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Item 7. Management’s Discussion and Analysis

2021-02-12 compared with 2020-02-18 · 119 added, 106 removed, 270 unchanged (45% of the section changed)

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You should read the “Risk Factors” section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

IQVIA is a leading global provider of advanced analytics, technology solutions and contract research services to the life sciences industry.

Formed through the Merger of IMS Health and Quintiles, IQVIA applies human data science – leveraging the analytic rigor and clarity of data science to the ever-expanding scope of human science – to enable companies to reimagine and develop new approaches to clinical development and commercialization, speed innovation, and accelerate improvements in healthcare outcomes.

Powered by the IQVIA CORE, we deliver unique and actionable insights at the intersection of large scale analytics, transformative technology and extensive domain expertise, as well as execution capabilities to help biotech, medical device, and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders tap into a deeper understanding of diseases, human behaviors and scientific advances, in an effort to advance their path toward cures .

IQVIA is a leading global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry.

IQVIA creates intelligent connections across all aspects of healthcare through its analytics, transformative technology, big data resources and extensive domain expertise.

IQVIA Connected Intelligence™ delivers powerful insights with speed and agility — enabling customers to accelerate the clinical development and commercialization of innovative medical treatments that improve healthcare outcomes for patients.

With approximately 70,000 employees, we conduct operations in more than 100 countries.

We are a global leader in protecting individual patient privacy.

We use a wide variety of privacy-enhancing technologies and safeguards to protect individual privacy while generating and analyzing information on a scale that helps healthcare stakeholders identify disease patterns and correlate with the precise treatment path and therapy needed for better outcomes.

Our insights and execution capabilities help biotech, medical device and pharmaceutical companies, medical researchers, government agencies, payers and other healthcare stakeholders tap into a deeper understanding of diseases, human behaviors and scientific advances, in an effort to advance their path toward cures.

We are managed through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions.

Technology & Analytics Solutions provides critical information, technology solutions and real world solutions and services to our life science clients.

Research & Development Solutions, which primarily serves biopharmaceutical clients, is engaged in research and development and provides clinical research and clinical trial services.

Technology & Analytics Solutions provides critical information, technology solutions and real world insights and services to our life science clients.

Research & Development Solutions, which primarily serves

biopharmaceutical clients, is engaged in research and development and provides clinical research and clinical trial services.

Contract Sales & Medical Solutions provides contract sales to both biopharmaceutical clients and the broader healthcare market.

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For information about the industry outlook and markets that we operate in, refer to Part I, Item I, “Our Market Outlook”.

Overview of the Impact of COVID-19

As a result of the global spread of COVID-19 beginning in early March, we began to experience general business disruptions that impeded normal business activity including our ability to perform on-site monitoring and deliver offerings that rely on face-to-face interaction or in-person gatherings.

These disruptions have impacted all three of our reportable segments.

The Research & Development Solutions business responded quickly to support our clients with the development of vaccines and therapies for COVID-19.

We have been involved in clinical trials and studies for the virus, as well as patient recruitment for COVID-19 trials.

The pandemic has accelerated the need for remote and risk-based monitoring in clinical research, which in turn has accelerated the adoption of our virtual trial technology.

This technology was deployed to speed vaccine development and helped secure full-service COVID trials and new studies with top pharmaceutical clients.

We continue to see gradual improvement in the accessibility of clinical research sites in the Research & Development Solutions business.

We are seeing a return to on-site monitoring visits which exceeded the number of remote visits during the second half of the year.

In instances where sites remain physically inaccessible for clinical monitoring, remote monitoring and virtual solutions continue to be effective alternatives.

Site start-up activities continued to increase along with patient recruitment trends.

In our Technology & Analytics Solutions segment, our Real-World business has been relatively well insulated from the impacts of the virus and it had strong growth for the year.

The Real-World business is advanced in the use of secondary data, remote monitoring and virtual research approaches, which helped us pivot quickly to working in the new remote world at the onset of the pandemic.

However, the portion of our Real-World business that requires site monitoring activity also experienced limitations on site accessibility, which led to a reduction in the associated revenue.

