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

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

Overview



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

Overview of the Impact of COVID-19 to our Business



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

The disruptions caused by COVID-19 did not have a material impact on our
financial results to start the year; however, as the global spread of the virus
began to accelerate late in the first quarter of 2020, we began to experience an
adverse impact to our financial results, which continued through the third
quarter of 2020. We believe that we will continue to experience disruptions to
our business due to the COVID-19 pandemic through the remainder of 2020 and into
2021.

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

•Workforce: In response to the outbreak and business disruption, first and
foremost, we have prioritized the health and safety of our employees and we
closed the majority of our physical office locations worldwide in March.
Although we have begun limited re-openings of some of our offices, most of our
workforce is able to work remotely in an effective way.
•Backlog: We have not experienced any material COVID-19 related trial
cancellations. Although business development activities began to normalize
during the second and third quarters, the nine month period ended September 30,
2020 was impacted by COVID-19. Late in the first quarter, we experienced
bid-defense meeting postponements due to travel restrictions and delays in study
award decision-making. This has had an impact on new business awards in both the
Clinical Research and Data Solutions segments, leading to lower growth in gross
new business awards in the first nine months of 2020 as compared to prior years.
•Clinical Research segment: During March 2020, we began to experience global
site closures, including some of our clinic facilities, which has led to a
decline in site-based monitoring and the enrollment of
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patients. We have been able to implement remote monitoring activities through
the use of our technology platforms in an effort to mitigate the impact of these
site closures. Limitations on travel and business closures recommended by
federal, state, and local governments, has and could continue to, among other
things, impact our ability to enroll patients in clinical trials, recruit
clinical site investigators, and obtain timely approvals from local regulatory
authorities.
•Data Solutions segment: Our Data Solutions segment is relatively more insulated
from the effects of the virus, due to its high proportion of recurring license
revenue. However, service offerings in this segment that rely on face-to-face
interactions or are dependent on in-person gatherings, events or conferences may
experience significant disruption.
•Mitigation strategies: In light of the current situation, we have initiated
proactive cost management strategies. These include, among other things, hiring
restrictions, reductions in third-party costs and certain compensation
adjustments. We have also implemented proactive cash conservation initiatives,
including delaying some capital expenditures and halting voluntary debt
repayments.
•Liquidity position: We believe that we have a strong liquidity position, which
includes cash on hand and access to our revolving credit facility. We are
currently subject to two debt covenants in our Senior Secured Credit Facility:
                                           Requirement:      As of 

September 30, 2020


        Total indebtedness to EBITDA         ? 4.25x                  1.61x
        Interest expense to EBITDA           ? 3.00x                  11.05x



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

Coronavirus Aid, Relief, and Economic Security Act



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

How We Assess the Performance of Our Business



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

Our gross new business awards for our Clinical Research segment for the nine
months ended September 30, 2020 and 2019 were $2,329.9 million and $2,300.3
million, respectively. New business awards arise when a client selects us to
execute its trial and is documented by written or electronic correspondence, or
for our Strategic Solutions offering when the amount of revenue expected to be
recognized is measurable. The number of new business awards can vary
significantly from year to year, and awards can have terms ranging from several
months to several years. For our Strategic Solutions offering, the value of a
new business award is the anticipated revenue to be recognized in the
corresponding quarter of the next fiscal year. For the remainder of our Clinical
Research segment, the value of a new award is the anticipated revenue over the
life of the contract, which does not include reimbursable expenses.

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In the normal course of business, we experience contract cancellations, which
are reflected as cancellations when the client provides us with written or
electronic correspondence that the work should cease. During the nine months
ended September 30, 2020 and 2019, we had $285.6 million and $295.6 million,
respectively, of cancellations for which we received correspondence from the
client for our Clinical Research segment. The number of cancellations can vary
significantly from period to period. The value of the cancellation is the
remaining amount of unrecognized service revenue, less the estimated effort to
transition the work back to the client.

Our backlog consists of anticipated revenue from new business awards that either
have not started or are in process but have not been completed for our Clinical
Research segment. Backlog varies from period to period depending upon new
business awards and contract modifications, cancellations, and the amount of
revenue recognized under existing contracts. Our backlog at September 30, 2020
and 2019 was $5.1 billion and $4.6 billion, respectively.

