What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-16 compared with 2021-02-12 · 106 added, 108 removed, 281 unchanged (43% of the section changed)

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

Research & Development Solutions, which primarily serves

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

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

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

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Industry Outlook

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

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

Overview of the Impact of COVID-19

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

These disruptions have impacted all three of our reportable segments.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During 2020, the COVID-19 pandemic disrupted the pace of our clinical trials and offerings that rely on face-to-face interactions, but, at the same time, it accelerated change in the industry and created demand for new services.

The pandemic resulted in the delay but not cancellation of a number of existing and planned clinical trials, both because many clinical trials were slowed or temporarily paused and because many planned clinical trials did not begin as scheduled as they were crowded out by clinical trials for COVID-19 vaccines and other therapies.

During 2021, we experienced an acceleration in business momentum as these delayed clinical trial activities began or restarted, which contributed to our financial results for the year.

Throughout the past year and into 2022, we have worked on a substantial number of COVID-related projects.

COVID-specific work currently does not represent a material amount of our backlog and is executed over shorter timelines than other therapeutic work, though we do anticipate that this work will continue through 2022 and potentially into 2023 and beyond.

There will be a need for vaccines for multiple manufacturers to meet global demand, new vaccines for emerging variants of the virus, alternative vaccines needed as a result of adverse safety events, quality issues, or manufacturing delays, novel treatment programs that are targeted at specific populations and conditions, and vaccine safety monitoring studies.

The pandemic has also affected our business strategy in a number of ways.

One of the most significant impacts on our Research & Development Solutions business, has been the acceleration of decentralized clinical trials.

Decentralized clinical trials combine the use of remote technologies and field-based services to enable portions of a clinical trial to be conducted away from an investigator site.

This approach reduces the burden on patients of having to travel to and from investigator sites frequently and allows trials to continue to be conducted even during periods of limited access to investigator sites.

While the decentralized clinical trial opportunity was identified before COVID-19, we saw how critical those capabilities were during the pandemic and accelerated their development accordingly.

We invested in the use of remote technologies, expanded our relationships with local laboratories and healthcare providers, and established a virtual network of investigators and care professionals.

We also took the opportunity presented by the pandemic to completely rethink and revolutionize our workplace and in 2021 we implemented the IQVIA Future of Work program.

This program was designed to address employee feedback for more flexibility, and it will facilitate approximately 80% of our employees working in flexible arrangements, reducing our physical footprint and the employee commute impact on the environment.

To facilitate this transition, we made investments in real estate to reconfigure our office space to install the most efficient work arrangements and in technology to support our employees and ensure that we can innovate, collaborate and grow successfully.

The Company continues to maintain strong liquidity.

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

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

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

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

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

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

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

As of December 31, 2021, cash and cash equivalents were $1,366 million and the Company had $100 million drawn under its $1.5 billion revolving credit facility.

As of December 31, 2021, the Company was in compliance with the financial covenants under its debt agreements in all material respects and does not have material uncertainty about ongoing ability to meet the covenants of our credit arrangements.

Business Combinations

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The revenue and expenses of our foreign operations are generally denominated in local currencies and translated into United States dollars for financial reporting purposes.

Accordingly, exchange rate fluctuations will affect the translation of foreign results into United States dollars for purposes of reporting our condensed consolidated results.

Accordingly, exchange rate fluctuations will affect the translation of foreign results into United States dollars for purposes of reporting our consolidated results.

As a result, we believe that reporting results of operations that exclude the effects of foreign currency rate fluctuations on certain financial results can facilitate analysis of period to period comparisons.

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For a discussion of our results of operations comparison for 2020 and 2019, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on February 12, 2021.

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

Year Ended December 31, Change

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In 2021, our revenues increased $2,515 million, or 22.1%, as compared to 2020.

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

This increase was comprised of constant currency revenue growth of approximately $2,398 million, or 21.1%, reflecting a $604 million increase in Technology & Analytics Solutions, a $1,752 million increase in Research & Development Solutions, and a $42 million increase in Contract Sales & Medical Solutions.

Costs of Revenue, exclusive of Depreciation and Amortization

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When compared to 2020, costs of revenue, exclusive of depreciation and amortization, in 2021 increased $1,733 million, or 23.1%.

