What changed in this filing

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Item 1. Financial Statements

2021-04-23 compared with 2020-10-22 · 94 added, 266 removed, 415 unchanged (46% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except per share data)

2020 2019 2020 2019

Revenues $ 3,409 $ 2,754

9 unchanged sentences

Income before income taxes and equity in earnings of unconsolidated affiliates 257 102

Income tax (benefit) expense ( 3 ) ( 1 ) 9 48

Income tax expense 44 17

Income before equity in earnings of unconsolidated affiliates 213 85

Equity in earnings (loss) of unconsolidated affiliates 3 ( 1 ) 8 ( 1 )

Equity in earnings of unconsolidated affiliates 4 6

Net income 217 91

1 unchanged sentence

Net income attributable to IQVIA Holdings Inc.

$ 101 $ 57 $ 160 $ 175

Earnings per share attributable to common stockholders:

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2021 2020

1 unchanged sentence

Comprehensive income (loss) adjustments:

Unrealized (losses) gains on derivative instruments, net of income tax (benefit) expense of $( 8 ), $( 2 ), $( 11 ), $( 7 )

( 1 ) ( 5 ) ( 33 ) ( 23 )

Foreign currency translation, net of income tax expense (benefit) of $( 54 ), $ 57 , $( 83 ), $ 65

Unrealized gains (losses) on derivative instruments, net of income tax expense (benefit) of $ 1 , $( 7 )

Foreign currency translation, net of income tax expense of $ 62 , $ 23

( 178 ) ( 155 )

Reclassification adjustments:

Losses (gains) on derivative instruments included in net income, net of income tax expense (benefit) of $ 1 , $ — , $ 2 , $( 1 )

Losses on derivative instruments included in net income, net of income tax benefit of $ 1 , $ —

Comprehensive income (loss)

239 ( 96 ) 171 51

Comprehensive income attributable to non-controlling interests

( 11 ) ( 9 ) ( 17 ) ( 29 )

Comprehensive income (loss) attributable to IQVIA Holdings Inc.

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data) September 30, 2020 December 31, 2019

(in millions, except per share data) March 31, 2021 December 31, 2020

Current assets:

30 unchanged sentences

Stockholders’ equity:

Common stock and additional paid-in capital, 400.0 shares authorized at September 30, 2020 and December 31, 2019, $ 0.01 par value, 254.5 shares issued and 191.7 shares outstanding at September 30, 2020;

253.0 shares issued and 192.3 shares outstanding at December 31, 2019

Common stock and additional paid-in capital, 400.0 shares authorized as of March 31, 2021 and December 31, 2020, $ 0.01 par value, 255.4 shares issued and 191.6 shares outstanding as of March 31, 2021;

254.7 shares issued and 191.2 shares outstanding as of December 31, 2020

11,068 11,095

Retained earnings 1,489 1,277

Treasury stock, at cost, 62.8 and 60.7 shares at September 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 63.8 and 63.5 shares as of March 31, 2021 and December 31, 2020, respectively

( 6,228 ) ( 6,166 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

4 unchanged sentences

Stock-based compensation

(Earnings) loss from unconsolidated affiliates ( 8 ) 1

(Earnings) from unconsolidated affiliates ( 4 ) ( 6 )

Gain on investments, net 3 8

24 unchanged sentences

Repayment of revolving credit facility

( 1,610 ) ( 1,930 )

(Payments) proceeds related to employee stock option plans ( 43 ) 15

(Payments) related to employee stock option plans ( 56 ) ( 41 )

Repurchase of common stock

2 unchanged sentences

Contingent consideration and deferred purchase price payments

( 20 ) ( 21 )

Net cash (used in) provided by financing activities ( 168 ) 107

Effect of foreign currency exchange rate changes on cash

Increase (decrease) in cash and cash equivalents 627 ( 28 )

( 32 ) ( 30 )

Increase in cash and cash equivalents 491 90

Cash and cash equivalents at beginning of period

20 unchanged sentences

Net income — — — — 212 — — 5 217

Unrealized losses on derivative instruments, net of tax — — — — — — ( 39 ) — ( 39 )

Unrealized gains on derivative instruments, net of tax — — — — — — 6 — 6

Foreign currency translation, net of tax — — — — — — ( 178 ) — ( 178 )

1 unchanged sentence

Balance, March 31, 2021 255.4 ( 63.8 ) $ 3 $ 11,065 $ 1,489 $ ( 6,228 ) $ ( 376 ) $ 284 $ 6,237

