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Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-10-22 · 91 added, 183 removed, 160 unchanged (63% of the section changed)

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You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (our “2021 Form 10-K”).

In addition to historical condensed consolidated financial information, the following discussion contains or incorporates by reference forward-looking statements within the meaning of the federal securities laws that are not historical facts but reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements.

In addition to historical condensed consolidated financial information, the following discussion contains or incorporates by reference forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts but reflect, among other things, our current expectations, our forecasts and our anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements.

Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such.

Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “forecasts,” “projects,” “should,” “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements.

Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “forecasts,” “plans,” “projects,” “should,” “targets,” “will” and similar words and expressions, and variations and negatives of these words are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

We assume no obligation to update any such forward-looking information to reflect actual results or changes in our outlook or the factors affecting such forward-looking information.

We caution you that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, business disruptions caused by natural disasters, pandemics such as the COVID-19 (coronavirus) outbreak or international conflict or other disruptions outside of our control;

our ability to accurately model or forecast the impact of the spread and/or containment of COVID-19, among other sources of business interruption, on our operations and financial results;

We caution you that any such forward-looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward-looking statements, including without limitation, business disruptions caused by natural disasters, pandemics such as the COVID-19 (coronavirus) outbreak, including any variants, and the public health policy responses to the outbreak, and international conflicts or other disruptions outside of our control such as the current situation in Ukraine and Russia;

our ability to accurately model or forecast the impact of the spread and/or containment of COVID-19, including any variants, among other sources of business interruption, on our operations and financial results;

most of our contracts may be terminated on short notice, and we may lose or experience delays with large client contracts or be unable to enter into new contracts;

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imposition of restrictions on our use of data by data suppliers or their refusal to license data to us;

any failure by us to comply with contractual, regulatory or ethical requirements under our contracts, including current or changes to data protection and privacy laws;

any failure by us to comply with contractual, regulatory or ethical requirements under our contracts, including current or future changes to data protection and privacy laws;

breaches or misuse of our or our outsourcing partners’ security or communications systems;

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

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

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

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

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

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

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

Sources of Revenue

Total revenues are comprised of revenues from the provision of our services.

We do not have material product revenues.

We do not have any material product revenues.

Costs and Expenses

Our costs and expenses are comprised primarily of our costs of revenue, which include reimbursed expenses, and selling, general and administrative expenses.

Costs of revenue include compensation and benefits for billable employees and personnel involved in production, data management and delivery, and the costs of acquiring and processing data for our information offerings;

Our costs and expenses are comprised primarily of our costs of revenue, reimbursed expenses and selling, general and administrative expenses.

Costs of revenue include compensation and benefits for billable employees and personnel involved in production, trial monitoring, data management and delivery, and the costs of acquiring and processing data for our information offerings;

costs of staff directly involved with delivering technology-related services offerings and engagements, related accommodations and the costs of data purchased specifically for technology services engagements;

costs related to facilities;

costs related to training and expenses for information technology (“IT”), reimbursed expenses that are comprised principally of payments to investigators who oversee clinical trials and travel expenses for our clinical monitors and sales representatives;

and other expenses directly related to service contracts such as courier fees, laboratory supplies, professional services and travel expenses.

Selling, general and administrative expenses include costs related to sales, marketing, and administrative functions (including human resources, legal, finance and general management) for compensation and benefits, travel, professional services, facilities and training and expenses for IT.

Reimbursed expenses are comprised principally of payments to investigators who oversee clinical trials and travel expenses for our clinical monitors and sales representatives.

Selling, general and administrative expenses include costs related to sales, marketing, and administrative functions (including human resources, legal, finance, quality assurance, compliance and general management) for compensation and benefits, travel, professional services, training and expenses for information technology and facilities.

We also incur costs and expenses associated with depreciation and amortization.

Foreign Currency Translation

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.

In the first three months of 2022, 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.

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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 September 30, Change

(in millions)

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

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.

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions)

Revenues $ 3,568 $ 3,409 $ 159 4.7 %

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 $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 .

For the first quarter of 2022, our revenues increased $159 million, or 4.7%, as compared to the same period in 2021.

This increase was comprised of constant currency revenue growth of approximately $231 million, or 6.8%, reflecting an $132 million increase in Technology & Analytics Solutions, an $88 million increase in Research & Development Solutions, and an $11 million increase in Contract Sales & Medical Solutions.