Sources of Revenue



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

Costs and Expenses

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

Direct Costs (Exclusive of Depreciation and Amortization)



For our Clinical Research segment, direct costs consist primarily of
labor-related charges. They include elements such as salaries, benefits and
incentive compensation for our employees. In addition, we utilize staffing
agencies to procure primarily part time individuals to perform work on our
contracts. Labor-related charges as a percentage of the Clinical Research
segment's total direct costs were 97.5% and 96.2% for the nine months ended
September 30, 2020 and 2019, respectively. The cost of labor procured through
staffing agencies is included in these percentages and represents 3.0% and 3.1%
of the Clinical Research segment's total direct costs for the nine months ended
September 30, 2020 and 2019, respectively. Our remaining direct costs are items
such as travel, meals, postage and freight, patient costs, medical waste and
supplies. The total of all these items as a percentage of the Clinical Research
segment's total direct costs were 2.5% and 3.8% for the nine months ended
September 30, 2020 and 2019, respectively.

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

For our Data Solutions segment, direct costs consist primarily of data costs.
Data costs as a percentage of the Data Solutions segment's total direct costs
were 76.7% and 73.3% for the nine months ended September 30, 2020 and 2019,
respectively. Labor-related charges, such as salaries, benefits and incentive
compensation for our employees, were 18.3% and 20.0% of the Data Solutions
segment's total direct costs for the nine months ended September 30, 2020 and
2019, respectively. Our remaining direct costs are items such as travel, meals,
and supplies and were 5.1% and 6.7% of the Data Solutions segment's total direct
costs for the nine months ended September 30, 2020 and 2019, respectively.

Reimbursable Expenses



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

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



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

Selling, General and Administrative Expenses



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

Transaction-related Costs



Transaction-related costs include fees associated with our secondary offerings,
costs associated with acquisition related earn-out liabilities or adjustments to
the initial fair value estimates, and expenses associated with our acquisitions.

Depreciation and Amortization Expense



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

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

Income Taxes



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

In addition, our effective income tax rate is influenced by U.S. tax law which
has been substantially modified by the U.S. Tax Cuts and Jobs Act of 2017, or
the Act. The following provisions of the Act could have an adverse effect on our
tax rate:
•global intangible low-taxed income, or GILTI;
•limitations on the U.S. deductions for net business interest;
•base erosion anti-abuse provisions, or BEAT; and
•performance-based compensation subject to $1 million limit.

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

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

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Exchange Rate Fluctuations

The majority of our foreign operations transact in the Euro, or EUR, or British
pound, or GBP. As a result, our revenue and expenses are subject to exchange
rate fluctuations with respect to these currencies. We have translated these
currencies into U.S. dollars using the following average exchange rates:
                                                         Three Months Ended September 30,                       Nine Months Ended September 30,
                                                        2020                            2019                  2020                            2019
U.S. dollars per:
Euro                                                     1.17                             1.11                 1.12                             1.12
British pound                                            1.29                             1.23                 1.27                             1.27



Results of Operations

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

Three Months Ended September 30,


                                                                                       2020                2019
(in thousands)
Revenue                                                                            $  796,307          $ 780,691
Operating expenses:
Direct costs (exclusive of depreciation and amortization)                             412,076            389,304
Reimbursable expenses                                                                 156,389            169,965
Selling, general and administrative expenses                                          115,409             95,542
Transaction-related costs                                                             (45,074)               572
Depreciation and amortization expense                                                  33,315             29,264
Loss on disposal of fixed assets                                                           32                256
Income from operations                                                                124,160             95,788
Interest expense, net                                                                 (10,721)           (12,974)
Loss on modification or extinguishment of debt                                              -             (1,855)
Foreign currency (losses) gains, net                                                   (9,128)             5,408
Other (expense) income, net                                                                (1)                15
Income before income taxes                                                            104,310             86,382
Provision for income taxes                                                             13,058              3,375
Net income                                                                         $   91,252          $  83,007



Revenue increased by $15.6 million, or 2.0%, from $780.7 million during the
three months ended September 30, 2019 to $796.3 million during the three months
ended September 30, 2020. Revenue for the three months ended September 30, 2020
benefited from an increase in billable hours as well as by a favorable impact of
$5.4 million from foreign currency exchange rate fluctuations offset by a
decrease in the reimbursable portion of revenue, which were impacted by the
continued disruption from the COVID-19 pandemic.