Issuance of common stock 0.3 — — 1 — — — — 1

Stock-based compensation — — — 30 — — — — 30

Net (loss) income — — — — ( 23 ) — — 2 ( 21 )

Unrealized losses on derivative instruments, net of tax

— — — — — — 7 — 7

Foreign currency translation, net of tax — — — — — — 46 ( 1 ) 45

Reclassification adjustments, net of tax — — — — — — ( 12 ) — ( 12 )

Balance, June 30, 2020 254.1 ( 62.8 ) $ 3 $ 11,040 $ 1,057 $ ( 6,065 ) $ ( 444 ) $ 261 $ 5,852

Issuance of common stock 0.4 — — ( 3 ) — — — — ( 3 )

Stock-based compensation — — — 30 — — — — 30

Distributions to non-controlling interests, net — — — — — — — ( 11 ) ( 11 )

Net income — — — — 101 — — 7 108

Unrealized losses on derivative instruments, net of tax

— — — — — — ( 1 ) — ( 1 )

Foreign currency translation, net of tax — — — — — — 126 4 130

Reclassification adjustments, net of tax — — — — — — 2 — 2

Balance, September 30, 2020 $ 254.5 $ ( 62.8 ) $ 3 $ 11,067 $ 1,158 $ ( 6,065 ) $ ( 317 ) $ 261 $ 6,107

IQVIA HOLDINGS INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

1 unchanged sentence

Comprehensive

Income (Loss)

(Loss) Income Non-

Balance, December 31, 2019 253.0 ( 60.7 ) $ 3 $ 11,046 $ 998 $ ( 5,733 ) $ ( 311 ) $ 260 $ 6,263

2 unchanged sentences

Stock-based compensation — — — 7 — — — — 7

Distributions to non-controlling interests, net — — — — — — — ( 5 ) ( 5 )

Net income — — — — 82 — — 9 91

3 unchanged sentences

Balance, March 31, 2020 253.8 ( 62.8 ) $ 3 $ 11,009 $ 1,080 $ ( 6,065 ) $ ( 485 ) $ 260 $ 5,802

Issuance of common stock 0.4 — — 8 — — — — 8

Repurchase of common stock — ( 1.8 ) — — — ( 236 ) — — ( 236 )

Stock-based compensation — — — 29 — — — — 29

Distributions to non-controlling interests — — — — — — — ( 2 ) ( 2 )

Net income — — — — 60 — — 11 71

Unrealized losses on derivative instruments, net of tax — — — — — — ( 13 ) — ( 13 )

Foreign currency translation, net of tax — — — — — — 63 ( 1 ) 62

Reclassification adjustments, net of tax — — — — — — ( 3 ) — ( 3 )

Balance, June 30, 2019 252.6 ( 56.8 ) $ 3 $ 10,961 $ 925 $ ( 5,151 ) $ ( 215 ) $ 258 $ 6,781

Issuance of common stock 0.2 — — ( 4 ) — — — — ( 4 )

Repurchase of common stock — ( 2 ) — — — ( 313 ) — — ( 313 )

Balance, Stock-based compensation — — — 30 — — — — 30

Distributions to non-controlling interests — — — — — — — ( 4 ) ( 4 )

Net income — — — — 57 — — 12 69

Unrealized losses on derivative instruments, net of tax — — — — — — ( 5 ) — ( 5 )

Foreign currency translation, net of tax — — — — — — ( 159 ) ( 3 ) ( 162 )

Reclassification adjustments, net of tax — — — — — — 2 — 2

Balance, September 30, 2019 252.8 ( 58.8 ) 3 10,987 982 ( 5,464 ) ( 377 ) 263 6,394

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

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As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements of the Company but does not include all the disclosures required by GAAP.

Additionally, t he outbreak of the novel coronavirus, or COVID-19, and the various governmental, industry and consumer actions related thereto, could have a material and adverse effect on our business, financial condition and results of operations.

These effects, which largely depend on future developments that cannot be accurately predicted and are uncertain, could include a negative impact on the availability of our key personnel, temporary closures of our facilities or the facilities of our business partners, customers, suppliers, third party service providers or other vendors, an increased risk of customer defaults or delays in payments or purchasing decisions, and the interruption of domestic and global supply chains, distribution channels, liquidity and capital or financial markets.

As COVID-19 continues to spread, we have and may continue to experience disruptions that could severely impact our business.

As such, the results for the three and nine months ended September 30, 2020 may not be indicative of results for the full year.

The balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements of the Company but does not include all the disclosures required by GAAP.

Recently Issued Accounting Standards

Accounting pronouncements adopted

In August 2018, the FASB issued new accounting guidance that clarifies and aligns the accounting for implementation costs for hosting arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The Company adopted this new accounting guidance on January 1, 2020.