Within our Technology & Analytics Solutions segment, we have had very little interruption in data supply and demand.

Our analytics and consulting businesses have performed well despite business development being hampered by lack of in-person interactions.

Our Technology & Analytics solutions offerings that rely on face-to-face interactions or are dependent on in-person gatherings, events or conferences continue to experience disruption, and where we were unable to execute on our commitments due to COVID-19, we were not able to recognize the associated revenue in the period.

Activity within the Contract Sales and Medical Solutions business continues to be more challenging due to a decline in sales rep visits, and physician attention diverted to the COVID-19 crisis.

We have accelerated and expanded a variety of cost containment actions to reduce the impact to profitability.

We have activated business continuity plans, including remote delivery capabilities in technology and analytics, remote monitoring and virtual trials in Research & Development Solutions and virtual commercial activity with clients wherever possible.

We anticipate an acceleration of business momentum when the crisis subsides as delayed trial activities will still need to be performed.

The Company continues to maintain strong liquidity.

As of December 31, 2020, cash and cash equivalents were $1,814 million and the Company had no amounts drawn under its $1.5 billion revolving credit facility.

At December 31, 2020, the Company was in compliance with the financial covenants under its debt agreements in all material respects and does not have material uncertainty about ongoing ability to meet the covenants of our credit arrangements.

To help ensure the safety and well-being of our employees, customers, partners and the broader community and continuity of our business operations, we continue to monitor health authority guidance on mitigating the spread of COVID-19 and managing positive cases.

We manage our response to the pandemic through a combination of enterprise-wide and regional governance teams, with particular focus on the medical and scientific, information technology, human capital and financial impacts of the pandemic on our business.

These teams met, and continue to meet, regularly as necessary based on the status of the pandemic.

We closely monitor the impact of COVID-19 on our operations and report to our Board regularly on the progress of our response to the COVID-19 outbreak.

We have established global workplace protocols that govern the return of our employees to our offices.

Business Combinations

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For a discussion of our results of operations comparison for 2019 and 2018, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on February 18, 2020.

Our reportable segment results of operations comparison for 2018 and 2017 included below within this Annual Report on Form 10-K reflects the change in segment presentation that occurred during the first quarter of 2019.

Year Ended December 31,

Our reportable segment results of operations comparison for 2018 included below within this Annual Report on Form 10-K reflects the change in segment presentation that occurred during the first quarter of 2019.

Year Ended December 31, Change

2019 2019 vs.

(dollars in millions) 2020 2019 2018 $ % $ %

Revenues $ 11,359 $ 11,088 $ 10,412 $ 271 2.4 % $ 676 6.5 %

2020 compared to 2019

In 2020, our revenues increased $271 million, or 2.4%, as compared to 2019.

This increase was comprised of constant currency revenue growth of approximately $835 million, or 8.0%, and a negative impact of approximately $159 million from the effects of foreign currency fluctuations.

The constant currency revenue growth was comprised of a $444 million increase in Technology & Analytics Solutions, a $378 million increase in Research & Development Solutions and a $13 million increase in Contract Sales & Medical Solutions.

This increase was comprised of constant currency revenue growth of approximately $252 million, or 2.3%, reflecting a $365 million increase in Technology & Analytics Solutions, offset by a $38 million decrease in Research & Development Solutions and a $75 million decrease in Contract Sales & Medical Solutions.

Costs of Revenue, exclusive of Depreciation and Amortization

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When compared to 2019, costs of revenue, exclusive of depreciation and amortization, in 2020 increased $200 million, or 2.7%.

This increase included a constant currency increase of approximately $690 million, or 10.2%, and a positive impact of approximately $136 million from the effects of foreign currency fluctuations.

The constant currency growth was comprised of a $369 million increase in Technology & Analytics Solutions, a $295 million increase in Research & Development Solutions and a $26 million increase in Contract Sales & Medical Solutions.

This increase included a constant currency increase of approximately $223 million, or 3.1%, comprised of a $232 million increase in Technology & Analytics Solutions, a $67 million increase in Research & Development Solutions, offset by a $76 million decrease in Contract Sales & Medical Solutions.