Direct costs, exclusive of depreciation and amortization, increased by $22.8
million, or 5.8%, from $389.3 million during the three months ended September
30, 2019 to $412.1 million during the three months ended September 30, 2020.
Salaries and related benefits in our Clinical Research segment increased $24.2
million due to hiring of billable staff to support our portfolio of studies
prior to March 2020, when COVID-19 began to have an adverse impact on our
operations. Data costs in our Data Solutions segment increased $1.7 million due
to increased costs on the renewal of existing contracts and the addition of new
sources of data to expand our data offerings. There was an unfavorable impact of
$1.3 million from foreign currency exchange rate fluctuations, which was offset
by a decrease in travel and other project-related costs of $4.2 million. Direct
costs as a percentage of revenue were 51.7% and 49.9% during the three months
ended September 30, 2020 and 2019, respectively.

Reimbursable expenses decreased by $13.6 million from $170.0 million during the
three months ended September 30, 2019 to $156.4 million during the three months
ended September 30, 2020. We believe that the fluctuations in reimbursable
expenses from period to period are not meaningful to our underlying performance
over the full terms of the relevant contracts.

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Selling, general and administrative expenses increased by $19.9 million, or
20.8%, from $95.5 million during the three months ended September 30, 2019 to
$115.4 million during the three months ended September 30, 2020. The increase in
selling, general and administrative expenses is primarily related to an increase
in salaries and related benefits, including stock-based compensation expense,
due to increased headcount and additional office space added prior to March 2020
when COVID-19 began to have an adverse impact on our operations. Selling,
general and administrative expenses as a percentage of revenue were 14.5% and
12.2% during the three months ended September 30, 2020 and 2019, respectively.

Transaction-related costs are primarily related to changes in the fair value of
contingent consideration and other expenses incurred in conjunction with our
recent acquisitions. During the three months ended September 30, 2020, we
recorded a $45.1 million reduction in the fair value of the earn-out liability
associated with the acquisition of Care Innovations, Inc., or Care Innovations,
as it was determined that the two 2020 financial targets would not be met.
Specifically, the revenue and earnings before interest, taxes, depreciation, and
amortization of the acquired business are expected to be lower than initial
forecasts. The initial growth estimates for the service offering were negatively
impacted by changes in market conditions, which negatively impacted Care
Innovations' ability to contract and deliver services on new commercial
opportunities within the one-year earn-out period.

Depreciation and amortization expense was $33.3 million and $29.3 million during
the three months ended September 30, 2020 and 2019, respectively. Depreciation
and amortization expense as a percentage of revenue was 4.2% during the three
months ended September 30, 2020 and 3.7% during the three months ended September
30, 2019. The increase is due to the amortization of the intangible assets
acquired in connection with the acquisition of Care Innovations as well as an
increase in depreciation expense due to an increase in our depreciable asset
base.

Interest expense, net, decreased by $2.3 million, or 17.4%, from $13.0 million
during the three months ended September 30, 2019 to $10.7 million during the
three months ended September 30, 2020. The decrease is primarily due to a
decrease in the weighted average interest rate on the unhedged portion of our
debt and was partially offset by an increase in the average outstanding debt
balance as compared to the three months ended September 30, 2019.

Foreign currency (losses) gains, net, changed by $14.5 million from foreign
currency gains of $5.4 million during the three months ended September 30, 2019
to foreign currency losses of $9.1 million during the three months ended
September 30, 2020. Foreign currency gains and losses are due to fluctuations in
the U.S. dollar, gains or losses that arise in connection with the revaluation
of short-term inter-company balances between our domestic and international
subsidiaries, and gains or losses from foreign currency transactions, such as
those resulting from the settlement of third-party accounts receivables and
payables denominated in a currency other than the local currency of the entity
making the payment. During the three months ended September 30, 2020, foreign
currency losses were primarily due to movement of the U.S. dollar versus the
British pound, Euro, Canadian dollar and Russian ruble.