The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued new accounting guidance that modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

This new accounting guidance also modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The Company adopted this new accounting guidance on January 1, 2020.

The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued new accounting guidance that simplifies the measurement of goodwill by eliminating the step two impairment test.

Step two measures a goodwill impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill.

The new guidance requires a comparison of the Company’s fair value of a reporting unit with the carrying amount and the Company is required to recognize an impairment charge for the amount by which the carrying amount exceeds the fair value.

In March 2020, the Financial Accounting Standards Board ("FASB") issued new accounting guidance that provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.

The new accounting guidance became effective for the Company as of March 12, 2020 through December 31, 2022.

The Company adopted this new accounting guidance on January 1, 2021.

The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In June 2016, the FASB issued a new accounting standard intended to provide financial statement users with more decision-useful information about expected credit losses and other commitments to extend credit held by the reporting entity.

The standard replaces the incurred loss impairment methodology in current GAAP with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company adopted this new accounting guidance on January 1, 2020.

The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

This is based on factors including the Company's assessment of historical losses, client's creditworthiness and the fact that the Company's trade receivables are short term in duration.

Accounting pronouncements being evaluated

In March 2020, the FASB issued new accounting guidance that provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.

The new accounting guidance is effective for the Company as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of this new accounting guidance on its credit arrangements and derivatives that reference LIBOR.

The Company does not expect the new accounting guidance to have a material effect on the Company’s consolidated financial statements.

In January 2020, the FASB issued new accounting guidance that states any equity security transitioning from the alternative method of accounting to the equity method, or vice versa, due to an observable transaction, will be remeasured immediately before the transition.

In addition, the new accounting guidance clarifies the accounting for certain non-derivative forward contracts or purchased call options to acquire equity securities stating such instruments will be measured using the fair value principles before settlement or exercise.

The new accounting guidance will be effective for the Company on January 1, 2021 on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this new accounting guidance on its consolidated financial statements.

The Company adopted this new accounting guidance on January 1, 2021.

The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In December 2019, the FASB issued new accounting guidance to clarify and simplify the accounting for income taxes.

Changes under the new guidance includes eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new accounting guidance will be effective for the Company on January 1, 2021.

Early adoption is permitted.

The Company is currently evaluating the impact of this new accounting guidance on its consolidated financial statements.

The Company adopted this new accounting guidance on January 1, 2021.

The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

Revenues by Geography, Concentration of Credit Risk and Remaining Performance Obligations

The following tables represent revenues by geographic region and reportable segment for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, 2020

The following tables represent revenues by geographic region and reportable segment for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021

(in millions)

9 unchanged sentences

$ 1,348 $ 1,868 $ 193 $ 3,409

Three Months Ended September 30, 2019

Three Months Ended March 31, 2020

(in millions)

9 unchanged sentences

$ 1,117 $ 1,441 $ 196 $ 2,754

Nine Months Ended September 30, 2020

(in millions) Technology & Analytics Solutions Research & Development Solutions Contract Sales & Medical Solutions Total

Americas $ 1,747 $ 1,826 $ 247 $ 3,820

Europe and Africa 1,254 1,214 134 2,602

Asia-Pacific 432 1,036 171 1,639

Total revenues $ 3,433 $ 4,076 $ 552 $ 8,061

Nine Months Ended September 30, 2019

(in millions) Technology &

Analytics Solutions Research &

Development Solutions Contract Sales &

Medical Solutions Total

Americas $ 1,722 $ 2,009 $ 298 $ 4,029

Europe and Africa 1,128 1,298 148 2,574

Asia-Pacific 422 1,010 158 1,590

Total revenues $ 3,272 $ 4,317 $ 604 $ 8,193

No customer accounted for 10% or more of consolidated revenues for the three and nine months ended September 30, 2020 or 2019.

No customer accounted for 10% or more of consolidated revenues for the three months ended March 31, 2021 or 2020.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 30, 2020, approximately $ 23.6 billion of revenue is expected to be recognized in the future from remaining performance obligations.

As of March 31, 2021, approximately $ 26.1 billion of revenue is expected to be recognized in the future from remaining performance obligations.

The Company expects to recognize revenue on approximately 35 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

3 unchanged sentences

(in millions)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Trade accounts receivable:

7 unchanged sentences

Unbilled services and unearned income were as follows:

(in millions) September 30, 2020 December 31, 2019 Change

(in millions) March 31, 2021 December 31, 2020 Change

Unbilled services

3 unchanged sentences

$ ( 321 ) $ 11 $ ( 332 )

Unbilled services, which is comprised of approximately 60 % of unbilled receivables and 40 % of contract assets as of September 30, 2020, increased by $ 6 million as compared to December 31, 2019.

