~~ to base erosion and anti-abuse minimum tax ("BEAT"), foreign ~~currency exchange; (ii) the geographical split of pre-tax income;~~income inclusions such as GILTI, and ~~(iii) deferred expense related to hanging credits~~a valuation allowance change on domestic ~~indefinite-lived intangibles.~~deferred tax assets. For the three months ended March 31, 2019, no material discrete tax expense or benefit existed.

BEAT

The Tax Cuts and Jobs Act of 2017 introduced a new tax on ~~U.S.~~United States corporations that derive tax benefits from deductible payments to ~~non-U.S.~~non-United States affiliates called BEAT. BEAT applies when base eroding payments are in excess of three percent of the Company’s total deductible payments and also where BEAT exceeds regular ~~U.S.~~United States taxable income, similar to an alternate minimum tax. Changes to the Company’s contractual arrangements, operating structure, and/or final regulations that modify the application of this provision could have a material impact on the Company’s tax provision.

The Company does not anticipate its base eroding payments to exceed the three percent threshold of its deductible payments in 2020; therefore, the Company has not recorded any associated BEAT liability for the three months ended March 31, 2020.

Unrecognized Tax Benefits

The Company's gross unrecognized tax benefits, exclusive of associated interest and penalties, were ~~$19.9~~$23.6 million and ~~$19.2~~$23.2 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The increase of ~~$0.7~~$0.4 million was primarily due to an unrecognized tax ~~benefits~~benefit in ~~foreign jurisdictions.~~the United States.

Tax Returns Under Audit

During the first quarter of 2019, the Company was notified by the Internal Revenue Service that the legacy inVentiv federal income tax return was under audit for the tax year beginning November 10, 2016

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and ending December 31, 2016. The examination commenced on May 8, 2019. Additionally, income tax returns are currently under examination by tax authorities in several state and foreign jurisdictions. Management regularly assesses the potential outcomes of both ongoing and potential future examinations and has concluded that the provisions for income taxes adequately reflects their impact.

New Tax Legislation

Many governments have enacted or are currently contemplating economic stimulus and financial aid measures. Many of these measures include deferring the due dates for tax payments, including both income tax and other taxes. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States to address the economic impacts of the COVID-19 pandemic. The CARES Act includes corporate income tax, payroll tax, and other provisions. While the Company may receive financial, tax, or other benefits under the bill, this legislation did not impact the Company during the three months ended March 31, 2020. The Company is still assessing the impact of the CARES Act and other global measures and does not expect there to be a material impact to its income tax provision for the year ending December 31, 2020. The Company plans to defer the timing of income tax payments and other taxes as permitted by the CARES Act, and other stimulus measures enacted globally.

~~12.~~10. Revenue from Contracts with Customers

Unsatisfied Performance Obligations

As of ~~September 30, 2019,~~March 31, 2020, the total aggregate transaction price allocated to the unsatisfied performance obligations under contracts with contract terms greater than one year and ~~which~~that are not accounted for as a series pursuant to ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”) was $~~5.34 billion.~~5.25 billion. This amount includes revenue associated with reimbursable out-of-pocket expenses. 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. The amount of unsatisfied performance obligations is presented net of any constraints and as a result, is lower than the potential contractual revenue. ~~Specifically,~~The contracts excluded due to constraints include contracts that do not commence within a certain period of time or that require the Company to undertake numerous activities to fulfill these performance obligations, including various activities that are outside of the Company’s control. Accordingly, such contracts have been excluded from the unsatisfied performance obligations balance presented above.

Timing of Billing and Performance

During the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company recognized approximately $~~340.8 million and $556.2~~328.9 million~~, respectively,~~ of revenue that was included in the deferred revenue balance at the beginning of the ~~periods.~~period. During the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, approximately ~~$19.1~~$3.2 million ~~and $40.1 million,~~ ~~respectively,~~ of the Company’s revenue recognized was allocated to performance obligations partially satisfied in previous periods and predominately related to changes in scope and estimates in full service clinical studies. Changes in ~~the~~unbilled services (including contract ~~assets~~assets) and deferred revenue balances during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 were not materially impacted by any other factors.

~~13.~~11. Segment Information

The Company ~~has~~is managed through 2 reportable segments: Clinical Solutions and Commercial Solutions. Each reportable ~~business~~ segment ~~comprises~~consists of multiple ~~similar~~ service offerings that, when combined, create a fully integrated biopharmaceutical ~~outsourcing solutions~~services organization. Clinical Solutions offers a variety of services spanning Phase I to Phase IV of clinical development, including full-service global studies, as well as individual service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Commercial Solutions provides ~~commercialization services to~~ the pharmaceutical, biotechnology, and healthcare industries ~~which include~~with commercialization services, including deployment solutions, ~~(formerly selling solutions),~~ communication solutions (public relations and advertising), and consulting ~~related~~ services.

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The Company’s Chief Operating Decision Maker (“CODM”) reviews segment performance and allocates resources based upon segment revenue and income from operations. Inter-segment revenue is eliminated from the segment reporting presented to the CODM and is not included in the segment revenue presented in the table below. Certain costs are not allocated to the Company’s reportable segments and are reported as general corporate expenses. These costs primarily consist of share-based compensation and general operating expenses associated with the Board and the Company’s senior leadership, finance, ~~Board of Directors,~~ investor relations, and internal audit functions. The Company does not allocate depreciation, amortization, asset impairment charges, restructuring and other costs, or transaction and integration-related ~~costs~~expenses to its segments. Additionally, the CODM reviews the Company’s assets on a consolidated basis and ~~the Company~~ does not allocate assets to its reportable segments ~~as they are not included in the review performed by the CODM~~ for purposes of assessing segment performance or allocating resources.

Information about reportable segment operating results was as follows (in thousands):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
Revenue:	Revenue:									Revenue:
Clinical Solutions	Clinical Solutions	$	867,427	$	819,203	$	2,522,307	$	2,389,955	Clinical Solutions	$	874,826	$	804,958
Commercial Solutions	Commercial Solutions	309,601		295,715		940,554		854,689		Commercial Solutions	288,529		314,048

Total consolidated revenue		1,177,028		1,114,918		3,462,861		3,244,644
Total revenue										Total revenue	1,163,355		1,119,006
Segment direct costs:	Segment direct costs:									Segment direct costs:
Clinical Solutions	Clinical Solutions	655,851		633,258		1,936,021		1,857,623		Clinical Solutions	677,091		625,767
Commercial Solutions	Commercial Solutions	250,904		233,740		759,591		688,339		Commercial Solutions	238,741		252,873
Total segment direct costs	Total segment direct costs	906,755		866,998		2,695,612		2,545,962		Total segment direct costs	915,832		878,640

Segment selling, general, and administrative expenses:	Segment selling, general, and administrative expenses:									Segment selling, general, and administrative expenses:
Clinical Solutions	Clinical Solutions	68,659		63,707		205,986		197,764		Clinical Solutions	74,559		69,702
Commercial Solutions	Commercial Solutions	21,416		22,182		69,671		63,368		Commercial Solutions	24,395		26,053
Total segment selling, general, and administrative expenses	Total segment selling, general, and administrative expenses	90,075		85,889		275,657		261,132		Total segment selling, general, and administrative expenses	98,954		95,755
Segment operating income:	Segment operating income:									Segment operating income:
Clinical Solutions	Clinical Solutions	142,917		122,238		380,300		334,568		Clinical Solutions	123,176		109,489
Commercial Solutions	Commercial Solutions	37,281		39,793		111,292		102,982		Commercial Solutions	25,393		35,122
Total segment operating income	Total segment operating income	180,198		162,031		491,592		437,550		Total segment operating income	148,569		144,611
Direct costs and operating expenses not allocated to segments:	Direct costs and operating expenses not allocated to segments:									Direct costs and operating expenses not allocated to segments:

Corporate selling, general, and administrative expenses		13,905		6,479		39,732		23,874
Share-based compensation included in direct costs	Share-based compensation included in direct costs	6,919		5,216		22,393		14,540		Share-based compensation included in direct costs	8,182		8,162
Share-based compensation included in selling, general, and administrative expenses	Share-based compensation included in selling, general, and administrative expenses	5,884		4,575		18,471		11,414		Share-based compensation included in selling, general, and administrative expenses	7,816		6,105
Corporate selling, general, and administrative expenses										Corporate selling, general, and administrative expenses	11,200		11,257
Restructuring and other costs	Restructuring and other costs	13,456		19,349		39,751		41,647		Restructuring and other costs	8,720		14,413
Transaction and integration-related expenses	Transaction and integration-related expenses	10,454		18,561		34,766		61,804		Transaction and integration-related expenses	7,577		16,658

Depreciation and amortization	Depreciation and amortization	60,137		68,034		182,086		203,557		Depreciation and amortization	56,107		61,200
Total consolidated income from operations		$	69,443	$	39,817	$	154,393	$	80,714
Total income from operations										Total income from operations	$	48,967	$	26,816

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~~14.~~12. Operations by Geographic Location

The following table summarizes ~~information about~~total revenue by geographic area (in thousands, ~~and with~~ all intercompany transactions have been eliminated):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
Revenue:	Revenue:									Revenue:
North America (a)	North America (a)	$	780,460	$	761,414	$	2,299,439	$	2,219,725	North America (a)	$	753,045	$	727,698
Europe, Middle East, and Africa	Europe, Middle East, and Africa	251,519		232,916		768,653		693,874		Europe, Middle East, and Africa	268,022		258,347
Asia-Pacific	Asia-Pacific	119,268		97,726		325,129		269,353		Asia-Pacific	117,053		111,566
Latin America	Latin America	25,781		22,862		69,640		61,692		Latin America	25,235		21,395
Total revenue	Total revenue	$	1,177,028	$	1,114,918	$	3,462,861	$	3,244,644	Total revenue	$	1,163,355	$	1,119,006

(a) Revenue for the North America region includes revenue attributable to the United States of ~~$745.6~~$713.4 million and ~~$718.0~~$704.1 million, or ~~63.3%~~61.3% and ~~64.4%~~62.9% of total revenue, for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Revenue for the North America region includes revenue attributable to the United States of $2,190.9 million and $2,104.8 million, or 63.3% and 64.9% of total revenue, for the nine months ended September 30, 2019 and September 30, 2018, respectively. No other ~~country~~countries represented more than 10% of total revenue for any period.

~~Long-lived~~The following table summarizes long-lived assets by geographic area ~~for each period were as follows (in~~(in thousands, ~~and~~ all intercompany transactions have been eliminated):


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
Property and equipment, net:	Property and equipment, net:					Property and equipment, net:
North America (a)	North America (a)	$	156,460	$	133,593	North America (a)	$	153,914	$	159,709
Europe, Middle East, and Africa	Europe, Middle East, and Africa	28,006		33,053		Europe, Middle East, and Africa	27,454		28,514
Asia-Pacific	Asia-Pacific	13,726		13,328		Asia-Pacific	11,554		12,742
Latin America	Latin America	2,930		3,512		Latin America	2,698		2,961
Total property and equipment, net	Total property and equipment, net	$	201,122	$	183,486	Total property and equipment, net	$	195,620	$	203,926

(a) Long-lived assets for the North America region include property and equipment, net attributable to the United States of ~~$151.0~~$148.0 million and ~~$128.3~~$153.1 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

~~15.~~13. Concentration of Credit Risk

Financial assets that subject the Company to credit risk primarily consist of cash and cash equivalents, accounts receivable and unbilled services (including contract assets). The Company's cash and cash equivalents consist principally of cash and are maintained at several financial institutions with reputable credit ratings. The Company maintains cash depository accounts with several financial institutions worldwide and is exposed to credit risk related to the potential inability to access liquidity in financial institutions where its cash and cash equivalents are concentrated. The Company has not historically incurred any losses with respect to these balances and believes that they bear minimal credit risk.

As of March 31, 2020 and December 31, 2018, the amount of cash and cash equivalents held outside the United States by the Company’s foreign subsidiaries was $43.6 million, or approximately 28% of the total consolidated cash and cash equivalents balance. As of September 30, 2019, substantially all of the Company’s cash and cash equivalents were held within the United States.