As a percent of revenues, costs of revenue remained flat compared to 2019.

Selling, General and Adm inistrative Expenses

Selling, General and Administrative Expenses

Year Ended December 31,

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2020 compared to 2019

The $18 million increase in selling, general and administrative expenses in 2019 as compared to 2018 included a constant currency increase of approximately $60 million, or 3.5%, and a positive impact of approximately $42 million from the effects of foreign currency fluctuations.

The constant currency growth primarily consisted of a $34 million increase in Research & Development Solutions and a $37 million increase in general corporate and unallocated expenses.

These increases were partially offset by a $6 million decrease in Technology & Analytics Solutions and a $5 million decrease in Contract Sales & Medical Solutions.

The $55 million increase in selling, general and administrative expenses in 2020 as compared to 2019 included a constant currency increase of approximately $62 million, or 3.6%, comprised of a $23 million increase in Technology & Analytics Solutions, a $31 million increase in Research & Development Solutions, and a $12 million increase in general corporate and unallocated expenses.

These increases were partially offset by a $4 million decrease in Contract Sales & Medical Solutions.

Depreciation and Amortization

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% of revenues 11.3 % 10.8 % 11.0 %

The $61 million increase in depreciation and amortization in 2019 as compared to 2018 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2018 and 2019, and increased amortization due to higher capitalized software balances.

Impairment Charges

Year Ended December 31,

(in millions)

Impairment charges

During 2017, we recognized $40 million of impairment losses for declines in fair value of goodwill and identifiable intangible assets in Encore.

See Note 8 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information with respect to impairment charges.

The $85 million increase in depreciation and amortization in 2020 as compared to 2019 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2019, increased amortization due to higher capitalized software balances, and accelerated depreciation on an internal-use software asset in the first quarter of 2020.

Restructuring Costs

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Restructuring costs $ 52 $ 75 $ 68

During 2019, we recognized $75 million of restructuring charges, net of reversals for changes in estimates, under our existing restructuring plans as a result of continuing efforts to streamline our global operations.

The remaining actions under these plans, as well as actions associated with upcoming 2020 plans, are expected to occur throughout 2020 and are expected to consist of severance, facility closure and other exit-related costs.

During 2018, we recognized $68 million of restructuring charges, net of reversals for changes in estimates, respectively, under our existing restructuring plans.

The restructuring costs incurred were due to ongoing efforts to streamline our global operations.

The remaining actions under these plans are expected to occur throughout 2021 and are expected to consist of consolidating functional activities, eliminating redundant positions, and aligning resources with customer requirements.

Interest Income and Interest Expense

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Interest expense $ 416 $ 447 $ 414

Interest income include d interest received primarily from bank balances and investments.

Interest expense during 2019 was higher than 2018 due to an increase in the average debt outstanding, primarily as a result of the May 2019 issuance of $1.1 billion of 5.00% senior notes due 2027 and the June 2018 issuance of $1.63 billion of additional term B loans.

Interest income included interest received primarily from bank balances and investments.

Interest expense during 2020 was lower than 2019 due to lower interest rates attributed to lower LIBOR rates and the redemption of the $800 million of 4.875% senior notes due 2023, partially offset by an increase in the average debt outstanding.

Loss on Extinguishment of Debt

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Loss on extinguishment of debt $ 13 $ 24 $ 2

During 2019, we incurred $24 million of fees and expenses related to the redemption of our 4.875% senior notes due 2023 in aggregate principal amount of $800 million as discussed further in Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

During 2018, we incurred $2 million of fees and expenses related to the refinancing of our Senior Secured Credit Facilities as discussed further in Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

During 2020, we recognized loss on extinguishment of debt of $13 million for fees and expenses related to the refinancing of our 3.500% senior notes due 2024 as discussed further in Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

During 2019, we recognized loss on extinguishment of debt of $24 million for fees and expenses related to the redemption of our 4.875% senior notes due 2023 in aggregate principal amount of $800 million as discussed further in Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

See “—Liquidity and Capital Resources” for more information on these transactions.