Unbilled services, which is comprised of approximately 60 % of unbilled receivables and 40 % of contract assets as of March 31, 2021, decreased by $ 30 million as compared to December 31, 2020.

Contract assets are unbilled services for which invoicing is based on the timing of certain milestones related to service contracts for clinical research whereas unbilled receivables are billable upon the passage of time.

Unearned income increased by $ 174 million over the same period resulting in a decrease of $ 168 million in the net balance of unbilled services and unearned income between December 31, 2019 and September 30, 2020.

The change in the net balance is driven by the difference in timing of revenue recognition in accordance with ASC 606, Revenue from Contracts with Customers, related to the Company’s Research & Development Solutions contracts (which is based on the percentage of costs incurred) versus the timing of invoicing, which is based on certain milestones.

Bad debt expense recognized on the Company’s receivables and unbilled services was not material for the three and nine months ended September 30, 2020 and 2019.

The Company has operating leases for corporate offices, datacenters, motor vehicles and certain equipment, many of which contain renewal and escalation clauses.

These operating leases expire at various dates through 2029 with options to cancel certain leases at various intervals.

The Company also has finance leases for office and lab spaces that expire in 2044.

Based on the timing of payments on the finance leases the cash flow impact is not material for the three and nine months ended September 30, 2020.

In determining the lease term at lease commencement, the Company includes the noncancellable term and the periods which the Company deems it is reasonably certain to exercise or not to exercise a renewal or cancellation option.

The components of lease expense were as follows:

(in millions) Classification Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Operating lease cost (1)

Selling, general and administrative expenses $ 49 $ 48

Finance lease cost (1)

Depreciation and amortization, and Interest expense 3 —

Total lease cost $ 52 $ 48

(in millions) Classification Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Operating lease cost (1)

Selling, general and administrative expenses $ 151 $ 143

Finance lease cost (1)

Depreciation and amortization, and Interest expense 4 —

Total lease cost $ 155 $ 143

(1) Includes variable lease costs, which are immaterial.

Other information related to leases was as follows:

(in millions) Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Supplemental Cash Flow:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 147 $ 147

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ 92 $ 62

Finance leases $ 119 $ —

Weighted Average Remaining Lease Term:

Operating leases 4.65 years 4.90 years

Finance leases 24.25 years —

Weighted Average Discount Rate:

Operating leases 4.04 % 4.26 %

Finance leases 3.18 % —

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

(in millions) Operating Leases Finance Leases

Remainder of 2020 $ 44 $ —

Thereafter 44 159

Total future minimum lease payments 595 183

Less imputed interest ( 54 ) ( 63 )

Total $ 541 $ 120

Reported as of September 30, 2020:

Other current liabilities $ 154 $ —

Operating lease liabilities 387 —

Other liabilities — 120

Total $ 541 $ 120

The following is a summary of goodwill by reportable segment for the nine months ended September 30, 2020:

Unearned income increased by $ 302 million over the same period resulting in a decrease of $ 332 million in the net balance of unbilled services and unearned income between December 31, 2020 and March 31, 2021.

The change in the net balance is driven by the difference in timing of revenue recognition in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, related to the Company’s Research & Development Solutions contracts (which is based on the percentage of costs incurred) versus the timing of invoicing, which is based on certain milestones.

Bad debt expense recognized on the Company’s receivables and unbilled services was not material for the three months ended March 31, 2021 and 2020.

The following is a summary of goodwill by reportable segment for the three months ended March 31, 2021:

(in millions)

6 unchanged sentences

( 264 ) ( 4 ) 14 ( 254 )

Balance as of September 30, 2020 $ 10,613 $ 1,607 $ 143 $ 12,363

Balance as of March 31, 2021 $ 10,615 $ 1,642 $ 158 $ 12,415

The fair values of the Company’s derivative instruments and the line items on the accompanying condensed consolidated balance sheets to which they were recorded are summarized in the following table:

1 unchanged sentence

Balance Sheet Classification

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Derivatives designated as hedging instruments:

12 unchanged sentences

The effect of the Company’s cash flow hedging instruments on other comprehensive income is summarized in the following table:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Foreign exchange forward contracts

1 unchanged sentence

Interest rate derivatives

1 ( 3 ) ( 32 ) ( 27 )

$ 3 $ ( 4 ) $ ( 36 ) $ ( 32 )

The amount of foreign exchange losses related to the net investment hedge included in the cumulative translation adjustment component of accumulated other comprehensive loss (“AOCI”) for the nine months ended September 30, 2020 was $ 273 million.

