What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-22 compared with 2021-07-28 · 109 added, 90 removed, 234 unchanged (46% of the section changed)

54 unchanged sentences

Foreign Currency Translation

In the first six months of 2021, approximately 35% of our revenues were denominated in currencies other than the United States dollar, which represents approximately 60 currencies.

In the first nine months of 2021, approximately 35% of our revenues were denominated in currencies other than the United States dollar, which represents approximately 60 currencies.

Because a large portion of our revenues and expenses are denominated in foreign currencies and our financial statements are reported in United States dollars, changes in foreign currency exchange rates can significantly affect our results of operations.

5 unchanged sentences

For information regarding our results of operations for Technology & Analytics Solutions, Research & Development Solutions and Contract Sales & Medical Solutions, refer to “Segment Results of Operations” later in this section.

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions)

Revenues $ 3,391 $ 2,786 $ 605 21.7 %

For the second quarter of 2021, our revenues increased $917 million, or 36.4%, as compared to the same period in 2020.

For the third quarter of 2021, our revenues increased $605 million, or 21.7%, as compared to the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $589 million, or 21.1%, reflecting an $120 million increase in Technology & Analytics Solutions, a $446 million increase in Research & Development Solutions, and a $23 million increase in Contract Sales & Medical Solutions.

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

Revenues $ 10,238 $ 8,061 $ 2,177 27.0 %

For the first six months of 2021, our revenues increased $1,572 million, or 29.8%, as compared to the same period in 2020.

For the first nine months of 2021, our revenues increased $2,177 million, or 27.0%, as compared to the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $2,015 million, or 25.0%.

The constant currency revenue growth was comprised of a $390 million increase in Technology & Analytics Solutions, a $1,031 million increase in Research & Development Solutions, and a $5 million increase in Contract Sales & Medical Solutions .

The constant currency revenue growth was comprised of a $510 million increase in Technology & Analytics Solutions, an $1,477 million increase in Research & Development Solutions, and a $28 million increase in Contract Sales & Medical Solutions .

Costs of Revenue, exclusive of Depreciation and Amortization

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions)

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66.4 % 64.6 % 67.1 % 66.1 %

The $619 million increase in costs of revenue, exclusive of depreciation and amortization, for the three months ended June 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $536 million, or 31.5%, reflecting an $119 million increase in Technology & Analytics Solutions, a $412 million increase in Research & Development Solutions, and a $5 million increase in Contract Sales & Medical Solutions.

The $1,088 million increase in costs of revenue, exclusive of depreciation and amortization, for the six months ended June 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $946 million, or 26.8%, reflecting a $238 million increase in Technology & Analytics Solutions, a $717 million increase in Research & Development Solutions, and a $(9) million decrease in Contract Sales & Medical Solutions.

The $453 million increase in costs of revenue, exclusive of depreciation and amortization, for the three months ended September 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $436 million, or 24.2%, reflecting a $56 million increase in Technology & Analytics Solutions, a $359 million increase in Research & Development Solutions, and a $21 million increase in Contract Sales & Medical Solutions.

The $1,541 million increase in costs of revenue, exclusive of depreciation and amortization, for the nine months ended September 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $1,382 million, or 25.9%, reflecting a $294 million increase in Technology & Analytics Solutions, a $1,076 million increase in Research & Development Solutions, and a $12 million increase in Contract Sales & Medical Solutions.

Selling, General and Administrative Expenses

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions)

3 unchanged sentences

14.7 % 16.5 % 13.9 % 16.1 %

The $51 million increase in selling, general and administrative expenses for the three months ended June 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $36 million, or 8.4%, reflecting a

$7 million increase in Technology & Analytics Solutions, a $14 million increase in Research & Development Solutions, and a $17 million increase in general corporate and unallocated expenses, offset by a $(2) million decrease in Contract Sales & Medical Solutions.

The $86 million increase in selling, general and administrative expenses for the six months ended June 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $61 million, or 7.3%, reflecting a $6 million increase in Technology & Analytics Solutions, an $11 million increase in Research & Development Solutions, and a $48 million increase in general corporate and unallocated expenses, offset by a $(4) million decrease in Contract Sales & Medical Solutions.