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Other (income) expense, net $ (65) $ (37) $ 5

Other income, net for 2020 primarily consisted of a decrease in fair value of acquisition-related contingent consideration, mark-to-market gains on equity securities, a decrease in foreign currency losses, and a gain on investments in mutual funds.

Other income, net for 2019 primarily consisted of a gain related to the remeasurement of a previously held equity interest of an equity method investment upon acquiring the remaining interest as a result of a business combination.

Other expense, net for 2018 primarily consisted of an increase in fair value of acquisition-related contingent consideration and foreign currency net losses partially offset by positive returns on pension assets.

Income Tax Expense (Benefit)

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In 2020, the U.S.

Treasury Department issued final regulations regarding Foreign Derived Intangible Income (“FDII”) and Global Intangible Low-Taxed Income (“GILTI”).

We have determined we will elect the GILTI high tax exception as allowed by the final regulations and we will amend our 2018 and 2019 US Federal consolidated income tax returns resulting in a favorable impact of $26 million, which we recorded in 2020.

In 2019 the U.S.

Treasury Department issued final regulations on the transition tax and proposed regulations on Foreign Derived Intangible Income (“FDII") which we analyzed.

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Although the proposed guidance for FDII is not authoritative and subject to change in the regulatory review process, we reversed the tax benefit recorded in 2018 by recording a tax expense of $25 million for this impact.

It is expected that during 2020 the U.S.

Treasury Department will issue final regulations on FDII.

On December 22, 2017, the U.S.

government enacted the Tax Act.

The Tax Act is comprehensive legislation that includes provisions that lower the federal corporate income tax rate from 35% to 21% beginning in 2018 and imposes a one-time transition tax on undistributed foreign earnings.

ASC 740 “Income Taxes” generally requires the effects of the tax law change to be recorded in the period of enactment.

However, the SEC staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) to address situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act.

During the fourth quarter of 2017, we recognized the tax impacts related to the transition tax on undistributed foreign earnings and the impact to deferred tax assets and liabilities and included these amounts in our consolidated financial statements on a provisional basis.

During the fourth quarter of 2018, we completed our accounting for SAB 118 that resulted in a full year benefit of $35 million related to the transition tax.

Additionally, in 2018 as a result of the new provisions of the Tax Act, we recorded a benefit of $25 million related to FDII as well as a tax expense of $35 million related to GILTI.

Our effective income tax rate was also favorably impacted by a tax benefit of $188 million related to purchase accounting amortization of approximately $813 million as a result of the Merger.

For 2017, we recorded a provisional deferred tax benefit of $966 million related to the revaluation of deferred taxes at the newly enacted 21% rate and the reversal of the deferred tax liability on undistributed foreign earnings net of the newly enacted transition tax.

We no longer consider any of our foreign earnings to be indefinitely reinvested.

Our effective income tax rate was also favorably impacted by a tax benefit of $261 million related to purchase accounting amortization of approximately $763 million as a

result of the Merger.

Equity in Earnings (Losses) of Unconsolidated Affiliates

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Equity in (losses) earnings of unconsolidated affiliates $ 7 $ (9) $ 15

Equity in earnings (losses) of unconsolidated affiliates decreased in 2019 compared to 2018 primarily as a result of earnings from our investment in NovaQuest Pharma Opportunities Fund III, L.P.

that were recognized in 2018 that did not reoccur in 2019.

See Note 4 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Equity in earnings (losses) of unconsolidated affiliates increased in 2020 compared to 2019 primarily due to higher earnings from our investment in NovaQuest Pharma Opportunities Fund III.

Net Income Attributable to Non-controlling Interests

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Net income attributable to non-controlling interests $ (29) $ (36) $ (25)

Net income attributable to non-controlling interests primarily included Quest’s interest in Q 2 Solutions.

Net income attributable to non-controlling interests primarily consists of Quest’s interest in Q 2 Solutions.