The amount of foreign exchange losses related to the net investment hedge included in the cumulative translation adjustment component of accumulated other comprehensive loss (“AOCI”) for the three months ended March 31, 2021 was $ 285 million.

Fair Value Measurements

10 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The carrying values of cash, cash equivalents, accounts receivable and accounts payable approximated their fair values at September 30, 2020 and December 31, 2019 due to their short-term nature.

At September 30, 2020 and December 31, 2019, the fair value of total debt approximated $ 12,443 million and $ 11,925 million, respectively, as determined under Level 1 and Level 2 measurements for these financial instruments.

The carrying values of cash, cash equivalents, accounts receivable and accounts payable approximated their fair values as of March 31, 2021 and December 31, 2020 due to their short-term nature.

As of March 31, 2021 and December 31, 2020, the fair value of total debt approximated $ 12,392 million and $ 12,746 million, respectively, as determined under Level 1 and Level 2 measurements for these financial instruments.

Recurring Fair Value Measurements

The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured and reported at fair value on a recurring basis as of September 30, 2020:

The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured and reported at fair value on a recurring basis as of March 31, 2021:

(in millions) Level 1 Level 2 Level 3 Total

11 unchanged sentences

Contingent consideration — The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows.

Key assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and operating forecasts) and the probability of achieving the specific targets.

The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the nine months ended September 30:

Assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and operating forecasts) and the probability of achieving the specific targets.

Based on the assessments of the probability of achieving specific targets, the Company has accrued approximately 84 % of the maximum contingent consideration payments that could potentially become payable.

The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the three months ended March 31:

Contingent Consideration

3 unchanged sentences

Contingent consideration paid

( 22 ) ( 44 )

Revaluations included in earnings and foreign currency translation adjustments

Balance as of September 30 $ 108 $ 113

The Company used the following key assumptions when estimating the fair value of contingent considerations:

Unobservable Input Weighted average probability of target achievement Range of potential payment

Revenue target 89 % 0 %- 100 %

EBITDA target 96 % 0 %- 100 %

Operational target 95 % 0 %- 100 %

Balance as of March 31 $ 109 $ 98

The current portion of contingent consideration is included within accrued expenses and the long-term portion is included within other liabilities on the accompanying condensed consolidated balance sheets.

Revaluations of the contingent consideration are recognized in other expense (income), net on the accompanying condensed consolidated statements of income.

A change in significant unobservable inputs above could result in a significantly higher or lower fair value measurement of contingent consideration.

A change in significant unobservable inputs above could result in a higher or lower fair value measurement of contingent consideration.

Credit Arrangements

The following is a summary of the Company’s revolving credit facilities at September 30, 2020:

The following is a summary of the Company’s revolving credit facilities as of March 31, 2021:

Interest Rates

$ 1,500 million (revolving credit facility)

LIBOR in the relevant currency borrowed plus a margin of 1.50 % at September 30, 2020

LIBOR in the relevant currency borrowed plus a margin of 1.50 % as of March 31, 2021

$ 25 million (receivables financing facility)

LIBOR Market Index Rate ( 0.15 % at September 30, 2020) plus 0.90 %

LIBOR Market Index Rate ( 0.11 % as of March 31, 2021) plus 0.90 %

£ 10 million (approximately $ 14 million) (general banking facility)

Bank’s base rate of 0.10 % at September 30, 2020 plus 1 %

Bank’s base rate of 0.10 % as of March 31, 2021 plus 1 %

The following table summarizes the Company’s debt at the dates indicated:

(in millions) September 30, 2020 December 31, 2019

(in millions) March 31, 2021 December 31, 2020

Senior Secured Credit Facilities:

12 unchanged sentences

Term B Loan due 2025—Euro LIBOR at average floating rates of 2.00 %

Revolving Credit Facility due 2023:

Dollar denominated borrowings—U.S.

Dollar LIBOR at average floating rates of 1.65 %

Japanese Yen denominated borrowings—Japanese Yen LIBOR at average floating rates of 1.50 %

5.0 % Senior Notes due 2027—U.S.

7 unchanged sentences

1.750 % Senior Notes due 2026—Euro denominated

2.250 % Senior Notes due 2029—Euro denominated

Receivables financing facility due 2022—U.S.