Costs of Revenue, exclusive of Depreciation and Amortization

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

Three Months Ended March 31,

(in millions)

2021 2020 2021 2020

Costs of revenue, exclusive of depreciation and amortization $ 2,323 $ 2,293

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65.1 % 67.3 %

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.

The $30 million increase in costs of revenue, exclusive of depreciation and amortization, for the three months ended March 31, 2022 as compared to the same period in 2021 included a constant currency growth of approximately $95 million, or 4.1%, reflecting a $44 million increase in Technology & Analytics Solutions, a $36 million increase in Research & Development Solutions, and a $15 million increase in Contract Sales & Medical Solutions.

Selling, General and Administrative Expenses

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

Three Months Ended March 31,

(in millions)

2021 2020 2021 2020

Selling, general and administrative expenses $ 488 $ 442

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13.7 % 13.0 %

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.

The $46 million increase in selling, general and administrative expenses for the three months ended March 31, 2022 as compared to the same period in 2021 included a constant currency growth of approximately $58 million, or 13.1%, reflecting a $39 million increase in Technology & Analytics Solutions, a $29 million increase in Research & Development Solutions, a $4 million increase in Contract Sales & Medical Solutions, offset by a $(14) million decrease in general corporate and unallocated expenses.

Depreciation and Amortization

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

Three Months Ended March 31,

(in millions) 2022 2021

2021 2020 2021 2020

Depreciation and amortization $ 255 $ 323

% of revenues

9.9 % 11.5 % 9.8 % 11.7 %

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.

The $68 million decrease in depreciation and amortization in the three months ended March 31, 2022 as compared to the same period in 2021 was primarily due to certain intangible assets from the merger between Quintiles and IMS Health becoming fully amortized in 2021, offset by an increase in amortization from intangible assets associated with acquisitions occurring in 2021 and higher capitalized software balances.

Restructuring Costs

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

Three Months Ended March 31,

(in millions) 2022 2021

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Interest Income and Interest Expense

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

Three Months Ended March 31,

(in millions) 2022 2021

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

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.

Interest expense during the three months ended March 31, 2022 was lower than the same period in 2021 due to the refinancing in 2021 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 in 2021 of our 1.750% senior notes due 2026 and 2.250% senior notes due 2029.

Loss on Extinguishment of Debt

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

Three Months Ended March 31,

(in millions) 2022 2021

Loss on extinguishment of debt $ — $ 24

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 September 30, Nine Months Ended September 30,

During the three months ended March 31, 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.

Other Expense (Income), Net

Three Months Ended March 31,

(in millions) 2022 2021

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

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 September 30, Nine Months Ended September 30,

Other expense (income), net $ 10 $ (37)

Other expense (income), net for the three months ended March 31, 2022 increased as compared to the same period in the prior year, primarily due to less foreign currency gain and losses on investments in mutual funds.

Income Tax Expense

Three Months Ended March 31,

(in millions) 2022 2021

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

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 of Unconsolidated Affiliates

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

Income tax expense $ 71 $ 44

Our effective income tax rate was 17.8% and 17.1% in the first quarter of 2022 and 2021, respectively.

Our effective income tax rate in the first quarter of 2022 and 2021 was favorably impacted by $13 million and $17 million, respectively, as a result of excess tax benefits recognized upon settlement of share-based compensation awards.

Equity in (Losses) Earnings of Unconsolidated Affiliates

Three Months Ended March 31,

(in millions) 2022 2021

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.

Equity in (losses) earnings of unconsolidated affiliates $ (4) $ 4

Equity in (losses) earnings of unconsolidated affiliates for the three months ended March 31, 2022 decreased as compared to the same period in the prior year due to losses in the operations of our unconsolidated affiliates.

Net Income Attributable to Non-controlling Interests

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

Three Months Ended March 31,

(in millions) 2022 2021

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

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.

Net income attributable to non-controlling interests included Quest Diagnostics Incorporated ("Quest") 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 months ended March 31, 2022 as compared to the prior period.