The $38 million increase in selling, general and administrative expenses for the three months ended September 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $33 million, or 7.2%, reflecting a $9 million increase in Technology & Analytics Solutions, a $12 million increase in Research & Development Solutions, and a $12 million increase in general corporate and unallocated expenses, while Contract Sales & Medical Solutions remained consistent.

The $124 million increase in selling, general and administrative expenses for the nine months ended September 30, 2021 as compared to the same period in 2020 included a constant currency growth of approximately $94 million, or 7.2%, reflecting a $15 million increase in Technology & Analytics Solutions, a $23 million increase in Research & Development Solutions, and a $60 million increase in general corporate and unallocated expenses, offset by a $(4) million decrease in Contract Sales & Medical Solutions.

Depreciation and Amortization

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions)

3 unchanged sentences

9.9 % 11.5 % 9.8 % 11.7 %

The $35 million and $42 million increases in depreciation and amortization in the three and six months ended June 30, 2021 as compared to the same periods in 2020 was primarily due to higher intangible asset balances as a result of acquisitions occurring in 2020 and 2021, increased amortization due to higher capitalized software balances, and accelerated amortization related to intangibles impacted by the acquisition of Quest's non-controlling interest.

The $17 million and $59 million increases in depreciation and amortization in the three and nine months ended September 30, 2021 as compared to the same periods in 2020 were primarily due to higher intangible asset balances as a result of acquisitions occurring in 2020 and 2021, increased amortization due to higher capitalized software balances, and accelerated amortization related to intangibles impacted by the Company's acquisition of Quest's non-controlling interest in Q 2 Solutions.

Restructuring Costs

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

Restructuring costs $ 2 $ 20 $ 15 $ 50

The restructuring costs incurred during 2021 were due to ongoing efforts to streamline our global operations.

The restructuring costs incurred during 2021 and 2020 were due to ongoing efforts to streamline our global operations.

The remaining actions under these plans are expected to occur throughout 2021 and into 2022 and are expected to consist of consolidating functional activities, eliminating redundant positions, and aligning resources with customer requirements.

Interest Income and Interest Expense

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

2 unchanged sentences

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

Interest expense during the three and six months ended June 30, 2021 was lower than the same periods in 2020 due to lower interest rates attributed to lower LIBOR rates and the redemption of the €1,425 million of 3.250% senior notes due 2025, partially offset by an increase in the average debt outstanding.

Interest expense during the three and nine months ended September 30, 2021 was lower than the same periods in 2020 due to lower interest rates attributed to lower LIBOR rates, the refinancing of our existing term A loans and the redemption of the €1,425 million of 3.250% senior notes due 2025.

See “Liquidity and Capital Resources” for more information on this transaction.

Loss on Extinguishment of Debt

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

Loss on extinguishment of debt $ 1 $ — $ 25 $ 12

During the six months ended June 30, 2021, we recognized a loss on extinguishment of debt for fees and expenses incurred related to the refinancing of our 3.250% senior notes due 2025.

During the three months ended September 30, 2021, we recognized a loss on extinguishment of debt for fees and expenses incurred related to the refinancing of our Prior Credit Agreement.

During the nine months ended September 30, 2021, we recognized a loss on extinguishment of debt for fees and expenses incurred related to the refinancing of our 3.250% senior notes due 2025 and Prior Credit Agreement..

Other Income, Net

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

Other income, net $ (62) $ (14) $ (128) $ (59)

Other income, net for the three months ended June 30, 2021 decreased as compared to the same period in the prior year, primarily due to less investment gain on marketable securities, offset by less foreign currency loss.

Other income, net for the six months ended June 30, 2021 increased as compared to the same period in the prior year, primarily due to foreign currency gain, offset by less investment gain on marketable securities.

Other income, net for the three and nine months ended September 30, 2021 increased as compared to the same periods in the prior year, primarily due to foreign currency gain.