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

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

This increase included a constant currency increase of approximately $1,606 million, or 21.4%, comprised of a $314 million increase in Technology & Analytics Solutions, a $1,267 million increase in Research & Development Solutions, and a $25 million increase in Contract Sales & Medical Solutions.

As a percent of revenues, costs of revenue, exclusive of depreciation and amortization in 2021 increased compared to 2020.

Selling, General and Administrative Expenses

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2021 compared to 2020

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

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

The $175 million increase in selling, general and administrative expenses in 2021 as compared to 2020 included a constant currency increase of approximately $151 million, or 8.4%, comprised of a $42 million increase in Technology & Analytics Solutions, a $32 million increase in Research & Development Solutions, a $(1) million decrease in Contract Sales & Medical Solutions, and a $78 million increase in general corporate and unallocated expenses.

Depreciation and Amortization

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% of revenues 9.1 % 11.3 % 10.8 %

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

The $(23) million decrease in depreciation and amortization in 2021 as compared to 2020 was primarily due to certain intangible assets from the merger between Quintiles and IMS Health becoming fully amortized in 2021, offset by 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

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

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

Interest expense during 2021 was lower than 2020 due to lower interest rates attributed to lower LIBOR rates, the refinancing of our existing term A loans and the redemption of our 3.250% senior notes due 2025, which was offset by the interest expense on the issuance of our 1.750% senior notes due 2026 and 2.250% senior notes due 2029.

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

Loss on Extinguishment of Debt

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Loss on extinguishment of debt $ 26 $ 13 $ 24

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

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

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

Other Expense (Income), Net

During 2021, we recognized loss on extinguishment of debt of $26 million for fees and expenses incurred related to the refinancing of our 3.250% senior notes due 2025 and Prior Credit Agreement as discussed further in Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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

Other Income, Net

Year Ended December 31,

(in millions) 2021 2020 2019

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

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

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

Income Tax Expense (Benefit)

Other income, net $ (130) $ (65) $ (37)

Other income, net for 2021 increased compared to 2020 primarily due to foreign currency gain.

Income Tax Expense

Year Ended December 31,

(dollars in millions) 2021 2020 2019

Income tax expense (benefit) $ 72 $ 116 $ 59

Income tax expense $ 163 $ 72 $ 116

Effective income tax rate 14.5 % 19.3 % 33.0 %

In 2021, we recorded a benefit of $29 million 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.

Also in 2021, we recorded a $9 million tax expense as a result of the U.S.

Treasury Department issuing final regulations on Foreign Tax Credits.

In 2020, the U.S.

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

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

Treasury Department issued final regulations regarding FDII and GILTI.

We have determined we will elect the GILTI high tax exception as allowed by the final regulations and have amended our 2018 U.S.

Federal consolidated income tax returns and plan to amend our 2019 US Federal consolidated income tax returns resulting in a favorable impact of $26 million, which we recorded in 2020.

In 2019 the U.S.

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

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

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

Treasury Department issued final regulations on the transition tax and proposed regulations on FDII, which was introduced by the Tax Act enacted by the U.S.

government on December 22, 2017.

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

The final regulations related to the transition tax did not have a material impact.

As a result of the proposed FDII guidance, which was subsequently finalized in 2020, we reversed the tax benefit originally recorded in 2018 by recording a tax expense of $25 million for this impact in 2019.

Equity in Earnings (Losses) of Unconsolidated Affiliates

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(in millions) 2021 2020 2019

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

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

Equity in earnings (losses) of unconsolidated affiliates $ 6 $ 7 $ (9)

Equity in earnings (losses) of unconsolidated affiliates remained relatively consistent in 2021 compared to 2020.

Net Income Attributable to Non-controlling Interests

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Net income attributable to non-controlling interests $ (5) $ (29) $ (36)

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

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 in 2021 compared to 2020.

See Note 13 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details regarding this transaction.

Segment Results of Operations

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

These costs primarily consist of stock-based compensation and expenses to integration activities and acquisitions.

These costs primarily consist of stock-based compensation and expenses related to integration activities and acquisitions.

We also do not allocate depreciation and amortization or impairment charges to our segments.

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

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

Technology & Analytics Solutions

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Revenues $ 5,534 $ 4,858 $ 4,486 $ 676 13.9 % $ 372 8.3 %

Cost of revenue, exclusive of depreciation and amortization

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

Costs of revenue, exclusive of depreciation and amortization 3,278 2,900 2,663 378 13.0 237 8.9

Selling, general and administrative expenses 798 742 722 56 7.5 20 2.8

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Technology & Analytics Solutions’ revenues were $5,534 million in 2021, an increase of $676 million, or 13.9%, over 2020.