Segment Results of Operations

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

Three Months Ended September 30, 2021 and 2020

Segment Revenues Segment Profit

(in millions) 2021 2020 2021 2020

Technology & Analytics Solutions $ 1,337 $ 1,207 $ 343 $ 292

Research & Development Solutions 1,853 1,400 364 291

Contract Sales & Medical Solutions 201 179 20 17

Total 3,391 2,786 727 600

General corporate and unallocated (87) (74)

Depreciation and amortization (336) (319)

Restructuring costs (2) (20)

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

Nine Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

Segment Revenues Segment Profit

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Technology & Analytics Solutions

Three Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2022 2021 $ %

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Segment profit $ 386 $ 349 $ 37 10.6 %

Nine Months Ended September 30, Change

(in millions) 2021 2020 $ %

Revenues $ 4,038 $ 3,433 $ 605 17.6 %

Costs of revenue, exclusive of depreciation and amortization 2,415 2,048 367 17.9

Selling, general and administrative 579 549 30 5.5

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

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 $4,038 million for the first nine months of 2021, an increase of $605 million, or 17.6%, over the same period in 2020.

Technology & Analytics Solutions’ revenues were $1,439 million for the first quarter of 2022, an increase of $91 million, or 6.8%, over the same period in 2021.

This increase was comprised of constant currency revenue growth of approximately $132 million, or 9.8%, reflecting revenue growth across all regions.

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.

The revenue growth for the three months ended March 31, 2022 was driven by higher technology, real-world and consulting and analytical services.

Costs of Revenue, exclusive of Depreciation and Amortization

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 $367 million, or 17.9%, in the first nine months of 2021 over the same period in 2020.

Technology & Analytics Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $22 million, or 2.7%, in the first quarter of 2022 over the same period in 2021.

This increase included a constant currency increase of approximately $44 million, or 5.4%.

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.

The constant currency increase for the three months ended March 31, 2022 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 $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.

Technology & Analytics Solutions’ selling, general and administrative expenses increased $32 million, or 17.1%, in the first quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $39 million, or 20.9%.

The constant currency increase for the three months ended March 31, 2022 was primarily related to an increase in compensation and related expenses.

Research & Development Solutions

Three Months Ended September 30, Change

(in millions)

$ 1,853 $ 1,400 $ 453 32.4 %

Costs of revenue, exclusive of depreciation and amortization

1,291 925 366 39.6

Selling, general and administrative expenses

198 184 14 7.6

Segment profit

$ 364 $ 291 $ 73 25.1 %

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions)

$ 5,612 $ 4,076 $ 1,536 37.7 %

Revenues $ 1,934 $ 1,868 $ 66 3.5 %

Costs of revenue, exclusive of depreciation and amortization 1,322 1,321 1 0.1

3,967 2,811 1,156 41.1

Selling, general and administrative expenses 211 185 26 14.1

576 544 32 5.9

Segment profit $ 401 $ 362 $ 39 10.8 %

$ 1,069 $ 721 $ 348 48.3 %

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 $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 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.

Research & Development Solutions’ contracted backlog increased from $24.8 billion as of December 31, 2021 to $25.3 billion as of March 31, 2022 and we expect approximately $7.0 billion of this backlog to convert to revenue in the next twelve months.

Research & Development Solutions’ revenues were $1,934 million in the first quarter of 2022, an increase of $66 million, or 3.5%, over the same period in 2021.

This increase was comprised of constant currency revenue increase of approximately $88 million, or 4.7%, reflecting revenue growth in the Europe and Africa and Asia-Pacific regions.

The revenue growth for the three months ended March 31, 2022 was primarily the result of volume-related increases in clinical services and lab testing.

Costs of Revenue, exclusive of Depreciation and Amortization

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 $1,156 million, or 41.1%, in the first nine months of 2021 over the same period in 2020.

Research & Development Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $1 million, or 0.1%, in the first quarter of 2022 over the same period in 2021.

This increase included a constant currency increase of approximately $36 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 as a result of volume-related increases in clinical services and lab testing.

The constant currency increase for the three months ended March 31, 2022 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 $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.

Research & Development Solutions’ selling, general and administrative expenses increased $26 million, or 14.1%, in the first quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $29 million, or 15.7%.

The constant currency increase for the three months ended March 31, 2022 was primarily related to an increase in compensation and related expenses.

Contract Sales & Medical Solutions

Three Months Ended September 30, Change

(in millions)

$ 201 $ 179 $ 22 12.3 %

Costs of revenue, exclusive of depreciation and amortization

167 148 19 12.8

Selling, general and administrative expenses

Segment profit

$ 20 $ 17 $ 3 17.6 %

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions)

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Costs of revenue, exclusive of depreciation and amortization 167 160 7 4.4

487 469 18 3.8

Selling, general and administrative expenses 16 13 3 23.1

Segment profit $ 12 $ 20 $ (8) (40.0) %

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 $588 million in the first nine months of 2021, an increase of $36 million, or 6.5%, over the same period in 2020.