No single customer accounted for greater than 10% of the Company’s revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019. During the nine months ended September 30, 2019, one customer accounted for approximately 10% of the Company’s revenue. During the three and nine months ended September 30, 2018, one customer accounted for 12% and 11%, respectively, of the Company’s revenue.

As of ~~September 30,~~March 31, 2020 and December 31, 2019, nono single customer accounted for greater than 10% of the Company’s ~~billed accounts receivable, unbilled~~ accounts receivable and unbilled services (including contract ~~assets~~assets) balances. ~~As of December 31, 2018, one customer accounted for approximately 13% of the Company’s billed accounts receivable, unbilled accounts receivable, and contract assets balances.~~

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~~16.~~

14. Related-Party Transactions

There were no material related party transactions for the three months ended March 31, 2020.

For the ~~nine~~three months ended~~September 30,~~ March 31, 2019, the Company incurred reimbursable out-of-pocket expenses of $1.1 million for professional services obtained from a provider whose board of directors included a member ~~of the Board of Directors~~who was also a member of the ~~Company’s Board~~Company's Board. Additionally, as of ~~Directors. NaN related party expenses were recorded for the three months ended September 30, 2019.~~

For the three and nine months ended September 30, 2018, the Company incurred reimbursable out-of-pocket expenses of $1.6 million and $2.8 million, respectively, for professional services obtained from 2 providers, one whose significant shareholder was also a significant shareholder of the Company and the other whose member of the Board of Directors was also a member of the Company’s Board of Directors. Additionally, at September 30, 2018March 31, 2019, the Company had ~~related party~~ liabilities of ~~$1.0~~$0.8 million included in ~~Accounts Payable~~accounts payable and ~~Accrued Expenses~~accrued expenses on the ~~unaudited~~ condensed consolidated balance ~~sheets.~~

sheets associated with this related party. This provider ceased to be a related-party as of December 31, 2019. No material related-party revenue was recorded for the three ~~and nine~~ months ended ~~September 30, 2019 or 2018.~~ March 31, 2019.

~~17.~~15. Commitments and Contingencies

Legal Proceedings

The Company is ~~involved in various claims~~party to legal proceedings incidental to its business. While the Company's management currently believes the ultimate outcome of these proceedings, individually and ~~legal actions arising~~ in the ~~ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but~~aggregate, will not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, other than the specific matters described below, if decided adversely, is not expected to have a material adverse effect on the Company's ~~business,~~consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the Company's financial condition and results of ~~operations, or cash flows.~~operations.

On December 1, 2017, the first of 2 virtually identical actions alleging federal securities law claims was filed against the Company and certain of its officers on behalf of a putative class of its shareholders. The first action, captioned Bermudez v. INC Research, Inc., et al, No. 17-09457 (S.D.N.Y.), in the Southern District of New York, names as defendants the Company, Michael Bell, Alistair MacDonald, Michael Gilbertini, and Gregory S. Rush (the "Bermudez action"), and the second action, Vaitkuvienë v. Syneos Health, Inc., et al, No. 18-0029 (E.D.N.C.), in the Eastern District of North Carolina, filed on January 25, 2018 (the ~~“Vaitkuvienë~~"Vaitkuvienë action"), names as defendants the Company, Alistair MacDonald, and Gregory S. Rush (the "Initial Defendants"). Both complaints allege similar claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of purchasers of the Company's common stock between May 10, 2017 and November 8, 2017 and November 9, 2017. The complaints allege that the Company published inaccurate or incomplete information regarding, among other things, the financial performance and business outlook for inVentiv’s business prior to the Merger and with respect to the combined company following the Merger. On January 30, 2018, 2 alleged shareholders separately filed motions seeking to be appointed lead plaintiff and approving the selection of lead counsel. On March 30, 2018, Plaintiff Bermudez filed a notice of voluntary dismissal of the Bermudez action, without prejudice, and as to all defendants. On May 29, 2018, the Court in the Vaitkuvienë action appointed the San Antonio Fire & Police Pension Fund and El Paso Firemen & Policemen’s Pension Fund as Lead Plaintiffs and, on June 7, 2018, the Court entered a schedule providing for, among other things, Lead Plaintiffs to file an amended complaint by July 23, 2018 (later extended to July 30, 2018). Lead Plaintiffs filed their amended complaint on July 30, 2018, which also includes a claim against the Initial Defendants, as well as each member of the board of directors at the time of the INC Research - inVentiv Health merger vote in July 2017 (the “Defendants”), contending that the inVentiv merger proxy was misleading under Section 14(a) of the Act. Lead Plaintiffs seek, among

other things, orders (i) declaring that the lawsuit is a proper class action and (ii) awarding compensatory damages in an amount to be proven at trial, including interest thereon, and reasonable costs and expenses incurred in this action, including attorneys’ fees and ~~experts'~~expert fees, to Lead Plaintiffs and other class members. Defendants filed a Motion to Dismiss Plaintiffs’ Amended Complaint on September 20, 2018. Lead Plaintiffs filed a Response in Opposition to such motion on November 21, 2018, and Defendants filed a Reply to such response on December 5, 2018. On May 23, 2019, Lead Plaintiffs filed a Notice of Filings in Related Case regarding the New Jersey shareholder action filed on March 1, 2019 described below, pending before the United States District Court for the District of New Jersey (the “New Jersey Action”), and Defendants filed their response on May 31, 2019. On September 26, 2019, the Court ordered, among other things, that this action is stayed in light of the ~~litigation~~New Jersey Action. On March 23, 2020, Defendants filed ~~on March 1, 2019~~a Notice of Disposition of a Related Action, notifying the Court that the New Jersey Action was dismissed and ~~described below, pending before~~requesting that the ~~United States District Court for the District of New Jersey.~~stay in this action should be lifted. The Company and the other defendants deny the

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allegations in these complaints and intend to defend vigorously against these claims. ~~In the Company's opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows.~~

On September 24, 2018, the Court unsealed a civil complaint captioned United States, et. al vs. AstraZeneca PLC, et. al, No. 2:17-cv-01328-RSL (W.D. Wa.) against inVentiv Health, Inc. and other co-defendants. The complaint alleges that the Company and co-defendants violated the Federal False Claims Act (and various state analogues) and Anti-Kickback Statute through the provision of clinical education services. On December 17, 2018, the United States moved to dismiss this lawsuit, as well as other similar lawsuits supported by the relator in this action. A hearing on such motion is scheduled for October 30, 2019. The Company denies the allegations in the complaint and intends to defend vigorously against these claims. In the Company’s opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

~~On February 21, 2019, the SEC notified the Company that it had commenced an investigation into the Company’s revenue accounting policies, internal controls and related matters.~~ ~~On August 26, 2019, the SEC notified the Company that it had concluded its investigation and does not intend to recommend an enforcement action against the Company at this time.~~

On March 1, 2019, a complaint was filed in the United States District Co~~urt~~Court for the District of New Jersey on behalf of a putative class of shareholders who purchased the Company's common stock during the period between May 10, 2017 and February 27, 2019. The action, captioned Murakami v. Syneos Health, Inc. et al, No. 19-7377 (D.N.J.), ~~names~~named the Company and certain of its executive officers as defendants and ~~alleges~~alleged violations of the Securities Exchange Act of 1934, as amended, based on allegedly false or misleading statements about its business, operations, and prospects. The plaintiffs ~~seek~~sought awards of compensatory damages, among other relief, and their costs and attorneys’ and experts’ fees. On March 28, 2019, Lead Plaintiffs in the Vaitkuvienë action filed a motion to intervene and to transfer this action to the Eastern District of North Carolina, and the Company filed its response on April 22, 2019. On April 30, 2019, a shareholder filed a motion seeking to be appointed lead plaintiff and approving the selection of lead counsel. On October 16, 2019, the Court ordered that Plaintiff, by November 8, 2019, file proof of service of the Complaint in Compliance with Rule 4, or otherwise show cause why the action should not be dismissed for failure to properly serve Defendants (the "Order to Show Cause"). The Court further ordered that the action is stayed and that both motions are administratively terminated pending the Court's resolution of the Order to Show Cause. ~~The~~Plaintiff filed a response to the Order to Show Cause on November 8, 2019, and the Company and the other defendants ~~deny~~filed a response on November 20, 2019. On March 20, 2020, the ~~allegations in~~Court dismissed this action without prejudice for failure to serve defendants within the complaint and intend to defend vigorously against these claims. In the Company's opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows.time period required by law.

The Company is presently unable to predict the duration, scope, or result of the ~~foregoing putative class actions,~~Vaitkuvienë action, or any other related lawsuit. As such, the Company is presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, related to ~~these matters.~~this matter. While the Company intends to defend the putative class action litigation vigorously, the outcome of such litigation or any other litigation is necessarily uncertain. The Company could be forced to expend significant resources in the defense of ~~these lawsuits~~this lawsuit or future ones, and it may not prevail. As such, these matters could have a material adverse effect on the Company's business, annual, or interim results of operations, cash flows, or its financial condition.

~~Self-Insurance Reserves~~

~~The Company is self-insured for certain losses relating to health insurance claims for the majority of its employees located within the United States.~~ ~~Additionally, the Company maintains certain self-insurance retention limits related to automobile and workers’ compensation insurance.~~

Assumed Contingent Tax-Sharing Obligations

As a result of the Merger, the Company assumed contingent tax-sharing obligations arising from ~~inVentiv’s~~inVentiv Health, Inc.'s 2016 merger with Double Eagle Parent, Inc. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the estimated fair value of the assumed contingent tax-sharing obligations was ~~$14.9~~$6.4 million and ~~$15.7~~$32.7 million, respectively.

Contingent Earn-out Liability

In connection with the acquisition of Kinapse ~~acquisition,~~Topco Limited ("Kinapse") in August 2018, the Company recorded a contingent earn-out liability to be paid based on Kinapse meeting revenue targets as of March 31, 2021. The ~~fair value of the earn-out liability is remeasured at the end of each reporting period, with changes in the estimated fair value reflected in earnings until the liability is settled. The~~ estimated fair value of the contingent earn-out liability was ~~$4.3 million and $4.4~~$4.6 million as of ~~September 30,~~December 31, 2019 and ~~December 31, 2018, respectively, and is~~was included in other long-term liabilities in the ~~accompanying unaudited~~ condensed consolidated balance ~~sheets.~~

sheet. During the three months ended March 31, 2020, the Company adjusted the fair value of the contingent earn-out liability to 0 to reflect the updated probability of achievement of the revenue targets. The change in fair value of the earn-out liability was recorded in transaction and integration-related expenses in the condensed consolidated statement of operations.

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

Forward Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

In addition to historical condensed consolidated financial information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such, including statements regarding our anticipated results of operations, our business strategy, possible impairment charges, the anticipated impact of the COVID-19 pandemic on our business, financial results, and financial condition, and planned capital ~~expenditures, and our expectations regarding the resolution of our material weaknesses.~~expenditures. Without limiting the foregoing, the words “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “projects,” “should,” “would,” “targets,” “will” and the negative thereof, and similar words and expressions are intended to identify forward-looking statements. Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

We caution you that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following: the need to hire, develop, and retain key personnel; the impact of unfavorable economic conditions, including the uncertain international economic environment, changes in exchange rates, and effective income tax rate fluctuations; the impact of potentially underpricing our contracts, overrunning our cost estimates, or failing to receive approval for or experiencing delays with documentation of change orders; any adverse effects from customer or therapeutic area concentration; our potential failure to generate a large number of new business awards and the risk of delay, termination, reduction in scope, or failure to go to contract of our business awards; our potential failure to convert backlog to revenue; fluctuations in our operating results and effective income tax rate; risks associated with the COVID-19 pandemic; the cyber-security and other risks associated with our information systems infrastructure; risks associated with the integration of our business with the business of Double Eagle Parent, Inc. (“inVentiv”) and our operation of the combined business following the closing of the merger with inVentiv (the “Merger”); the risks associated with doing business internationally; risks related to the impact of the U.K.’s ~~planned~~ withdrawal from the European Union; impact of the Tax Cuts and Jobs Act; challenges by tax authorities of our intercompany transfer pricing policies; our potential failure to successfully increase our market share, grow our business, and execute our growth strategies; our ability to effectively upgrade our information systems; our failure to perform our services in accordance with contractual requirements, regulatory standards, and ethical considerations; the risk of litigation and personal injury claims; risks related to the management of clinical trials; failure of our insurance to cover our indemnification obligations and other liabilities; risks related to marketing drugs for biopharmaceutical companies; our ability to protect our intellectual property; the risks associated with potential future acquisitions or investments in our customers’ businesses or drugs; our relationships with customers who are in competition with each other; any failure to realize the full value of our goodwill and intangible assets; risks related to restructuring; our compliance with anti-corruption and anti-bribery laws; our dependence on third parties; potential employment liability; downgrades of our credit ratings; outsourcing trends and changes in aggregate spending and research and development budgets; the impact of, including changes in, government regulations and healthcare reform; our ability to keep pace with rapid technological change; the cost of and our ability to service our substantial indebtedness; and

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other risks related to ownership of our common stock. For a further discussion of the risks relating to our business, refer to

~~“Risk~~ “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Overview of Our Business and Services

Syneos Health, Inc. (the “Company,” “we,” “us,” and “our”) is a leading global biopharmaceutical solutions organization providing a full suite of clinical and commercial services to customers in the biopharmaceutical, biotechnology, and medical device industries. We offer both ~~standalone~~stand-alone and integrated biopharmaceutical product development solutions through our Contract Research Organization (“CRO”) and Contract Commercial Organization (“CCO”), ranging from Early Phase (Phase I) clinical trials to the full commercialization of biopharmaceutical products, with the goal of increasing the likelihood of regulatory approval and commercial ~~launch success for our customers.~~success.