Segment Results of Operations

Revenues and profit by segment are as follows:

Segment Revenues

Segment Profit

Segment Revenues Segment Profit

(in millions) 2020 2019 2018 2020 2019 2018

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Contract Sales & Medical Solutions 741 814 810 57 52 61

Total 11,359 11,088 10,412 2,321 2,294 2,157

General corporate and unallocated (251) (240) (207)

Depreciation and amortization (1,287) (1,202) (1,141)

Impairment charges

Restructuring costs (52) (75) (68)

Consolidated $ 11,359 $ 11,088 $ 10,412 $ 731 $ 777 $ 741

Certain costs are not allocated to our segments and are reported as general corporate and unallocated expenses.

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Prior period segment results have been recast to conform to changes to management reporting in 2019.

The recast impacts the allocation of selling, general and administrative expenses for 2018 and 2017.

The recast impacts the allocation of selling, general and administrative expenses for 2018.

Technology & Analytics Solutions

Year Ended December 31,

(dollars in millions)

Costs of revenue, exclusive of depreciation

and amortization

Year Ended December 31, Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

Revenues $ 4,858 $ 4,486 $ 4,137 $ 372 8.3 % $ 349 8.4 %

Cost of revenue, exclusive of depreciation and amortization

2,900 2,663 2,343 237 8.9 320 13.7

Selling, general and administrative expenses 742 722 753 20 2.8 (31) -4.1

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Technology & Analytics Solutions’ revenues were $4,858 million in 2020, an increase of $372 million, or 8.3%, over 2019.

This increase was comprised of constant currency revenue growth of approximately $444 million, or 10.7%, and a negative impact of approximately $95 million from the effects of foreign currency fluctuations.

The constant currency growth resulted primarily from revenue growth in the Americas region as well as the Europe and Africa region.

The revenue growth in these regions was driven by higher real-world and analytical services as well as incremental revenue from acquisitions.

This increase was comprised of constant currency revenue growth of approximately $365 million, or 8.1%, reflecting revenue growth in the Europe and Africa region as well as the Americas region.

The revenue growth in these regions was driven by higher real-world and analytical services.

See Part II—Item 7—“Overview of the Impact of COVID-19" included elsewhere in this Annual Report on Form 10-K for a discussion of the impact from COVID-19 on Technology & Analytics Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

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Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, were $2,900 million in 2020, an increase of $237 million over 2019.

This increase was comprised of constant currency growth of approximately $369 million, or 15.7%, and a positive impact of approximately $49 million from the effects of foreign currency fluctuations.

The constant currency increase was primarily due to an increase in compensation and related expenses from higher headcount to support revenue growth and incremental costs from acquisitions.

This increase was comprised of constant currency increase of approximately $232 million, or 8.7%, reflecting an increase in compensation and related expenses to support revenue growth.

Selling, General and Administrative Expenses

2 020 compared to 2019

Technology & Analytics Solutions’ selling, general and administrative expenses decreased $31 million in 2019 as compared to 2018.

This decrease was comprised of a constant currency decrease of approximately $6 million, or 0.8%, and a positive impact of approximately $25 million from the effects of foreign currency fluctuations.

The constant currency decrease was primarily related to cost savings initiatives .

Technology & Analytics Solutions’ selling, general and administrative expenses increased $20 million in 2020 as compared to 2019.

This increase was comprised of a constant currency increase of approximately $23 million, or 3.2%, reflecting an increase in compensation and related expenses.

Research & Development Solutions

Year Ended December 31,

(dollars in millions)

Costs of revenue, exclusive of depreciation

and amortization

Year Ended December 31, Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

Revenues $ 5,760 $ 5,788 $ 5,465 $ (28) (0.5) % $ 323 5.9 %

Cost of revenue, exclusive of depreciation and amortization 3,974 3,936 3,721 38 1.0 215 5.8

Selling, general and administrative expenses 738 711 689 27 3.8 22 3.2

Segment profit $ 1,048 $ 1,141 $ 1,055 $ (93) (8.2) % $ 86 8.2 %

Research and Development Solutions contracted backlog increased from $17.1 billion at December 31, 2018 to $19.0 billion at December 31, 2019 and we expect approximately $5.2 billion of this backlog to convert to revenue in the next 12 months.