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

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

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

This increase was comprised of constant currency revenue growth of approximately $604 million, or 12.4%, reflecting revenue growth across all regions.

The revenue growth was driven by higher technology, real-world and analytical services and COVID-19 related work.

Costs of Revenue, exclusive of Depreciation and Amortization

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Revenues $ 7,556 $ 5,760 $ 5,788 $ 1,796 31.2 % $ (28) (0.5) %

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

Costs of revenue, exclusive of depreciation and amortization 5,303 3,974 3,936 1,329 33.4 38 1.0

Selling, general and administrative expenses 777 738 711 39 5.3 27 3.8

Segment profit $ 1,476 $ 1,048 $ 1,141 $ 428 40.8 % $ (93) (8.2) %

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

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

Research & Development Solutions contracted backlog increased from $22.6 billion as of December 31, 2020 to $24.8 billion as of December 31, 2021 and we expect approximately $7.0 billion of this backlog to convert to revenue in the next 12 months.

Contracted backlog was $19.0 billion as of December 31, 2019.

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

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2021 compared to 2020

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

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

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

Research & Development Solutions’ revenues were $7,556 million in 2021, an increase of $1,796 million, or 31.2%, over 2020.

This increase was comprised of constant currency revenue growth of approximately $1,752 million, or 30.4%, reflecting revenue growth across all regions.

The revenue growth 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

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Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $1,329 million, or 33.4%, in 2021 as compared to 2020.

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

This increase included a constant currency increase of approximately $1,267 million, or 31.9%, reflecting 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

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Revenues $ 784 $ 741 $ 814 $ 43 5.8 % $ (73) (9.0) %

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

Costs of revenue, exclusive of depreciation and amortization 652 626 701 26 4.2 (75) (10.7)

Selling, general and administrative expenses 57 58 61 (1) (1.7) (3) (4.9)

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2021 compared to 2020

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

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

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

Contract Sales & Medical Solutions’ revenues were $784 million in 2021, an increase of $43 million, or 5.8%, over 2020.

This increase was comprised of a constant currency revenue growth of approximately $42 million, or 5.7%, reflecting a volume increase primarily in the Americas and Asia-Pacific regions.

Costs of Revenue, exclusive of Depreciation and Amortization

2021 compared to 2020

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

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

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $26 million, or 4.2%, in 2021 as compared to 2020.

This increase included a constant currency increase of approximately $25 million, or 4.0%, reflecting an increase in compensation and related expenses.

Selling, General and Administrative Expenses

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In addition to operating cash flows, other significant factors that affect our overall management of liquidity include:

capital expenditures, acquisitions, investments, debt service requirements, dividends, equity repurchases, adequacy of our revolving credit and receivables financing facilities, and access to the capital markets.

capital expenditures, acquisitions, investments, debt service requirements, equity repurchases, adequacy of our revolving credit and receivables financing facilities, and access to the capital markets.

We manage our worldwide cash requirements by monitoring the funds available among our subsidiaries and determining the extent to which those funds can be accessed on a cost-effective basis.

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

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

We had a cash balance of $1,366 million as of December 31, 2021 ($385 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 credit and receivables financing facilities will enable us to fund our operating requirements, capital expenditures, contractual obligations, and meet debt obligations for at least the next 12 months.

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

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

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

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Equity Repurchase Program

On February 13, 2019, the Board increased the stock repurchase authorization under the “Repurchase Program by $2.0 billion, which increased the total amount that has been authorized under the Repurchase Program to $7.725 billion since the plan’s inception in October 2013.

On February 10, 2022 the Board increased the stock repurchase authorization under the Repurchase Program with respect to the repurchase of the Company's common stock by an additional $2.0 billion, which increased the total amount that has been authorized under the Repurchase Program to $9.725 billion since the plan’s inception in October 2013.

The Repurchase Program does not obligate the Company to repurchase any particular amount of common stock, and it may be modified, extended, suspended or discontinued at any time.

As of December 31, 2020, the Company has remaining authorization to repurchase up to $0.9 billion of its common stock under the Repurchase Program.