Our operations are divided into 2two reportable segments, Clinical Solutions and Commercial ~~Solutions.~~Solutions, to reflect the structure under which we operate, evaluate our performance, make strategic decisions, and allocate resources. Our Clinical Solutions segment offers a variety of services spanning Phase ~~I to Phase IV~~I-IV of clinical development, including full-service global studies, as well as individual service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Our Commercial Solutions segment provides the pharmaceutical, biotechnology, and healthcare ~~industries~~industries with commercialization services, including deployment solutions, communication solutions (public relations and advertising), and consulting services. We integrate our clinical and commercial capabilities into customized solutions by sharing knowledge, data, and insights through our biopharmaceutical acceleration model (“BAM”). This collaboration across the development and commercialization continuum facilitates unique insights into patient populations, therapeutic environments, product timelines, and the competitive landscape. For ~~further~~further discussion, refer to “Note 1311 - Segment Information” of our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

COVID-19 Pandemic

During the first quarter of 2020, we implemented contingency planning to protect the health and well-being of our employees, with most employees working remotely where possible. We have global and regional crisis teams in place monitoring the rapidly evolving situation and recommending risk mitigation actions. We have implemented travel restrictions as well as visitor protocols and we are following social distancing practices. We have assessed and are implementing continuity plans to provide customers with continued services.

We did not observe significant impacts on our business or results of operations for the quarter ended March 31, 2020 due to the global emergence of COVID-19 or the mitigation actions taken to slow its spread. We maintained new business award growth in both of our segments, and did not experience any significant cancellations related to COVID-19.

During and since March 2020, the COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, our customers, suppliers, and partners conduct significant portions of our business, such as Europe and North America, and, as a result, we expect to begin to experience more pronounced disruptions in our operations during the second quarter of 2020. We have experienced, and may continue to experience, curtailed customer demand that could materially adversely impact our business, results of operations, and overall financial performance in future periods. As a result of these conditions, we are taking proactive steps to mitigate the projected revenue and cash flow impacts for the

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remainder of 2020, including proactive cost management strategies consisting of accelerating our ForwardBound margin enhancement initiative, hiring restrictions, reductions in third-party costs, certain compensation adjustments, and other initiatives.

Specifically, in our Clinical Solutions segment, we expect impacts to be temporary and relate to limitations on our staff's ability to physically access investigative sites, delays in new patient enrollment, delays in new trial start-up activities, and delayed decision making related to new business awards. Our full service studies as well as our functional service provider offering are also expected to be impacted by a switch from site-based monitoring visits to remote monitoring visits and temporary or permanent closures of businesses that utilize our services or facilities we use to conduct our business during the pandemic. In our Commercial Solutions segment, we expect impacts to be temporary and relate to delayed decision making related to new business awards, delays of existing projects, declines in field sales team visits to healthcare providers, and travel disruptions.

We remain confident in our liquidity position, which includes cash on hand of $336.0 million as of March 31, 2020, and access to our revolving credit facility, of which we drew $300.0 million during March 2020. We have also implemented proactive cash conservation initiatives, including delaying certain capital expenditures, reducing operating costs, and purchasing interest rate swaps to fix certain variable rate debt at lower interest rates.

To the extent that COVID-19 continues or worsens, national, state, and local governments may impose additional restrictions or extend the restrictions already in place. The continuing spread of COVID-19 and the related safety and business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to, additional disruption to the economy and our customers, additional work restrictions, and supply chains being interrupted or slowed. Also, governments may impose other laws, regulations, or taxes that could adversely impact our business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected, they could delay or reduce purchases of services we provide. The potential effects of COVID-19 also could impact us in a number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying amount of goodwill or other definite-lived assets.

We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers, and shareholders. To the extent the pandemic worsens, we cannot predict the effects it may have on our business, in particular with respect to demand for our services, our strategy, and our prospects, the effects on our customers, or the impact on our financial results. See Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q for further discussion of the potential impact of the COVID-19 pandemic on our business.

New Business Awards and Backlog

We add new business awards to backlog when we enter into a contract or when we receive a written commitment from the customer selecting us as a service provider, provided that:

•the customer has received appropriate internal funding approval and collection of the award value is probable;

•the project or projects are not contingent upon completion of another clinical trial or event that would place the project or projects at material risk of not commencing in accordance with the expected timeline;

•the project or projects are expected to commence within a certain period of time from the end of the quarter in which the award was granted;

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•the customer has entered or intends to enter into a comprehensive contract as soon as practicable; and

•for awards related to ~~our~~ deployment solutions and ~~Functional Service Provider ("FSP")~~functional service provider offerings, a maximum of twelve months of services are included in the award value.

In addition, we continually evaluate our backlog to determine if any of the previously awarded work is no longer expected to be performed, regardless of whether we have received formal cancellation notice from the customer. If we determine that any previously awarded work is no longer probable of being performed, we remove the value from our backlog based on the risk of cancellation. We recognize revenue from these awards as services are performed, provided we have entered into a ~~contractual commitment~~contract with the customer.

~~Beginning in 2019, we now~~We report new business awards for our Clinical Solutions and Commercial Solutions segments on a trailing twelve months (“TTM”) basis. Our total backlog represents backlog for our Clinical Solutions segment and the deployment solutions ~~service~~ offering within our Commercial Solutions segment. We do not report backlog for the remaining service offerings in the Commercial Solutions segment. ~~New business awards and backlog include reimbursable out-of-pocket expenses for all periods presented.~~

Backlog

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts can be terminated by the customer with a 30-day notice.

Our backlog was as follows as of ~~September 30, 2019 and 2018~~March 31 (in millions):


		2019		2018		Change							2020			2019			Change
Clinical Solutions	Clinical Solutions	$	7,781.8	$	7,263.5	$	518.3	7.1	%	Clinical Solutions	$	8,549.4		$	7,612.9		$	936.5	12.3	%
Commercial Solutions - Deployment Solutions	Commercial Solutions - Deployment Solutions	597.5		603.7		(6.2)		(1.0)	%	Commercial Solutions - Deployment Solutions	658.1			690.2			(32.1)		(4.7)	%
Total backlog	Total backlog	$	8,379.3	$	7,867.2	$	512.1	6.5	%	Total backlog	$	9,207.5		$	8,303.1		$	904.4	10.9	%

We expect ~~that~~ approximately ~~$0.98~~$3.06 billion of our backlog as of ~~September 30, 2019~~March 31, 2020 will be recognized as revenue during the remainder of ~~2019.~~2020. We adjust the amount of our backlog each quarter for the effects of fluctuations in foreign currency exchange rates.

Net ~~new business awards~~New Business Awards

New business awards, net of cancellations, were as follows for the TTM ~~period~~periods ended ~~September 30, 2019~~March 31 (in millions):

~~Clinical Solutions~~

~~3,911.9~~

~~Commercial Solutions - Deployment Solutions~~

~~1,260.1~~

~~Total net new business awards~~

~~5,172.0~~


	2020		2019
Clinical Solutions	$	4,451.3	$	4,193.5
Commercial Solutions	1,273.4		1,324.6
Total net new business awards	$	5,724.7	$	5,518.1

New business awards have varied and may continue to vary significantly from quarter to quarter. Fluctuations in our net new business award levels often result from the fact that we may receive a small number of relatively large orders in any given reporting period. Because of these large orders, our backlog and net new business awards in a reporting period may reach levels that are not sustainable in subsequent reporting periods.

We believe that our backlog and net new business awards might not be consistent indicators of future revenue because they have been, and likely will continue to be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and ~~cancellations and~~ changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed by

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the customer or regulatory authorities. Net new business awards and backlog could also be affected by various risks and uncertainties, including, but not limited to, the broad effects of the COVID-19 pandemic on the global economy and major financial markets, as well as other risks detailed in Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. We generally do not have a contractual right to the full amount of the awards reflected in our backlog. If a customer cancels an award, we might be reimbursed for the costs we have incurred. As we increasingly compete for and enter into large contracts that are more global in nature, we expect that the rate at which our backlog and net new business awards convert into revenue is likely to decrease, and the duration of projects and the period over which related revenue is recognized to lengthen. For more information about risks related to our backlog see Part I, Item 1A "Risk Factors - Risks Related to Our Business - Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog" included in “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Results of Operations

The following table sets forth amounts from our unaudited condensed consolidated statements of operations along with dollar and percentage changes (in thousands, except percentages):

Three Months Ended
September 30,
2019 2018 Change
Revenue $ 1,177,028 $ 1,114,918 $ 62,110 5.6 %
Costs and operating expenses:
Direct costs (exclusive of depreciation and amortization) 913,674 872,214 41,460 4.8 %
Selling, general, and administrative expenses 109,864 96,943 12,921 13.3 %
Restructuring and other costs 13,456 19,349 (5,893) (30.5) %
Transaction and integration-related expenses 10,454 18,561 (8,107) (43.7) %
Depreciation and amortization 60,137 68,034 (7,897) (11.6) %
Total operating expenses 1,107,585 1,075,101 32,484 3.0 %
Income from operations 69,443 39,817 29,626 74.4 %
Total other income (expense), net 532 (38,228) 38,760 n/m
Income before provision for income taxes 69,975 1,589 68,386 n/m
Income tax expense (11,055) (11,983) 928 7.7 %
Net income (loss) $ 58,920 $ (10,394) $ 69,314 n/m

Nine Months Ended
September 30,
2019 2018 Change
Revenue $ 3,462,861 $ 3,244,644 $ 218,217 6.7 %
Costs and operating expenses:
Direct costs (exclusive of depreciation and amortization) 2,718,005 2,560,502 157,503 6.2 %
Selling, general, and administrative expenses 333,860 296,420 37,440 12.6 %
Restructuring and other costs 39,751 41,647 (1,896) (4.6) %
Transaction and integration-related expenses 34,766 61,804 (27,038) (43.7) %
Depreciation and amortization 182,086 203,557 (21,471) (10.5) %
Total operating expenses 3,308,468 3,163,930 144,538 4.6 %
Income from operations 154,393 80,714 73,679 91.3 %
Total other income (expense), net (70,429) (83,042) 12,613 15.2 %
Income (loss) before provision for income taxes 83,964 (2,328) 86,292 n/m
Income tax expense (43,756) (19,058) (24,698) (129.6) %
Net income (loss) $ 40,208 $ (21,386) $ 61,594 n/m


	Three Months Ended March 31,
	2020		2019		Change
Revenue	$	1,163,355	$	1,119,006	$	44,349	4.0	%
Costs and operating expenses:
Direct costs (exclusive of depreciation and amortization)	924,014		886,802		37,212		4.2	%

Selling, general, and administrative expenses	117,970		113,117		4,853		4.3	%
Restructuring and other costs	8,720		14,413		(5,693)		(39.5)	%
Transaction and integration-related expenses	7,577		16,658		(9,081)		(54.5)	%

Depreciation and amortization	56,107		61,200		(5,093)		(8.3)	%
Total operating expenses	1,114,388		1,092,190		22,198		2.0	%
Income from operations	48,967		26,816		22,151		82.6	%
Total other expense, net	7,192		46,404		(39,212)		84.5	%
Income (loss) before provision for income taxes	41,775		(19,588)		61,363		n/m
Income tax expense	8,201		10,416		(2,215)		21.3	%
Net income (loss)	$	33,574	$	(30,004)	$	63,578	n/m

Revenue

For the three months ended ~~September 30, 2019,~~March 31, 2020, our revenue increased by ~~$62.1 million,~~$0.04 billion, or ~~5.6%~~4.0%, to ~~$1.18~~$1.16 billion from ~~$1.11~~$1.12 billion for the three months ended ~~September 30, 2018. For the nine months ended September 30, 2019, our revenue increased by $218.2 million, or 6.7%, to $3.46 billion from $3.24 billion for the nine months ended September 30, 2018.~~March 31, 2019. The ~~increases were~~increase was primarily driven by growth in ~~both~~ our Clinical Solutions ~~and~~segment, which was partially offset by a decrease in our Commercial Solutions ~~segments~~segment as discussed below.