Income Tax Expense (Benefit)

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

Income tax expense (benefit) $ 12 $ (3) $ 104 $ 9

Our effective income tax rate was 21.6% and 20.0% in the second quarter of 2021 and 2020, respectively, and 19.2% and 15.6% in the first six months of 2021 and 2020 .

Our effective income tax rate in the second quarter and in the first six months of 2021 and 2020 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the second quarter of 2021 and 2020 this impact was $6 million and $5 million, respectively, and for the first six months of 2021 and 2020 this impact was $23 million and $26 million, respectively.

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

Our effective income tax rate was 4.4% and (2.9)% in the third quarter of 2021 and 2020, respectively, and 13.8% and 5.0% in the first nine months of 2021 and 2020.

In the third quarter of 2021, we recorded a benefit related to a 2020 U.S.

Federal tax return position associated with Foreign Derived Intangible Income (“FDII”) and Global Intangible Low-Taxed Income (“GILTI”) tax credits of $29 million.

In the third quarter of 2020, the U.S.

Treasury Department issued final regulations regarding FDII and GILTI and we had determined we would elect the GILTI high tax exception as allowed by the final regulations.

As a result, we amended our 2018 U.S.

Federal consolidated income tax return and plan to amend our 2019 U.S.

Federal consolidated income tax return.

This resulted in a favorable impact of $24 million, which we recorded in the third quarter of 2020.

Additionally, our effective income tax rate in the third quarter and in the first nine months of 2021 and 2020 was favorably impacted as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

For the third quarter of 2021 and 2020, this impact was $3 million and $9 million, respectively, and for the first nine months of 2021 and 2020, this impact was $26 million and $35 million, respectively.

Also, our 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 U.S.

tax on undistributed foreign earnings.

Equity in Earnings (Loss) of Unconsolidated Affiliates

Three Months Ended June 30, Six Months Ended June 30,

Equity in Earnings of Unconsolidated Affiliates

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

(in millions) 2021 2020 2021 2020

Equity in earnings (loss) of unconsolidated affiliates $ 1 $ (1) $ 5 $ 5

Equity in earnings (loss) of unconsolidated affiliates for the three and six months ended June 30, 2021 remained relatively consistent with the same periods in the prior year.

Equity in earnings of unconsolidated affiliates $ — $ 3 $ 5 $ 8

Equity in earnings of unconsolidated affiliates for the three months ended September 30, 2021 decreased as compared to the same period in the prior year primarily due to losses from our investments in the NovaQuest Pharma Opportunities Funds.

Equity in earnings of unconsolidated affiliates for the nine months ended September 30, 2021 decreased as compared to the same period in the prior year primarily due to losses from investments in some of our unconsolidated affiliates.

Net Income Attributable to Non-controlling Interests

Three Months Ended June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

Net income attributable to non-controlling interests $ — $ (7) $ (5) $ (18)

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

On April 1, 2021 the Company acquired the 40% non-controlling interest in Q 2 Solutions from Quest Diagnostics Incorporated which resulted in a decrease in the net income attributable to non-controlling interests for the three and six months ended June 30, 2021 as compared to prior periods.

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

On April 1, 2021 the Company acquired the 40% non-controlling interest in Q 2 Solutions from Quest which resulted in a decrease in the net income attributable to non-controlling interests for the three and nine months ended September 30, 2021 as compared to prior periods.

See Note 9 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding this transaction.

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The Company’s revenues and profit by segment are as follows:

Three Months Ended June 30, 2021 and 2020

Three Months Ended September 30, 2021 and 2020

Segment Revenues Segment Profit

8 unchanged sentences

Consolidated $ 3,391 $ 2,786 $ 302 $ 187

Six Months Ended June 30, 2021 and 2020

Nine Months Ended September 30, 2021 and 2020

Segment Revenues Segment Profit

12 unchanged sentences

Technology & Analytics Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions) 2021 2020 $ %

3 unchanged sentences

Segment profit $ 343 $ 292 $ 51 17.5 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2021 2020 $ %

3 unchanged sentences

Segment profit $ 1,044 $ 836 $ 208 24.9 %

Technology & Analytics Solutions’ revenues were $1,353 million for the second quarter of 2021, an increase of $244 million, or 22.0%, over the same period in 2020.