Provision for income taxes increased by $9.7 million from $3.4 million during
the three months ended September 30, 2019 to $13.1 million during the three
months ended September 30, 2020. Our effective tax rate was 3.9% and 12.5%
during the three months ended September 30, 2019 and 2020, respectively. The
comparative increase in income tax expense was primarily driven by the impact of
a cumulative reduction in the Company's BEAT liability for the three months
ended September 30, 2019 related to revisions to contractual arrangements which
reduced the effective tax rate. For the three months ended September 30, 2020,
the annual estimated effective tax rate varied from the U.S. statutory rate of
21% primarily due to (i) geographic distribution of global pre-tax income, (ii)
the U.S. inclusion of amounts related to the estimated tax on GILTI, (iii) the
U.S. inclusion of amounts related to Foreign-Derived Intangible Income, and (iv)
a decrease in the fair value of the earn-out liability related to the stock
acquisition of Care Innovations, which was not included in taxable income, but
instead decreased the tax basis.
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Consolidated Results of Operations for the Nine Months Ended September 30, 2020
Compared to the Nine Months Ended September 30, 2019
                                                                                        Nine Months Ended September 30,
                                                                                           2020                    2019
(in thousands)
Revenue                                                                            $       2,309,907          $ 2,266,022
Operating expenses:
Direct costs (exclusive of depreciation and amortization)                                  1,211,278            1,153,441
Reimbursable expenses                                                                        481,497              471,682
Selling, general and administrative expenses                                                 332,346              291,439
Transaction-related costs                                                                    (44,465)                 572
Depreciation and amortization expense                                                         98,078               85,462
Loss on disposal of fixed assets                                                                 207                  900
Income from operations                                                                       230,966              262,526
Interest expense, net                                                                        (36,102)             (37,834)
Loss on modification or extinguishment of debt                                                     -               (1,855)
Foreign currency (losses) gains, net                                                         (12,036)               1,864
Other expense, net                                                                                (1)                 (66)
Income before income taxes                                                                   182,827              224,635
Provision for income taxes                                                                    37,041               56,317

Net income                                                                                   145,786              168,318
Net income attributable to noncontrolling interest                                                 -                  (99)
Net income attributable to PRA Health Sciences, Inc.                               $         145,786          $   168,219




Revenue increased by $43.9 million or 1.9%, from $2,266.0 million during the
nine months ended September 30, 2019 to $2,309.9 million during the nine months
ended September 30, 2020. Revenue for the nine months ended September 30, 2020
benefited from an increase in billable hours and the reimbursable portion of
revenue, offset by an unfavorable impact of $4.6 million from foreign currency
exchange rate fluctuations. For the nine months ended September 30, 2020, our
revenue growth was impacted by the COVID-19 pandemic. Although we saw an
increase in billable hours during the nine months ended September 30, 2020, our
billable hours, particularly during the second quarter, were impacted by the
inaccessibility of investigator sites and an inability to screen and enroll
patients due to the continued disruption from the COVID-19 pandemic. The growth
in revenue and the increase in billable hours for the nine months ended
September 30, 2020 was due largely to the increase in our backlog as we entered
the year, the type of services we are providing on our active studies, which was
driven by the life cycles of projects that were active during the period, the
growth in new business awards as a result of higher demand for our services
across the industries we serve, more effective sales efforts and the growth in
the overall CRO market.

Direct costs, exclusive of depreciation and amortization, increased by $57.8
million, or 5.0%, from $1,153.4 million during the nine months ended September
30, 2019 to $1,211.3 million during the nine months ended September 30, 2020.
Salaries and related benefits in our Clinical Research segment increased $67.6
million due to hiring of billable staff to support our portfolio of studies
prior to March 2020, when COVID-19 began to have an adverse impact on our
operations. Data costs in our Data Solutions segment increased $15.1 million due
to increased costs on the renewal of existing contracts and the addition of new
sources of data to expand our data offerings. These were offset by a decrease in
travel and other project-related costs of $12.1 million and a favorable impact
of $12.9 million from foreign currency exchange rate fluctuations. Direct costs
as a percentage of revenue were 52.4% and 50.9% during the nine months ended
September 30, 2020 and 2019, respectively.

Reimbursable expenses increased by $9.8 million from $471.7 million during the
nine months ended September 30, 2019 to $481.5 million during the nine months
ended September 30, 2020. We believe that the fluctuations in reimbursable
expenses from period to period are not meaningful to our underlying performance
over the full terms of the relevant contracts.

