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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2022

or

 

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

 

For the transition period from            to            .

Commission File Number: 001-36730

 

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)

(919876-9300

(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 April 21, 2022, there were approximately 102,575,027 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 Income for the three months ended March 31, 2022 and 2021 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021 (unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

 

 

 

Item 4.

Controls and Procedures

34

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

35

 

 

 

Item 1A.

Risk Factors

35

 

 

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

35

 

 

 

Item 5.

Other Information

36

 

 

 

Item 6.

Exhibits

37

 

 

 

 

Signature

38

 

 

2


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share data)

 

Revenue

 

$

1,336,253

 

 

$

1,208,745

 

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

Direct costs (exclusive of depreciation and amortization)

 

 

1,044,432

 

 

 

945,250

 

Selling, general, and administrative expenses

 

 

140,166

 

 

 

137,314

 

Restructuring and other costs

 

 

15,557

 

 

 

7,228

 

Depreciation

 

 

20,579

 

 

 

18,447

 

Amortization

 

 

41,623

 

 

 

39,491

 

Total operating expenses

 

 

1,262,357

 

 

 

1,147,730

 

Income from operations

 

 

73,896

 

 

 

61,015

 

 

 

 

 

 

 

 

 

 

Total other expense, net:

 

 

 

 

 

 

 

 

Interest income

 

 

(3

)

 

 

(71

)

Interest expense

 

 

15,765

 

 

 

23,328

 

Loss on extinguishment of debt

 

 

 

 

 

603

 

Other expense (income), net

 

 

4,642

 

 

 

(9,856

)

Total other expense, net

 

 

20,404

 

 

 

14,004

 

Income before provision for income taxes

 

 

53,492

 

 

 

47,011

 

Income tax expense

 

 

7,316

 

 

 

8,287

 

Net income

 

$

46,176

 

 

$

38,724

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.45

 

 

$

0.37

 

Diluted

 

$

0.44

 

 

$

0.37

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

103,665

 

 

 

104,274

 

Diluted

 

 

104,410

 

 

 

105,457

 

 

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

3


Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Net income

 

$

46,176

 

 

$

38,724

 

Unrealized gain on derivative instruments, net of income tax expense of $3,420 and $2,013, respectively

 

 

9,640

 

 

 

5,937

 

Foreign currency translation adjustments, net of income tax benefit of $(2,711) and $(708), respectively

 

 

(17,386

)

 

 

(4,310

)

Comprehensive income

 

$

38,430

 

 

$

40,351

 

 

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

4


Table of Contents

 

SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(in thousands, except par value)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash

 

$

119,151

 

 

$

106,475

 

Accounts receivable and unbilled services, net

 

 

1,596,315

 

 

 

1,524,890

 

Prepaid expenses and other current assets

 

 

160,792

 

 

 

135,091

 

Total current assets

 

 

1,876,258

 

 

 

1,766,456

 

Property and equipment, net

 

 

240,015

 

 

 

222,657

 

Operating lease right-of-use assets

 

 

201,407

 

 

 

209,408

 

Goodwill

 

 

4,942,727

 

 

 

4,956,015

 

Intangible assets, net

 

 

808,931

 

 

 

854,067

 

Deferred income tax assets

 

 

34,788

 

 

 

35,387

 

Other long-term assets

 

 

199,835

 

 

 

193,103

 

Total assets

 

$

8,303,961

 

 

$

8,237,093

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

108,315

 

 

$

107,535

 

Accrued expenses

 

 

657,084

 

 

 

614,441

 

Deferred revenue

 

 

891,750

 

 

 

868,455

 

Current portion of operating lease obligations

 

 

43,234

 

 

 

43,058

 

Current portion of finance lease obligations

 

 

21,998

 

 

 

20,627

 

Total current liabilities

 

 

1,722,381

 

 

 

1,654,116

 

Long-term debt

 

 

2,906,270

 

 

 

2,775,721

 

Operating lease long-term obligations

 

 

195,557

 

 

 

205,798

 

Finance lease long-term obligations

 

 

40,162

 

 

 

34,181

 

Deferred income tax liabilities

 

 

78,609

 