Technology & Analytics Solutions’ revenues were $1,337 million for the third quarter of 2021, an increase of $130 million, or 10.8%, over the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $120 million, or 9.9%, reflecting revenue growth across all regions.

Technology & Analytics Solutions’ revenues were $2,701 million for the first six months of 2021, an increase of $475 million, or 21.3%, over the same period in 2020.

Technology & Analytics Solutions’ revenues were $4,038 million for the first nine months of 2021, an increase of $605 million, or 17.6%, over the same period in 2020.

This increase was comprised of constant currency revenue growth of approximately $510 million, or 14.9%, reflecting revenue growth across all regions.

The revenue growth for the three months ended June 30, 2021 was driven by higher technology, real-world and analytical services and COVID-19 related work.

The revenue growth for the six months ended June 30, 2021 was driven by higher real-world and analytical services and COVID-19 related work.

The revenue growth for the three and nine months ended September 30, 2021 was driven by higher technology, real-world and analytical services and COVID-19 related work.

Costs of Revenue, exclusive of Depreciation and Amortization

Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $153 million, or 23.4%, in the second quarter of 2021 over the same period in 2020.

Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $68 million, or 9.4%, in the third quarter of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $56 million, or 7.7%.

Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $299 million, or 22.6%, in the first six months of 2021 over the same period in 2020.

Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $367 million, or 17.9%, in the first nine months of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $294 million, or 14.4%.

The constant currency increase for the three and six months ended June 30, 2021 was primarily related to an increase in compensation and related expenses to support revenue growth.

The constant currency increase for the three and nine months ended September 30, 2021 was primarily related to an increase in compensation and related expenses to support revenue growth.

Selling, General and Administrative Expenses

Technology & Analytics Solutions’ selling, general and administrative expenses increased $15 million, or 8.4%, in the second quarter of 2021 as compared to the same period in 2020, which included a constant currency increase of approximately $7 million, or 3.9%.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $19 million, or 5.3%, in the first six months of 2021 as compared to the same period in 2020, which included a constant currency increase of approximately $6 million, or 1.7%.

The constant currency increase for the three and six months ended June 30, 2021 was primarily related to an increase in compensation and related expenses.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $11 million, or 5.9%, in the third quarter of 2021 as compared to the same period in 2020, which included a constant currency increase of approximately $9 million, or 4.8%.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $30 million, or 5.5%, in the first nine months of 2021 as compared to the same period in 2020, which included a constant currency increase of approximately $15 million, or 2.7%.

The constant currency increase for the three and nine months ended September 30, 2021 was primarily related to an increase in compensation and related expenses.

Research & Development Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions)

6 unchanged sentences

$ 364 $ 291 $ 73 25.1 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

6 unchanged sentences

$ 1,069 $ 721 $ 348 48.3 %

Research & Development Solutions’ contracted backlog increased from $22.6 billion as of December 31, 2020 to $23.9 billion as of June 30, 2021 and we expect approximately $6.6 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $1,891 million in the second quarter of 2021, an increase of $656 million, or 53.1%, over the same period in 2020.

Research & Development Solutions’ contracted backlog increased from $22.6 billion as of December 31, 2020 to $24.4 billion as of September 30, 2021 and we expect approximately $6.9 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $1,853 million in the third quarter of 2021, an increase of $453 million, or 32.4%, over the same period in 2020.

This increase was comprised of constant currency revenue increase of approximately $446 million, or 31.9%, reflecting revenue growth across all regions.

Research & Development Solutions’ revenues were $3,759 million in the first six months of 2021, an increase of $1,083 million, or 40.5%, over the same period in 2020.

Research & Development Solutions’ revenues were $5,612 million in the first nine months of 2021, an increase of $1,536 million, or 37.7%, over the same period in 2020.

This increase was comprised of constant currency revenue increase of approximately $1,477 million, or 36.2%, reflecting revenue growth across all regions.