Selling, general and administrative expenses increased by $40.9 million, or
14.0%, from $291.4 million during the nine months ended September 30, 2019 to
$332.3 million during the nine months ended September 30, 2020. The increase in
selling, general and administrative expenses is primarily related to an increase
in salaries and related benefits, including stock-based compensation expense,
due to increased headcount and additional office space added prior to March 2020
when COVID-19 began to have an adverse impact on our operations. Selling,
general and administrative expenses as a percentage of revenue were 14.4% and
12.9% during the nine months ended September 30, 2020 and 2019, respectively.
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Transaction-related costs are primarily related to changes in the fair value of
contingent consideration and other expenses incurred in conjunction with our
recent acquisitions. During the nine months ended September 30, 2020, we
recorded a $44.5 million reduction in the fair value of the earn-out liability
associated with the acquisition of Care Innovations, as it was determined that
the two 2020 financial targets would not be met. Specifically, the revenue and
earnings before interest, taxes, depreciation, and amortization of the acquired
business are expected to be lower than initial forecasts. The initial growth
estimates for the service offering were negatively impacted by changes in market
conditions, which negatively impacted Care Innovations' ability to contract and
deliver services on new commercial opportunities within the one-year earn-out
period.

Depreciation and amortization expense increased by $12.6 million, or 14.8%, from
$85.5 million during the nine months ended September 30, 2019 to $98.1 million
during the nine months ended September 30, 2020. Depreciation and amortization
expense as a percentage of revenue was 4.2% during the nine months ended
September 30, 2020 and 3.8% during the nine months ended September 30, 2019. The
increase is due to the amortization of the intangible assets acquired in the
acquisition of Care Innovations as well as an increase in depreciation expense
due to an increase in our depreciable asset base.

Interest expense, net, decreased by $1.7 million, or 4.6%, from $37.8 million
during the nine months ended September 30, 2019 to $36.1 million during the nine
months ended September 30, 2020. The decrease is primarily due to a decrease in
the weighted average interest rate on the unhedged portion of our debt and was
partially offset by an increase in the average outstanding debt balance as
compared to the nine months ended September 30, 2019.

Foreign currency (losses) gains, net, changed by $13.9 million from foreign
currency gains of $1.9 million during the nine months ended September 30, 2019
to foreign currency losses of $12.0 million during the nine months ended
September 30, 2020. Foreign currency gains and losses are due to fluctuations in
the U.S. dollar, gains or losses that arise in connection with the revaluation
of short-term inter-company balances between our domestic and international
subsidiaries, and gains or losses from foreign currency transactions, such as
those resulting from the settlement of third-party accounts receivables and
payables denominated in a currency other than the local currency of the entity
making the payment. During the nine months ended September 30, 2020, foreign
currency losses were primarily due to movement of the U.S. dollar versus the
British pound, Euro, Canadian dollar and Russian ruble.

Provision for income taxes decreased by $19.3 million from $56.3 million during
the nine months ended September 30, 2019 to $37.0 million during the nine months
ended September 30, 2020. Our effective tax rate was 25.1% and 20.3% during the
nine months ended September 30, 2019 and 2020, respectively. The decrease in the
effective tax rate of 4.8% was primarily attributable to the effect of a
decrease in the fair value of the earn-out liability related to the stock
acquisition of Care Innovations, which was not included in taxable income, but
instead decreased the tax basis.

Segment Results of Operations for the Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019



Clinical Research
                                         Three Months Ended September 30,
                                         2020                            2019
            (in thousands)
            Revenue               $       732,126                    $ 719,005
            Segment profit                211,186                      206,345
            Segment profit %                 28.8   %                     28.7  %



Revenue increased by $13.1 million, or 1.8%, from $719.0 million during the
three months ended September 30, 2019 to $732.1 million during the three months
ended September 30, 2020. Revenue for the three months ended September 30, 2020
benefited from an increase in billable hours and an increase in the effective
rate of hours billed on our studies. We saw a decrease in the reimbursable
portion of revenue, primarily driven by a lack of access to investigator sites
and an inability to screen and enroll patients due to the continued disruption
from the COVID-19 pandemic.