 

 

78,062

 

Other long-term liabilities

 

 

59,423

 

 

 

76,660

 

Total liabilities

 

 

5,002,402

 

 

 

4,824,538

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 30,000 shares authorized, 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.01 par value; 600,000 shares authorized, 102,558 and 103,764 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

1,026

 

 

 

1,038

 

Additional paid-in capital

 

 

3,410,524

 

 

 

3,474,088

 

Accumulated other comprehensive loss, net of taxes

 

 

(57,364

)

 

 

(49,618

)

Accumulated deficit

 

 

(52,627

)

 

 

(12,953

)

Total shareholders’ equity

 

 

3,301,559

 

 

 

3,412,555

 

Total liabilities and shareholders’ equity

 

$

8,303,961

 

 

$

8,237,093

 

 

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

46,176

 

 

$

38,724

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

62,202

 

 

 

57,938

 

Share-based compensation

 

 

17,333

 

 

 

17,353

 

Recovery from doubtful accounts

 

 

(108

)

 

 

(187

)

Provision for (benefit from) deferred income taxes

 

 

1,000

 

 

 

(4,653

)

Foreign currency transaction adjustments

 

 

434

 

 

 

(9,522

)

Fair value adjustment of contingent obligations

 

 

 

 

 

(597

)

Loss on extinguishment of debt

 

 

 

 

 

603

 

Other non-cash items

 

 

(1,945

)

 

 

953

 

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, unbilled services, and deferred revenue

 

 

(49,905

)

 

 

30,997

 

Accounts payable and accrued expenses

 

 

39,650

 

 

 

518

 

Other assets and liabilities

 

 

(43,950

)

 

 

(5,039

)

Net cash provided by operating activities

 

 

70,887

 

 

 

127,088

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payments related to acquisitions of businesses, net of cash acquired

 

 

(1,727

)

 

 

(9,982

)

Purchases of property and equipment

 

 

(23,474

)

 

 

(11,173

)

(Investments in) proceeds from unconsolidated affiliates

 

 

(296

)

 

 

1,374

 

Net cash used in investing activities

 

 

(25,497

)

 

 

(19,781

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of debt financing costs

 

 

 

 

 

(49

)

Repayments of long-term debt

 

 

 

 

 

(105,856

)

Proceeds from accounts receivable financing agreement

 

 

 

 

 

65,000

 

Proceeds from revolving line of credit

 

 

130,000

 

 

 

 

Payments of contingent consideration related to acquisitions

 

 

 

 

 

(6,196

)

Payments of finance leases

 

 

(2,193

)

 

 

(4,269

)

Payments for repurchases of common stock

 

 

(149,961

)

 

 

(44,505

)

Proceeds from exercises of stock options

 

 

11,483

 

 

 

10,804

 

Payments related to tax withholdings for share-based compensation

 

 

(25,901

)

 

 

(26,295

)

Net cash used in financing activities

 

 

(36,572

)

 

 

(111,366

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

3,858

 

 

 

(3,425

)

Net change in cash, cash equivalents, and restricted cash

 

 

12,676

 

 

 

(7,484

)

Cash, cash equivalents, and restricted cash - beginning of period

 

 

106,475

 

 

 

272,173

 

Cash, cash equivalents, and restricted cash - end of period

 

$

119,151

 

 

$

264,689

 

 

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

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SYNEOS HEALTH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Shareholders’ equity, beginning balance

 

$

3,412,555

 

 

$

3,242,112

 

 

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,038

 

 

 

1,039

 

Repurchases of common stock

 

 

(19

)

 

 

(6

)

Issuances of common stock

 

 

7

 

 

 

9

 

Ending balance

 

 

1,026

 

 

 

1,042

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

Beginning balance

 

 

3,474,088

 

 

 

3,461,747

 

Repurchases of common stock

 

 

(64,092

)

 

 

(19,817

)

Issuances of common stock

 

 

(16,805

)

 

 

(18,443

)

Share-based compensation

 

 

17,333

 

 

 

17,353

 

Ending balance

 

 

3,410,524

 

 

 

3,440,840

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(49,618

)

 

 