The revenue growth for the three and six months ended June 30, 2021 was primarily the result of volume-related increases in clinical services and lab testing, including incremental revenue from large COVID-19 vaccine clinical trials.

The revenue growth for the three and nine months ended September 30, 2021 was primarily the result of volume-related increases in clinical services and lab testing, including incremental revenue from large COVID-19 vaccine clinical trials.

Costs of Revenue, exclusive of Depreciation and Amortization

Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $457 million, or 50.9%, in the second quarter of 2021 over the same period in 2020.

Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $366 million, or 39.6%, in the third quarter of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $359 million, or 38.8%.

Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $790 million, or 41.9%, in the first six months of 2021 over the same period in 2020.

Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $1,156 million, or 41.1%, in the first nine months of 2021 over the same period in 2020.

This increase included a constant currency increase of approximately $1,076 million, or 38.3%.

The constant currency increase for the three and six months ended June 30, 2021 was primarily related to an increase in compensation and related expenses as a result of volume-related increases in clinical services and lab testing.

The constant currency increase for the three and nine months ended September 30, 2021 was primarily related to an increase in compensation and related expenses as a result of volume-related increases in clinical services and lab testing.

Selling, General and Administrative Expenses

Research & Development Solutions’ selling, general and administrative expenses increased $18 million, or 10.3% in the second quarter of 2021 as compared to the same period in 2020, and included a constant currency increase of approximately $14 million, or 8.0%.

Research & Development Solutions’ selling, general and administrative expenses increased $18 million, or 5.0% in the first six months of 2021 as compared to the same period in 2020, and included a constant currency increase of approximately $11 million, or 3.1%.

The constant currency increase for the three and six months ended June 30, 2021 was primarily related to an increase in compensation and related expenses.

Research & Development Solutions’ selling, general and administrative expenses increased $14 million, or 7.6%, in the third quarter of 2021 as compared to the same period in 2020, and included a constant currency increase of approximately $12 million, or 6.5%.

Research & Development Solutions’ selling, general and administrative expenses increased $32 million, or 5.9%, in the first nine months of 2021 as compared to the same period in 2020, and included a constant currency increase of approximately $23 million, or 4.2%.

The constant currency increase for the three and nine months ended September 30, 2021 was primarily related to an increase in compensation and related expenses.

Contract Sales & Medical Solutions

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions)

3 unchanged sentences

Selling, general and administrative expenses

14 15 (1) (6.7)

Segment profit

$ 20 $ 17 $ 3 17.6 %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions)

4 unchanged sentences

Segment profit $ 60 $ 39 $ 21 53.8 %

Contract Sales & Medical Solutions’ revenues were $194 million in the second quarter of 2021, an increase of $17 million, or 9.6%, over the same period in 2020.

Contract Sales & Medical Solutions’ revenues were $201 million in the third quarter of 2021, an increase of $22 million, or 12.3%, over the same period in 2020.

This increase included a constant currency revenue increase of approximately $23 million, or 12.8%.

Contract Sales & Medical Solutions’ revenues were $387 million in the first six months of 2021, an increase of $14 million, or 3.8%, over the same period in 2020.

Contract Sales & Medical Solutions’ revenues were $588 million in the first nine months of 2021, an increase of $36 million, or 6.5%, over the same period in 2020.

This increase included a constant currency revenue increase of approximately $28 million, or 5.1%.

The revenue growth for the three and six months ended June 30, 2021 was largely due to a volume increase in the Asia-Pacific region.

The revenue growth for the three and nine months ended September 30, 2021 was largely due to a volume increase in the Americas and Asia-Pacific regions.

Costs of Revenue, exclusive of Depreciation and Amortization

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $9 million, or 6.0%, in the second quarter of 2021 as compared to the same period in 2020.

This increase included a constant currency increase of approximately $5 million, or 3.3%, primarily as a result of an increase in compensation and related expenses.

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, decreased $(1) million, or (0.3)%, in the first six months of 2021 as compared to the same period in 2020.