Segment profit increased by $4.8 million, or 2.3%, from $206.3 million during
the three months ended September 30, 2019 to $211.2 million during the three
months ended September 30, 2020 primarily due to an increase in revenue. Segment
profit as a percentage of revenue increased from 28.7% during the three months
ended September 30, 2019 to 28.8% for the same period in 2020.
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Data Solutions
                                          Three Months Ended September 30,
                                         2020                             2019
            (in thousands)
            Revenue               $        64,181                      $ 61,686
            Segment profit                 16,656                        15,077
            Segment profit %                 26.0   %                      24.4  %



Revenue increased by $2.5 million, or 4.0%, from $61.7 million during the three
months ended September 30, 2019 to $64.2 million during the three months ended
September 30, 2020. The increase in revenue was related to an increase in
services provided during the quarter.

Segment profit increased by $1.6 million, or 10.5%, from $15.1 million during
the three months ended September 30, 2019 to $16.7 million during the three
months ended September 30, 2020 primarily due to an increase in revenue. Segment
profit as a percentage of revenue increased from 24.4% during the three months
ended September 30, 2019 to 26.0% for the same period in 2020 primarily due to
factors noted above.

Segment Results of Operations for the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

Clinical Research


                                          Nine Months Ended September 30,
                                           2020                        2019
              (in thousands)
              Revenue               $     2,125,510               $ 2,087,863
              Segment profit                577,991                   593,852
              Segment profit %                 27.2   %                  28.4  %



Revenue increased by $37.6 million, or 1.8%, from $2,087.9 million during the
nine months ended September 30, 2019 to $2,125.5 million during the nine months
ended September 30, 2020. Revenue for the nine months ended September 30, 2020
benefited from an increase of billable hours and the reimbursable portion of
revenue. For the nine months ended September 30, 2020, our revenue growth was
impacted by the COVID-19 pandemic. Although we saw an increase in billable hours
during the nine months ended September 30, 2020, our billable hours,
particularly during the second quarter, were impacted by the inaccessibility of
investigator sites and an inability to screen and enroll patients due to the
continued disruption from the COVID-19 pandemic. The growth in revenue and the
increase in billable hours for the nine months ended September 30, 2020 was due
largely to the increase in our backlog as we entered the year, the type of
services we are providing on our active studies, which was driven by the life
cycles of projects that were active during the period, the growth in new
business awards as a result of higher demand for our services across the
industries we serve, more effective sales efforts and the growth in the overall
CRO market.

Segment profit decreased by $15.9 million, or 2.7%, from $593.9 million during
the nine months ended September 30, 2019 to $578.0 million during the nine
months ended September 30, 2020 primarily due to an increase in direct costs
(exclusive of depreciation and amortization) and reimbursable expenses. Segment
profit as a percentage of revenue decreased from 28.4% during the nine months
ended September 30, 2019 to 27.2% for the same period in 2020. Segment profit as
a percentage of revenue decreased primarily due to the factors noted above.


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Data Solutions
                                          Nine Months Ended September 30,
                                          2020                           2019
             (in thousands)
             Revenue               $       184,397                   $ 178,159
             Segment profit                 39,141                      47,047
             Segment profit %                 21.2   %                    26.4  %



Revenue increased by $6.2 million, or 3.5%, from $178.2 million during the nine
months ended September 30, 2019 to $184.4 million during the nine months ended
September 30, 2020. The increase in revenue was related to an increase in the
volume of data services provided during the nine-month period offset by a
decrease in the amount of consulting and service in kind services provided
during the nine month period.

Segment profit decreased by $7.9 million, or 16.8%, from $47.0 million during
the nine months ended September 30, 2019 to $39.1 million during the nine months
ended September 30, 2020 due to an increase in direct costs (exclusive of
depreciation and amortization). The increase in direct costs is attributable to
increased costs on the renewal of existing contracts and the addition of new
sources of data to expand our data offerings. Segment profit as a percentage of
revenue decreased from 26.4% during the nine months ended September 30, 2019 to
21.2% for the same period in 2020 primarily due to the factors noted above.