Research & Development Solutions contracted backlog increased from $19.0 billion at December 31, 2019 to $22.6 billion at December 31, 2020 and we expect approximately $5.9 billion of this backlog to convert to revenue in the next 12 months.

Contracted backlog was $17.1 billion at December 31, 2018.

The December 31, 2017 backlog amount has been updated to reflect the adoption of the new revenue standard.

Backlog represents, at a particular point in time, future revenues from work not yet completed or performed under signed contracts.

Once work begins on a project, revenues are recognized over the duration of the project.

Backlog denominated in foreign currencies are valued each month using the actual average foreign exchange rates in effect during the month.

We believe that backlog may not be a consistent indicator of future revenues because backlog has been and likely will be affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, cancellations, and changes to the scope of work during the course of projects.

We believe that backlog is an indicator of future revenues but the timing of revenue will be affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, cancellations, and changes to the scope of work during the course of projects.

Projects that have been delayed remain in backlog, but the timing of the revenue generated may differ from the timing originally expected.

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2020 compared to 2019

Research & Development Solutions’ revenues were $5,788 million in 2019, an increase of $323 million, or 5.9%, over 2018.

This increase was comprised of constant currency revenue growth of approximately $378 million, or 6.9%, and a negative impact of approximately $55 million from the effects of foreign currency fluctuations.

The constant currency growth primarily included volume-related increases in clinical services, data management and lab testing volumes as well as incremental revenue from acquisitions.

Research & Development Solutions’ revenues were $5,760 million in 2020, a decrease of $28 million, or 0.5%, over 2019.

This decrease was comprised of constant currency revenue decline of approximately $38 million, or 0.7%, reflecting volume-related decreases in clinical services and lab testing impacted by COVID-19, largely offset by the incremental revenue from the clinical trials and studies to support the development of vaccines and therapies for COVID-19.

See Part II—Item 7—“Overview of the Impact of COVID-19" included elsewhere in this Annual Report on Form 10-K for a discussion of the impact from COVID-19 on Research & Development Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

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Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $38 million, or 1.0%, in 2020 as compared to 2019.

This increase included a constant currency increase of approximately $295 million, or 7.9%, and a positive impact of approximately $80 million from the effects of foreign currency fluctuations.

The constant currency increase was primarily due to an increase in compensation and related expenses as well as incremental costs from acquisitions.

Compensation and related expenses increased as a result of higher headcount to support revenue growth.

This increase included a constant currency increase of approximately $67 million, or 1.7%, reflecting an increase in compensation and related expenses.

Selling, General and Administrative Expenses

2020 compared to 2019

Research & Development Solutions’ selling, general and administrative expenses increased $22 million, or 3.2%, in 2019 as compared to 2018, which included a constant currency increase of approximately $34 million, or 4.9%, and a positive impact of approximately $12 million from the effects of foreign currency fluctuations.

The constant currency increase was primarily related to an increase in compensation and related expenses from higher headcount to support growth and incremental costs from acquisitions.

Research & Development Solutions’ selling, general and administrative expenses increased $27 million, or 3.8%, in 2020 as compared to 2019, which included a constant currency increase of approximately $31 million, or 4.4%, reflecting an increase in compensation and related expenses.

Contract Sales & Medical Solutions

Year Ended December 31,

(dollars in millions)

Costs of revenue, exclusive of depreciation

and amortization

Year Ended December 31, Change

(dollars in millions) 2020 2019 2018 2020 vs.

2019 2019 vs.

Revenues $ 741 $ 814 $ 810 $ (73) (9.0) % $ 4 0.5 %

Cost of revenue, exclusive of depreciation and amortization 626 701 682 (75) (10.7) 19 2.8

Selling, general and administrative expenses 58 61 67 (3) (4.9) (6) (9.0)

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2020 compared to 2019

Contract Sales & Medical Solutions’ revenues were $814 million in 2019, an increase of $4 million, or 0.5%, over 2018.

This increase was comprised of a constant currency revenue growth of approximately $13 million, or 1.6%, and a negative impact of approximately $9 million from the effects of foreign currency fluctuations.