This decrease included a constant currency decrease of approximately $(9) million, or (2.8)%, primarily as a result of a decrease in compensation and related expenses.

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $19 million, or 12.8%, in the third quarter of 2021 as compared to the same period in 2020.

This increase included a constant currency increase of approximately $21 million, or 14.2%.

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $18 million, or 3.8%, in the first nine months of 2021 as compared to the same period in 2020.

This increase included a constant currency increase of approximately $12 million, or 2.6%.

The constant currency increase for the three and nine months ended September 30, 2021 was primarily related to an increase in compensation and related expenses.

Selling, General and Administrative Expenses

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $(1) million, or (6.7)%, in the second quarter of 2021 as compared to the same period in 2020.

This decrease included a constant currency decrease of approximately $(2) million, or (13.3)%.

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $(3) million, or (10.0)%, in the first six months of 2021 as compared to the same period in 2020.

Contract Sales & Medical Solutions’ selling, general and administrative expenses remained consistent in the third quarter of 2021 as compared to the same period in 2020.

Contract Sales & Medical Solutions’ selling, general and administrative expenses decreased $(3) million, or (6.8)%, in the first nine months of 2021 as compared to the same period in 2020.

This decrease included a constant currency decrease of approximately $(4) million, or (9.1)%.

The constant currency decrease for the three and six months ended June 30, 2021 was primarily related to a decrease in compensation and related expenses.

The constant currency decrease for the nine months ended September 30, 2021 was primarily related to a decrease in compensation and related expenses.

Liquidity and Capital Resources

7 unchanged sentences

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 $1,807 million as of June 30, 2021 ( $924 million of which was in the United States), a decrease from $1,814 million as of December 31, 2020.

We had a cash balance of $1,470 million as of September 30, 2021 ($600 million of which was in the United States), a decrease from $1,814 million as of December 31, 2020.

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 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.

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Equity Repurchase Program

During the six months ended June 30, 2021, we repurchased 459,309 shares of our common stock for $95.5 million under the Repurchase Program.

During the nine months ended September 30, 2021, we repurchased 973,313 shares of our common stock for $221 million under the Repurchase Program.

See Note 9 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding the Repurchase Program.

As of June 30, 2021, we have remaining authorization to repurchase up to approximately $0.8 billion of our common stock under the Repurchase Program.

As of September 30, 2021, we have remaining authorization to repurchase up to approximately $0.7 billion of our common stock under the Repurchase Program.

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

Senior Secured Credit Facilities

On August 25, 2021, we entered into Amendment No.

9 (the “Amendment”) to the Company’s Fourth Amended and Restated Credit Agreement (the “Prior Credit Agreement,” and together with the Amendment, the "Fifth Amended and Restated Credit Agreement") to (i) extend the maturity of our revolving credit facility to 2026, (ii) refinance our existing term A loans with a new class of term A loans that mature in 2026 and (iii) add IQVIA RDS Inc.

as a borrower under the senior secured credit facilities.

In connection with this Amendment, we recognized a $1 million loss on extinguishment of debt, which includes fees and related expenses.

As of September 30, 2021, the Fifth Amended and Restated Credit Agreement provided financing through several senior secured credit facilities (collectively, the “senior secured credit facilities”) of up to approximately $7.2 billion, which consisted of $5.7 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 September 14, 2021, we repaid $250 million of our term B loans under the senior secured credit facilities using the proceeds from the increased loans under our receivables financing facility.

Receivables Financing Facility

On August 13, 2021, the Company amended its receivables financing facility (the “Receivables Amendment”) to extend the term of the facility to October 1, 2024 and to increase the size of the facility to $550 million from $300 million.

Under the receivables financing facility, certain of our accounts receivable are sold on a non-recourse basis by certain of our consolidated subsidiaries (each, an “Originator”) to another of our consolidated subsidiaries, a bankruptcy-remote special purpose entity (the “SPE”).

The SPE obtained a term loan and revolving loan commitment from a third-party lender, secured by liens on the assets of the SPE, to finance the purchase of the accounts receivable, which includes a $440 million term loan and a $110 million revolving loan commitment.