(40,801

)

Unrealized gain on derivative instruments, net of taxes

 

 

9,640

 

 

 

5,937

 

Foreign currency translation adjustment, net of taxes

 

 

(17,386

)

 

 

(4,310

)

Ending balance

 

 

(57,364

)

 

 

(39,174

)

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(12,953

)

 

 

(179,873

)

Repurchases of common stock

 

 

(85,850

)

 

 

(24,682

)

Net income

 

 

46,176

 

 

 

38,724

 

Ending balance

 

 

(52,627

)

 

 

(165,831

)

 

 

 

 

 

 

 

 

 

Shareholders’ equity, ending balance

 

$

3,301,559

 

 

$

3,236,877

 

 

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

Nature of Operations

Syneos Health, Inc. (the “Company”) is a global provider of end-to-end biopharmaceutical outsourcing solutions. The Company operates under two 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 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 fiscal year ended December 31, 2021 (the “2021 Form 10-K”), filed with the Securities and Exchange Commission on February 17, 2022. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or any other future period. The unaudited condensed consolidated balance sheet as of December 31, 2021 is derived from the amounts in the audited consolidated balance sheet included in the 2021 Form 10-K.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current year presentation.

COVID-19 Pandemic

The ongoing COVID-19 pandemic and associated economic repercussions have significantly impacted, and are expected to continue to impact, the Company’s business and operations. The continued availability and effectiveness of vaccines may partially mitigate the risks around the continued spread of COVID-19, however, with the spread of COVID-19 variants, the ongoing impacts of the COVID-19 pandemic could adversely impact the Company’s business and results of operations. For further discussion of the potential impact of the pandemic on its business, refer to Part I, Item 1A, “Risk Factors” in the 2021 Form 10-K.

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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. As part of a master netting arrangement, 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. Under the terms of the master netting arrangement, the financial institution has the right, ability, and intent to offset a positive balance in one account against an overdrawn amount in another account. Amounts in each of the accounts are unencumbered and unrestricted with respect to use. As such, the net cash balance related to this pooling arrangement is included in cash, cash equivalents, and restricted cash in the condensed consolidated balance sheets.

The Company’s net cash pool position consisted of the following (in thousands):

 

 

March 31, 2022

 

 

December 31, 2021

 

Gross cash position

 

$

149,819

 

 

$

179,160

 

Less: cash borrowings

 

 

(146,677

)

 

 

(167,507

)

Net cash position

 

$

3,142

 

 

$

11,653

 

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):

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Accounts receivable billed

 

$

918,248

 

 

$

873,265

 

Accounts receivable unbilled

 

 

251,194

 

 

 

241,799

 

Contract assets

 

 

434,320

 

 

 

417,411

 

Less: Allowance for doubtful accounts

 

 

(7,447

)

 

 

(7,585

)

Accounts receivable and unbilled services, net

 

$

1,596,315

 

 

$

1,524,890

 

Accounts Receivable Factoring Arrangement

The Company has an accounts receivable factoring agreement to sell certain eligible unsecured trade accounts receivable, at its option, without recourse, to an unrelated third-party financial institution for cash. For the three months ended March 31, 2022 and 2021, the Company factored $34.1 million and $30.1 million, respectively, of trade accounts receivable on a non-recourse basis and received $34.0 million and $30.0 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 three months ended March 31, 2022 were as follows (in thousands):

 

 

 

Clinical

Solutions (a)

 

 

Commercial

Solutions (a)

 

 

Total

 

Balance as of December 31, 2021

 

$

3,448,699

 

 

$

1,507,316

 

 

$

4,956,015

 

Acquisitions (b)

 

 

1,879

 

 

 

 

 

 

1,879

 

Impact of foreign currency translation

 

 

(9,284

)

 

 

(5,883

)

 

 

(15,167

)

Balance as of March 31, 2022

 

$

3,441,294

 

 

$

1,501,433

 

 

$

4,942,727

 

(a) No impairment of goodwill was recorded for the three months ended March 31, 2022.

(b) Amount represents goodwill recognized in connection with an insignificant acquisition and measurement period adjustments in connection with insignificant 2021 acquisitions during the three months ended March 31, 2022 within the Clinical Solutions segment.