No single customer accounted for greater than 10% of ~~the Company’s~~our revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019. ~~During the nine months ended September 30, 2019,~~ ~~one customer accounted for approximately 10% of our~~ ~~revenue. During the three and nine months ended September 30, 2018, one customer accounted for approximately 12% and 11%, respectively, of our revenue.~~ Revenue from our top five customers accounted for ~~approximately~~approximately 21% and 22% ~~and 25%~~ of revenue for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and 23% and 25% of revenue for the nine months ended September 30, 2019 and 2018,~~ respectively.

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Revenue for each of our segments was as follows (dollars in thousands):

Three Months Ended September 30,
2019 % of total 2018 % of total Change
Clinical Solutions $ 867,427 73.7 % $ 819,203 73.5 % $ 48,224 5.9 %
Commercial Solutions 309,601 26.3 % 295,715 26.5 % 13,886 4.7 %
Total revenue $ 1,177,028 $ 1,114,918 $ 62,110 5.6 %

Nine Months Ended September 30,
2019 % of total 2018 % of total Change
Clinical Solutions $ 2,522,307 72.8 % $ 2,389,955 73.7 % $ 132,352 5.5 %
Commercial Solutions 940,554 27.2 % 854,689 26.3 % 85,865 10.0 %
Total revenue $ 3,462,861 $ 3,244,644 $ 218,217 6.7 %


	Three Months Ended March 31,
	2020		% of total		2019		% of total		Change
Clinical Solutions	$	874,826	75.2	%	$	804,958	71.9	%	$	69,868	8.7	%
Commercial Solutions	288,529		24.8	%	314,048		28.1	%	(25,519)		(8.1)	%
Total revenue	$	1,163,355			$	1,119,006			$	44,349	4.0	%

Clinical Solutions

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, revenue attributable to our Clinical Solutions segment increased compared to the same ~~periods~~period in the prior year primarily due to net new business awards resulting in higher backlog as we entered ~~each~~the period ~~the startup of new work in backlog,~~ and growth in reimbursable out-of-pocket expenses, partially offset by the negative ~~impact~~impacts of fluctuations in foreign currency exchange rates of ~~$8.5 million~~$6.0 million.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to negatively impact our full year 2020 Clinical Solutions revenue. At this time, we believe that the most significant impacts to revenue in our Clinical Solutions segment will be temporary and ~~$32.4 million for~~relate to limitations on our staff's ability to physically access investigative sites, delays in new patient enrollment, delays in new trial start-up activities, and delayed decision making related to new business awards. Our full service studies as well as our functional service provider offering are also expected to be impacted by a switch from site-based monitoring visits to remote monitoring visits and temporary or permanent closures of businesses that utilize our services or facilities we use to conduct our business during the ~~respective periods.~~

pandemic.

Commercial Solutions

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, revenue attributable to our Commercial Solutions segment ~~increased~~decreased compared to the same ~~periods~~period in the prior year primarily due to ~~net~~unfavorable revenue mix and a decline in reimbursable out-of-pocket expenses.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to negatively impact our full year 2020 Commercial Solutions revenue. At this time, we believe that the most significant impacts to revenue in our Commercial Solutions segment will be temporary and relate to delayed decision making related to new business awards, ~~that resulted~~delays of existing projects, declines in higher backlog as we entered each period, as well as revenue from our acquisition of Kinapse Topco Limited (“Kinapse”) during the third quarter of 2018. These revenue increases were partially offset by a decline in medication adherence services revenue duefield sales team visits to ~~project delays~~healthcare providers, and ~~cancellations and the negative impact of fluctuations in foreign currency exchange rates of $1.1 million and $5.0 million for the respective periods.~~

travel disruptions.

Direct Costs

Direct costs consist principally of compensation expense and benefits associated with our employees and other employee-related costs, and reimbursable out-of-pocket expenses directly related to delivering on our projects. While we have some ability to manage the majority of these costs relative to the amount of contracted services we have during any given period, direct costs as a percentage of revenue can vary from period to period. Such fluctuations are due to a variety of factors, including, among others: (i) the level of staff utilization on our projects; (ii) adjustments to the timing of work on specific customer contracts; (iii) the experience mix of personnel assigned to projects; (iv) the service mix and pricing of our contracts; and (v) the timing of the incurrence of reimbursable out-of-pocket expenses, particularly on our Clinical Solutions projects. In addition, as global projects wind down or as delays and cancellations occur, staffing levels in certain countries or functional areas can become misaligned with the current business volume.

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Direct costs consisted of the following (dollars in thousands):

Three Months Ended September 30,
2019 2018 Change
Direct costs (exclusive of depreciation and amortization) $ 913,674 $ 872,214 $ 41,460 4.8 %
% of revenue 77.6 % 78.2 %
Gross margin % 22.4 % 21.8 %


		Nine Months Ended September 30,														Three Months Ended March 31,
		2019			2018			Change								2020			2019		Change
Direct costs (exclusive of depreciation and amortization)	Direct costs (exclusive of depreciation and amortization)	$	2,718,005		$	2,560,502		$	157,503	6.2	%	Direct costs (exclusive of depreciation and amortization)	$	924,014		$	886,802		$	37,212	4.2	%

% of revenue	% of revenue	78.5		%	78.9		%					% of revenue	79.4		%	79.2		%
Gross margin %	Gross margin %	21.5		%	21.1		%					Gross margin %	20.6		%	20.8		%

For the three months ended ~~September 30, 2019,~~March 31, 2020, our direct costs increased by ~~$41.5~~$37.2 million, or ~~4.8%~~4.2%, compared to the three months ended ~~September 30, 2018. For the nine months ended September 30, 2019, our direct costs increased by $157.5 million, or 6.2%, compared to the nine months ended September 30, 2018.~~March 31, 2019. The ~~increases were~~increase was primarily driven by ~~an increase~~growth in ~~compensation and related costs (including share-based compensation), reimbursable out-of-pocket expenses,~~our Clinical Solutions segment, partially offset by a decrease in our Commercial Solutions segment as ~~well as direct costs from Kinapse, which was acquired in the third quarter of 2018.~~

discussed below.

Clinical Solutions

Direct costs for our Clinical Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):


		Three Months Ended September 30,																	Three Months Ended March 31,
		2019			2018			Change								2020			2019		Change
Direct costs	Direct costs	$	655,851		$	633,258		$	22,593	3.6	%	Direct costs	$	677,091		$	625,767		$	51,324	8.2	%

% of segment revenue	% of segment revenue	75.6		%	77.3		%					% of segment revenue	77.4		%	77.7		%
Segment gross margin %	Segment gross margin %	24.4		%	22.7		%					Segment gross margin %	22.6		%	22.3		%

Nine Months Ended September 30,
2019 2018 Change
Direct costs $ 1,936,021 $ 1,857,623 $ 78,398 4.2 %
% of segment revenue 76.8 % 77.7 %
Segment gross margin % 23.2 % 22.3 %

For the three months ended ~~September 30, 2019,~~March 31, 2020, our Clinical Solutions segment direct costs increased by ~~$22.6~~$51.3 million, or ~~3.6%~~8.2%, compared to the three months ended September 30, 2018. For the nine months ended September 30, 2019, our Clinical Solutions segment direct costs increased by $78.4 million, or 4.2%, compared to the nine months ended September 30, 2018. These increases wereMarch 31, 2019. The increase was primarily due to higher reimbursable out-of-pocket expenses and an increase in compensation and related costs due to higher billable headcount to support revenue growth. These increases were partially offset by favorable impacts from our ForwardBound margin enhancement initiative and foreign currency exchange rate fluctuations.

Gross margin for our Clinical Solutions segment was ~~24.4%~~22.6% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~22.7%~~22.3% for the three months ended ~~September 30, 2018.~~March 31, 2019. Gross margin ~~for our Clinical Solutions segment~~ was ~~23.2% for the nine months ended September 30, 2019, compared to 22.3% for the nine months ended September 30, 2018. Gross margins were~~ higher during the current year ~~periods~~period as compared to the same ~~periods~~period in ~~2018~~2019 primarily due to ~~revenue growth and~~ favorable revenue mix ~~net realized cost synergies,~~ and ~~a favorable impact~~impacts from ~~foreign currency exchange rate fluctuations,~~our ForwardBound margin enhancement initiative, partially offset by higher reimbursable out-of-pocket expenses.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to negatively impact our full year 2020 Clinical Solutions margins. At this time, we believe that the most significant impacts to margins in our Clinical Solutions segment will be those noted in the above Revenue section as well as potential increased costs ~~associated with certain new strategic relationships with large pharmaceutical customers.~~related to inefficiencies, partially offset by proactive cost management strategies.

Commercial Solutions

Direct costs for our Commercial Solutions segment, excluding share-based compensation expense, were as follows (dollars in thousands):

Three Months Ended September 30,
2019 2018 Change
Direct costs $ 250,904 $ 233,740 $ 17,164 7.3 %
% of segment revenue 81.0 % 79.0 %
Segment gross margin % 19.0 % 21.0 %


		Nine Months Ended September 30,																	Three Months Ended March 31,
		2019			2018			Change								2020			2019		Change
Direct costs	Direct costs	$	759,591		$	688,339		$	71,252	10.4	%	Direct costs	$	238,741		$	252,873		$	(14,132)	(5.6)	%

% of segment revenue	% of segment revenue	80.8		%	80.5		%					% of segment revenue	82.7		%	80.5		%
Segment gross margin %	Segment gross margin %	19.2		%	19.5		%					Segment gross margin %	17.3		%	19.5		%

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For the three months ended ~~September 30, 2019,~~March 31, 2020, our Commercial Solutions segment direct costs ~~increased~~decreased by ~~$17.2~~$14.1 million, or ~~7.3%~~5.6%, compared to the three months ended September 30, 2018. For the nine months ended September 30, 2019, our Commercial Solutions segment direct costs increased by $71.3 million, or 10.4%, compared to the nine months ended September 30, 2018. These increases wereMarch 31, 2019. The decrease was primarily related to ~~an increase~~a decline in reimbursable out-of-pocket expenses, lower compensation and related costs due to ~~higher~~reduced billable headcount, ~~to support revenue growth, as well as direct costs~~and favorable impacts from ~~Kinapse, which was acquired in the third quarter of 2018. Direct costs for the nine months ended September 30, 2019 were also negatively impacted by higher reimbursable out-of-pocket expenses.~~our ForwardBound margin enhancement initiative.

Gross margin for our Commercial Solutions segment was ~~19.0%~~17.3% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~21.0%~~19.5% for the three months ended ~~September 30, 2018.~~March 31, 2019. Gross margin ~~for our Commercial Solutions segment~~ was ~~19.2% for the nine months ended September 30, 2019, compared to 19.5% for the nine months ended September 30, 2018. Gross margins were~~ lower during the current year ~~periods~~period compared to the same ~~periods~~period in ~~2018~~2019 primarily due to an unfavorable revenue ~~mix~~mix. This decrease was partially offset by lower reimbursable out-of-pocket expenses and ~~a negative~~favorable impacts from our ForwardBound margin enhancement initiative.