Contract Sales & Medical Solutions’ revenues were $195 million in the first quarter of 2022, an increase of $2 million, or 1.0%, over the same period in 2021.

This increase included a constant currency revenue increase of approximately $11 million, or 5.7%.

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.

The revenue growth for the three months ended March 31, 2022 was largely due to a volume increase in the Americas region.

Costs of Revenue, exclusive of Depreciation and Amortization

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.

Contract Sales & Medical Solutions’ costs of revenue, exclusive of depreciation and amortization, increased $7 million, or 4.4%, in the first quarter of 2022 as compared to the same period in 2021.

This increase included a constant currency increase of approximately $15 million, or 9.4%.

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.

The constant currency increase for the three months ended March 31, 2022 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 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 nine months ended September 30, 2021 was primarily related to a decrease in compensation and related expenses.

Contract Sales & Medical Solutions’ selling, general and administrative expenses increased $3 million or 23.1% in the first quarter of 2022 as compared to the same period in 2021, which included a constant currency increase of approximately $4 million, or 30.8%.

The constant currency increase for the three months ended March 31, 2022 was primarily related to an increase in compensation and related expenses and IT related expenses.

Liquidity and Capital Resources

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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 and other credit 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 $1,470 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.

We had a cash balance of $1,387 million as of March 31, 2022 ($334 million of which was in the United States), an increase from $1,366 million as of December 31, 2021.

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

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

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

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.

During the three months ended March 31, 2022, we repurchased 1.7 million shares of our common stock for $403 million under the Repurchase Program.

As of March 31, 2022, we have remaining authorization to repurchase up to approximately $2.1 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.

As of March 31, 2022, we had $12.7 billion of total indebtedness, excluding $750 million of additional available borrowings under our revolving credit facility.

Our long-term debt arrangements contain customary restrictive covenants and, as of March 31, 2022, we believe we were in compliance with our restrictive covenants in all material respects.

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.

As of March 31, 2022, the Company’s Fifth Amended and Restated Credit Agreement provided financing through the senior secured credit facilities of up to approximately $7,075 million , which consisted of $6,325 million principal amounts of debt outstanding, and $750 million of available borrowing capacity on the revolving credit facility and standby letters of credit.

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”).

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.

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 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

As of March 31, 2022, no additional amounts of revolving loan commitments were available under the receivables financing facility.

Three months ended March 31, 2022 and 2021

Cash Flow from Operating Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2022 2021

Net cash provided by operating activities $ 508 $ 867

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 provided by operating activities decreased $359 million during the first three months of 2022 as compared to the same period in 2021.

The decrease was primarily due to a decrease in cash collections from unearned income ($198 million), less cash from other operating assets and liabilities ($153 million) and a decrease in cash from accounts receivable and unbilled services ($90 million), offset by higher cash related net income ($82 million).

Cash Flow from Investing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2022 2021

Net cash used in investing activities $ (613) $ (176)

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 used in investing activities increased $437 million during the first three months of 2022 as compared to the same period in 2021, primarily driven by more cash used for acquisitions of businesses ($411 million), acquisitions for property, equipment, and software ($28 million) and investments in unconsolidated affiliates ($5 million), offset by less purchases of marketable securities, net ($4 million), net proceeds from sale of equity securities ($1 million) and other investing activities ($2 million).

Cash Flow from Financing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2022 2021

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).

Net cash provided by (used in) financing activities $ 144 $ (168)

Cash provided by financing activities increased $312 million during the first three months of 2022 as compared to the same period in 2021, primarily due to a decrease in debt and principal payments ($1,734 million), an increase in cash proceeds from revolving credit facilities, net of repayments ($650 million), offset by a decrease in cash provided by proceeds from debt issuances, net of debt issuance costs ($1,719 million), an increase in cash used to repurchase common stock ($341 million), an increase in cash payments related to employee stock option plans ($11 million), and an increase in cash payments on contingent consideration and deferred purchase price accruals ($1 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 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.

There have been no material changes, outside of the ordinary course of business, to our contractual obligations as previously disclosed in our 2021 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