Accumulated Other Comprehensive Loss, Net of Taxes

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

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Beginning balance

 

$

(49,618

)

 

$

(40,801

)

 

 

 

 

 

 

 

 

 

Derivative instruments:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(2,621

)

 

 

(18,761

)

Other comprehensive income before reclassifications

 

 

8,612

 

 

 

772

 

Reclassification adjustments

 

 

1,028

 

 

 

5,165

 

Ending balance

 

 

7,019

 

 

 

(12,824

)

 

 

 

 

 

 

 

 

 

Foreign currency translation:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(46,997

)

 

 

(22,040

)

Other comprehensive loss before reclassifications

 

 

(17,386

)

 

 

(4,310

)

Ending balance

 

 

(64,383

)

 

 

(26,350

)

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss, net of taxes

 

$

(57,364

)

 

$

(39,174

)

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

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Unrealized gain on derivative instruments:

 

 

 

 

 

 

 

 

Unrealized gain during period, before taxes

 

$

11,667

 

 

$

1,034

 

Income tax expense

 

 

3,055

 

 

 

262

 

Unrealized gain during period, net of taxes

 

 

8,612

 

 

 

772

 

Reclassification adjustment, before taxes

 

 

1,393

 

 

 

6,916

 

Income tax expense

 

 

365

 

 

 

1,751

 

Reclassification adjustment, net of taxes

 

 

1,028

 

 

 

5,165

 

Total unrealized gain on derivative instruments, net of taxes

 

 

9,640

 

 

 

5,937

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, before taxes

 

 

(20,097

)

 

 

(5,018

)

Income tax benefit

 

 

(2,711

)

 

 

(708

)

Foreign currency translation adjustments, net of taxes

 

 

(17,386

)

 

 

(4,310

)

 

 

 

 

 

 

 

 

 

Total other comprehensive (loss) income, net of taxes

 

$

(7,746

)

 

$

1,627

 

 

Other Expense (Income), Net

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

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Net realized foreign currency loss

 

$

2,456

 

 

$

1,192

 

Net unrealized foreign currency loss (gain)

 

 

434

 

 

 

(9,522

)

Equity investment income

 

 

 

 

 

(1,100

)

Other, net

 

 

1,752

 

 

 

(426

)

Total other expense (income), net

 

$

4,642

 

 

$

(9,856

)

 

3. Investments

During 2020, the Company made a non-cash investment of $27.3 million to acquire certain intellectual property rights from a customer in lieu of cash payment for services rendered. The Company subsequently exchanged the intellectual property for an equity method investment in an unconsolidated variable interest entity. The Company provided the entity $3.8 million in cash, in the form of a loan, during the third quarter of 2021. Based on the hypothetical liquidation book value of its investment as of March 31, 2022, the Company recorded a $1.2 million loss to other expense (income), net in the accompanying condensed consolidated statement of income for the three months ended March 31, 2022. As of March 31, 2022, the book value of the Company’s investment was $14.4 million and was included in other long-term assets in the accompanying condensed consolidated balance sheet, with a maximum exposure to loss of approximately $18.3 million, which includes funding of the loan.

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4. Long-Term Debt Obligations

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

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Secured Debt

 

 

 

 

 

 

 

 

Term Loan A - tranche one due March 2024

 

$

149,195

 

 

$

149,195

 

Term Loan A - tranche two due August 2024

 

 

1,636,797

 

 

 

1,636,797

 

Revolving credit facility due August 2024

 

 

130,000

 

 

 

 

Accounts receivable financing agreement due October 2024

 

 

400,000

 

 

 

400,000

 

Total secured debt

 

 

2,315,992

 

 

 

2,185,992

 

Unsecured Debt

 

 

 

 

 

 

 

 

Senior notes due January 2029 (the “Notes”)

 

 

600,000

 

 

 

600,000

 

Total debt obligations

 

 

2,915,992

 

 

 

2,785,992

 

Less: Term loan original issuance discount

 

 

(2,021

)

 

 

(2,228

)

Less: Unamortized deferred issuance costs