Although we are aggressively managing our response to the COVID-19 pandemic, it is expected to negatively impact ~~from foreign currency exchange rate fluctuations.~~our full year 2020 Commercial Solutions margins. At this time, we believe that the most significant impacts to margins in our Commercial Solutions segment will be those noted in the above Revenue section as well as potential increased costs related to inefficiencies, partially offset by proactive cost management strategies.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were as follows (dollars in thousands):


		Three Months Ended September 30,														Three Months Ended March 31,
		2019			2018			Change								2020			2019		Change
Selling, general, and administrative expenses	Selling, general, and administrative expenses	$	109,864		$	96,943		$	12,921	13.3	%	Selling, general, and administrative expenses	$	117,970		$	113,117		$	4,853	4.3	%
% of total revenue	% of total revenue	9.3		%	8.7		%					% of total revenue	10.1		%	10.1		%

Nine Months Ended September 30,
2019 2018 Change
Selling, general, and administrative expenses $ 333,860 $ 296,420 $ 37,440 12.6 %
% of total revenue 9.6 % 9.1 %

The ~~increases~~increase in selling, general, and administrative expenses for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 as compared to the same ~~periods~~period in ~~2018 were~~2019 was primarily caused by higher ~~compensation-related expenses (including share-based~~compensation and ~~incentive compensation), incremental~~related costs primarily due to strategic investments in some of our key functions including business development, our Syneos One^TM product offering, and information technology. These increases were partially offset by favorable impacts from ~~Kinapse, which was acquired during the third quarter of 2018, and incremental costs from a strategic partnership agreement entered into during the fourth quarter of 2018.~~our ForwardBound margin enhancement initiative.

Restructuring and Other Costs

Restructuring and other costs were ~~$13.5~~$8.7 million and ~~$19.3~~$14.4 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and September 30, 2018, respectively, and $39.8 million and $41.6 million for the nine months ended September 30, 2019 and 2018,~~ respectively. ~~During 2017, in~~In connection with the Merger, we established a restructuring plan to eliminate redundant positions and reduce our facility footprint worldwide. We expect to continue the ongoing evaluations of our workforce and facilities infrastructure needs ~~through 2020 and beyond~~ in an effort to optimize our resources. Additionally, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ we incurred employee severance costs and facility closure costs for ~~non-Merger~~non Merger-related related restructuring activities.

Restructuring and other costs consisted of the following (in thousands):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
Merger-related restructuring and other costs:	Merger-related restructuring and other costs:									Merger-related restructuring and other costs:
Employee severance and benefit costs	Employee severance and benefit costs	$	2,288	$	1,936	$	14,537	$	13,229	Employee severance and benefit costs	$	962	$	6,272
Facility and lease termination costs	Facility and lease termination costs	2,283		15,794		10,741		20,592		Facility and lease termination costs	597		1,954
Other merger-related costs		—		33		—		548
Non-merger related restructuring and other costs:

Non Merger-related restructuring and other costs:										Non Merger-related restructuring and other costs:
Employee severance and benefit costs	Employee severance and benefit costs	5,797		713		11,070		1,690		Employee severance and benefit costs	6,659		5,960
Facility and lease termination costs	Facility and lease termination costs	2,855		—		3,130		1,438		Facility and lease termination costs	136		219
Consulting fees		—		695		—		3,176

Other costs	Other costs	233		178		273		974		Other costs	366		8
Total restructuring and other costs	Total restructuring and other costs	$	13,456	$	19,349	$	39,751	$	41,647	Total restructuring and other costs	$	8,720	$	14,413

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We expect to continue to incur significant costs related to the restructuring of our ~~operations in order to achieve our targeted synergies as a result of the Merger.~~operations. However, the timing and the amount of these costs depends on various factors, including, but not limited to, identifying and realizing synergy opportunities and executing the integration of our combined operations. We may also incur additional restructuring and other costs during 2020 related to our cost savings initiatives, including our response to the COVID-19 pandemic and our ForwardBound margin enhancement initiative.

Transaction and Integration-Related Expenses

Transaction and integration-related expenses consisted of the following (in thousands):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2019		2018		2019		2018			2020		2019
Professional fees	Professional fees	$	7,108	$	14,851	$	26,632	$	40,624	Professional fees	$	10,123	$	12,846

Debt modification and related expenses	Debt modification and related expenses	1,582		409		5,555		1,726		Debt modification and related expenses	—		2,241
Integration and personnel retention-related costs	Integration and personnel retention-related costs	1,394		2,107		3,150		15,847		Integration and personnel retention-related costs	1,549		847
Fair value adjustments to contingent obligations	Fair value adjustments to contingent obligations	370		1,194		(571)		3,582		Fair value adjustments to contingent obligations	(4,095)		724
Other		—		—		—		25

Total transaction and integration-related expenses	Total transaction and integration-related expenses	$	10,454	$	18,561	$	34,766	$	61,804	Total transaction and integration-related expenses	$	7,577	$	16,658

We expect to incur additional professional fees and integration-related ~~expenses~~costs associated with the ~~Merger.~~Merger and continued consolidation of our legal entities and information technology systems. The timing and amount of these expenses will depend on the identification of synergy opportunities and the timing and execution of our integration activities.

The decrease in fair value adjustments to contingent obligations during the three months ended March 31, 2020 as compared to 2019 is primarily due to a decrease in the estimate of the contingent earn-out liability associated with our acquisition of Kinapse Topco Limited in 2018.

Depreciation and Amortization Expense

Total depreciation and amortization expense was ~~$60.1~~$56.1 million and ~~$68.0~~$61.2 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $182.1 million and $203.6 million for the nine months ended September 30, 2019 and 2018,~~ respectively. The ~~decreases~~decrease in total depreciation and amortization expense ~~were~~was primarily due to a decrease in amortization expense from intangible assets resulting from business combinations completed in prior periods ~~partially offset by~~and a decrease in depreciation expense related to an increase in ~~depreciation expense from continued investment in information technology and facilities to support growth in our operational capabilities and optimization of our infrastructure.~~

assets that are fully amortized.

Other Expense, Net

Other expense, net consisted of the following (dollars in thousands):

Three Months Ended September 30,
2019 2018 Change
Interest income $ 2,426 $ 1,004 $ 1,422 141.6 %
Interest expense (32,607) (33,097) 490 1.5 %
Loss on extinguishment of debt — (1,789) 1,789 100.0 %
Other income (expense), net 30,713 (4,346) 35,059 n/m
Total other income (expense), net $ 532 $ (38,228) $ 38,760 n/m


		Nine Months Ended September 30,											Three Months Ended March 31,
		2019		2018		Change							2020		2019		Change
Interest income	Interest income	$	6,061	$	3,498	$	2,563	73.3	%	Interest income	$	(336)	$	(1,502)	$	1,166	(77.6)	%
Interest expense	Interest expense	(101,500)		(97,727)		(3,773)		(3.9)	%	Interest expense	26,458		34,630		(8,172)		23.6	%
Loss on extinguishment of debt	Loss on extinguishment of debt	(4,355)		(3,914)		(441)		(11.3)	%	Loss on extinguishment of debt	—		4,355		(4,355)		100.0	%
Other income, net		29,365		15,101		14,264		94.5	%
Total other income (expense), net		$	(70,429)	$	(83,042)	$	12,613	15.2	%
Other (income) expense, net										Other (income) expense, net	(18,930)		8,921		(27,851)		(312.2)	%
Total other expense, net										Total other expense, net	$	7,192	$	46,404	$	(39,212)	84.5	%

Total other ~~income (expense),~~expense, net was ~~$0.5~~$7.2 million and ~~$(38.2)~~$46.4 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $(70.4) million and $(83.0) million for the nine months ended September 30, 2019 and 2018,~~ respectively. ~~These changes were~~The change was primarily due to higher other ~~income,~~(income) expense, net, and a decrease in interest expense in the current ~~periods~~period as compared to the prior ~~periods, which~~period. Other (income) expense, net primarily consists of foreign currency gains and losses that result from exchange rate fluctuations on our monetary asset balances denominated in currencies other than our functional currency.

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Income Tax Expense

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, we recorded income tax expense of ~~$11.1~~$8.2 million, ~~and $43.8 million, respectively,~~ compared to pre-tax income of ~~$70.0 million and $84.0 million, respectively.~~$41.8 million. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 varied from the ~~U.S.~~United States federal statutory income tax rate of 21.0% primarily ~~due to: (i) base erosion and anti-abuse minimum tax, (ii)~~due to foreign income inclusions such as the Global Intangible Low-Taxed Income provisions ("GILTI"), state and ~~(iii) valuation allowance change~~local taxes on ~~domestic deferred tax assets.~~United States income, and research and general business credits.

For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, we recorded an income tax expense of ~~$12.0~~$10.4 million, ~~and $19.1 million, respectively,~~ compared to pre-tax ~~income of $1.6 million and pre-tax~~ loss of ~~$2.3 million, respectively.~~$19.6 million. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 varied from the ~~U.S.~~United States federal statutory income tax rate of 21.0% primarily due ~~to: (i) the recognition of unfavorable discrete adjustments related~~ to base erosion and anti-abuse minimum tax, foreign ~~currency exchange; (ii) the geographical split of pre-tax income;~~income inclusions such as GILTI, and ~~(iii) deferred expense related to hanging credits~~valuation allowance changes on domestic ~~indefinite-lived intangibles.~~deferred tax assets.

We currently maintain a valuation allowance against a ~~material~~ portion of our ~~domestic~~state deferred tax assets and a portion of our foreign deferred tax assets as of ~~September 30, 2019.~~March 31, 2020. We intend to continue to maintain a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. ~~However, given our recent earnings~~

Many governments have enacted or are currently contemplating economic stimulus and ~~anticipated future earnings, we believe that there is a reasonable possibility that, within~~financial aid measures. Many of these measures include deferring the ~~next 12 months, sufficient positive evidence may become available~~due dates for tax payments, including both income tax and other taxes. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States to ~~allow us to reach a conclusion that approximately $50.0 million to $70.0 million of our valuation allowance against our domestic deferred tax assets will no longer be needed. Release~~address the economic impacts of the ~~valuation allowance would result in the recognition of certain deferred tax assets and a decrease to~~COVID-19 pandemic. The CARES Act includes corporate income tax, ~~expense in~~payroll tax, and other provisions. While we may receive financial, tax, or other benefits under the ~~period~~bill, this legislation did not impact us during the ~~release is recorded. However,~~three months ended March 31, 2020. We are still assessing the ~~exact timing and amount of any valuation allowance release are subject to change on the basis~~impact of the ~~level~~CARES Act and other global measures and do not expect there to be a material impact to our income tax provision for the year ending December 31, 2020. We plan to defer the timing of ~~profitability that we are able to achieve.~~income tax payments and other taxes as permitted by the CARES Act, and other stimulus measures enacted globally.

Liquidity and Capital Resources

Key measures of our liquidity were as follows (in thousands):


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
Balance sheet statistics:	Balance sheet statistics:					Balance sheet statistics:
Cash and cash equivalents	Cash and cash equivalents	$	127,368	$	153,863	Cash and cash equivalents	$	335,573	$	163,227
Restricted cash	Restricted cash	1,836		2,069		Restricted cash	387		462
Working capital (excluding restricted cash)	Working capital (excluding restricted cash)	38,942		(13,305)		Working capital (excluding restricted cash)	333,141		45,241

As of ~~September 30, 2019,~~March 31, 2020, we had ~~$129.2~~$336.0 million of cash, cash equivalents, and restricted ~~cash.~~cash, which reflects a $300.0 million draw on our $600.0 million revolving credit facility (the "Revolver") in March 2020. As of ~~September 30, 2019,~~March 31, 2020, substantially all of our cash, cash equivalents, and restricted cash was held within the United States. In addition, we had ~~$580.2~~$280.8 million (net of ~~$19.8~~$19.2 million in outstanding letters of ~~credit)~~credit ("LOCs")) available for borrowing under our ~~$600.0~~Revolver, of which $130.8 million ~~Revolver facility.~~was available for LOCs.