Seasonality



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

Liquidity and Capital Resources



We assess our liquidity in terms of our ability to generate cash to fund our
operating, investing and financing activities. Our principal source of liquidity
is operating cash flows. As of September 30, 2020, we had $336.2 million of cash
and cash equivalents of which $56.4 million was held by our foreign
subsidiaries. Additionally, as of September 30, 2020 our Revolver and Accounts
Receivable Financing Agreement provided for $640.4 million of potential
borrowings. Our expected primary cash needs on both a short and long-term basis
are for capital expenditures, expansion of services, geographic expansion, debt
repayments, acquisitions and other strategic transactions, and other general
corporate purposes. We have historically funded our operations and growth,
including acquisitions, with cash flow from operations, borrowings, and
issuances of equity securities. We expect to continue expanding our operations
through internal growth and strategic acquisitions and investments. We expect
these activities will be funded from existing cash, cash flow from operations
and, if necessary or appropriate, borrowings under our existing or future credit
facilities. Our sources of liquidity could be affected by our dependence on a
small number of industries and clients, compliance with regulations,
international risks (including the ongoing COVID-19 pandemic), and personal
injury, environmental or other material litigation claims.

Cash Collections



Cash collections from accounts receivable were $2,363.1 million during the nine
months ended September 30, 2020, including $331.8 million of funds received from
customers to pay independent physician investigators, or investigators, as
compared to $2,195.2 million during the nine months ended September 30, 2019,
including $261.5 million of funds received from customers to pay investigators.
The increase in cash collections during the nine months ended September 30, 2020
is related to our increase in revenue, driven by an increase in new business
awards and an increase in our backlog, as well as improvements in our days sales
outstanding.

Discussion of Cash Flows

Cash Flow from Operating Activities



During the nine months ended September 30, 2020, net cash provided by operations
was $267.1 million compared to $66.0 million for the same period in 2019. Cash
provided by operating activities increased over the prior year primarily due to
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Cash Flow from Investing Activities



Net cash used in investing activities was $219.2 million during the nine months
ended September 30, 2020 compared to $59.7 million for the same period in 2019.
The increase in cash outflows is primarily attributable to the acquisition of
Care Innovations.

Cash Flow from Financing Activities



Net cash provided by financing activities was $55.5 million during the nine
months ended September 30, 2020 compared to $31.0 million for the same period in
2019. During the nine months ended September 30, 2020 our long-term debt
balances increased by $26.3 million compared to a $305.0 million increase for
the same period in 2019. Additionally, the prior year included a $300.0 million
cash outflow for the repurchase and retirement of common stock as well as a $4.1
million outflow for the acquisition of a non-controlling interest.

Indebtedness

As of September 30, 2020, we had $1,285.1 million of total indebtedness. We do not expect to pay dividends in the foreseeable future. Our long-term debt arrangements contain usual and customary restrictive covenants, and, as of September 30, 2020, we were in compliance with these covenants.



See Note 9 to our consolidated condensed financial statements included in this
Quarterly Report on Form 10-Q, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations- Liquidity and Capital Resources"
and Note 11 to our audited consolidated financial statements, each included in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for
additional details regarding our credit arrangements.

Contractual Obligations and Commercial Commitments



We have various contractual obligations, which are recorded as liabilities in
our consolidated condensed financial statements. Other items are not recognized
as liabilities in our consolidated condensed financial statements but are
required to be disclosed. There have been no material changes, outside of the
ordinary course of business, to our contractual obligations as previously
disclosed in our Annual Report on Form 10-K for fiscal year ended December 31,
2019.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Disclosure Regarding Forward-Looking Statements



This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. In addition
to historical consolidated condensed financial information, this Quarterly
Report on Form 10-Q contains forward-looking statements that reflect, among
other things, our current expectations and anticipated results of operations,
all of which are subject to known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements, market
trends, or industry results to differ materially from those expressed or implied
by such forward-looking statements. For this purpose, any statements contained
herein that are not statements of historical fact may constitute forward-looking
statements. Without limiting the foregoing, words such as "anticipates,"
"believes," "estimates," "expects," "intends," "may," "plans," "projects,"
"should," "targets," "will" and the negative thereof and similar words and
expressions are intended to identify forward-looking statements. These
forward-looking statements speak only as of the date hereof, and unless legally
required, we assume no obligation to update any such forward-looking information
to reflect actual results or changes in the factors affecting such
forward-looking information.

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

Website and Social Media Disclosure



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

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