4 unchanged sentences

Long-term debt $ 12,092 $ 12,384

Contractual maturities of long-term debt are as follows at September 30, 2020:

Contractual maturities of long-term debt are as follows as of March 31, 2021:

(in millions)

1 unchanged sentence

Thereafter 4,684

At September 30, 2020, there were bank guarantees totaling approximately £ 0.9 million (approximately $ 1.1 million) issued against the availability of the general banking facility.

As of March 31, 2021, there were bank guarantees totaling approximately £ 0.8 million (approximately $ 1.1 million) issued against the availability of the general banking facility.

Senior Secured Credit Facilities

At September 30, 2020, the Company’s 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 $ 7.6 billion, which consisted of $ 6.1 billion principal amounts of debt outstanding (as detailed in the table above), $ 1.5 billion of available borrowing capacity on the revolving credit facility and standby letters of credit.

On March 11, 2020, the Company entered into Amendment No.

7 to the Credit Agreement to borrow $ 900 million in additional U.S.

Dollar denominated term A loans due 2023 (the “TLA-2 Loans”) and, on March 30, 2020, entered into Amendment No.

8 to the Credit Agreement to amend certain terms of the TLA-2 Loans.

The TLA-2 Loans bear interest based on the U.S.

Dollar LIBOR plus a margin ranging from 1.50 % to 2.25 %, with a U.S.

Dollar LIBOR floor of 1.00 % per annum.

The proceeds from the TLA-2 Loans were used to repay outstanding revolving credit loans under the Company's senior secured credit facilities.

On March 30, 2020, the Company prepaid $ 100 million of the TLA-2 loans.

On June 24, 2020, IQVIA Inc.

(the “Issuer”), a wholly owned subsidiary of the Company, completed the issuance and sale of € 711,000,000 in gross proceeds of the Issuer’s 2.875 % senior notes due 2028 (the “ 2.875 % Notes”).

The 2.875 % Notes were issued pursuant to an Indenture, dated June 24, 2020, among the Issuer, U.S.

As of March 31, 2021, the Company’s 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 $ 7.5 billion, which consisted of $ 6.0 billion principal amounts of debt outstanding (as detailed in the table above), and $ 1.5 billion of available borrowing capacity on the revolving credit facility and standby letters of credit.

On March 3, 2021, IQVIA Inc.

(the “Issuer”), a wholly owned subsidiary of the Company, completed the issuance and sale of € 1,450,000,000 in gross proceeds of the Issuer's (i) € 550,000,000 aggregate principal amount of its 1.750 % Senior Notes due 2026 (the “2026 Notes”) and (ii) € 900,000,000 aggregate principal amount of its 2.250 % Senior Notes due 2029 (the “2029 Notes” and, together with the 2026 Notes, the “Notes”).

The Notes were issued pursuant to an Indenture, dated March 3, 2021, among the Issuer, U.S.

Bank National Association, as trustee of the Notes, and certain subsidiaries of the Issuer as guarantors.

The 2.875 % Notes are unsecured obligations of the Issuer, will mature on June 15, 2028 and bear interest at the rate of 2.875 % per year, with interest payable semiannually on June 15 and December 15 of each year, beginning on December 15, 2020.

The Issuer may redeem the 2.875 % Notes prior to their final stated maturity, subject to a customary make-whole premium, at any time prior to June 15, 2023 (subject to a customary “equity claw” redemption right) and thereafter subject to a redemption premium declining from 1.438 % to 0.000 %.

The proceeds from the 2.875 % Notes offering were used to redeem all of the Issuer’s outstanding 3.500 % senior notes due 2024 (the “ 3.500 % Notes”), including the payment of premiums in respect thereof, to repay a portion of the existing borrowings under the Issuer’s revolving credit facility and to pay fees and expenses related to the offering.

The Issuer’s obligations with respect to the 3.500 % Notes were discharged on the same day as the Issuer completed the issuance of the 3.500 % Notes, and the 3.500 % Notes were redeemed on July 9, 2020.

The 2026 Notes are unsecured obligations of the Issuer, will mature on March 15, 2026 and bear interest at the rate of 1.750 % per year, with interest payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2021.

The 2029 Notes are unsecured obligations of the Issuer, will mature on March 15, 2029 and bear interest at the rate of 2.250 % per year, with interest payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2021.

The Issuer may redeem (i) the 2026 Notes prior to their final stated maturity, subject to a customary make-whole premium, at any time prior to March 15, 2023 (subject to a customary “equity claw” redemption right) and thereafter subject to a redemption premium declining from 0.875 % to 0.000 % and (ii) the 2029 Notes prior to their final stated maturity, subject to a customary make-whole premium, at any time prior to March 15, 2024 (subject to a customary “equity claw” redemption right) and thereafter subject to a redemption premium declining from 1.125 % to 0.000 %.