Pursuant to the Receivables Amendment, we also added three additional subsidiaries as Originators.

As of September 30, 2021, no additional amounts of revolving loans were available under the receivables financing facility.

On March 3, 2021, we 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”).

1 unchanged sentence

See Note 7 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding our credit arrangements.

As of June 30, 2021, we had $12.4 billion of total indebtedness, excluding $1.5 billion of additional available borrowings under our revolving credit facility.

Our long-term debt arrangements contain customary restrictive covenants and, as of June 30, 2021, we believe we were in compliance with our restrictive covenants in all material respects.

Six months ended June 30, 2021 and 2020

As of September 30, 2021, we had $12.2 billion of total indebtedness, excluding $1.5 billion of additional available borrowings under our revolving credit facility.

Our long-term debt arrangements contain customary restrictive covenants and, as of September 30, 2021, we believe we were in compliance with our restrictive covenants in all material respects.

Nine months ended September 30, 2021 and 2020

Cash Flow from Operating Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2021 2020

Net cash provided by operating activities $ 2,250 $ 1,209

Cash provided by operating activities increased $771 million during the first six months of 2021 as compared to the same period in 2020.

Cash provided by operating activities increased $1,041 million during the first nine months of 2021 as compared to the same period in 2020.

The increase was primarily due to higher cash related net income ($682 million), an increase in cash collections from unearned income ($445 million) and higher cash from other operating assets and liabilities ($24 million), offset by a decrease in cash from accounts receivable and unbilled services ($110 million).

Cash Flow from Investing Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2021 2020

Net cash used in investing activities $ (1,456) $ (560)

Cash used in investing activities decreased $8 million during the first six months of 2021 as compared to the same period in 2020 primarily driven by less cash used for acquisitions of businesses ($27 million), offset by lower payments received from unconsolidated affiliates ($18 million).

Cash used in investing activities increased $896 million during the first nine months of 2021 as compared to the same period in 2020, primarily driven by more cash used for acquisitions of businesses ($876 million), acquisitions for property, equipment, and software ($16 million) and lower net payments received from unconsolidated affiliates ($11 million), offset by net proceeds from sale of equity securities ($7 million).

Cash Flow from Financing Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions) 2021 2020

Net cash (used in) provided by financing activities $ (1,031) $ 34

Cash used in financing activities increased $1,065 million during the first six months of 2021 as compared to the same period in 2020 primarily due to an increase in debt and principal payments ($1,039 million), cash payments for the acquisition of Quest's non-controlling interest ($756 million), an increase in cash payments on contingent consideration and deferred purchase price accruals ($22 million), and an increase in cash payments related to employee stock option plans ($14 million), offset by a decrease in cash used in repayments of revolving credit facilities, net of proceeds ($360 million), a decrease in cash used to repurchase common stock ($239 million), an increase in cash provided by proceeds from debt issuances, net of repayments and debt issuance costs ($162 million), and a decrease in cash distributions to non-controlling interests ($5 million).

Net cash used in financing activities $ (1,097) $ (19)

Cash used in financing activities increased $1,078 million during the first nine months of 2021 as compared to the same period in 2020, primarily due to an increase in debt and principal payments ($1,276 million), cash payments for the Company's acquisition of Quest's non-controlling interest in Q 2 Solutions ($758 million), an increase in cash payments on contingent consideration and deferred purchase price accruals ($19 million), and an increase in cash payments related to employee stock option plans ($8 million), offset by a decrease in cash used in repayments of revolving credit facilities, net of proceeds ($470 million), a decrease in cash used to repurchase common stock ($144 million), an increase in cash provided by proceeds from debt issuances, net of repayments and debt issuance costs ($353 million), and a decrease in cash distributions to non-controlling interests ($16 million).

Off-Balance Sheet Arrangements

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We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements.

With the exception of new senior notes disclosed in Note 7 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2020 Form 10-K.

With the exception of the financing transactions disclosed in Note 7 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2020 Form 10-K.

Application of Critical Accounting Policies

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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 2. Management’s Discussion and Analysis