We have historically funded our operations and growth, including acquisitions, primarily with our working capital, cash flow from operations, and funds available through various borrowing arrangements. Our principal liquidity requirements are to fund our debt service obligations, capital expenditures, expansion of service offerings, possible acquisitions, integration and restructuring costs, geographic expansion, stock repurchases, working capital, and other general corporate expenses. Cash from operations also could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic on the global economy and major financial markets, as well as other risks detailed in Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. We have implemented proactive cash conservation initiatives, including delaying certain capital expenditures, reducing operating costs, and purchasing interest rate swaps to fix certain variable rate debt at lower interest rates. Based on past

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performance and current expectations, we believe our cash and cash equivalents, cash generated from operations, and remaining funds available under our ~~revolving credit facility~~Revolver, will be sufficient to meet our working capital needs, capital expenditures, scheduled debt and interest payments, income tax obligations, and other currently anticipated liquidity requirements for at least the next 12 months.

However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Indebtedness

As of ~~September 30, 2019,~~March 31, 2020, we had approximately ~~$2.75~~$2.97 billion of total principal indebtedness ~~comprised~~(including $49.1 million in finance lease obligations), consisting of ~~$2.01~~$2.35 billion in term loan debt, ~~$403.0~~$300.0 million ~~in Senior Unsecured Notes due 2024 (the “Senior Notes”),~~under our Revolver, and $275.0 million in borrowings against the accounts receivable financing agreement.

Credit Agreement

We are party to a credit agreement (as amended, the "Credit Agreement") for: (i) a $1.55 billion Term Loan A facility that matures on March 26, 2024 (“Term Loan A”); (ii) a $1.60 billion Term Loan B facility that matures on August 1, 2024 (“Term Loan B”); and ~~$54.6~~(iii) a $600.0 million in current and non-current finance lease obligations. In addition, as of September 30, 2019 we had $580.2 million (net of $19.8 million in outstanding letters of credit) of available borrowings for working capital and other purposes under the Revolver ~~and $0.7 million of letters of credit~~ that ~~were not secured by the Revolver.~~ matures on March 26, 2024.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we ~~made~~did not make any voluntary prepayments ~~of $179.8 million, which were applied~~ against ~~the regularly-scheduled quarterly principal payments of the~~ Term ~~Loan~~Loans A or B. As a result of ~~these and~~ previous voluntary prepayments, we are not required to make a mandatory payment against the Term Loan B principal balance until maturity in August 2024. Additionally, during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we ~~made~~were not required to make any mandatory principal payments ~~of $12.5 million~~ towards ~~our~~ Term Loan A.

~~Amendment No. 2 to the Credit Agreement~~

On March 26, 2019, we entered into Amendment No. 2 to the Credit Agreement (“the Second Amendment”). The Second Amendment, among other things, modifies the terms of the Credit Agreement to refinance the existing Term Loan A facility and the RevolverIn February 2020, as ~~follows:~~

~~(a) to increase the existing Term Loan A facility by $587.5 million to $1.55 billion. $187.5 million of such increase was applied at closing to repay~~ a ~~portion~~result of our existing Term Loan B facility and the fees and expenses incurred in connection with the Second Amendment, and the remaining $400.0 million will be available to be funded in multiple draws within nine months of closing;

(b) to increase the existing Revolver commitments available by $100.0 million to $600.0 million, and reduce the margin spread by 0.25% overall, resulting in (i) for Adjusted Eurocurrency Rate (as defined in the Credit Agreement) loans, a margin spread of 1.50% and (ii) for Alternate Base Rate (as defined in the Credit Agreement) loans, a margin spread of 0.50%, with a single 0.25% step-down based on the achievement of certain leverage ratios; and

~~(c) to extend the maturity of the Term Loan A facility and the Revolver to March 26, 2024.~~

~~The Term Loan A facility and the Revolver will continue to be subject to the same affirmative covenants and negative covenants. The financial covenant will be set at a First Lien~~Secured Leverage Ratio (as defined in the Credit Agreement) ~~of 5.00:1.00 with a single step-down~~being less than or equal to ~~4.50:1.00 commencing with~~2.75x, the ~~fiscal quarter ending March 31, 2020. We were~~Adjusted Eurocurrency Rate Spread (as defined in ~~compliance with all covenants of~~ the Credit ~~Agreement as of September 30, 2019.~~Agreement) on our Term B Loans decreased from 2.00% to 1.75%.

In ~~connection with the Second Amendment, during the three months ended~~ March ~~31, 2019, we recorded a $4.4 million loss on extinguishment of debt, mainly due to the write-off of the deferred issuance costs and debt discount.~~

The funded amount of the Term Loan A facility was issued net of a discount and debt issuance costs totaling $2.8 million. These costs are being accreted as a component of interest expense using the effective interest rate method over the term of this facility.

We recorded debt issuance costs and related fees in connection with the Revolver and the unfunded amount of the Term Loan A facility of approximately $3.5 million, which are included in other assets in the unaudited condensed consolidated balance sheet. These costs are amortized as a component of interest expense on a straight-line basis over the related terms.

~~Redemption of Senior Notes~~

~~On October 2, 2019,~~2020, we drew ~~down the $400.0~~$300.0 million ~~Term Loan A balance and used the proceeds and cash on hand to redeem all of the Senior Notes for $403.0 million and paid a $15.1 million premium related to the early redemption.~~

~~Interest Rates~~

In June 2018, we entered into an interest rate swap that has an aggregate notional value of $1.01 billion, has an effective date of December 31, 2018, and expires on June 30, 2021. As a result, as of September 30, 2019, the percentage of our total principal debt (excluding leases) that is subject to fixed interest rates was approximately 53.7%. Each quarter-point increase or decrease in the applicable interest rate at September 30, 2019 would change our annual interest expense by approximately $3.1 million.

~~Covenant Restrictions under our Lease Agreement~~

~~The lease agreement for our new corporate headquarters in Morrisville, North Carolina includes a provision that requires us to issue a letter of credit in certain amounts to the landlord based~~ on our debt rating issued by Moody’s Investors Service (or other nationally-recognized debt rating agency). As of September 30, 2019 (and through the date of this filing), our credit rating was Ba3. As such, no letter of credit was required through the date of this filing. Any letters of credit issued in accordance with the aforementioned requirements could be issued under our Revolver, and, if issued under our Revolver, would reduce its available borrowing capacity by the same amount.Revolver.

Our ability to make payments on our indebtedness and to fund planned capital expenditures and necessary working capital will depend on our ability to generate cash in the future. Our ability to meet our cash needs through cash flows from operations will depend on the demand for our services, as well as general economic, financial, competitive, and other factors, many of which are beyond our ~~control.~~control, including the broad effects of the COVID-19 pandemic on the global economy and major financial markets. Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness, or to fund our other liquidity needs, including working capital, capital

expenditures, acquisitions, investments, and other general corporate requirements. If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, acquisitions or investments, selling assets, restructuring or refinancing our debt, reducing the scope of our operations and growth plans, or seeking additional capital. We cannot assure you that any of these remedies could, if necessary, be affected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. Our Credit Agreement contains covenant restrictions that limit our ability to direct the use of proceeds from any disposition of assets and, as a result, we may not be allowed to use the proceeds from any such dispositions to satisfy all current debt service obligations.

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Debt Covenants

Our Credit Agreement contains usual and customary restrictive covenants. Our Credit Agreement requires us to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Agreement) of no more than 4.5 to 1.0 as of the last day of each fiscal quarter from and after March 31, 2020. We were in compliance with all applicable debt covenants as of March 31, 2020.

Letters of Credit

Our Revolver includes LOCs with a sublimit of $150.0 million. As of March 31, 2020, we had $300.0 million of outstanding Revolver borrowings and $19.2 million of LOCs outstanding, leaving $280.8 million in available borrowings under our Revolver, including $130.8 million available for LOCs.

Accounts Receivable Financing Agreement

~~On June 29, 2018, we entered into~~We have an accounts receivable financing agreement (as amended) ~~with an original termination date of June 29, 2020, unless terminated earlier pursuant to its terms. Under this agreement,~~under which we ~~could previously~~can borrow up to ~~$250.0~~$275.0 million from a third-party lender, secured by liens on certain receivables and other ~~assets. On September 30, 2019, we entered into an amendment that increased the amount we can borrow from $250.0 million to $275.0 million and extended the~~assets, with a termination date ~~to September 30, 2021. As~~ of September 30, ~~2019,~~2021, unless terminated earlier pursuant to its terms. As of March 31, 2020, we had $275.0 million of outstanding borrowings under this agreement with no remaining borrowing capacity available.

~~2018~~ Interest Rates

We have entered into various interest rate swaps to mitigate our exposure to changes in interest rates on our term loans. As of March 31, 2020, the percentage of our total principal debt (excluding leases) that is subject to fixed interest rates was approximately 54.4%. Each quarter-point increase or decrease in the applicable floating interest rate at March 31, 2020, would change our annual interest expense by approximately $3.3 million.

Stock Repurchase Program

On February 26, 2018, our Board of Directors ("Board") authorized the repurchase of up to an aggregate of $250.0 million of our common stock ~~par value $0.01 per share,~~ to be executed from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or privately negotiated transactions ~~(“2018~~through December 31, 2019 (the "stock repurchase program"). On December 5, 2019, our Board approved an expansion and extension of the stock repurchase ~~program”).~~program. The ~~2018~~Board increased the share repurchase authorization of our common stock ~~repurchase~~to $300.0 million and extended the term of the program ~~commenced on March 1, 2018 and will end no later than~~to December 31, ~~2019.~~2020. We intend to use cash on hand and future free cash flow to fund the ~~2018~~ stock repurchase ~~program.~~

In January 2019, we repurchased 552,100 shares of our common stock in open market transactions at an average price of $39.16 per share, resulting in a total purchase price of approximately $21.6 million. In February 2019, we repurchased 120,600programshares of our common stock in open market transactions at an average price of $41.40 per share, resulting in a total purchase price of approximately $5.0 million. In June 2019, we repurchased 509,100 shares of our common stock in open market transactions at an average price of $45.29 per share, resulting in a total purchase price of approximately $23.1 million. In August 2019, we repurchased 141,100 shares of its common stock in open market transactions at an average price of $49.93 per share, resulting in a total purchase price of approximately $7.0 million. We immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in-capital, with the remainder applied to accumulated deficit. As of September 30, 2019, we had remaining authorization to repurchase up to approximately $118.3 million of shares of our common stock under the 2018 stock repurchase program..

We are not obligated to repurchase any particular amount of our common stock, and the ~~2018~~ stock repurchase program may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases is determined by our management based on a variety of factors such as our corporate requirements for cash, overall market conditions, and the market price of our common stock. The stock repurchase program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules.

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The following table sets forth repurchase activity under the stock repurchase program from inception through March 31, 2020:


	Total number of shares purchased	Average price paid per share		Approximate dollar value of shares purchased (in thousands)
March 2018	948,100	$	39.55	$	37,493
April 2018	1,024,400	36.60		37,492
January 2019	552,100	39.16		21,623
February 2019	120,600	41.40		4,993
June 2019	509,100	45.29		23,055
August 2019	141,100	49.93		7,045
March 2020	600,000	53.38		32,029
Total	3,895,400			$	163,730

As of March 31, 2020, we had remaining authorization to repurchase up to approximately $136.3 million of shares of our common stock under the stock repurchase program.

Cash, Cash Equivalents and Restricted Cash

Our cash flows from operating, investing, and financing activities were as follows (in thousands):

Nine Months Ended September 30,
2019 2018 Change
Net cash provided by operating activities $ 157,933 $ 191,000 $ (33,067)
Net cash used in investing activities (59,872) (133,853) 73,981
Net cash used in financing activities (123,885) (246,677) 122,792


	Three Months Ended March 31,
	2020		2019		Change
Net cash used in operating activities	$	(38,607)	$	(13,306)	$	(25,301)
Net cash used in investing activities	(18,620)		(11,445)		(7,175)
Net cash provided by (used in) financing activities	229,918		(26,338)		256,256

Cash Flows from Operating Activities

Cash flows ~~provided by~~from operating activities decreased by ~~$33.1~~$25.3 million during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The decrease is primarily due to changes in operating assets and liabilities partially offset by higher cash-related net income. Fluctuations in accounts receivable, unbilled services (including contract ~~assets,~~assets), and deferred revenue ~~and contract liabilities~~ occur on a regular basis as we perform services, achieve milestones or other billing criteria, send invoices to customers and collect outstanding accounts receivable. This activity varies by individual customer and contract. We attempt to negotiate payment terms that provide for payment of services prior to or soon after the provision of services, but the levels of accounts receivable, unbilled services (including contract assets), and deferred revenue can vary significantly from period to period. The impacts of the COVID-19 pandemic may also result in lower cash flow from operating activities during 2020 as a result of the anticipated impacts on our revenue and costs.