As of December 31, 2021, the Company had remaining authorization to repurchase up to approximately $0.5 billion of its common stock under the Repurchase Program.

The February 10, 2022 $2.0 billion increase in the stock repurchase authorization, increased the remaining authorization to repurchase common stock under the Repurchase Program up to approximately $2.5 billion.

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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Our long-term debt arrangements contain customary restrictive covenants and, as of December 31, 2021, we believe we were in compliance with our restrictive covenants in all material respects.

Senior Secured Credit Facilities and Senior Notes

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

Senior Secured Credit Facilities

As of December 31, 2021, the Fifth Amended and Restated Credit Agreement, as amended (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 $7,140 million, which consisted of $5,740 million principal amounts of debt outstanding and $1,400 million of available borrowing capacity on the revolving credit facility and standby letters of credit, with a total capacity of $1,500 million.

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

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dollars and Yen.

The term A loans and revolving credit facility under the Credit Agreement mature in June 2023, while the term B loans under the Credit Agreement mature in 2024 and 2025.

The term A loans and revolving credit facility under the Fifth Amended and Restated Credit Agreement mature in August 2026, while the term B loans under the Fifth Amended and Restated Credit Agreement mature in 2024 and 2025.

We are required to make scheduled quarterly payments on the term A loans equal to 1.25% of the original principal amount, with the remaining balance paid at maturity.

We are required to make scheduled quarterly payments on the term B loans equal to approximately 0.25% of the original principal amount, with the remaining balance paid at maturity.

In addition, beginning with fiscal year ending December 31, 2017, we were required to apply 50% of excess cash flow (as defined in the Credit Agreement), subject to a reduction to 25% or 0% depending upon our senior secured first lien net leverage ratio, for prepayment of the term loans, with any such prepayment to be applied toward principal payments due in subsequent quarters.

In addition, beginning with fiscal year ending December 31, 2017, we were required to apply 50% of excess cash flow (as defined in the Fifth Amended and Restated Credit Agreement), subject to a reduction to 25% or 0% depending upon our senior secured first lien net leverage ratio, for prepayment of the term loans, with any such prepayment to be applied toward principal payments due in subsequent quarters.

We are also required to pay an annual commitment fee that ranges from 0.20% to 0.35% in respect of any unused commitments under the revolving credit facility.

The senior secured credit facilities are collateralized by substantially all of our assets and the assets of our material domestic subsidiaries including 100% of the equity interests of substantially all of our material domestic subsidiaries and 66% of the equity interests of substantially all of our first-tier material foreign subsidiaries and their domestic subsidiaries.

For information regarding the Senior Secured Credit Facilities and senior notes, see Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

For information regarding the senior secured credit facilities, see Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Receivables Financing Facility

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

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

As of December 31, 2021, no additional amounts of revolving loans were available under the receivables financing facility.

Years ended December 31, 2021, 2020 and 2019

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Cash provided by operating activities increased $983 million in 2021 as compared to 2020.

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

The increase is primarily due to an increase in cash-related net income ($762 million), an increase in advanced billings ($411 million), a decrease in prepaid expenses and other assets ($131 million) and the timing of income tax and other payables ($81 million), offset by a decrease in accounts receivable and unbilled services ($393 million) and the timing of accounts payable and accrued expenses ($9 million).

Cash Flow from Investing Activities

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2021 compared to 2020

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

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

Cash used in investing activities increased $1,307 million in 2021 as compared to 2020.

The increase was primarily driven by more cash used for the acquisition of businesses, net of cash acquired ($1,281 million), acquisitions of property, equipment, and software ($24 million), lower net payments received from unconsolidated affiliates ($15 million) and an increase in purchase of marketable securities ($1 million), offset by an increase in net proceeds from sale of equity securities ($7 million), and other ($7 million).

Cash Flow from Financing Activities

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2021 compared to 2020

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

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

Cash used in financing activities increased $1,018 million in 2021 as compared to 2020, primarily due to an increase in debt payments ($1,227 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 ($20 million) and an increase in cash payments related to employee stock option plans ($15 million), offset by a decrease in cash used in repayments of revolving credit facilities, net of proceeds ($595 million), a decrease in cash used to repurchase common stock ($41 million), an increase in cash provided by proceeds from debt issuances, net of payment of debt issuance costs ($353 million) and a decrease in cash distributions to non-controlling interests ($13 million).