The constant currency growth was largely due to volume increases in the Americas region.

Contract Sales & Medical Solutions’ revenues were $741 million in 2020, a decrease of $73 million, or 9.0%, over 2019.

This decrease was comprised of a constant currency revenue decline of approximately $75 million, or 9.2%, reflecting a volume decrease in the Americas region.

See Part II—Item 7—“Overview of the Impact of COVID-19" included elsewhere in this Annual Report on Form 10-K for a discussion of the impact from COVID-19 on Contract Sales & Medical Solutions business activity.

Costs of Revenue, exclusive of Depreciation and Amortization

2020 compared to 2019

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $19 million, or 2.8%, in 2019 as compared to 2018.

This increase included a constant currency growth of approximately $26 million, or 3.8%, and a positive impact of approximately $7 million from the effects of foreign currency fluctuations.

The constant currency cost of revenue increase was due an increase in compensation and related expenses from higher headcount to support revenue growth.

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, decreased $75 million, or 10.7%, in 2020 as compared to 2019.

This decrease included a constant currency decrease of approximately $76 million, or 10.8%, reflecting a decrease in compensation and related expenses as a result of reduced volume in the Americas region.

Selling, General and Administrative Expenses

2020 compared to 2019

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $6 million, or 9.0%, in 2019 as compared to 2018, primarily related to cost saving initiatives.

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $3 million, or 4.9%, in 2020 as compared to 2019.

This decrease included a constant currency decrease of approximately $4 million, or 6.6%, reflecting a decrease in compensation and related expenses.

Liquidity and Capital Resources

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We have and expect to transfer cash from those subsidiaries to the United States and to other international subsidiaries when it is cost effective to do so.

We had a cash balance of $837 million at December 31, 2019 ($293 million of which was in the United States), a decrease from $891 million at December 31, 2018.

Based on our current operating plan, we believe that our available cash and cash equivalents, future cash flows from operations and our ability to access funds under our revolving credit and receivables financing facilities will enable us to fund our operating requirements and capital expenditures and meet debt obligations for at least the next 12 months.

We had a cash balance of $1,814 million at December 31, 2020 ($1,065 million of which was in the United States), an increase from $837 million at December 31, 2019.

Based on our current operating plan, we believe that our available cash and cash equivalents, future cash flows from operations and our ability to access funds under our revolving credit and receivables financing facilities will enable us to fund our operating requirements, capital expenditures, contractual obligations, and meet debt obligations for at least the next 12 months.

We regularly evaluate our debt arrangements, as well as market conditions, and from time to time we may explore opportunities to modify our existing debt arrangements or pursue additional financing arrangements that could result in the issuance of new debt securities by us or our affiliates.

We may use our existing cash, cash generated from operations or dispositions of assets or businesses and/or proceeds from any new financing arrangements or issuances of debt or equity securities to repay or reduce some of our outstanding obligations, to repurchase shares from our stockholders or for other purposes.

As part of our ongoing business strategy, we also continually evaluate new acquisition, expansion and investment possibilities or other strategic growth opportunities, as well as potential dispositions of assets or businesses, as appropriate, including dispositions that may cause us to recognize a loss on certain assets.

Should we elect to pursue any such transaction, we may seek to obtain debt or equity financing to facilitate those activities.

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As of December 31, 2020, we had $12.6 billion of total indebtedness, excluding $1.5 billion of available borrowings under our revolving credit facilities.

S ee Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details regarding our credit arrangements.

See Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details regarding our credit arrangements.

Our long-term debt arrangements contain customary restrictive covenants and, as of December 31, 2020, we believe we were in compliance with our restrictive covenants in all material respects.

Senior Secured Credit Facilities and Senior Notes

At December 31, 2019, our Fourth Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) provided financing through several senior secured credit facilities (collectively, the “Senior Secured Credit Facilities”) of approximately $6,811 million, which consisted of $5,677 million principal amount of debt outstanding, $3 million of issued standby letters of credit, and $1,131 million of available borrowing capacity on the $1,500 million revolving credit facility .