As a result of our integration activities associated with the Merger and our acquisition activity, we have incurred substantial expenses that have negatively impacted our cash flow from operating activities. For example, during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we incurred ~~$35.3~~$11.7 million of expenses that impacted our operating cash flows in the current period or will impact operating cash flows in the future. We anticipate that we will continue to incur ~~similar~~ costs related to our integration ~~efforts through 2020.~~efforts.

Cash Flows from Investing Activities

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we used ~~$59.9~~$18.6 million in cash for investing activities, which consisted of ~~$50.6~~$11.9 million for purchases of property and equipment and ~~$9.2~~$6.8 million for investments in unconsolidated affiliates. We continue to closely monitor our capital expenditures, especially in light of the COVID-19 pandemic, while making strategic investments in the development of our information

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technology infrastructure to meet the needs of our workforce, enable efficiencies, reduce business continuity risks, and conform to changes in governing rules and regulations.

For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we used ~~$133.9~~$11.4 million in cash for investing ~~activities. In particular, we paid $90.9 million, net of cash acquired~~activities, primarily for ~~an acquisition and $43.0 million for purchases~~the purchase of property and equipment.

Cash Flows from Financing Activities

For the ~~nine~~three months ended ~~September 30, 2019, we used $123.9~~March 31, 2020, our financing activities provided $229.9 million in cash for financing activities, which consisted primarily of ~~net repayments on term loan debt and payments for the repurchase~~our $300.0 million draw down of our Revolver partially offset by repurchases of our common ~~stock. These payments were partially offset by net proceeds from our accounts receivable financing agreement~~stock and ~~proceeds received from the exercise of stock options.~~contingent consideration payments.

For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, we used ~~$246.7~~$26.3 million in cash for financing activities, which consisted primarily of repayments of term loan debt and payments for the repurchase of our common stock. These payments were partially offset by proceeds from issuance of long-term debt and proceeds from our accounts receivable financing ~~agreement and proceeds received from the exercise of stock options.~~agreement.

Contractual Obligations and Commitments

~~There~~Except for the $300.0 million draw on our Revolver, there have been no material changes during the three months ended ~~September 30, 2019,~~March 31, 2020, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018, except as described below.~~

In March 2019, we entered into Amendment No. 2 to the Credit Agreement, which, among other things, modified the terms of the Credit Agreement to refinance the existing Term Loan A facility and the Revolver. Please refer to “Note 4 - Long-Term Debt Obligations” for information regarding changes in the maturities of our contractual obligation related to principal balances and interest on our long-term debt.2019.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, revenues, and expenses during the period, as well as disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, share-based compensation, valuation of goodwill and identifiable intangibles, tax-related contingencies and valuation allowances, allowance for doubtful accounts, and litigation contingencies, among others. These estimates are based on the information available to management at the time these estimates, judgments, and assumptions are made. Actual results may differ materially from these estimates. ~~There~~Except as set forth below, there have been no significant changes to our critical accounting policies and estimates. For additional information on all of our critical accounting policies and estimates, refer to Part II - Item 7 - Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired, including the amount assigned to identifiable intangible assets, in business combinations. In accordance with ASC Topic 350, Intangibles - Goodwill and Other, goodwill is not subject to amortization but must be tested for impairment annually or more frequently if events or changes in circumstances indicate that goodwill might be impaired. Goodwill is tested for impairment at the reporting unit level, which is one level below the operating segment level. This test requires us to determine if the implied fair value of the reporting unit's goodwill is less than its carrying amount.

The impairment analysis requires significant judgments, estimates and assumptions. There is no assurance that the actual future earnings or cash flows of the reporting units will not decline significantly from the projections used in the impairment analysis. Goodwill impairment charges may be recognized in future periods in one or more of the reporting units to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, industry, deterioration in our performance or future projections, or changes in plans for one or more of our reporting units. Specifically, the broad impacts of the COVID-19 pandemic may contribute to the potential impairment of the carrying value of our goodwill and definite-lived assets in the future.

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We completed our annual impairment test for potential impairment as of October 1, 2019 for all five of our reporting units, determining that there were no impairments. Our goodwill is principally related to the Merger completed on August 1, 2017. During the three months ended March 31, 2020, we evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. We expect the COVID-19 pandemic will negatively impact our full year 2020 results of operations. However, at this time, we do not believe there has been a significant change in the long-term fundamentals of our business. Therefore, we have concluded a triggering event did not occur during the three months ended March 31, 2020. Depending on the extent to which future developments negatively impact our results of operations or financial outlook, an interim impairment test may be required in the future.

Intangible assets consist of backlog, customer relationships, and trademarks. We amortize intangible assets related to customer relationships and trademarks on a straight-line basis over the estimated useful life of the asset. Intangible assets related to backlog are amortized based on our expectations of the timing of when revenue associated with the backlog is expected to be recognized.

We review intangible assets at the end of each reporting period to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets might not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives to their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination is made. During the three months ended March 31, 2020, we evaluated whether a triggering event had occurred because of the broad impacts of the COVID-19 pandemic. We expect the COVID-19 pandemic will negatively impact our full year 2020 results of operations. However, at this time, we do not believe there has been a significant change in the long-term fundamentals of our business. We have concluded a triggering event did not occur during the three months ended March 31, 2020, and, as a result, no interim impairment testing was required. We will continue to evaluate the impacts of the COVID-19 pandemic on our business. Depending on the extent to which future developments negatively impact our results of operations and financial outlook, an

interim impairment test may be required in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~There~~Except for the broad effects of the COVID-19 pandemic on the global economy and major financial markets, there have been no material changes to our quantitative and qualitative disclosures about market risk as compared to the quantitative and qualitative disclosures about market risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~

2019.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of such date, our disclosure controls and procedures were ~~not~~ effective at the reasonable assurance level.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Controls

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

In connection with management’s assessment of our internal control over financial reporting as of December 31, 2018, management concluded that material weaknesses existed in the design and operating effectiveness of internal controls within the Clinical Solutions segment in connection with the revenue recognition process under ASU 2014-09 “Revenue from Contracts with Customers” (ASC 606), which we adopted on January 1, 2018.

The following components of internal control over financial reporting were impacted: (i) control environment - the training process associated with ASC 606 was not sufficient in all cases to support the development of estimates of the costs necessary to complete the performance of contracts and related supporting documentation; (ii) risk assessment - our risk assessment process did not effectively evaluate risks resulting from changes in the external environment or business operations at a sufficient level of precision to identify errors; (iii) control activities - we did not have effective control activities related to the operation of process-level controls over revenue recognition; and (iv) monitoring - we did not have effective monitoring activities to assess the operation of internal controls, including the continued appropriateness of internal controls.

~~Remediation of the Material Weaknesses in Internal Control over Financial Reporting~~

Management is actively engaged in the implementation of remediation efforts to address the material weaknesses. The remediation plan includes: (i) the modification of certain internal controls designed to evaluate the appropriateness of revenue recognition in our Clinical Solutions segment; (ii) implementing new internal controls over recording revenue transactions; and (iii) additional training for staff involved in the related processes. During the nine months ended September 30, 2019, management has substantially completed its remediation activities in all three areas described above. Completion of ongoing testing of the design and operational effectiveness of modified and new controls is necessary to validate that the material weaknesses have been fully remediated.

As management continues to test and improve internal control over financial reporting, we may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the planned remediation measures.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

On December 1, 2017, the first of two virtually identical actions alleging federal securities law claims was filed against us and certain of our officers on behalf of a putative class of our shareholders. The first action, captioned Bermudez v. INC Research, Inc., et al, No. 17-09457 (S.D.N.Y.), in the Southern District of New York, names as defendants us, Michael Bell, Alistair MacDonald, Michael Gilbertini, and Gregory S. Rush (the "Bermudez action"), and the second action, Vaitkuvienë v. Syneos Health, Inc., et al, No. 18-0029 (E.D.N.C.), in the Eastern District of North Carolina, filed on January 25, 2018 (the "Vaitkuvienë action"), names as defendants us, Alistair MacDonald, and Gregory S. Rush (the "Initial Defendants"). Both complaints allege similar claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of purchasers of our common stock between May 10, 2017 and November 8, 2017 and November 9, 2017. The complaints allege that we published inaccurate or incomplete information regarding, among other things, the financial performance and business outlook for inVentiv’s business prior to the Merger and with respect to the combined company following the Merger. On January 30, 2018, two alleged shareholders separately filed motions seeking to be appointed lead plaintiff and approving the selection of lead counsel. On March 30, 2018, Plaintiff Bermudez filed a notice of voluntary dismissal of the Bermudez action, without prejudice, and as to all defendants. On May 29, 2018, the Court in the Vaitkuvienë action appointed the San Antonio Fire & Police Pension Fund and El Paso Firemen & Policemen’s Pension Fund as Lead Plaintiffs and, on June 7, 2018, the Court entered a schedule providing for, among other things, Lead Plaintiffs to file an amended complaint by July 23, 2018 (later extended to July 30, 2018). Lead Plaintiffs filed their amended complaint on July 30, 2018, which also includes a claim against the Initial Defendants, as well as each member of the board of directors at the time of the INC Research - inVentiv Health merger vote in July 2017 (the “Defendants”), contending that the inVentiv merger proxy was misleading under Section 14(a) of the Act. Lead Plaintiffs seek, among other things, orders (i) declaring that the lawsuit is a proper class action and (ii) awarding compensatory damages in an amount to be proven at trial, including interest thereon, and reasonable costs and expenses incurred in this action, including attorneys’ fees and ~~experts'~~expert fees, to Lead Plaintiffs and other class members. Defendants filed a Motion to Dismiss Plaintiffs’ Amended Complaint on September 20, 2018. Lead Plaintiffs filed a Response in Opposition to such motion on November 21, 2018, and Defendants filed a Reply to such response on December 5, 2018. On May 23, 2019, Lead Plaintiffs filed a Notice of Filings in Related Case regarding the New Jersey shareholder action filed on March 1, 2019 described below, pending before the United States District Court for the District of New Jersey (the “New Jersey Action”), and Defendants filed their response on May 31, 2019. On September 26, 2019, the Court ordered, among other things, that this action is stayed in light of the ~~litigation~~New Jersey Action. On March 23, 2020, Defendants filed ~~on March 1, 2019~~a Notice of Disposition of a Related Action, notifying the Court that the New Jersey Action was dismissed and ~~described below, pending before~~requesting that the ~~United States District Court for the District of New Jersey.~~stay in this action should be lifted. We and the other defendants deny the allegations in these complaints and intend to defend vigorously against these claims. ~~In our opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on our financial position, results of operations, or cash flows.~~

On September 24, 2018, the Court unsealed a civil complaint captioned United States, et. al vs. AstraZeneca PLC, et. al, No. 2:17-cv-01328-RSL (W.D. Wa.) against inVentiv Health, Inc. and other co-defendants. The complaint alleges that we and co-defendants violated the Federal False Claims Act (and various state analogues) and Anti-Kickback Statute through the provision of clinical education services. On December 17, 2018, the United States moved to dismiss this lawsuit, as well as other similar lawsuits supported by the relator in this action. A hearing on such motion is scheduled for October 30, 2019. We deny the allegations in the complaint and intend to defend vigorously against these claims. In our opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on our financial position, results of operations, or cash flows.