The Issuer may choose to redeem the 2026 Notes and the 2029 Notes, either together or separately, on a non-ratable basis.

The proceeds from the Notes offering were used to redeem all of the Issuer’s outstanding 3.250 % senior notes due 2025 (the “ 3.250 % Notes”), including the payment of premiums in respect thereof and to pay fees and expenses related to the Notes offering.

On February 16, 2021, the Issuer issued a conditional notice of redemption with respect to the 3.250 % Notes, for a total redemption price equal to the sum of the principal amount of the 3.250 % Notes, accrued and unpaid interest on the 3.250 % Notes to the redemption date and the applicable redemption premium.

The Issuer’s obligations with respect to the 3.250 % Notes were discharged on the same day as the Issuer completed the issuance of the Notes.

Restrictive Covenants

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The Company’s long-term debt arrangements contain other usual and customary restrictive covenants that, among other things, place limitations on the Company’s ability to declare dividends.

At September 30, 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 the Company’s credit arrangements.

Based on our current operating plan, and after considering the likely future impacts of COVID-19, we believe that our available cash and cash equivalents, future cash flows from operations and our ability to access funds under our revolving and other credit facilities will enable us to fund our operating requirements and capital expenditures and meet debt obligations for at least the next 12 months.

As of March 31, 2021, the Company was in compliance in all material respects with the financial covenants under the Company’s financing arrangements.

Stockholders’ Equity

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The Company is authorized to issue 1.0 million shares of preferred stock, $ 0.01 per share par value.

No shares of preferred stock were issued or outstanding as of September 30, 2020 or December 31, 2019.

No shares of preferred stock were issued or outstanding as of March 31, 2021 or December 31, 2020.

Equity Repurchase Program

During the nine months ended September 30, 2020, the Company repurchased 2,106,403 shares of its common stock for approximately $ 321.4 million under the Repurchase Program.

These amounts include 1,000,000 shares of our common stock repurchased from certain of the Company’s stockholders (the “Selling Stockholders”) in a private transaction for an aggregate purchase price of approximately $ 164.3 million.

As of September 30, 2020, the Company has remaining authorization to repurchase up to approximately $ 1.0 billion of its common stock under the Repurchase Program.

During the three months ended March 31, 2021, the Company repurchased 265,809 shares of its common stock for $ 50.5 million under the Repurchase Program.

As of March 31, 2021, the Company has remaining authorization to repurchase up to approximately $ 0.9 billion of its common stock under the Repurchase Program.

In addition, from time to time, the Company has repurchased and may continue to repurchase common stock through private or other transactions outside of the Repurchase Program.

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Related Costs

Balance at December 31, 2019 $ 64 $ 3 $ 67

Balance as of December 31, 2020 $ 51 $ 2 $ 53

Expense, net of reversals

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Foreign currency translation and other

Balance at September 30, 2020 $ 63 $ 2 $ 65

( 2 ) — ( 2 )

Balance as of March 31, 2021 $ 44 $ 2 $ 46

Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management.

The Company expects that the majority of the restructuring accruals at September 30, 2020 will be paid in 2020 and 2021.

The effective income tax rate was ( 2.9 )% and ( 1.4 )% in the third quarter of 2020 and 2019, respectively, and 5.0 % and 18.8 % in the first nine months of 2020 and 2019, respectively.

In the third quarter 2020, the U.S.

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

The Company has determined it will elect the GILTI high tax exception as allowed by the final regulations and will amend its 2018 and 2019 US Federal consolidated income tax returns resulting in a favorable impact of $ 24 million.

The Company recorded this impact in the third quarter of 2020.

The effective income tax rate in the third quarter and first nine months of 2020 and 2019 was also favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the third quarter of 2020 and 2019 this impact was $ 9 million and $ 3 million, respectively, and for the first nine months of 2020 and 2019 this impact was $ 35 million and $ 20 million, respectively.

Additionally, the effective income tax rate in the first nine months of 2020 was unfavorably impacted by a $ 10 million discrete tax expense related to change in the measurement of the U.S.

The Company expects that the majority of the restructuring accruals as of March 31, 2021 will be paid in 2021 and 2022.

The effective income tax rate was 17.1 % and 16.7 % in the first quarter of 2021 and 2020, respectively.

The effective income tax rate in the first quarter of 2021 and 2020 was favorably impacted by $ 17 million and $ 21 million, respectively, as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

Also, the effective income tax rate in the first quarter of 2020 was unfavorably impacted by a $ 10 million discrete tax expense related to change in the measurement of U.S.

tax on undistributed foreign earnings.