At December 31, 2020, our Fourth Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) provided financing through several senior secured credit facilities (collectively, the “senior secured credit facilities”) of up to approximately $7,692 million, which consisted of $6,192 million principal amounts of debt outstanding (as detailed in the table above), $4 million of issued standby letters of credit and $1,496 million of available borrowing capacity on the revolving credit facility.

The revolving credit facility is comprised of a $675 million senior secured revolving facility available in U.S.

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For information regarding receivables financing facility, see Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

As of December 31, 2019, no additional amounts of revolving loans were available under the receivables financing facility.

As of December 31, 2020, there were $60 million of revolving loans available under the receivables financing facility.

Years ended December 31, 2020, 2019 and 2018

5 unchanged sentences

Cash provided by operating activities increased $542 million in 2020 as compared to 2019.

The increase is primarily due to improved collections on receivables, higher cash-related net income and the timing of income tax and other payables.

The increase is primarily due to improved collections from clients resulting in a decrease in accounts receivable and unbilled services ($377 million), an increase in advanced billings ($182 million), an increase in cash-related net income ($102 million), and the timing of income tax and other payables ($78 million), partially offset by a decrease in customer prepayments ($54 million).

Cash Flow from Investing Activities

3 unchanged sentences

2020 compared to 2019

Cash used in investing activities increased $380 million in 2019 as compared to 2018.

The increase was primarily due to higher cash used for the acquisition of property, equipment and software ($123 million) and for the acquisition of businesses ($279 million).

Cash used in investing activities decreased $394 million in 2020 as compared to 2019.

The decrease was primarily driven by lower cash used for the acquisition of businesses, net of cash acquired ($411 million).

Cash Flow from Financing Activities

4 unchanged sentences

Cash used in financing activities decreased $59 million in 2020 as compared to 2019.

The decrease in cash used in financing activities was primarily related to fewer share repurchases ($456 million), proceeds from debt issuance ($269 million), partially offset by repayment of revolving credit facility, net of proceeds ($370 million) and debt repayment ($167 million).

The decrease in cash used in financing activities was primarily due to less cash used to repurchase common stock ($502 million), offset by a decrease in cash provided by proceeds from debt issuances ($309 million) and a decrease in cash proceeds from revolving credit facilities, net of repayments ($131 million).

Contingencies

4 unchanged sentences

We believe that we have made appropriate arrangements in respect of the future effect on us of these known contingencies.

We also believe that the amount of cash available to us from our operations, together with cash from financing, will be sufficient for us to pay any known contingencies as they become due without materially affecting our ability to conduct our operations and invest in the growth of our business.

We also believe that the amount of cash available to us from our operations, together with cash from financing, will be sufficient for us

to pay any known contingencies as they become due without materially affecting our ability to conduct our operations and invest in the growth of our business.

Off-Balance Sheet Arrangements

2 unchanged sentences

Below is a summary of our future payment commitments by year under contractual obligations as of December 31, 2020:

(in millions)

(in millions) 2021 2022 - 2023 2024 - 2025 Thereafter Total

Long-term debt, including interest (1)

$ 498 $ 2,758 $ 6,875 $ 4,088 $ 14,219

Operating leases 159 236 131 52 578

Finance leases — 12 12 159 183

Data acquisition 344 339 82 2 767

2 unchanged sentences

Benefit obligations (4)

32 33 34 90 191

Uncertain income tax positions (5)

Total $ 1,064

(1) Interest payments on our debt are based on the interest rates in effect on December 31, 2020.

15 unchanged sentences

The majority of the Company’s contracts within the Research & Development Solutions segment are service contracts for clinical research that represent a single performance obligation.

The Company provides a significant integration service resulting in a combined output, which is clinical trial data that meets the relevant regulatory standards and can be used by the customer to progress to the next phase of a clinical trial or solicit approval of a treatment by the applicable regulatory body.

The Company provides a significant integration service resulting in a

combined output, which is clinical trial data that meets the relevant regulatory standards and can be used by the customer to progress to the next phase of a clinical trial or solicit approval of a treatment by the applicable regulatory body.

The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of the arrangement and furthers progress of the clinical trial.

43 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis