IQVIA HOLDINGS INC. 10-Q

Item 1. Financial Statements IQVIA HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three Months Ended March 31, (in millions, except per share data) 2021 2020 Revenues $ 3,409 $ 2,754 Costs of revenue, exclusive of depreciation and amortization 2,293 1,824 Selling, general and administrative expenses 442 407 Depreciation and amortization 323 316 Restructuring costs 9 14 Income from operations 342 193 Interest income ( 1 ) ( 2 ) Interest expense 99 106 Loss on extinguishment of debt 24 — Other income, net ( 37 ) ( 13 ) Income before income taxes and equity in earnings of unconsolidated affiliates 257 102 Income tax expense 44 17 Income before equity in earnings of unconsolidated affiliates 213 85 Equity in earnings of unconsolidated affiliates 4 6 Net income 217 91 Net income attributable to non-controlling interests ( 5 ) ( 9 ) Net income attributable to IQVIA Holdings Inc. $ 212 $ 82 Earnings per share attributable to common stockholders: Basic $ 1.11 $ 0.43 Diluted $ 1.09 $ 0.42 Weighted average common shares outstanding: Basic 191.5 191.6 Diluted 194.9 195.7 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of contents IQVIA HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Three Months Ended March 31, (in millions) 2021 2020 Net income $ 217 $ 91 Comprehensive income (loss) adjustments: Unrealized gains (losses) on derivative instruments, net of income tax expense (benefit) of $ 1 , $( 7 ) 6 ( 39 ) Foreign currency translation, net of income tax expense of $ 62 , $ 23 ( 178 ) ( 155 ) Reclassification adjustments: Losses on derivative instruments included in net income, net of income tax benefit of $ 1 , $ — 1 16 Comprehensive income (loss) 46 ( 87 ) Comprehensive income attributable to non-controlling interests ( 5 ) ( 5 ) Comprehensive income (loss) attributable to IQVIA Holdings Inc. $ 41 $ ( 92 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of contents IQVIA HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in millions, except per share data) March 31, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 2,305 $ 1,814 Trade accounts receivable and unbilled services, net 2,361 2,410 Prepaid expenses 159 159 Income taxes receivable 64 56 Investments in debt, equity and other securities 97 88 Other current assets and receivables 593 563 Total current assets 5,579 5,090 Property and equipment, net 472 482 Operating lease right-of-use assets 437 471 Investments in debt, equity and other securities 74 78 Investments in unconsolidated affiliates 88 84 Goodwill 12,415 12,654 Other identifiable intangibles, net 4,915 5,205 Deferred income taxes 107 114 Deposits and other assets 380 386 Total assets $ 24,467 $ 24,564 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,819 $ 2,813 Unearned income 1,554 1,252 Income taxes payable 135 102 Current portion of long-term debt 144 149 Other current liabilities 216 242 Total current liabilities 4,868 4,558 Long-term debt 12,092 12,384 Deferred income taxes 337 338 Operating lease liabilities 347 371 Other liabilities 586 633 Total liabilities 18,230 18,284 Commitments and contingencies Stockholders’ equity: 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, 63.8 and 63.5 shares as of March 31, 2021 and December 31, 2020, respectively ( 6,228 ) ( 6,166 ) Accumulated other comprehensive loss ( 376 ) ( 205 ) Equity attributable to IQVIA Holdings Inc.’s stockholders 5,953 6,001 Non-controlling interests 284 279 Total stockholders’ equity 6,237 6,280 Total liabilities and stockholders’ equity $ 24,467 $ 24,564 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of contents IQVIA HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31, (in millions) 2021 2020 Operating activities: Net income $ 217 $ 91 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 323 316 Amortization of debt issuance costs and discount 5 3 Stock-based compensation 32 — (Earnings) from unconsolidated affiliates ( 4 ) ( 6 ) Gain on investments, net 3 8 Benefit from deferred income taxes ( 39 ) ( 40 ) Changes in operating assets and liabilities: Change in accounts receivable, unbilled services and unearned income 342 ( 84 ) Change in other operating assets and liabilities ( 12 ) ( 125 ) Net cash provided by operating activities 867 163 Investing activities: Acquisition of property, equipment and software ( 149 ) ( 141 ) Acquisition of businesses, net of cash acquired ( 19 ) ( 14 ) Purchases of marketable securities, net ( 7 ) ( 7 ) Investments in unconsolidated affiliates, net of payments received ( 1 ) 17 Investments in equity securities ( 1 ) ( 6 ) Other 1 1 Net cash used in investing activities ( 176 ) ( 150 ) Financing activities: Proceeds from issuance of debt 1,751 800 Payment of debt issuance costs ( 32 ) ( 11 ) Repayment of debt and principal payments on capital lease obligations ( 1,758 ) ( 25 ) Proceeds from revolving credit facility — 990 Repayment of revolving credit facility — ( 1,250 ) (Payments) related to employee stock option plans ( 56 ) ( 41 ) Repurchase of common stock ( 62 ) ( 345 ) Distributions to non-controlling interests, net — ( 5 ) Contingent consideration and deferred purchase price payments ( 11 ) ( 6 ) Net cash (used in) provided by financing activities ( 168 ) 107 Effect of foreign currency exchange rate changes on cash ( 32 ) ( 30 ) Increase in cash and cash equivalents 491 90 Cash and cash equivalents at beginning of period 1,814 837 Cash and cash equivalents at end of period $ 2,305 $ 927 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of contents IQVIA HOLDINGS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) (in millions) Common Stock Shares Treasury Stock Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Non- controlling Interests Total Balance, December 31, 2020 254.7 ( 63.5 ) $ 3 $ 11,092 $ 1,277 $ ( 6,166 ) $ ( 205 ) $ 279 $ 6,280 Issuance of common stock 0.7 — — ( 57 ) — — — — ( 57 ) Repurchase of common stock — ( 0.3 ) — — — ( 62 ) — — ( 62 ) Stock-based compensation — — — 30 — — — — 30 Distributions to non-controlling interests, net — — — — — — — — — Net income — — — — 212 — — 5 217 Unrealized gains on derivative instruments, net of tax — — — — — — 6 — 6 Foreign currency translation, net of tax — — — — — — ( 178 ) — ( 178 ) Reclassification adjustments, net of tax — — — — — — 1 — 1 Balance, March 31, 2021 255.4 ( 63.8 ) $ 3 $ 11,065 $ 1,489 $ ( 6,228 ) $ ( 376 ) $ 284 $ 6,237 (in millions) Common Stock Shares Treasury Stock Shares Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Non- controlling Interests Total Balance, December 31, 2019 253.0 ( 60.7 ) $ 3 $ 11,046 $ 998 $ ( 5,733 ) $ ( 311 ) $ 260 $ 6,263 Issuance of common stock 0.8 — — ( 44 ) — — — — ( 44 ) Repurchase of common stock — ( 2.1 ) — — — ( 332 ) — — ( 332 ) Stock-based compensation — — — 7 — — — — 7 Distributions to non-controlling interests, net — — — — — — — ( 5 ) ( 5 ) Net income — — — — 82 — — 9 91 Unrealized losses on derivative instruments, net of tax — — — — — — ( 39 ) — ( 39 ) Foreign currency translation, net of tax — — — — — — ( 151 ) ( 4 ) ( 155 ) Reclassification adjustments, net of tax — — — — — — 16 — 16 Balance, March 31, 2020 253.8 ( 62.8 ) $ 3 $ 11,009 $ 1,080 $ ( 6,065 ) $ ( 485 ) $ 260 $ 5,802 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of contents IQVIA HOLDINGS INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) 1. Summary of Significant Accounting Policies The Company IQVIA Holdings Inc. (together with its subsidiaries, the “Company” or “IQVIA”) is a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry. With approximately 72,000 employees, IQVIA conducts business in more than 100 countries. Unaudited Interim Financial Information The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the Company’s financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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 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 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 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 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 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. 8 Table of contents 2. 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 months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 (in millions) Technology & Analytics Solutions Research & Development Solutions Contract Sales & Medical Solutions Total Revenues: Americas $ 600 $ 1,034 $ 78 $ 1,712 Europe and Africa 590 443 49 1,082 Asia-Pacific 158 391 66 615 Total revenues $ 1,348 $ 1,868 $ 193 $ 3,409 Three Months Ended March 31, 2020 (in millions) Technology & Analytics Solutions Research & Development Solutions Contract Sales & Medical Solutions Total Revenues: Americas $ 581 $ 670 $ 91 $ 1,342 Europe and Africa 396 428 50 874 Asia-Pacific 140 343 55 538 Total revenues $ 1,117 $ 1,441 $ 196 $ 2,754 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 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. The customer contract transaction price allocated to the remaining performance obligations differs from backlog in that it does not include wholly unperformed contracts under which the customer has a unilateral right to cancel the arrangement. 3. Trade Accounts Receivable, Unbilled Services and Unearned Income Trade accounts receivables and unbilled services consist of the following: (in millions) March 31, 2021 December 31, 2020 Trade accounts receivable: Billed $ 1,159 $ 1,181 Unbilled services 1,233 1,263 Trade accounts receivable and unbilled services 2,392 2,444 Allowance for doubtful accounts ( 31 ) ( 34 ) Trade accounts receivable and unbilled services, net $ 2,361 $ 2,410 9 Table of contents Unbilled services and unearned income were as follows: (in millions) March 31, 2021 December 31, 2020 Change Unbilled services $ 1,233 $ 1,263 $ ( 30 ) Unearned income ( 1,554 ) ( 1,252 ) ( 302 ) Net balance $ ( 321 ) $ 11 $ ( 332 ) 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 $ 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. 4. Goodwill The following is a summary of goodwill by reportable segment for the three months ended March 31, 2021: (in millions) Technology & Analytics Solutions Research & Development Solutions Contract Sales & Medical Solutions Consolidated Balance as of December 31, 2020 $ 10,864 $ 1,646 $ 144 $ 12,654 Business combinations 15 — — 15 Impact of foreign currency fluctuations and other ( 264 ) ( 4 ) 14 ( 254 ) Balance as of March 31, 2021 $ 10,615 $ 1,642 $ 158 $ 12,415 5. Derivatives 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: (in millions) Balance Sheet Classification March 31, 2021 December 31, 2020 Assets Liabilities Notional Assets Liabilities Notional Derivatives designated as hedging instruments: Foreign exchange forward contracts Other current assets and liabilities $ 3 $ — $ 64 $ 5 $ — $ 70 Interest rate swaps Other assets and liabilities — 44 1,800 — 55 1,800 Derivatives not designated as hedging instruments: Interest rate swaps Other liabilities — — — — 1 356 Total derivatives $ 3 $ 44 $ 5 $ 56 10 Table of contents The effect of the Company’s cash flow hedging instruments on other comprehensive income is summarized in the following table: Three Months Ended March 31, (in millions) 2021 2020 Foreign exchange forward contracts $ ( 2 ) $ ( 6 ) Interest rate derivatives 11 ( 23 ) Total $ 9 $ ( 29 ) 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. 6. Fair Value Measurements The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Unobservable inputs that are supported by little or no market activity. 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 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 March 31, 2021: (in millions) Level 1 Level 2 Level 3 Total Assets: Marketable securities $ 126 $ — $ — $ 126 Derivatives — 3 — 3 Total $ 126 $ 3 $ — $ 129 Liabilities: Derivatives $ — $ 44 $ — $ 44 Contingent consideration — — 109 109 Total $ — $ 44 $ 109 $ 153 Below is a summary of the valuation techniques used in determining fair value: Marketable securities — The Company values trading and available-for-sale securities using the quoted market value of the securities held. 11 Table of contents Derivatives — Derivatives consist of foreign exchange contracts and interest rate swaps. The fair value of foreign exchange contracts is based on observable market inputs of spot and forward rates or using other observable inputs. The fair value of the interest rate swaps is the estimated amount that the Company would receive or pay to terminate such agreements, taking into account market interest rates and the remaining time to maturities or using market inputs with mid-market pricing as a practical expedient for bid-ask spread. 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. 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 (in millions) 2021 2020 Balance as of January 1 $ 119 $ 113 Business combinations 5 8 Contingent consideration paid ( 9 ) ( 10 ) Revaluations included in earnings and foreign currency translation adjustments ( 6 ) ( 13 ) 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 higher or lower fair value measurement of contingent consideration. 7. Credit Arrangements The following is a summary of the Company’s revolving credit facilities as of March 31, 2021: Facility Interest Rates $ 1,500 million (revolving credit facility) 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 ( 0.11 % as of March 31, 2021) plus 0.90 % £ 10 million (approximately $ 14 million) (general banking facility) Bank’s base rate of 0.10 % as of March 31, 2021 plus 1 % 12 Table of contents The following table summarizes the Company’s debt at the dates indicated: (in millions) March 31, 2021 December 31, 2020 Senior Secured Credit Facilities: Term A Loan due 2023—U.S. Dollar LIBOR at average floating rates of 1.70 % $ 718 $ 728 Term A Loan due 2023—U.S. Dollar LIBOR at average floating rates of 2.75 % 755 766 Term A Loan due 2023—Euro LIBOR at average floating rates of 1.50 % 377 400 Term B Loan due 2024—U.S. Dollar LIBOR at average floating rates of 1.86 % 535 535 Term B Loan due 2024—Euro LIBOR at average floating rates of 2.00 % 1,347 1,413 Term B Loan due 2025—U.S. Dollar LIBOR at average floating rates of 1.86 % 724 726 Term B Loan due 2025—U.S. Dollar LIBOR at average floating rates of 1.95 % 924 926 Term B Loan due 2025—Euro LIBOR at average floating rates of 2.00 % 665 697 5.0 % Senior Notes due 2027—U.S. Dollar denominated 1,100 1,100 5.0 % Senior Notes due 2026—U.S. Dollar denominated 1,050 1,050 2.875 % Senior Notes due 2025—Euro denominated 493 515 3.25 % Senior Notes due 2025—Euro denominated — 1,748 2.25 % Senior Notes due 2028—Euro denominated 844 883 2.875 % Senior Notes due 2028—Euro denominated 834 872 1.750 % Senior Notes due 2026—Euro denominated 645 — 2.250 % Senior Notes due 2029—Euro denominated 1,056 — Receivables financing facility due 2022—U.S. Dollar LIBOR at average floating rates of 1.01 % 240 240 Principal amount of debt 12,307 12,600 Less: unamortized discount and debt issuance costs ( 71 ) ( 67 ) Less: current portion ( 144 ) ( 149 ) Long-term debt $ 12,092 $ 12,384 Contractual maturities of long-term debt are as follows as of March 31, 2021: (in millions) Remainder of 2021 $ 107 2022 388 2023 1,700 2024 1,868 2025 3,560 Thereafter 4,684 $ 12,307 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 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. 13 Table of contents Senior Notes 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 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 The Company’s debt agreements provide for certain covenants and events of default customary for similar instruments, including a covenant not to exceed a specified ratio of consolidated senior secured net indebtedness to Consolidated EBITDA, as defined in the senior secured credit facility agreement and a covenant to maintain a specified minimum interest coverage ratio. If an event of default occurs under any of the Company’s or the Company’s subsidiaries’ financing arrangements, the creditors under such financing arrangements will be entitled to take various actions, including the acceleration of amounts due under such arrangements, and in the case of the lenders under the revolving credit facility and term loans, other actions permitted to be taken by a secured creditor. 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. As of March 31, 2021, the Company was in compliance in all material respects with the financial covenants under the Company’s financing arrangements. 8. Stockholders’ Equity Preferred Stock 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 March 31, 2021 or December 31, 2020. Equity 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. 9. Restructuring The Company has continued to take restructuring actions in 2021 to align its resources and reduce overcapacity to adapt to changing market conditions and integrate acquisitions. These actions include consolidating functional activities, eliminating redundant positions, and aligning resources with customer requirements. These restructuring actions are expected to continue into 2022. 14 Table of contents The following amounts were recorded for the restructuring plans: (in millions) Severance and Related Costs Facility Exit Costs Total Balance as of December 31, 2020 $ 51 $ 2 $ 53 Expense, net of reversals 9 — 9 Payments ( 14 ) — ( 14 ) Foreign currency translation and other ( 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 as of March 31, 2021 will be paid in 2021 and 2022. 10. Income Taxes 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. 11. Comprehensive Income (Loss) Below is a summary of the components of AOCI: (in millions) Foreign Currency Translation Derivative Instruments Defined Benefit Plans Income Taxes Total Balance as of December 31, 2020 $ ( 395 ) $ ( 48 ) $ ( 85 ) $ 323 $ ( 205 ) Other comprehensive income (loss) before reclassifications ( 116 ) 7 — ( 63 ) ( 172 ) Reclassification adjustments — 2 — ( 1 ) 1 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: (in millions) Affected Financial Statement Line Item Three Months Ended March 31, 2021 2020 Derivative instruments: Interest rate swaps and caps Interest expense $ 4 $ — Foreign exchange forward contracts Revenues ( 2 ) 2 Foreign exchange forward contracts Other income, net — 14 Total before income taxes 2 16 Income tax benefit 1 — Total net of income taxes $ 1 $ 16 12. Segments The following table presents the Company’s operations by reportable segment. The Company is managed through three reportable segments, Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions. 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 15 Table of contents 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. Certain costs are not allocated to the Company’s segments and are reported as general corporate and unallocated expenses. These costs primarily consist of stock-based compensation and expenses related to integration activities and acquisitions. The Company also does not allocate depreciation and amortization or impairment charges to its segments. Asset information by segment is not presented, as this measure is not used by the chief operating decision maker to assess the Company’s performance. The Company’s reportable segment information is presented below: Three Months Ended March 31, (in millions) 2021 2020 Revenues Technology & Analytics Solutions $ 1,348 $ 1,117 Research & Development Solutions 1,868 1,441 Contract Sales & Medical Solutions 193 196 Total revenues 3,409 2,754 Costs of revenue, exclusive of depreciation and amortization Technology & Analytics Solutions 812 666 Research & Development Solutions 1,321 988 Contract Sales & Medical Solutions 160 170 Total costs of revenue 2,293 1,824 Selling, general and administrative expenses Technology & Analytics Solutions 187 183 Research & Development Solutions 185 185 Contract Sales & Medical Solutions 13 15 General corporate and unallocated 57 24 Total selling, general and administrative expenses 442 407 Segment profit Technology & Analytics Solutions 349 268 Research & Development Solutions 362 268 Contract Sales & Medical Solutions 20 11 Total segment profit 731 547 General corporate and unallocated ( 57 ) ( 24 ) Depreciation and amortization ( 323 ) ( 316 ) Restructuring costs ( 9 ) ( 14 ) Total income from operations $ 342 $ 193 13. 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 March 31, (in millions) 2021 2020 Shares subject to performance conditions 0.7 1.4 Shares subject to anti-dilutive stock-based awards 0.3 1.0 Total shares excluded from diluted earnings per share 1.0 2.4 16 Table of contents The vesting of performance awards is contingent upon the achievement of certain performance targets. The performance awards are not included in diluted earnings per share until the performance targets have been met. 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. 14. 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. 17 Table of contents