In the first nine months of 2019 the U.S.

Treasury Department issued final regulations on the transition tax and proposed regulations on FDII.

While the final regulations related to the transition tax did not have a material impact on the Company, the proposed guidance on FDII had an unfavorable impact.

Although the proposed guidance for FDII was not authoritative and subject to change in the regulatory review process, the Company reversed a portion of the tax benefit related to 2018 and recorded a tax expense of $ 20 million for this impact in the first nine months of 2019.

Comprehensive Income (Loss)

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(in millions)

Balance at December 31, 2019 $ ( 430 ) $ ( 21 ) $ ( 16 ) $ 156 $ ( 311 )

Balance as of December 31, 2020 $ ( 395 ) $ ( 48 ) $ ( 85 ) $ 323 $ ( 205 )

Other comprehensive income (loss) before reclassifications

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— 2 — ( 1 ) 1

Balance at September 30, 2020 $ ( 492 ) $ ( 57 ) $ ( 16 ) $ 248 $ ( 317 )

Balance as of March 31, 2021 $ ( 511 ) $ ( 39 ) $ ( 85 ) $ 259 $ ( 376 )

Below is a summary of the adjustments for (gains) losses reclassified from AOCI into the condensed consolidated statements of income and the affected financial statement line item:

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Affected Financial Statement

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Derivative instruments:

Interest rate swaps and caps Interest expense $ 4 $ —

Foreign exchange forward contracts

$ 4 $ 2 $ 9 $ 3

Foreign exchange forward contracts

Other expense (income), net

( 1 ) — ( 1 ) ( 6 )

Other income, net — 14

Total before income taxes

Income tax (benefit) expense

Income tax benefit 1 —

Total net of income taxes

$ 2 $ 2 $ 6 $ ( 2 )

The following table presents the Company’s operations by reportable segment.

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Technology & Analytics Solutions provides mission-critical information, technology solutions and real-world insights and services to the Company’s life sciences customers.

Research & Development Solutions, which primarily serves biopharmaceutical customers, provides outsourced clinical research and clinical trial related services.

Research & Development Solutions, which primarily serves

biopharmaceutical customers, provides outsourced clinical research and clinical trial related services.

Contract Sales & Medical Solutions provides health care provider (including contract sales) and patient engagement services to both biopharmaceutical customers and the broader healthcare market.

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The Company’s reportable segment information is presented below:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Technology & Analytics Solutions

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Research & Development Solutions

1,400 1,466 4,076 4,317

Contract Sales & Medical Solutions

179 208 552 604

Total revenues

2,786 2,769 8,061 8,193

Costs of revenue, exclusive of depreciation and amortization

Technology & Analytics Solutions

727 667 2,048 1,956

Research & Development Solutions

925 1,007 2,811 2,924

Contract Sales & Medical Solutions

148 178 469 519

Total costs of revenue

1,800 1,852 5,328 5,399

Selling, general and administrative expenses

Technology & Analytics Solutions

188 167 549 539

Research & Development Solutions

184 172 544 529

Contract Sales & Medical Solutions

General corporate and unallocated

74 41 161 137

Total selling, general and administrative expenses

460 395 1,298 1,250

Segment profit

Technology & Analytics Solutions

292 261 836 777

Research & Development Solutions

291 287 721 864

Contract Sales & Medical Solutions

Total segment profit

600 563 1,596 1,681

General corporate and unallocated

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Restructuring costs

( 20 ) ( 19 ) ( 50 ) ( 45 )

Total income from operations

$ 187 $ 204 $ 442 $ 611

Earnings Per Share

The following table presents the weighted average number of outstanding stock-based awards not included in the computation of diluted earnings per share because they are subject to performance conditions or the effect of including such stock-based awards in the computation would be anti-dilutive:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

2020 2019 2020 2019

Shares subject to performance conditions 0.7 1.4

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Stock-based awards will have a dilutive effect under the treasury method when the respective period’s average market value of the Company’s common stock exceeds the exercise proceeds.

Subsequent Events

On April 1, 2021 the Company acquired the 40 % non-controlling interest in Q 2 Solutions from Quest Diagnostics Incorporated for $ 760 million, financed with cash on hand.

The transaction will result in the Company having 100 % ownership in Q 2 Solutions.

The Company previously held a controlling interest in, and consolidated the financial results of the joint venture.

The transaction will be recorded in the second quarter of 2021.

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-Q

Item 1. Financial Statements