Contingencies

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

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

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

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

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements except for operating leases entered into in the normal course of business.

We do not have any material off-balance sheet arrangements.

Contractual Obligations and Commitments

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Uncertain income tax positions(5)

21 25 12 2 60

Total $ 1,271 $ 3,953 $ 6,643 $ 4,218 $ 16,085

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(5) As of December 31, 2021, our liability related to uncertain income tax positions was approximately $131 million, $71 million of which has not been included in the above table as we are unable to predict when these liabilities will be paid due to the uncertainties in the timing of the settlement of the income tax positions.

Application of Critical Accounting Policies

Application of Critical Accounting Policies and Estimates

Note 1 to the audited consolidated financial statements provided elsewhere in this Annual Report on Form 10-K describes the significant accounting policies used in the preparation of the consolidated financial statements.

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

The Company provides a significant integration service resulting in a

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

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

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

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however, in the event of termination, most contracts require payment for services rendered through the date of termination, as well as for subsequent services rendered to close out the contract.

Certain items of income and expense are not recognized on our income tax returns and financial statements in the same year, which creates timing differences.

The income tax effect of these timing differences results in (1) deferred income tax assets that create a reduction in future income taxes and (2) deferred income tax liabilities that create an increase in future income taxes.

Recognition of deferred income tax assets is based on management’s belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss and capital loss carryforwards and income tax credits, would be realized.

The provision for income taxes includes federal, state, local and foreign taxes.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled.

We record U.S.

deferred taxes based on the Federal corporate income tax rate of 21%, We account for tax related to GILTI as a period cost when incurred.

Recognition of deferred income tax assets is based on management’s belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss, capital loss carryforwards, and income tax credits, would be realized.

We recorded a valuation allowance to reduce our deferred income tax assets for those deferred income tax items for which it was more likely than not that realization would not occur.

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We do not consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested outside of the United States.

Business Combinations

Business Combinations and Goodwill

We use the acquisition method to account for business combinations, and accordingly, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree are recorded at their estimated fair values on the date of the acquisition.

We use significant judgments, estimates and assumptions in determining the estimated fair value of assets acquired, liabilities assumed and non-controlling interest including expected future cash flows, discount rates that reflect the risk associated with the expected future cash flows and estimated useful lives.

We have recorded and allocated to our reporting units the excess of the cost over the fair value of the net assets acquired, known as goodwill.

The recoverability of the goodwill and indefinite-lived intangible assets are evaluated annually for impairment, or if and when events or circumstances indicate a possible impairment.

We use significant judgments, estimates and assumptions in determining the estimated fair value of assets acquired, liabilities assumed and non-controlling interest including expected future cash flows and discount rates that reflect the risk associated with the expected future cash flows and estimated useful lives.

We have recorded and allocated to our reporting units the excess of the purchase price over the fair value of the net assets acquired, known as goodwill.

The recoverability of goodwill is evaluated annually for impairment, or if and when events or circumstances indicate a possible impairment.

We perform our annual goodwill impairment evaluation as of July 31.

The impairment analysis requires significant judgments, estimates and assumptions, including those related to macroeconomic conditions, industry and market considerations, cost factors, financial performance, fair value history and other company specific events.

For the years ended December 31, 2021, 2020 and 2019, the Company determined that there was no impairment of goodwill.

We review the carrying values of other identifiable intangible assets if the facts and circumstances indicate a possible impairment.

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Stock-based Compensation

We measure compensation cost for stock-based payment awards (stock options and stock appreciation rights) granted to employees and non-employee directors at fair value using the Black-Scholes-Merton option-pricing model and for performance awards using the Monte Carlo simulation model.

Stock-based compensation expense includes stock-based awards granted to employees and non-employee directors and has been reported in selling, general and administrative expenses in our consolidated statements of income based upon the classification of the individuals who were granted stock-based awards.

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• We estimate forfeitures based on our historical analysis of actual forfeitures.

The Company accounts for its stock-based compensation for performance awards based on the closing market price of the Company's common stock on the date of grant, and for performance awards that include market conditions based upon the Monte Carlo simulation model.

The Company records the expense amount of these awards based on its estimates of the likelihood that the various performance targets will be achieved.

The estimates are assessed on a quarterly basis.

Pensions and Other Postretirement Benefits

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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-K

Item 7. Management’s Discussion and Analysis