On February 21, 2019, the Securities and Exchange Commission (“SEC”) notified us that it had commenced an investigation into our revenue accounting policies, internal controls, and related matters. ~~On August 26, 2019, the SEC notified us that it had concluded its investigation and does not intend to recommend an enforcement action against us at this time.~~

On March 1, 2019, a complaint was filed in the United States District Court for the District of New Jersey on behalf of a putative class of shareholders who purchased our common stock during the period between May 10, 2017 and February 27, 2019. The action, captioned Murakami v. Syneos Health, Inc. et al, No. 19-7377 (D.N.J.), ~~names~~named us and certain of our executive officers as defendants and ~~alleges~~alleged violations of the Securities Exchange Act of 1934, as amended, based on allegedly false or misleading statements about our business, operations, and prospects. The plaintiffs ~~seek~~sought awards of compensatory damages, among other relief, and their costs and attorneys’ and experts’ fees. On March 28, 2019, Lead Plaintiffs in the Vaitkuvienë action filed a motion to intervene and to transfer this action to the Eastern District of North Carolina, and we filed our response on April 22, 2019. On April 30, 2019, a shareholder filed a motion seeking to be appointed lead plaintiff and approving the selection of lead counsel. On October 16, 2019, the Court ordered that ~~Plantiff,~~Plaintiff, by November 8, 2019, file proof of service of the

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Complaint in Compliance with Rule 4, or otherwise show cause why the action should not be dismissed for failure to properly serve Defendants (the "Order to Show Cause"). The Court further ordered that the action is stayed and that both motions are administratively terminated pending the Court's resolution of the Order to Show Cause. WePlaintiff filed a response to the Order to Show Cause on November 8, 2019, and we and the other defendants ~~deny~~filed a response on November 20, 2019. On March 20, 2020, the ~~allegations in~~Court dismissed this action without prejudice for failure to serve defendants within the complaint and intend to defend vigorously against these claims. In our opinion, the ultimate outcome of this matter is not expected to have a material adverse effect on our financial position, results of operations, or cash flows.time period required by law.

~~We are presently unable to predict the duration, scope, or result of the foregoing putative class actions or any other related lawsuit.~~

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Item 1A. Risk Factors.

~~There~~Other than the following risk factor, there have been no significant changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. Refer to “Risk Factors” in Part 1, Item 1A of that report for a detailed discussion of risk factors affecting us.

The COVID-19 pandemic is expected to adversely impact our business and results of operations.

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic. Governments around the world have taken unprecedented actions to mitigate the spread of COVID-19, including stay-at-home orders, quarantine requirements, and limitations on travel, including the closing of national borders. As a result of these restrictions, most of our employees are working remotely where possible and we have limited employee travel.

As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could severely impact our business and our operations, including:

•delays or difficulties in commencing new and operating ongoing clinical trials, including the inability to access investigative sites, delays in enrolling patients and difficulty obtaining necessary pharmaceutical products and supplies;

•restrictions on the ability of our field teams within the Commercial Solutions segment to visit healthcare providers and delays in the commencement of new customer projects in that segment;

•diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, as well as the reduction of our customers' operating budgets;

•interruption of key clinical trial activities, such as clinical trial site data monitoring, due to stay-at-home orders imposed or recommended by federal or state governments, employers, and others or interruption of clinical trial subject visits and study procedures;

•shutdowns or other business disruptions at our customers;

•limitations on our employee resources, including because of stay-at-home orders from federal or state governments, sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

•diversion of management resources to focus on mitigating the impacts of the COVID-19 pandemic; and

•impacts from prolonged remote work arrangements, such as strains on our business continuity plans, cybersecurity risks, and inability of certain employees to perform their work remotely.

We currently expect that these disruptions will negatively impact our results of operations for the year ending December 31, 2020. The COVID-19 pandemic continues to evolve rapidly. The extent to which the pandemic will impact our business, liquidity and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic; travel restrictions and social distancing requirements in the countries where we conduct business; the effectiveness of actions taken to contain and treat the disease; and how quickly and to what extent more normalized economic and operating conditions can resume. If we or our customers experience prolonged shutdowns or other business disruptions beyond current expectations, our ability to conduct our business could be materially and adversely impacted, and our business, liquidity, and financial results may be adversely affected.

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The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. This volatility and uncertainty have adversely affected our stock price, and may continue to do so. The actions that governments and individuals have taken in response to COVID-19 have led to a sharp contraction in many aspects of the United States economy and a steep rise in unemployment. The pandemic may cause an economic slowdown of potentially extended duration, and it is possible that it could cause a global recession. If this occurs, it could reduce our customer’s operating budgets or drive them to internally perform the clinical development and commercialization tasks that we provide, in which case our business would suffer. Even after the COVID-19 pandemic has subsided, we may continue to experience material adverse effects to our business as a result of the global economic impact of the pandemic.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

Recent Sales of Unregistered Securities

Not applicable.

Purchases of Equity Securities by the Issuer

During the three months ended ~~September 30, 2019,~~March 31, 2020, we repurchased ~~141,100~~600,000 shares of our Class A common stock under our previously announced stock repurchase program described below, for a total of approximately ~~$7.0~~$32.0 million. As of ~~September 30, 2019,~~March 31, 2020, we have remaining authorization to repurchase up to approximately ~~$118.3~~$136.3 million of shares of our Class A common stock under the stock repurchase program.

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)
July 1, 2019 - July 31, 2019 — $ — — $ 125,344
August 1, 2019 - August 31, 2019 141,100 $ 49.93 141,100 $ 118,299
September 1, 2019 - September 30, 2019 — $ — — $ 118,299
Total 141,100 141,100


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)	Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)
January 1, 2020 - January 31, 2020	—	$	—	—	$	168,299
February 1, 2020 - February 29, 2020	—	$	—	—	$	168,299
March 1, 2020 - March 31, 2020	600,000	$	53.38	600,000	$	136,270
Total	600,000			600,000

(1) On February 26, 2018, the Board authorized the repurchase of up to an aggregate of $250.0 million of our Class A common stock, par value $0.01 per share, from time to time in open market transactions effected through a broker at prevailing market prices, in block trades, or privately negotiated ~~transactions.~~transactions through December 31, 2019 (the "stock repurchase program"). The stock repurchase program commenced on March 1, ~~2018~~2018. On December 5, 2019, the Board increased the dollar amount authorized under the stock repurchase program to an aggregate of $300.0 million and ~~will end no later than~~extended the term of the program to December 31, ~~2019.~~2020. We intend to use cash on hand and future free cash flow to fund the stock repurchase program. The stock repurchase program does not obligate us to repurchase any particular amount of our Class A common stock, and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases is determined by our management based on a variety of factors such as the market price of our Class A common stock, our corporate requirements, and overall market conditions. The stock repurchase program is subject to applicable legal requirements, including federal and state securities laws. We may also repurchase shares of our Class A common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit shares of our Class A common stock to be repurchased when we might otherwise be precluded from doing so by law.

~~The Company~~We immediately retired all of the repurchased common stock and charged the par value of the shares to common stock. The excess of the repurchase price over the par value was applied on a pro rata basis against additional paid-in capital, with the remainder applied to accumulated deficit.

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Item 5. Other Information.

Not applicable.

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Item 6. Exhibits

~~Incorporated by Reference (Unless Otherwise Indicated)~~

~~Exhibit Number~~

~~Exhibit Description~~

~~Form~~

~~File No.~~

~~Exhibit~~

~~Filing Date~~

~~10.1~~

~~Sixth Amendment to the Receivables Financing Agreement, dated September 30, 2019, among Syneos Health Receivables LLC, as borrow~~er ~~, PNC Bank, National Association, as administrative agent and as lender and Syneos Health, LLC as initial servicer.~~

—

~~Filed herewith~~

~~31.1~~

~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

—

~~Filed herewith~~

~~31.2~~

~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

—

~~Filed herewith~~

~~32.1~~

~~Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

—

~~Furnished herewith~~

~~32.2~~

~~Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

—

~~Furnished herewith~~

~~101.INS~~

~~Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.~~

—

~~Filed herewith~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document.~~

—

~~Filed herewith~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document.~~

—

~~Filed herewith~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~

—

~~Filed herewith~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Label Linkbase Document.~~

—

~~Filed herewith~~

~~101.PRE~~

~~Inline Taxonomy Extension Presentation Linkbase Document.~~

—

~~Filed herewith~~

~~104~~

~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~

—

~~Filed herewith~~


		Incorporated by Reference (Unless Otherwise Indicated)
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.1	Eighth Amendment to the Receivables Financing Agreement, dated March 18, 2020, among Syneos Health Receivables LLC, as borrower, Syneos Health, LLC as initial servicer, and PNC Bank, National Association, as administrative agent and as lender.	—	—	—	Filed herewith
10.2	Amendment No. 3 to the Credit Agreement, dated as of April 7, 2020, by and between Syneos Health, Inc. as Administrative Borrower and JPMorgan Chase Bank, N.A., as Administrative Agent.	—	—	—	Filed herewith
10.3	Letter Agreement between INC Research Holding Limited and Alistair Macdonald, dated April 18, 2020.	8-K	001-36730	10.1	April 22, 2020
10.4	Letter Agreement between Syneos Health, Inc. and Jason Meggs, dated April 18, 2020.	8-K	001-36730	10.2	April 22, 2020
10.5	Letter Agreement between Syneos Health, Inc. and Michelle Keefe, dated April 18, 2020.	8-K	001-36730	10.3	April 22, 2020
10.6	Letter Agreement between Syneos Health, Inc. and Paul Colvin, dated April 18, 2020.	8-K	001-36730	10.4	April 22, 2020
10.7	Letter Agreement between Syneos Health, Inc. and Jonathan Olefson, dated April 18, 2020.	8-K	001-36730	10.5	April 22, 2020
10.8	Letter Agreement between Syneos Health UK Limited and Alistair Macdonald, dated May 3, 2019.	—	—	—	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	—	—	—	Furnished herewith
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	—	—	—	Furnished herewith
101.INS	Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.	—	—	—	Filed herewith
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	—	—	—	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	—	—	—	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	—	—	—	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	—	—	—	Filed herewith
101.PRE	Inline Taxonomy Extension Presentation Linkbase Document.	—	—	—	Filed herewith
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	—	—	—	Filed herewith

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SIGNATURE

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



		SYNEOS HEALTH, INC.

Date: ~~October 30, 2019~~April 29, 2020	BY:	/s/ Jason Meggs
		Jason Meggs
		Chief Financial Officer (Principal Financial Officer)

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	September 30, 2019		December 31, 2018
Secured Debt
Term Loan A due March 2024	$	1,150,000	$	975,000
Term Loan B due August 2024	862,564		1,221,000

Accounts receivable financing agreement due September 2021	275,000		169,400
Total secured debt	2,287,564		2,365,400
Unsecured Debt
7.5% Senior Unsecured Notes due 2024 (the "Senior Notes")	403,000		403,000
Total debt obligations	2,690,564		2,768,400
Add: unamortized Senior Notes premium, net of term loan original issuance discount	27,178		32,303
Less: unamortized deferred issuance costs	(8,881)		(13,584)
Less: current portion of debt	(28,750)		(50,100)
Total debt obligations, non-current portion	$	2,680,111	$	2,737,019


		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating leases:
Fixed lease costs	Selling, general, and administrative expenses	$	15,720	$	49,825
Short-term lease costs	Selling, general, and administrative expenses	630		1,204
Variable lease costs	Selling, general, and administrative expenses	8,580		25,234
Total operating lease costs		$	24,930	$	76,263
Finance leases:
Amortization of right-of-use assets	Depreciation	$	3,677	$	11,987
Interest on lease liabilities	Interest expense	502		1,309
Variable lease costs	Selling, general, and administrative expenses	2,138		5,769
Total finance lease costs		$	6,317	$	19,065


	Operating Leases		Finance Leases		Total
2019	$	2,816	$	5,530	$	8,346
2020	52,426		18,918		71,344
2021	46,974		16,952		63,926
2022	40,717		12,762		53,479
2023	35,723		4,366		40,089
2024 and thereafter	131,233		—		131,233
Total lease payments	309,889		58,528		$	368,417
Less: management fee			(768)
Less: imputed interest	(57,300)		(3,139)
Total lease liabilities	$	252,589	$	54,621


	Employee Severance Costs		Facility Closure and Lease Termination Costs		Other Costs		Total
Balance at December 31, 2018	$	7,474	$	16,761	$	52	$	24,287
Adoption of ASC 842 (a)	—		(16,761)		—		(16,761)
Expenses incurred (b)	25,607		—		273		25,880
Cash payments made	(22,513)		—		(303)		(22,816)
Balance at September 30, 2019	$	10,568	$	—	$	22	$	10,590